ROYAL SKANDIA LIFE ASSURANCE LTD v. SPARKLE CONSULTANTS (HONG KONG) LTD AND OTHERS

HCMP 1453/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

HIGH COURT MISCELLANEOUS PROCEEDINGS NO. 1453 OF 2006

(ON AND INTENDED APPEAL FROM DCCJ NO. 2837 OF 2005)

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J U D G M E N T

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Hon Cheung JA (giving judgment of the court) :

1. This is an application for leave to appeal by the 3^rd defendant against the decision of H H Judge Chow.  Previous applications by the 3^rd defendant for leave to appeal had been refused by the judge and Yuen JA of this Court. 

Facts

2. The plaintiff claimed against the 3^rd defendant as the guarantor under a written guarantee dated 29^th August 2001 (‘the guarantee’) in which the 3^rd defendant together with the 2^nd defendant guaranteed the repayment of any indemnified commission advanced by the plaintiff to the 1^st defendant.  The 3^rd defendant agreed that should the 1^st defendant be unable to repay any amount advanced to it he will pay all sums due to the plaintiff under the guarantee.  The plaintiff by a letter dated 4^th April 2005 demanded the 3^rd defendant to make immediate repayment under the guarantee of the sum of $437,640.91 together with interest. 

3. By a summons dated 2^nd September 2005 the 3^rd defendant applied to stay or dismiss the action against him.  The margin note of the summons referred to Order 12 rule 8 of the Rules of the District Court and the inherent jurisdiction of the court.  The judge dismissed the application. 

Order 12 rule 8

4. Order 12 rule 8 of the Rules of the District Court are identical to the same order in the Rules of the High Court.  Hence for the purpose of this appeal reliance will be made of the Hong Kong Civil Procedure 2006 which deals with the operation of the High Court rules. 

5. The first thing to note is that the reliance by the 3^rd defendant of Order 12 rule 8 is misconceived because as pointed out at para 12/8/2 of the Hong Kong Civil Procedure 2006, the grounds of an application under rule 8(1) depend on the circumstances and will be found in the orders dealing with :

(1) service outside the jurisdiction (Order 11);

(2) the validity of writs (Order 6);

(3) interim relief (Order 29). 

6. None of these Orders apply in this case.  Specifically the writ was served on the defendant who was physically in the jurisdiction.  There was no requirement to serve the writ outside jurisdiction.  There was no order authorizing such a service under Order 11.  The case was also not concerned with the validity of writs under Order 6 or with interim relief.  The application is simply an application under the inherent jurisdiction to the court to stay the proceedings on the ground of forum conveniens.  In other words the 3^rd defendant contends that Hong Kong is not the appropriate forum to try the case.

Forum conveniensand exclusive jurisdiction clause 

7. The basis of the application is that the guarantee referred to the exclusive jurisdiction of Isle of Man in the event of disputes of the parties.  The law of Isle of Man is to be the governing law.  Where breach of an exclusive jurisdiction court clause is relied upon as the basis of an application to stay a Hong Kong proceeding, the Privy Council in The K H Enterprise (cargo owners) v. The Pioneer Container (vessel owners) [1994] 2 HKLR 134, approved of the principles stated in the case of Aratra Potato Co Ltd v. Egyptian Navigation Co (the El Amria) [1981] 2 Lloyd’s Rep. 119.

The El Amria

8. According to the principles the court has a discretion whether to grant a stay of proceedings brought in breach of an agreement to refer disputes to a foreign court, but the discretion should be exercised by granting a stay unless strong cause for not doing so is shown.  The burden of proving such strong cause is on the plaintiff. 

9. In exercising the discretion the court should take into account all the circumstances of the case, in particular the following matters, which are not exclusive, may properly be regarded :

(1) In what country the evidence on the issues of fact is situated, or more readily available, and the effect of that on the relative convenience and expense of trial as between the English and foreign courts (in this case the difference is between the Hong Kong and Isle of Man courts);

(2) Whether the law of the foreign court applies and, if so, whether it differs from English law (Hong Kong law) in any material respects;

(3) With what country either party is connected, and how closely;

(4) Whether the defendants genuinely desire trial in the foreign country, or are only seeking procedural advantages.

(5) Whether the plaintiff would be prejudiced by having to sue in the foreign court because they would

i. be deprived of security for their claim;

ii. be unable to enforce any judgment obtained;

iii. be faced with a time bar not applicable in England; or

iv. for political, racial, religious or other reasons be unlikely to get a fair trial.     

The judge’s view

10. The judge considered the El Amria case in his judgment and he referred to the five matters that are relevant for considering the exercise of discretion.  Although he did not refer in his judgment to the starting principle that the discretion should be exercised by granting a stay unless strong cause for not doing so is shown or the burden of proof, one can assume that he must have these principles in mind.  As to the various factors he came to the following view :

(1) The 3^rd defendant is a Hong Kong citizen, currently residing in Hong Kong.  Hong Kong is the most convenient place to conduct the trial, at least so far as the 3^rd defendant is concerned, if he wishes to give evidence to defend himself against the plaintiff’s claim in the trial. 

(2) Although the law of the Isle of Man (Manx law) was the proper law of the contract, there should be no difficulty for the Hong Kong court to apply Manx law as the principles of Manx contract law are largely the same as those of English contract law.  The 3^rd defendant himself stated that the laws of evidence and trials of the Isle of Man court and the Hong Kong court are similar.

(3) The 3^rd defendant is a Hong Kong citizen who resides and carrying on business in Hong Kong.  He is not in any way connected with the Isle of Man.

(4) As to the issue of whether there is any genuine desire on the part of the 3^rd defendant to conduct a trial in the Isle of Man, the 3^rd defendant had merely ‘tried to identify some lawyers of the Isle of Man from the internet’.  He had not suggested any defence to the plaintiff’s claim by disclosing a proposed defence.  The 3^rd defendant was granted leave to file his defence out of time and one day before the expiration of that period he took out the present application.  There was no explanation offered by him why he suddenly changed his stance.  The purpose of the present application appeared to be a tactic deployed by him to seek to delay the process of this action. 

(5) If the plaintiff is forced to bring the action against the 3^rd defendant in the Isle of Man and the 3^rd defendant ignores the foreign action, the default judgment obtained against him would not be enforceable in Hong Kong.  Even if the 3^rd defendant agrees to submit to the jurisdiction of the court of the Isle of Man, the plaintiff would have to go through the procedure of enforcing the Manx judgment if the plaintiff is successful in such action by starting an action in the High Court in Hong Kong, as there does not exist any reciprocal enforcement arrangement between Hong Kong and the Isle of Man.  This would mean added delay and extra costs on the part of the plaintiff.  In the circumstances, there would be serious prejudice caused to the plaintiff if a stay is granted as the plaintiff would have no choice but to bring the action in the Isle of Man and the judgment (if obtained by default) would be unenforceable in Hong Kong. 

11. The judge held for these reasons he would dismiss the 3^rd defendant’s application. 

Discretion properly exercised

12. In our view the judge had properly evaluated all the relevant circumstances and chose not to exercise the discretion in favour of the 3^rd defendant.  Although the plaintiff is an Isle of Man company it is an authorised insurer registered with the insurance authority of Hong Kong.  The 1^st defendant is a limited company incorporated in Hong Kong.  The 2^nd and 3^rd defendants were a director and a shareholder respectively of the 1^st defendant.  The 3^rd defendant was physically in Hong Kong when the writ was served.  The plaintiff was entitled to invoke the jurisdiction as of right.  The 3^rd defendant has not shown why the discretion was wrongly exercised and needs the intervention of the Court of Appeal.  As Yuen JA who refused the 3^rd defendant’s application for leave to appeal said ‘the exercise of the judge’s discretion was sufficiently supported by relevant grounds’. 

Submission to jurisdiction

13. In the present case there was a consent order allowing the 3^rd defendant to file his defence out of time.  This consent order was made pursuant to an application by the 3^rd defendant to file his defence out of time.  The judge held that by applying for such an order the 3^rd defendant evinced an intention that he intended to submit himself to the jurisdiction of the Hong Kong courts.  The judge may well be wrong on this issue but this would not assist the 3^rd defendant because the judge then proceeded to consider the principles set out in the El Amria. 

Bill of Rights

14. The 3^rd defendant also argued that the requirement of leave to appeal for a litigant in a District Court action is in breach of the equality provision of the Hong Kong Bill of Rights (Article 22) by which Basic Law is also engaged.  Litigants in the Court of First Instance of the High Court is not met with the same requirement.  In our view the fact that equality before the law is guaranteed by the Bill of Rights and the position for litigants is different in the High Court does not mean the equality provision is breached.  If a matter falls within the jurisdiction of the District Court then the District Court will be the proper forum for the determination of that matter.  The leave requirement imposed by the District Court Ordinance applies to litigants that invoked the District Court jurisdiction.  The 3^rd defendant being one of those litigants would have to observe the same procedure as the other litigants who invoked the District Court jurisdiction.  Equality is observed.  A comparison with the High Court is not appropriate.

Conclusion 

15. In the circumstances we will dismiss the application for leave to appeal with no order as to costs.