MGM GRAND PARADISE LTD v. WONG SING WA

HCA 2140/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2140 OF 2011

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REASONS FOR DECISION

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1. This is an appeal against the decision of Master de Souza on 19 March 2012 granting summary judgment in the sum of $5,561,000 and interest against the defendant. In the hearing on 10 May 2012, I dismissed the appeal with costs and I now give my reasons.

Background

2. The plaintiff carries on the business of a licensed casino (“the Casino”) in Macau.  By a Marker Signing Privileges Application/Agreement dated 15 May 2008 (“the Loan Agreement”), the plaintiff granted to the defendant a line of credit for the sole purpose of enabling the defendant to engage in gambling activities in the Casino. It is the plaintiff’s case that the defendant has failed to make full repayment of the loan granted by the plaintiff to him pursuant to the Loan Agreement, and so the plaintiff commenced the present proceedings against the defendant to claim for the amount due under the Loan Agreement.

3. The writ was issued on 16 December 2011.  The defendant filed the acknowledgment of service on 4 January 2012.  The plaintiff issued the notice of intention to enter judgment on 9 January 2012.  On 31 January 2012, the defendant solicitors took out a time summons for extension of time to file the Defence.  On 14 February 2012, the court granted an unless order for the defendant to file the Defence, which the defendant did so on 20 February 2012.

4. The defendant pleaded, inter alia, the following averments in the Defence:

(i)  Hong Kong courts are forum non conveniens for the resolution of the dispute;

(ii)  the Loan Agreement is unenforceable in Hong Kong because it is illegal and against public policy; and

(iii)  if the defendant is liable for the sum claimed by the plaintiff, credit should be given to the defendant for the commissions and rebates entitled by him under the Loan Agreement.

5. The plaintiff filed the Reply on 28 February 2012.  The plaintiff then took out the application for summary judgment on 2 March 2012.  On 17 March 2012, the defendant filed the affirmation in opposition.  In the first hearing before Master de Souza, the learned Master granted summary judgment in favour of the plaintiff.  The defendant was not satisfied with the decision and filed the notice of appeal on 2 April 2012.

Merits of the appeal

6. Mr Poon, counsel for the defendant, only seeks to rely on one ground of appeal, that is the learned Master had not considered sufficiently or at all the forum non conveniens argument.  Despite Mr Poon’s able submission, I do not find that there is any merit in such challenge.

7. Firstly, the alleged forum non conveniens argument is a procedural objection.  It is certainly not a triable issue which goes to the merits of defence.  In relying on such procedural objection, the defendant has to comply with O 12 r 8 of the RHC in taking out an appropriate application to stay the proceedings, otherwise the defendant is deemed to have submitted to the jurisdiction of the court and he will be debarred from raising such procedural objection at a later stage of the proceedings.  As the defendant has failed to take out the forum non conveniens application in accordance with O 12 r 8, the learned Master was entitled to ignore such procedural objection in considering the summary judgment application.

8. The defendant has not taken out a forum application even up to this stage, and Mr Poon accepts that this was an oversight on the part of the defendant’s solicitors.  Despite that, Mr Poon relies on the decisions of Hwoo Huang Linda v Fu Being San & Ors, unreported, HCA No. 4888 of 2001 (decision of Reyes DHCJ, as he then was, on 10 April 2002) and Miruvor Ltd v Panama-Globe Lines SA & Ors [2007] HKEC 262 and submits that:

(i)  O 12 r 8 of the RHC does not provide the complete procedural regime for the application to challenge the jurisdiction of the court;

(ii)  a party does not submit to the jurisdiction if he merely acts to preserve the status quo pending the mounting and resolution of an application to challenge forum; and

(iii)  a party may be able to preserve an option to challenge forum, despite having engaged in conduct which may be regarded as submission to the jurisdiction, if before or at the time of such conduct he makes it clear that his action is without prejudice to the bringing of a challenge to forum.

9. Although the defendant has failed to take out a forum non conveniens application in accordance with O 12 r 8, Mr Poon argues that the defendant has raised the forum objection very early in the Defence and in the affirmation in opposition to the summary judgment.  Further, the other defences pleaded in the Defence are only subsidiary to the forum argument, and so the raising of those defences should not be regarded as conduct submitting to the jurisdiction of the Hong Kong court.  Upon the defendant’s undertaking to make a forum non conveniens application and to submit to the jurisdiction of the Macau court, Mr Poon submits that the court should not grant summary judgment in favour of the plaintiff.

10. However, Mr Poon has overlooked one important point.  O 12 r 8 was amended when CJR was implemented in 2009.  O 12 r 8 now reads as follows:

“(1) A defendant who wishes to dispute the jurisdiction of the court in the proceedings by reason of any such irregularity as is mentioned in rule 7 or on any other ground shall give notice of intention to defend the proceedings and shall, within the time limited for service of a defence, apply to the Court for –

… … …

(ga) an order staying the proceedings, or

… … …

(2) A defendant who wishes to argue that the Court should not exercise its jurisdiction in the proceedings on one or more of the grounds specified in paragraph (2A) or on any other ground shall also give notice of intention to defend the proceedings and shall, within the time limited for service of a defence, apply to the Court for –

(a) a declaration that in the circumstances of the case the Court should not exercise any jurisdiction it may have, or

(b) an order staying the proceedings, or

(c) such other relief as may be appropriate, including the relief specified in paragraph (1)(e) or (f).

(2A) The grounds specified for the purposes of paragraph (2) are that –

(a) considering the best interests and convenience of the parties to the proceedings and the witnesses in the proceedings, the proceedings should be conducted in another court.

(b) the defendant is entitled to rely on an agreement to which the plaintiff is a party, excluding the jurisdiction of the Court, and

(c) in respect of the same cause of action to which the proceedings relate, there are other proceedings pending between the defendant and the plaintiff in another court.

... … …

(7)  Except where the defendant makes an application in accordance with paragraph (1) or (2), the acknowledgement by a defendant of service of a writ shall, unless the acknowledgment is withdrawn by leave of the Court under Order 21, rule 1, be treated as a submission by the defendant to the jurisdiction of the Court of the proceedings.”

O 12 r 8(1)(ga), (2), (2A) and (7) were either amended or introduced in 2009 during the CJR exercise.

11. Obviously, the main object of the amendments is to remove the previous confusion in the law as to what conduct amounts to submission to the jurisdiction of the court.  The new O 12 r 8 therefore provides a single mechanism for dealing with all forms of challenges to the jurisdiction of the court, including setting aside the writ for lack of jurisdiction and staying the proceedings on the ground of forum non conveniens.  As the defendant has failed to comply with the mechanism in taking out the forum application in good time, he shall be treated as having submitted to the jurisdiction of the court pursuant to O 12 r 8(7).

12. This would have been sufficient to dispose of the appeal.  However, even if the defendant is allowed to raise the forum non conveniens objection at such a late stage, the defendant has failed to satisfy the burden of showing that Macau court is clearly and distinctly the more appropriate forum under Stage I of the inquiry under the Spiliada principles.

13. I do not propose to recite in detail the well-established principles for forum non conveniens applications laid down in the case of Spiliada Martime Corp v Cansulex Ltd [1987] AC 460 and summarised in Halsbury’s Laws of Hong Kong, vol 5(1A), 2011 Reissue, §90.0991 (see also: Johnston, The Conflicts of Laws in Hong Kong, §3.059). For the purpose of this appeal, the court only needs to focus on Stage I of the inquiry: whether it has been shown by the defendant that Hong Kong is not only not the natural and appropriate forum for the trial but there is another available forum which is clearly and distinctly more appropriate than Hong Kong.  The emphasis is upon “appropriate” rather than “convenient” because this is not simply a matter of practical convenience.  Several relevant factors for deciding upon the natural and appropriate forum for the action have been identified by the courts:

(i)  the law governing the transaction;

(ii)  the place where the parties reside or carry on business;

(iii)  the cost of the trial;

(iv)  the convenience of witnesses;

(v)  the place where the transaction giving rise to the litigation occurred;

(vi)  the relative ease of execution; and

(vii)  the avoidance of a multiplicity of actions.

14. The evidential burden of showing a more appropriate forum lies upon the defendant or the applicant for the stay.  The purpose is to identify the forum “with which the action has the most real and substantial connection”.  Failure by the defendant or the applicant at this stage means that the stay will be refused.

15. In seeking to establish that Macau court is clearly and distinctly the more appropriate forum, the defendant is relying on his following acknowledgement in the Loan Agreement:

“I agree Macau SAR exclusively governs the terms of the credit line, advances or credit instruments. I agree to submit exclusively to the jurisdiction of any court in Macau SAR. Notwithstanding, I acknowledge that [the plaintiff] may litigate any dispute involving the credit line, the debt, or the payee in any court, in another jurisdiction if, in its own judgment, litigation in Macau courts is foreseen to be fruitless or deemed inconvenient, provided that litigation is such other jurisdiction is not substantially and seriously inconvenient for myself.”

16. According to Mr Poon, the Loan Agreement is governed by the law of Macau.  Further, the said acknowledgement provides that the parties can only litigate outside Macau if both parties agree to do so.  Since the defendant refuses to litigate the dispute in Hong Kong, the appropriate forum to adjudicate the claim is the court in Macau.

17. I disagree.  It has been repeatedly emphasised in various judicial decisions that the Hong Kong courts are accustomed to deal with aspects of foreign law, and so the governing law of the Loan Agreement being Macau law is not an obstacle at all.  In Rambas Marketing Co LLC v Chow Kam Fai David [2001] 3 HKC 250, Mr Recorder Geoffrey Ma SC, as he then was, allowed a casino in Las Vegas to recover a debt under a gambling loan despite the governing law of the loan agreement being Nevada law.  In Wynn Resorts (Macau) SA v Mong Henry [2010] HKCU 379, Chu J, as she then was, analysed the Macau Credit Law in length and gave summary judgment to another Macau casino for the enforcement of a gambling loan agreement.

18. Further, the said acknowledgment provides that the plaintiff can litigate the dispute in jurisdictions outside Macau under certain provisio.  If the defendant seeks to dispute the application of the provisio with a view to challenge the jurisdiction of the Hong Kong court to adjudicate the claim, he has to firstly make the application under O 12 r 8(2) and (2A)(b), and secondly he has to bear the burden of proving why the provisio does not apply.  The defendant has simply failed to discharge such burden in the present case.

19. In my judgment, the defendant is just making a bare allegation that Macau court is the more appropriate forum without any substantive supporting evidence.  On the other hand, according to the evidence contained in the plaintiff’s affirmation in support of the summary judgment, the defendant holds a Hong Kong permanent identity card and he accepted service of the writ through an address in Hong Kong.  There is also nothing to show that the defendant resides or has any assets in Macau.  Hence, there is nothing to support the defendant’s allegation that Macau court is clearly and distinctly the more appropriate forum to adjudicate the claim.

20. Apart from the forum argument, the defendant is not relying on the other defences mentioned in the Defence and the affirmation in opposition.  In fact, the Hong Kong courts have allowed various casinos in Macau or elsewhere to recover similar debts from their clients on many occasions in the past, and Mr Lai, solicitor for the plaintiff, is able to include 23 such cases in his list of authorities.  In such circumstances, it is quite impossible for the defendant to argue that the Loan Agreement is not enforceable in Hong Kong.  The defendant also has not adduced any evidence to substantiate his claim on the rebates and the commissions.  Hence, there is no merit in these other defences.

21. In the defendant’s affirmation in opposition filed on 17 March 2012, he has indicated that he would like to file a further affirmation in support of his defence.  However, since the defendant has not taken out a forum application in accordance with O 12 r 8 and there is no merit in the other defences pleaded in the Defence, I do not see how the filing of further affirmation can assist the defendant’s case except to delay the proceedings.  Hence, the learned Master was right in granting summary judgment in favour of the plaintiff and I therefore dismissed the appeal with costs.