CHOW FU HSIEN v. K VISION INTERNATIONAL INVESTMENT (HK) LTD

HCA 2884/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2884 OF 2004

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J U D G M E N T

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Introduction

1.  This is an appeal from a decision of Master Au Yeung who declined to stay this action on the ground that Hong Kong is forum non conveniens.

2.  The action is brought by the Plaintiff who seeks a declaration against the Defendant, based on a Deed of Trust, that the Deed is valid and subsisting and that the Defendant should account to her for her share of income and profit, alternatively damages in respect of the subject matter of the Deed which concerns a joint venture project at Beijing to build a commercial complex there by the name of Celebrity Plaza.

The Nature of the Joint Venture

3.  In the course of 1994 the Defendant, which is a Hong Kong company, entered into joint venture with a PRC company called China Beijing Residential Development Construction Holdings to build Celebrity Plaza.  At about this time the Defendant, through one of its directors, Mr Qu Hong agreed with the Plaintiff, who has much expertise in this type of joint venture construction project in the PRC, that in consideration for her professional expertise and services, the Defendant would hold 35% of its share in the joint venture on trust for her benefit.  This was reduced into writing in 1998 in the form of Deed of Trust and signed by Mr Qu and a Madam Lam Yin, as directors of the Defendant, on the Defendant’s behalf and by the Plaintiff herself.  [The Deed is at page 3 of the Bundle and in translation starts at page 6A.]

4.  The building project was, I am told, completed in 2004 following which the Plaintiff’s then solicitors wrote to the Defendant’s solicitors asking for payment out to her of her share of profit and income as provided for in the Deed.  The Defendant refused to acknowledge the Plaintiff’s entitlement, hence this action by her to secure a declaration and thereafter an account of profit and income due to her.

Other Proceedings

5.  There are a number of actions currently afoot which have been set out in Mr Qu’s affirmation dated 21 January 2005 [page 10].  Also awaiting trial is a winding-up application against the Defendant brought by a number of creditors including this Plaintiff which will be heard by Kwan J in January next year.  I am told that it is based on non-payment of debts as well as on the basis of oppressive conduct by the majority shareholders against the minority.  Finally, I should also mention, because this will impact on the decision that I have to make on this appeal, that Beijing K Vision, which is the name of the joint venture company in which the Defendant is a shareholder, is in the process of being liquidated.  The Beijing Commerce Bureau, which is a government appointed body, has placed the affairs of the joint venture company for the purpose of its liquidation into the hands of a liquidation committee.  And so this is how the matter currently lies.  I should also mention one other matter which is that in this action the Plaintiff intends to seek summary judgment against the Defendant, which application has been adjourned to await the outcome of this appeal.

The Argument

6.  As one might expect counsel are agreed as to the relevant principles which govern an application of this sort.  The law is to be found in the speech of Lord Goff of Chievely in Spiliada Maritime Corporation v Cansulex Ltd [1987] AC 460.  Mr Wong for the Defendant (the Applicant) has helpfully set out the principles in summary form which appear in the current edition (14^th) of Dicey, Morris and Collins: The Conflict of Laws.  I gratefully adopt this summary here:

“	(1)	In general the legal burden of proof rests on the defendant to persuade the Court to exercise its discretion to grant a stay.
	(2)	If the Court is satisfied by the defendant that there is another available forum which is clearly more appropriate forum for the trial of the action, the burden will shift to the claimant to show that there are special circumstances by reason of which justice requires that the trial should nevertheless take place in Hong Kong.
	(3)	The burden on the defendant is not just to show that Hong Kong is not the natural of appropriate forum, but to establish that there is another forum which is clearly or distinctly more appropriate than the Hong Kong forum.
	(4)	The Court will look to see what factors there are which point in the direction of another forum as being the ‘natural forum’, ie that with which the action has the most real and substantial connection.  These will include factors affecting convenience or expense (such as availability of witnesses) and such other factors as the law governing the transaction and the places where the parties reside or carry on business and also whether the claim is part of a larger overall dispute which would be damaged by being fragmented.
	(5)	If, however, the Court concludes that there is some other available forum which prima facie is clearly more appropriate, it will ordinarily grant a stay unless there are circumstances by reason of which justice requires that a stay should not be granted.
	(6)	A stay will not be refused simply because the claimant will thereby be deprived of ‘a legitimate personal and juridical advantage’, provided that the Court is satisfied that substantial justice will be done in the available appropriate forum.
	(7)	If the legal issues are straightforward, or if the competing forums have domestic laws which are substantially similar, the identity of the governing law will be a factor of rather little significance.”

7.  Mr Wong has, I think rightly, accepted that but for the relief sought, which is for an account, for reasons which I will need to explain in a moment, he would have had a virtually impossible task in persuading me to grant a stay.

8.  This action is, after all, about a declaration in respect of a Deed of Trust entered into in Hong Kong, signed by Hong Kong residents, the governing law of which are the laws of Hong Kong.  The Defendant being a party to the Deed is a Hong Kong company.  At this stage everything points to this court as the natural forum for the resolution of the question of whether “the Trust is valid and subsisting and binding on the Defendant …” and whether “… the Defendant is obliged to account to the Plaintiff the Plaintiff’s share … in Celebrity Plaza …” [para. 1 of the prayer of the Statement of Claim].

9.  Notwithstanding that the underlying subject matter of the trust, being the joint venture company’s construction of Celebrity Plaza at Beijing, Mr Au for the Plaintiff rightly submits that this is an action in personam based on the Trust Deed.

10.  Accepting the force of that argument, Mr Wong says that what really tips this matter in favour of the courts of Beijing and therefore in favour of a stay is that the relief sought is for an account.  This places the Plaintiff in very real difficulties, submits Mr Wong, because all the paper work and documents which are essential to the taking of an account are physically located at Beijing and in the possession of the liquidation committee which I have referred to.  Mr Wong’s submission comes to this; that this court will simply be unable to perform its task in arriving at a proper account without those documents, assuming for the moment that the Plaintiff gets her declaration.  This trial therefore is one that should be held before a court which will be able to call for the documents.  Whilst Mr Wong accepts that the concept of a trust was unknown to the laws of the PRC until recently, its court should not have any real difficulty in applying Hong Kong law to determine the validity or otherwise of the Trust Deed and thereafter, if the Plaintiff gets home on liability, will be infinitely better placed than this court to conduct the holding of an account for the reasons which I have already referred to.

11.  Mr Au has made a number of points as to why the application is a hopeless one, to use his language.  Firstly, he says that overwhelmingly this is a Hong Kong case for the reasons that I have already summarised and, in this regard I consider that he is correct.  Replying to Mr Wong’s principal point that the documents that will be required for an account are physically located at Beijing and under the custody and control of the liquidation committee, Mr Au submits that it is much too early to be considering any potential difficulties as to access to such documents.  Once this court determines the validity of this Hong Kong Trust Deed, applying its governing Hong Kong law, it will then go on and direct an account to be taken.  The process by which this is done is set out in Vol. 2 of the current edition of Bullen and Leake 46-01 which is in these terms:

“Although accounts were sometimes ordered in the common law courts, the remedy of an account is chiefly the creation of the courts of equity.  By an order for an account, the court compels the defendant to produce the documents and records of his dealings with the relevant property and explain such dealings by sworn witness statement.

The essential feature of the cause of action for an account is that the defendant is an ‘accounting party’, someone who is or has been in such a relation to the claimant that he is obliged to render an account.  Such a person may be an agent, a broker, a trustee, or a person who has rendered himself liable to account as a constructive trustee by reason of his dealings with property the subject of a trust or fiduciary obligation.  The circumstances in which an account may be ordered are almost infinitely variable.”

One can see therefore that once the account is taken the burden will be on the losing Defendant to produce the necessary documents and records.  Mr Au says that Mr Wong’s evidence is grossly deficient.  Although, Mr Qu affirms that the papers are with the liquidation committee he does not say that the Defendant does not have copies, nor that copies will not be made available by the committee.  At this stage therefore, Mr Au submits, that there is no reason to think that once ordered to produce the record by this court that the Defendant will not be able to do so particularly now that Hong Kong civil judgments are recognised and reciprocally enforceable in the PRC.  The Defendant will be able to go to the relevant court at Beijing and show what its obligations are under a judgment ordering an account and therefore seek that court’s assistance to obtain the documents required for the taking of an account in Hong Kong.

12.  In my judgment, Mr Au’s analysis is the correct one.  Firstly, overwhelmingly a Hong Kong case on the issue of liability and thereafter no compelling evidence that this court will not be able to obtain due performance by the Defendant of any account that it requires from it.

Other Reasons for Refusing a Stay

13.  Mr Au has also pointed to two further reasons why the application should be refused.  Firstly, because the applicant has not indicated which court is the more appropriate forum to this court.  He submits that it is insufficient to merely indicate the location of the suggested court, in this case Beijing.  He supports this proposition by reference to the Court of Appeal’s decision in Greenwood Ltd v Pearl River Container Transportation Ltd, CACV 27/1994 unreported.  In that case the Defendant had suggested that the trial should take place before a Chinese court, but never suggested in which particular court this should be.  All three Justices, Power VP and Nazareth and Litton JJA’s (as they then were) held that this was simply not sufficient and what was required was that the Plaintiff and the court should know with precision which particular court was the more suitable forum.  For this and for other reasons, which are not relevant to this matter, they declined to order a stay.  This point is further explained in “The Conflict of Laws in Hong Kong” by Graeme Johnston at 3.061 page 107 to identical effect.

14.  Secondly, the applicant for a stay should also identify its defence with sufficient particularity to demonstrate a real issue requiring resolution between the parties.  If there is no bona fide defence then a challenge based on forum non conveniens grounds will fail.  See “The Conflict of Laws in Hong Kong” at 3.062 (ibid).  This proposition comes from a series of English cases being Adria Services YU v Grey Shipping Co. Ltd (Folio 212/1993, unreported, Bank of Credit and Commerce Hong Kong Ltd v Sonali Bank (1995) 1 Lloyd’s Rep. 227 and Standard Chartered Bank v Pakistan National Shipping Corporation & Ors (1995) 2 Lloyd’s Rep. 365 — all of which were applied in Hong Kong by Stone J in Bayer Polymers Co. Ltd v ICBC, Hong Kong Branch (2000) 1 HKC 805.

15.  In this matter, Mr Au correctly observed that nowhere in the evidence has the Defendant indicated its defence or the issues that it proposes to raise which are said to give rise to an arguable defence, which is all that is required.

Conclusion

16.  For all these reasons I am satisfied that no stay should be granted.  This matter should be tried in this court.  The Master was right to have refused the application with the consequence that this appeal must stand dismissed with costs.

17.  In the event of my having ruled as I have just done the parties have asked me to make further directions as to the conduct and hearing of the Plaintiff’s application for summary judgment. 

	They are these:
(1)	The Defendant do file within 28 days from today its affirmation in opposition to the Plaintiff’s Order 14 application;
(2)	The Plaintiff do file and serve its reply thereto within 14 days therefore;
(3)	No further affirmations without leave;
(4)	The hearing of the Order 14 application be fixed with a 3½ hour estimate.