CHINA NATIONAL GEOLOGICAL & MINING (HK) LTD v. TIANJIN HOPETONE CO, LTD

HCA 1589/2018

[2020] HKCFI 2780

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1589 OF 2018

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DECISION

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1.  This is the application taken out by Tianjin Hopetone Co Limited (“the Defendant”) by summons dated 8 July 2020 for leave to appeal to the Court of Appeal from the Decision of this Court dated 24 June 2020 (“the Decision”) dismissing the Defendant’s application to set aside the order dated 26 July 2018 of Master Chow granting leave to China National Geological & Mining (HK) Ltd (“the Plaintiff”) to issue a concurrent Writ of Summons and to serve the same on the Defendant out of the jurisdiction

2.  The action concerns the Plaintiff’s claim for unpaid commission for sales agency services provided to the Defendant and calculated it 0.8% of the value of the transactions.

3.  The Plaintiff relies on 3 written agreements made in 2009, 2012 and 2015 (collectively “the Agreements”) under which the Plaintiff was appointed sales agent of the Defendant. Each of the Agreements contained a jurisdiction clause in the event of a dispute between the parties and an express provision for payment of agency fees.

4.  Although the rate of commission was not stated in the Agreements, it is the Plaintiff’s case that prior to the 2009 Agreement, the parties had orally agreed a commission rate of 0.8%.

5.  The background facts and the Court’s reasons and ruling on each of the issues raised are fully set out in Decision to which reference should be made.

The Defendant’s grounds of appeal

6.  Of the 3 grounds of appeal raised, the principal ground is the first.

(1) The Court erred in ruling that the Plaintiffhas shown a good arguable case that its claim comes within RHC O 11 r 1(d)(iv)

7.  The Defendant’s case is that the Agreements were signed as a result of the bribe offered by Zhu Bin (“Zhu”) the sole director and shareholder of the Plaintiff to Xu Jianhua (“Xu”) who at all material times was the chairman and legal representative of the Defendant. All 3 Agreements were said to have been brought into existence by Xu in 2016.

8.  At the core of the Defendant’s case is the stark proposition that as illegality vitiates the Agreements in their entirety (including the jurisdiction clauses), the separability doctrine has no application.

9.  The implications of the Defendant’s core submission are far-reaching. It would mean that a party (A) merely has to assert that the contract on which the claimant (B) relies was brought into existence as a result of bribery that, ipso facto, B is precluded from availing itself of the jurisdiction clause in the contract.

10.  The correctness of that submission caused the Court to consider the separability doctrine raised in a number of cases that are factually complicated and not easy to reconcile. The Court took the view that the proposition advanced was not supported by clear authority.

11.  It was thus necessary also to evaluate the relative merits of the parties’ case relating to the bribery issue and the existence of the Agreements, applying Lord Sumption’s reformulation of the effect of the “good arguable case” test in Brownlie.

12.  The Defendant’s criticism of the factual analysis is that the Court failed to take into account the evidence that the relevant approval for the use of the Defendant’s seal on the Agreements is not to be found in the Defendant’s internal records and that therefore the Court should have concluded that the Defendant had the better of the argument on its case of bribery.

13.  On the evidence filed by experts on PRC law, the Court concluded that Xu had ostensible authority to enter into the Agreements on behalf of the Defendant: see §§44-45 and 54 of the Decision. This coupled with the fact that the Agreements conformed with normal formal requirements was balanced against the bare allegation of bribery and the unsatisfactory state of the Defendant’s evidence in that regard that formed the basis of the Court’s conclusion in applying the Brownlie approach.

14.  Much is now made of the fact that the Court did not mention the evidence relating to the Defendant’s internal records concerning the use of its seal which largely come within the indoor management rule.

15.  If those internal records are of such significance, it is inexplicable that such evidence did not feature at the forefront of the Defendant’s case supporting its application to set aside the order of Master Chow. Rather, it was only adduced in its reply affirmation filed some 6 months later.

16.  The Court was also criticised for not stating reasons when deciding that it preferred the jurisdiction clause relied on by the Plaintiff (“the 2^nd jurisdiction clause”) over that put forward by the Defendant (“the 1^st jurisdiction clause”).

17.  Having reviewed my Decision on that issue, there is nothing that I can usefully add to what I have already stated.

(2) No serious issue to be tried

18.  The ex parte application was made on the basis of the Agreements which provided for payment of commission but which did not specify the applicable rate.

19.  It is said that because the claim was for commission calculated at 0.8%, the Plaintiff cannot depart from the case it had relied on at the ex parte stage and so cannot establish a serious issue to be tried. That argument was rejected for the reasons set out in §§66-70 of the Decision.

20.  Again, there is nothing I can usefully add to the reasons given from which I do not resile.

(3) Forum non conveniens

21.  As stated in §71 of the Decision, this issue does not even arise unless the jurisdiction clauses do not apply.

22.  In that event, the grounds now put forward by the Defendant are no different from what argued before the Court and addressed in §§72-84 of the Decision. 

Conclusion

23.  I do not consider that the Defendant has shown a reasonable prospect of success on any of the 3 grounds advanced for leave to appeal. Accordingly, the Defendant’s application is dismissed with costs.

24.  There is to be an order nisi of costs in favour of the Plaintiff with certificate for 2 counsel, such costs to be summarily assessed and payable forthwith. Directions will be given separately for summary assessment.