MEDISELL MEDICAL INSTRUMENT CO LTD v. SANYOU INTERNATIONAL (GROUP) CO LTD

DCCJ1778/2006

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 1778 OF 2006

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D E C I S I O N

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1.  The defendant applied by summons to set aside the service of the writ, in the same summons, the defendant applied, in the alternative, a stay of proceedings pending a trial in the Shenzhen court in the PRC.  The application was dismissed on 12 October 2006. 

2.  At today’s hearing of application for leave to appeal, the defendant’s grounds of appeal set out in his summons for leave to appeal of 25 October 2006 are that I have failed to consider the effect of the Chinese share purchase agreement dated 6 November 2004 between the plaintiff and Mr Liu Xiao-min or that I have failed to consider the effect of the repudiation thereof on the alleged liability of the defendant to the plaintiff.

3.  Both grounds of appeal are in fact defences of the defendant rather than an appeal for the setting aside of the refusal to stay proceedings pending trial in Shenzhen or to set aside the writ of summons issued by the plaintiff.  As stated in my Decision and Reasons for Decision on 12 October this year, the basis of an application for stay of proceedings pending trial in a different forum or setting aside the service of the writ of summons in favour of a forum conveniens under Order 12 rule 8 is whether the contract between the plaintiff and the defendant contains an exclusive jurisdiction clause.

4.  Mr Tsang, counsel for the defendant, submitted today that subsequent agreements to the 2 December 2002 agreement such as  the 6 November 2004 agreement provided for the application of the  sum of US$50,000, they are the subject of these proceedings taken out by the plaintiff.  The 6 November 2004 agreement was entered between Mr Chen Chu-hong, Alvin and Mr Liu Xiao-min.  Paragraph 6 of that agreement, made references to the US$50,000 being applied in the purchase of the shares into another mainland company, the Dalian “長通心血管介入公司”.

5.  Mr Tsang also referred to Clause 9 of that contract which has a jurisdiction clause that can loosely be translated as “Failing negotiation, any one of the parties may take up proceedings at the Shenzhen’s People’s Court.”  Mr Tsang agreed that the word that appeared in Clause 9 “可” is translated as “may”. 

6.  Mr Tsang further submitted that should one of the parties of the 6 November 2004 agreement take up proceedings in Shenzhen, the forum conveniens of these proceedings would be in Shenzhen.  That, I understand, is the basis of Mr Tsang’s argument.

7.  Mr Tsang further submitted that my interpretation of Clause 5 of the 2 December 2002 transfer of share agreement was incorrect.  Clause 5 can be loosely translated as “Failing negotiation, (i.e. of the settlement of disputes) to take up proceedings at the Shenzhen People’s Court.”  Mr Tsang further submitted, it means there is exclusive jurisdiction in the Shenzhen court. 

8.  I have given full reasons in my decision on 12 October 2006 which I shall not repeat here, save that I did find Clause 5 of the 2 December 2002 agreement not an exclusive jurisdiction clause.   Unless the agreement contains a clause that goes something like this, “All proceedings concerning this contract shall be brought in the Shenzhen People’s Court”, I am not persuaded Clause 5 is such a clause, nor did Clause 5 provide the only Court with jurisdiction over the contract to be the Shenzhen Court.

9.  As to Clause 9 of the 6 November 2004 contract, it is even more liberal in its terms.  It simply gave the option that one party “may” take out proceedings in the Shenzhen’s People’s Court.  It is even further from the exclusive jurisdiction clause requirement.

10.  As to whether Shenzhen is a convenient forum, I had also dealt with this aspect in my decision on 12 October 2006.  I do not wish to speculate if the parties to the 6 November 2004 contract would choose to take up proceedings in Shenzhen.  I notice the 6 November 2004 contract was entered between Mr Chan and Mr Liu.  Mr Chan was named as the legal representative of the plaintiff’s company in the 2 December 2002 agreement.  He had also made it plain in his affirmations filed in these proceedings that he considered the Hong Kong courts to be the proper forum.  It is unlikely that he will start proceedings in Shenzhen even though he was given an option under Clause 9 of the 6 November 2004 agreement.  While Mr Liu was described as one of the two transferors in the 6 November 2004 agreement, the other transferor did not sign or enter into this agreement with Mr Chen.  Neither Mr Chen nor Mr Liu signed as the authorised or legal representatives of the plaintiff company or the defendant company while the 2 December 2002 agreement was signed between the plaintiff company and the defendant company.  

11.  Even if Mr Liu choose to start proceedings under the 6 November 2004 agreement in Shenzhen, Mr Chan is unlikely to accept Shenzhen as the forum and he may very well resist any attempt to have the 6 November 2004 agreement tried in Shenzhen given the sentiments expressed in his affirmations in these proceedings.

12.  Even if I were wrong in my interpretation of Clause 5 and  Clause 5 is an exclusive jurisdiction clause, there are certain criteria that the Hong Kong courts have to take into consideration given the plaintiff has resisted the defendant’s application to stay these proceedings pending trial in Shenzhen.  In the reasons given in my 12 October 2006 decision, I have given considerations to whether Shenzhen is the more appropriate forum for trial or whether Hong Kong is the more appropriate forum on the basis that Clause 5 is an exclusive jurisdiction clause.  It is not disputed that the plaintiff and the defendant are both incorporated in Hong Kong; the defendant admitted to have a bank account in Hong Kong and the payment by the plaintiff to the defendant was made in Hong Kong; the payment was quoted in US Dollars.  Though some of the witnesses are located in Shenzhen, it will not be difficult for them to come to Hong Kong to give evidence.

13.  Therefore, as I stated in my decision before, I was not persuaded that these proceedings should be stayed.  I remain of the same opinion in spite of Mr Tsang’s submission today and, as I said, his grounds of appeal are issues of defence, including the various agreements subsequent to the 2 December 2002 agreement.  My decision was based on the two certificates promising to repay the overpayment by the plaintiff to the defendant and in a subsequent agreement between one of the shareholders of the plaintiff to one of the shareholders of the defendant.  Whether they are binding on the plaintiff company and the defendant company is a matter for the trial court.  It has nothing to do with whether Shenzhen should be the forum of trial unless both parties should consent to trial in Shenzhen. 

14.  The defendant may certainly raise any issues as to subsequent agreement and the application of the excess payment by the plaintiff to the defendant but these certainly are not the issues to decide whether Shenzhen is the exclusive jurisdiction for the action.

15.  I am not persuaded that the defendant has any prospects of success in the appeal.  Therefore, I dismiss the defendant’s application with costs to the Plaintiff to be taxed if not agreed.