NAN TUNG BANK LTD., ZHUHAI v. WANGFOONG TRANSPORTATION LTD.

HCCL176/1997

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL LIST NO.176 OF 1997

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J U D G M E N T

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The Application

1. This is an application by the Defendant herein, by summons dated 3rd December 1997, for a stay of these proceedings on the ground of forum non conveniens.

2. Before turning to the arguments, I should, I think, advert briefly to the factual background against which this application is mounted.

The Factual Background

3. This case is larded with considerable detail in terms of the evidence which has been filed, but, at bottom, the broad sequence of events is tolerably clear.

4. The Plaintiff is a bank in Zhuhai, PRC. It has invoked the jurisdiction of the High Court of the Hong Kong SAR in these proceedings against the Defendant, a Hong Kong company. In its Points of Claim attached to the Writ, filed herein on 30th September 1997, the Plaintiff maintains that it is the indorsee and holder of 33 bills of lading representing various types of electronic goods, which bills of lading were negotiated for value by one Zhuhai Gree AV Corp. Limited ("ZGAV"). The Plaintiff's complaint is that the Defendant, the carrier named on the bills, undertook to carry the goods from Zhuhai to Hong Kong and to make delivery of the goods against presentation of the respective bills of lading. To the contrary. What happened in fact is that the Defendant released the goods to a company known as Win Bright Enterprises Co. Ltd. ("Win Bright") without production of the original bills of lading, and the Plaintiff, as holder and indorsee of the bills, asserts consequential loss and damage in terms of the face value of the goods covered by the 33 Bills, namely HK$19,623,494.90.

5. As I understand the position, the Defendant does not contest that it carried the goods from Zhuhai to Hong Kong, nor that it effected delivery in each instance to other than the holder of the respective bills of lading, that is, to Win Bright. However, what it says is this. The manufacturer and shipper of these electronic goods, ZGAV was part of a joint venture with Win Bright, together with a Chinese party, since 1982; in effect, I suppose, Win Bright was to be at the Hong Kong selling end of ZGAV's Chinese manufacturing. In any event, a Mr William Law was an instrumental figure in the management both of the business of ZGAV and of Win Bright. And what had been happening, for the past couple of years at least, was that the Defendant had been carrying goods down the Pearl River to Hong Kong for ZGAV and Win Bright, but, and here I quote from the 1st Affirmation of Mr Szeto leading the application,

"... Because of the very close relationship between ZGAV and Win Bright, and the fact that William Y.M. Law was in fact managing the business of both ZGAV and Win Bright, the Defendant accepted the request made by ZGAV and Win Bright and allowed Win Bright to take delivery in Hong Kong without demanding the original delivery orders."

It is further alleged that although the delivery orders bore the title "Bill of Lading", they were not intended to be documents of title in terms of the goods described therein and, moreover, that the originals of the 'delivery orders' were largely kept by ZGAV and never returned to the Defendant.

6. So far as the Defendant was concerned, inquiries from the Plaintiff in Zhuhai asking for the whereabouts of the goods the subject of the 33 bills of lading the focus of the present proceedings began in August 1997, when the Defendant received the Writ commencing this action. The Defendant avers that since the start of these proceedings it has discovered the existence of a "long relationship" between ZGAV and the Plaintiff, and that although the Plaintiff bank was aware of ZGAV's financial difficulties, the Plaintiff nevertheless continued its financial exposure to ZGAV. Moreover, says the Defendant, the provision of finance by the Plaintiff to ZGAV was and is irregular in that, for each tranche of monies advanced, the Plaintiff accepted as security 'delivery orders' which were some months' old (including the acceptance as security of the 33 documents the subject of the present proceedings), and that in so acting the Plaintiff was infringing certain Chinese commercial laws, in particular that the Plaintiff continued to grant loans exceeding its lawful investment limit, that the Plaintiff was in breach of Articles 3, 4 and 35 of the PRC Commercial Bank Law, and that the pledges of such 'delivery orders' were void and that civil liability accrued to the Plaintiff and Win Bright under Articles 58 and 106 of the PRC Civil Law and Article 5 of the PRC Security Law.

7. I am told by Mr Winston Poon, S.C., who appeared for the Defendant on this application, that in addition to the 33 'delivery orders' in question, the Plaintiff was holding another 364 such 'delivery orders', and as a consequence Chinese proceedings have been commenced by the Defendant herein in the Guangzhou Maritime Court in Civil Writ No.97WC261. I have been supplied with a copy of a translation of this Writ, which I am told was issued in March 1998, in which Win Bright ("Defendant 1"), ZGAV ("Defendant 2") and the present Plaintiff ("Defendant 4") are, together with Zhuhai Gree Group Company ("Defendant 3") sued for an order declaring that the negotiations of 33 bills of lading by Defendants 1, 2 and 4 are void, an order that Defendants 1 and 2 return the 33 bills of lading to the Plaintiff (that is, the present Defendant), and an order that Defendant 3 shall be jointly liable for the unlawful negotiation of the said 33 bills of lading by Defendants 1 and 2, together with a claim for costs against all four defendants.

8. It is not entirely clear why, as a matter of chronology, the Defendant saw fit to commence its proceedings in Guangzhou when it did, that is, some five to six months after being served with the present proceedings in Hong Kong, although in his 4th Affirmation in support of the stay application, Mr Szeto Yuen Kim notes as follows (at page 3, paragraph 5) :-

"I verily believe that compared to the present proceedings instituted by the Plaintiff in Hong Kong, the PRC proceedings instituted by the Defendant more comprehensively covered all the issues and the full picture of the case could be unveiled in the course of such proceedings. If the PRC Court accepts the claims of the Defendant, no issue will arise on the alleged wrongful delivery of goods by the Defendant."

9. As to these Guangzhou proceedings, I am told also that the Plaintiff herein (the 4th Defendant before the Guangzhou Maritime Court) has objected to the jurisdiction of the Guangzhou Maritime Court, an objection which was dismissed by that Court in a ruling dated 8th September 1998, a translation of which ruling is before me, and in which the Court observed as follows :-

"... In this case, the legal action as instituted by Wangfoong on the ground that Win Bright, ZGAV and Nan Tung Bank had collaborated and had asserted rights against Wangfoong based on 33 stale bills of lading thus infringing Wangfoong's legitimate rights and interests is a case of maritime disputes arising from tortious acts. The tortious acts concerned took place in Zhuhai and this Court has jurisdiction over the case. In terms of parties, object and subject matter of the case, this lawsuit is different from the lawsuit instituted by Nan Tung Bank in the Hong Kong court and Nan Tung Bank's contentions that the subject matter of this lawsuit and that of the said lawsuit instituted in Hong Kong are the same and that this lawsuit is a counterclaim to that lawsuit are all not tenable. As such, this Court does not support the jurisdiction objections in respect of this lawsuit as raised by Nan Tung Bank and Gree Group."

10. I have been informed that an appeal against this decision overruling the jurisdictional objections is presently pending.

The Argument

11. Mr Winston Poon, S.C., on behalf of the Defendant, accepts the principles outlined in Spiliada Maritime Corp. v. Cansulex Ltd. [1987] AC 460 at 476C-478E. He says that the Guangzhou Maritime Court is clearly more appropriate for the trial of this action, that is, in the interests of all parties and the ends of justice, and that the Guangzhou litigation "embraces the issues raised in these proceedings". Mr Poon asserts that "my defence here will be my claim there", and that "if the Defendant fails in Guangzhou, this action will revive". Accordingly, he asks in terms for the present action herein to be stayed pending the conclusion of the hearing in the Guangzhou Maritime Court.

12. However, Mr Poon does not run this case on the basis of lis alibi pendens as such -- the Guangzhou proceedings are "simply an additional factor" to be considered, and he maintains his argument under accepted forum non conveniens principles. In this context, I have had the considerable advantage of a detailed skeleton argument wherein Mr Poon amplifies the main thrust of his submissions, namely, that PRC law governs all transactions, in particular that the 33 contracts of affreightment were not "bills of lading", that they were governed by PRC law and were non-negotiable, and that the circumstances in which the Plaintiff obtained the 33 'delivery orders' in question (involving loan contracts and security contracts) were all governed by PRC law, and in particular involved breaches of various articles of the Commercial Bank Law and the Civil Law, and, most importantly, that the pledges made were void and unenforceable as such, the Plaintiff not being the lawful holder of the alleged "bills of lading". Moreover, said Mr Poon, the principal parties involved were resident in the PRC or conducted business in Zhuhai, whereas the Plaintiff and ZGAV had no connection with Hong Kong, and a predominant number of witnesses and experts resided in the PRC, so that litigation on this subject matter could be conducted with substantially less inconvenience and expense to all parties concerned.

13. For the Defendant, Mr Benjamin Chain forcefully opposed this application. The Plaintiff had established jurisdiction over the Defendant company as of right, he said, and accordingly the Defendant bore a significant burden in applying to stay these proceedings. He submitted that the Plaintiff's arguments served to complicate and to confuse what was a fundamentally simple case : the Plaintiff was the indorsee of the bills of lading and the Defendant had misdelivered the goods. The Defendant was a Hong Kong company and there was no evidence that the bills in question were not the Defendant's standard documents, and that it was 'inconceivable' that the proper law of the contract of carriage in this case was not that of Hong Kong, Mr Chain relying in this connection upon the approach of the Court of Appeal in Century Yachts Ltd. v. Xiamen Celestial Yacht Ltd. [1994] 1 HKLR 385, wherein Litton, J.A. observed, at page 393 :-

"... In considering the question whether the parties intended by implication that the sales contracts should be governed by Hong Kong law, the test is what ordinary reasonable businessmen would have been likely to have agreed if their minds had been directed to the question. In my judgment, there can be no doubt what [the parties] would have said, before the dispute arose in this case. They would have said that Hong Kong law governed their contracts. It would have been highly improbable that they would have selected PRC law, having regard to the commercial realities of the matter."

14. And as for the Defendant's argument that the documents which were actually entitled "Bills of Lading" were not bills of lading as such, Mr Chain submitted that it was noteworthy that the Defendant's own case in the PRC Court appeared to be that these documents were indeed bills of lading; accordingly, the Defendant was running mutually inconsistent cases on the point, and in any event if these documents were just internal 'delivery orders' as was now alleged, there would have been no need for the consignee, Win Bright, to request delivery against production of separate letters of guarantee, such guarantees having been issued in each case by Win Bright to the Defendant. In this context, Mr Chain pointed to the content of the Civil Writ before the Chinese Court, in particular to Clause 4.8 thereof, which reads at Sub-Clause E as follows :-

"The reasons why the Plaintiff allowed Defendant 1 to collect the goods without production of the original Bills of Ladings are :-

.....

e. The voyage from Zhuhai to Hong Kong is short and frequently, the cargoes arrive before the Bills of Lading are received and the Consignee cannot collect the cargoes [when they arrive]. Therefore, using letters of guarantees to collect cargoes is a special feature of Zhuhai -- Hong Kong shipping practice."

15. The attention of the Court was also drawn to the wording of the particular letters of guarantee issued by Win Bright to the Defendant carrier, the substance of which reads :-

"Dear Sirs,

In consideration of your granting us delivery of the Undermentioned Cargo [details of vessel and cargo inserted] which cargo we declare to have been shipped to our consignment but the Bills of Lading for which have not been received, we hereby agree to surrender the said Bills of Lading duly endorsed immediately on receipt and guarantee to indemnify you and/or the owner of the said vessel against any claim whatsoever, which may be made by other party or parties on account of the aforesaid cargo, holding you and the owner immune from all consequences that may arise from your so doing, and undertake to pay you on demand any freight or other charges that may be due here or that may have remained unpaid at the port of shipment in respect to the above-mentioned goods.

We, the undersigned, hereby jointly and severally guarantee due performance of the above contract, and in the event of the documents for the cargo herein mentioned being hypothecated to any other bank or person, we further guarantee to hold you harmless from all consequences whatsoever arising therefrom."

16. The Defendant could not now be heard to say that these documents were not bills of lading, concluded Mr Chain, who asked for the dismissal of the application.

Decision

17. After reviewing the considerable amount of evidence and documentary material before me, together with the submissions of Counsel, I am bound to say that I have not changed my instinctive reaction to this case, namely, that it would be an odd state of affairs indeed if the Commercial Court of Hong Kong classified itself as forum non conveniens in a case involving the carriage of goods to Hong Kong by a Hong Kong carrier under a bill of lading arguably subject to Hong Kong law, and the misdelivery of those goods to a Hong Kong company against production of that company's letter of guarantee, which document is without doubt governed by Hong Kong law, and which itself may well be the focus of third party proceedings wherein the carrier pursues the appropriate contractual indemnity.

18. In my view it should also not be overlooked that the Spiliada approach requires the establishment not only of the existence of another "clearly or distinctly more appropriate" forum, but also the conclusion as to the inappropriateness of the existing forum; as Lord Goff crisply put it in Spiliada, op.cit., at 477E :-

"... In my opinion, the burden resting on the defendant is not just to show that England is not the natural or appropriate forum for the trial, but to establish that there is another available forum which is clearly or distinctly more appropriate than the English forum ..."

19. In my judgment, the Defendant/Applicant herein clearly fails to satisfy this threshold in this case. Whilst, as earlier observed, reliance is not placed by the Defendant on the now-commenced Guangzhou litigation as justifying an independent lis alibi pendens argument, nevertheless this litigation in the Guangzhou Maritime Court looms large in Mr Poon's submissions on the basis that the hearing of the case in that jurisdiction will, when taken overall, be more convenient in terms of the attendance of witnesses and/or in terms of the knowledge and application of PRC laws said to classify and govern the rights and obligations arising from that which is presently alleged, by the Plaintiff at least, to be an entirely straightforward case of misdelivery of goods at a Hong Kong wharf.

20. These Guangzhou proceedings may or may not continue against the present Plaintiff, depending upon the result of what I am told is the jurisdictional appeal. But I am disinclined, in the exercise of my discretion, to permit a Defendant, sued in Hong Kong as of right against the background of the matrix of facts outlined in this judgment, to order a stay of the existing Hong Kong litigation on the basis, in effect, of the existence of Guangzhou proceedings concerning the same 33 bills of lading, whatever may have been the motive for the subsequent commencement of these proceedings, although possibly this was the Defendant's concern about the 364 Bills of Lading apparently still in the possession of the Zhuhai Gree AV Corporation Limited ("Defendant 2") and the Zhuhai Gee Group Company ("Defendant 3"). Nor do I regard as sufficiently determinative in this instance such matters as the alleged applicability of Chinese law or the convenience of witnesses, although in this regard it would appear that the Defendant and Win Bright, as Hong Kong companies, presumably have witnesses readily available in Hong Kong.

21. Mr Chain maintains, in my view with considerable justification, that his client is entitled to come to this jurisdiction and to present its case, that the relief sought against the other parties sued by the Defendant in Guangzhou has little to do with his client, and that if the Hong Kong action proceeds in normal course, and is determined as such, the dispute between the present two parties will have been duly resolved and that there is therefore no reason whatever why the Hong Kong action should now be ordered to await the Guangzhou determination, whenever this may be.

22. In my view, this approach is correct. However preferable or convenient it may seem to the Defendant, or indeed to its legal advisers, whose views are also prayed in aid in support of this application, to stay the Hong Kong action and to continue only in Guangzhou, wherein it is perceived that it can more conveniently ventilate all of its arguments outlined to this Court, in my judgment it would be neither just nor proper in the circumstances to bring the present proceedings to a halt. If the result of this, therefore, is that proceedings continue in parallel in the two jurisdictions, with possible problems, adverted to by Mr Poon, S.C., attendant upon a multiplicity of proceedings, then so be it; this, it seems to me, is entirely the product of the Defendant going off and subsequently commencing the action before the Guangzhou Maritime Court, which Court, I note from the extract from its jurisdictional judgment reproduced herein, itself considers that the suit with which it is seized "is different from the lawsuit instituted by Nan Tung Bank in the Hong Kong court ...". Moreover, if the Court in this jurisdiction has to deal with matters of Chinese law, however such matters are to be pleaded, again so be it. If these issues are raised and established to be relevant, it will not be the first time that the Hong Kong Courts have had to deal with contentions based upon foreign law; indeed Mr Dicks, Q.C., S.C., whose eminence and expertise is prayed in aid by the Defendant on this application on matters of Chinese law, is no stranger to these Courts qua expert witness.

23. Accordingly, therefore, after weighing everything in the balance, and notwithstanding Mr Poon's persuasive arguments, it seems to me, in the exercise of my discretion, that this present action must be permitted to continue, and I so hold.

Order

24. It follows from the foregoing that the Defendant's application for a stay of proceedings by its summons dated 3rd December 1997 is dismissed. I make a costs order nisi that the costs of and occasioned by the application be to the Plaintiff, to be taxed if not agreed.