PO SUN LIU JAMES AND ANOTHER v. SHANDONG JIATAI PETROLEUM AND CHEMICAL CO., LTD AND OTHERS

HCA 1802/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1802 OF 2010

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J U D G M E N T

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1.  In this case it is common ground that there was a joint venture agreement between the 2^nd plaintiff and the 1^st defendant. According to the joint venture agreement there is a provision for arbitration in Singapore in all matters concerning with and arising out of this agreement. Between the plaintiffs and the 1^st defendant they have consented to the stay of the proceedings pending arbitration in Singapore. The other defendants who have been served with the writ, and they are the 2^nd, 3^rd, 4^th and 7^th defendants, applied to stay the proceedings pending the outcome of the arbitration in Singapore.

2.  Miss Elsie Yiu counsel for the plaintiffs opposed the stay and submitted that in respect of section C (paragraphs 30 to 41 of the Statement of Claim) there are distinct causes of action against the other defendants which should not be stayed.  They concerned with the payments of US$6,000,000 for the purchase of certain machineries and equipment for the use by the anticipated joint venture company.  The plaintiffs alleged that there was a misappropriation of these properties by the other defendants which amounted to breach of trusts and fiduciary duties, conspiracy to injure or causing loss by unlawful means and conspiracies to injure the economic interests of the plaintiffs by unlawful means.  However there are provisions in the joint venture agreement and evidence before the court that the joint venture contract was not even effective and had not come into force.  The joint venture company was not established and has never came into existence.  That, however, would be a matter to be decided in the arbitration proceedings.  Thus whether there is any effective contract or joint venture company established will give rise to different basis of these causes of action. 

3.  Mr Jeremy Chan for the other defendants submitted that if there is no effective contract or company in existence, then it will be a case of restitution, unjust enrichment or certain purpose trust which failed.  There is also another question of what law would apply.  (There is a provision that the contract is governed by the Mainland law and then it will be another consideration as to whether the action against the other defendants should be stayed on the ground of forum non conveniens.)  I accept the submissions of Mr Chan.  I consider that it cannot be said that there are distinct causes of action and they have nothing to do with the 1^st defendant. It actually hinged on the joint venture agreement and the joint venture company to be established. 

4.  There is of course another cause of action under section B alleging conspiracy involving the 1^st defendant. For this part it is quite clear that it cannot be said that it will be convenient, fair and just for the plaintiffs to sue the 2^nd, 3^rd, 5^th defendants without the involvement of the 1^st defendant. That will be another sets of proceedings or another trial involving the 1^st defendant. This conspiracy allegation involving the 1^st defendant should be tried in one trial and not two trials.  This section cannot be said to be independent on its own for the 2^nd, 3^rd, 5^th defendants, without the participation of the 1^st defendant.  It is, to say the least, inconvenient or even improper for the court to conduct a trial involving the 2^nd, 3^rd, and 5^th defendants and thereafter another trial after the arbitration proceedings with the 1^st defendant.

5.  As submitted by Mr Chan, if the 1^st defendant is alleged to be involved in this conspiracy they are entitled to serve contributory notice.  The trouble is the 1^st defendant will not be in this trial when the action of the plaintiffs are proceeding against the 2^nd, 3^rd and 5^th defendants. 

6.  For the aforesaid reasons I consider that the better course is to stay the other proceedings against the 2^nd, 3^rd, 4^th and 7^th defendants, pending the final determination of the arbitration proceedings. 

7.  The order I am making is :

“Without prejudice to the bringing of a challenge to forum by the 2^nd, 3^rd, 4^th and 7^th Defendants and /or any of their applications for stay on grounds of forum non conveniences or otherwise:‑

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(b) all proceedings against the 2^nd, 3^rd, 4^th and 7^th Defendants be stayed (whether under Section 16(3) of the High Court Ordinance (Cap. 4), the inherent jurisdiction, or otherwise) pending final determination of the 1^st Defendant’s Summons filed herein on 10^th June 2011;”

[Submissions on Costs]

8.  Order in terms of paragraph 1(b) of the Summons, i.e. costs of the Summons be to the 2^nd, 3^rd, 4^th, and 7^th defendants against the 1^st and 2^nd plaintiffs.