HIROMI OKADA v. TOMOHIRO OKADA AND ANOTHER

HCMP 2446/2017

[2018] HKCFI 2310

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2446 OF 2017

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J U D G M E N T

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Introduction

1.  By an Originating Summons dated 31 October 2017, subsequently amended on 6 November 2017 (“AOS”), the Plaintiff seeks at paragraphs 3 to 6 thereof the following substantive relief:

(1) A declaration that:

(a) the Plaintiff owns the beneficial interest, without any encumbrances or restriction of rights, in the 916,127,910 shares (“Shares”) of the 2^nd Defendant (“Company”) transferred from the Plaintiff to the 1^st Defendant by an Instrument of Transfer dated 14 August 2017;

(b) the following agreements/dispositions pertaining to the Shares are void/voided for undue influence and/or equitable mistake:

(i) 2 Share Management and Disposal Trust Agreements (“Trust Agreements”) both dated 23 May 2017;

(ii) 2 株式管理処分信託契約書both dated 23 May 2017; and

(iii) Instrument of Transfer dated 14 August 2017 (“Instrument of Transfer”);

(2)  an order that the 1^st Defendant do forthwith transfer the Shares to the Plaintiff or such person as she shall direct;

(3)  an order that the register of members of the Company be rectified by striking out the name of the 1^st Defendant as the legal owner of the Shares and inserting the name of the Plaintiff in his place as the legal owner of the Shares;

(4)  an order that the Plaintiff be authorized to give notice to the Registrar of Companies of the rectification made pursuant to the preceding paragraph.

2.  By a summons filed herein on 31 October 2017 (“Plaintiff’s Summons”), the Plaintiff seeks an order for interim relief in terms of paragraph 7, alternatively paragraph 8, of the AOS.

3.  Paragraph 7 seeks an order for interim relief until resolution of the AOS as follows (“Interim Relief”):

“ (a) The 1^st Defendant (whether by himself, his officers, employees, servants or agents or any of them or otherwise howsoever) be restrained from taking any steps to dispose of, encumber, diminish the value of, or otherwise deal with the Shares, and/or their traceable fruits and/or proceeds or any part thereof.

(b) Upon the undertaking of Kazuo Okada to comply with this order, Kazuo Okada and the 1^st Defendant (whether by himself, his officers, employees, servants or agents or any of them or otherwise howsoever) do forthwith take any and all necessary steps (including procuring the 2^nd Defendant to commence, pursue, or take steps in any legal action, whether in Hong Kong, Japan, or elsewhere) to:

(i) exercise their shareholding rights of the 2^nd Defendant to appoint the Plaintiff as a director of the 2^nd Defendant, pursuant to Article 77(A) of the Articles of Association of the 2^nd Defendant;

(ii) exercise their shareholding rights of the 2^nd Defendant to appoint Mr Kazuo Okada as a director of the 2^nd Defendant, pursuant to Article 77(A) of the Articles of Association of the 2^nd Defendant;

(iii) exercise their shareholding rights of the 2^nd Defendant to appoint the 1^st Defendant (or any other person he should nominate as his nominee) as a director of the 2^nd Defendant, pursuant to Article 77(A) of the Articles of Association of the 2^nd Defendant; and

(iv) exercise their shareholding rights of the 2^nd Defendant to remove Mr Makoto Takada and Mr Atsunobu Ishida as directors of the 2^nd Defendant, pursuant to Article 77(A) of the Articles of Association of the 2^nd Defendant.

(v) Procure the 2^nd Defendant, as owner of 67.9% of the shareholding of the Japanese company Universal Entertainment Corporation (“UEC”), to duly exercise the rights attached to such 67.9% shareholding in accordance with Japanese law, in order to call, attend, and vote at a general meeting of UEC for the purpose of:

(1) Removing all existing directors and auditors of UEC.

(2) Appointing new directors of UEC as follows:

• 4 persons to be jointly nominated by the Plaintiff and Mr Kazuo Okada;

• 2 persons to be nominated by the 1^st Defendant; and

• 3 independent professional managers to be approved by this Court and who shall directly undertake to this Court to act independently and impartially, as directors of UEC.

(3) Alternative to (2), appointing new directors of UEC as follows:-

• 3 persons to be jointly nominated by the Plaintiff and Mr Kazuo Okada;

• 3 persons to be nominated by the 1^st Defendant; and

• 3 independent professional managers to be approved by this Court and who shall directly undertake to this Court to act independently and impartially, as directors of UEC.

(4) Appointing new auditors of UEC as follows:-

• 1 person to be jointly nominated by the Plaintiff and Mr Kazuo Okada;

• 1 person to be nominated by the 1^st Defendant; and

• 1 independent auditor to be approved by this Court and who shall directly undertake to this Court to act independently and impartially, as auditor of UEC.

(c) Mr Kazuo Okada and the 1^st Defendant shall be restrained from exercising the voting rights attached to their respective shareholdings in the 2^nd Defendant in any way save as expressly provided for in this order.

(d) The Plaintiff, Mr Kazuo Okada, and the 1^st Defendant (or his nominee), upon being appointed as directors of the 2^nd Defendant, shall be restrained from procuring the 2^nd Defendant to do any act save for the purposes of carrying out this order or for complying with any statutory or regulatory requirement.

(e) The Plaintiff shall be authorized to give notice to the Registrar of Companies of the changes to the directors of the 2^nd Defendant made pursuant to (b)(i) to (iv) hereinabove.”

4.  Paragraph 8 seeks an order that the Interim Relief be granted in aid of earlier proceedings commenced by the 1^st Defendant on 27 September 2017 in the Tokyo District Court, Japan against the Plaintiff (“Japanese Proceedings”), pursuant to s 21M of the High Court Ordinance, Cap 4 (“HCO”), and RHC O 29 r 8A until the resolution of the Japanese Proceedings or further order.

5.  On 3 November 2017, the Plaintiff’s Summons first came before DHCJ Kent Yee. At that hearing, the 1^st Defendant gave an undertaking that, until the determination of the Plaintiff’s Summons or further order of the Court, he will not take any steps to dispose of, encumber, diminish the value of, or otherwise deal with the Shares, and/or their traceable fruits, and/or proceeds or any part thereof (for the avoidance of doubt, the 1^st Defendant is not restrained from exercising the voting rights attached to the Shares).

6.  In the 1^st Defendant’s skeleton submissions, Mr Hollander QC fairly accepted that the ring must be effectively and fairly held before determination of the substantive dispute in this action.  He also sensibly indicated there is no objection to the continuation of the 1^st Defendant’s said undertaking until the final determination of the AOS.

7.  By a summons filed herein on 1 March 2018 (“1^st Defendant’s Summons”), the 1^st Defendant seeks an order that all further proceedings in this action be stayed in favour of the Tokyo District Court pursuant to the exclusive jurisdiction clause contained in the Trust Agreements and/or on the ground of forum non conveniens.

8.  This is the hearing of the Plaintiff’s and the 1^st Defendant’s Summonses.

Background

9.  The disputes in this action involve members of the Okada family viz the Plaintiff, her elder brother ie the 1^st Defendant and their father Mr Kazuo Okada (“Father”).  The Plaintiff is 48 years old and is resident in Japan.  The 1^st Defendant is 2 years older and is also resident in Japan.  Father, on the other hand, resides in Hong Kong.

10.  The Company was incorporated in Hong Kong in September 2010.  According to its Annual Return as at 13 September 2016, the 4 shareholders of the Company and their shareholding were:

(1)  Father — 4,342,147,372 (46.3%);

(2)  The 1^st Defendant — 4,071,306,841 (43.4%);

(3)  The Plaintiff — 916,127,910 (9.78%);

(4)  Takako Okada (“Takako”)[1] — 33,386,126 (0.36%).

11.  The Company is an investment holding company and holds 67.9% of the shareholding in UEC, a company listed on the Tokyo Stock Exchange.  Father founded the predecessor of UEC back in 1969.  UEC is said to be a major player in the global gaming industry.

12.  Father was a director of the Company until 12 May 2017 when he was removed and replaced by Mr Makoto Takada and Mr Atsunobu Ishida.  Soon afterwards, on 23 May 2017, Father was suspended as Chairman of UEC.

13.  By a petition dated 7 June 2017 (“Petition”), Father commenced proceedings in HCMP 1324 of 2017 (“HCMP 1324”) under s 724 of the Companies Ordinance (Cap 622), on the basis that the affairs of the Company had been conducted in an unfairly prejudicial manner against him.  The Respondents to the Petition are the Plaintiff, the 1^st Defendant, Takako and the Company.  In the Petition, Father sought (a) to be reinstated as a director of the Company, (b) the removal of Mr Takada and Mr Ishida as directors and (c) an order to buy out the Plaintiff’s, the 1^st Defendant’s and Takako’s shares in the Company.  The 1^st Defendant defended the Petition on the merits and had filed a substantial affirmation in opposition, not just on his own behalf but also on behalf of the Plaintiff.  The Plaintiff herself has also filed an affirmation confirming the contents of the 1^st Defendant’s affirmation.

14.  By a summons dated 8 June 2017 issued in HCMP 1324, Father sought an order that:

(1)  the Plaintiff and the 1^st Defendant do forthwith issue notice in writing to the Company pursuant to Article 77A of the Articles of Association of the Company removing Mr Takada and Mr Ishida as directors of the Company, and appointing him as sole director until trial or further order; and

(2)  until trial or further order, the Plaintiff, the 1^st Defendant and Takako be restrained from exercising any rights that they hold under the Articles of Association of the Company, or otherwise, to remove or replace Father as sole director of the Company or appoint any person as a director of the Company.

15.  By a summons dated 26 June 2017, Father sought, in the alternative to the above, an order that until trial or further order, the Company be restrained from exercising its voting rights in its 67.9% shareholding in UEC, including in relation to UEC’s Annual Shareholders Meeting scheduled to take place on 29 June 2017.

16.  On 28 June 2017, Harris J dismissed Father’s both applications which were made on an ex parte on notice basis.  It stands to reason that the learned Judge did not consider it appropriate to grant interim mandatory relief to re‑instate Father as a director of the Company.  It also stands to reason that the learned Judge did not consider it appropriate to interfere with the current Boards of the Company or UEC at the interlocutory stage.

17.  On 29 June 2017, at UEC’s 44^th Annual General Meeting of Shareholders, it was resolved that the following 7 persons be appointed directors of UEC — Father was not among them:

(1)  Jun Fujimoto

(2)  Hajime Tokuda

(3)  Takako

(4)  Kenshi Asano

(5)  Seisui Kamigaki

(6)  Sadao Otani

(7)  Masayoshi Miyanaga

18.  On 26 September 2017, Harris J adjourned the Petition sine die by reason of the dispute over the ownership of the Shares between the Plaintiff and the 1^st Defendant.

19.  On 27 September 2017, the 1^st Defendant commenced the Japanese proceedings in the Tokyo District Court against the Plaintiff for a declaration that the Trust Agreements are valid and effective.  The Plaintiff contends that the Tokyo District Court has no jurisdiction over the matter and the Hong Kong Court is the appropriate forum for determining the 1^st Defendant’s claim.  The Plaintiff’s alternative position is that, if the present proceedings are stayed, she will make a counterclaim in the Japanese Proceedings to seek a declaration that the Trust Agreements are void and invalid and an order declaring that she is the sole legal and beneficial owner of the Shares.

The Parties’ cases

20.  On several occasions in March and May 2017, the 1^st Defendant requested the Plaintiff to sign various papers which had the effect of entrusting the Shares to the 1^st Defendant and effected a complete change to the Company’s board of directors:

Date	Document	Language and number of pages	The Plaintiff’s signature
2.3.2017	株主間契約書between the Plaintiff and the 1st Defendant	Japanese (3 pages)	Signed in Japanese and sealed
2.3.2017	株式管理処分信託契約書between the Plaintiff and the 1st Defendant	Japanese (6 pages)	Signed in Japanese and sealed
12.5.2017	Two notices of appointment appointing Mr Makoto Takada and Mr Atsunobu Ishida as directors of OHL (“Notices of Appointment”)	English (2 pages)	Signed in English only
22.5.2017	合意解約契約書 (of the Share Management and Trust Disposal Agreement) dated 2.3.2017	Japanese (14 pages)	Signed in Japanese and sealed
23.5.2017	The Trust Agreements and 2 株式管理処分信託契約書between the Plaintiff and the 1st Defendant	Japanese (10 pages each) and English (10 pages each) – altogether 40 pages	Signed in Japanese in front of a Japanese notary public and sealed
14.8.2017	The Instrument of Transfer for transfer of the Shares from the Plaintiff as beneficiary to the 1st Defendant as nominee at nil consideration	English (1 page)	Signed in both English and Japanese without seal

21.  For the present purpose, one needs only focus on the Notices of Appointment dated 12 May 2017, the Trust Agreements and 2 株式管理処分信託契約書 dated 23 May 2017 and the Instrument of Transfer dated 14 August 2017 (“Subject Documents”) which admittedly bore the Plaintiff’s signatures and which she now seeks to impugn.

22.  The Plaintiff recalls meeting the 1^st Defendant on four occasions: 2 March 2017, 2 May 2017, 11 May 2017 and 23 May 2017.  Each time she was asked to sign documents in the following circumstances:

(1)  She was not given any time or means to understand the documents, or was positively misled by the 1^st Defendant as to the nature and effect of the documents.

(2)  She was not given any explanation of the nature or content of the documents.

(3)  She was not provided with independent legal advice.

(4)  She believed the 1^st Defendant would at all times act in her family’s and her interests.

(5)  She acted on the complete trust and confidence she reposed in the 1^st Defendant and his legal representatives.

(6)  She was not given a copy of the documents signed.

23.  As far as the three meetings in May 2017 are concerned:

(1)  On 2 May 2017, the 1^st Defendant suddenly contacted the Plaintiff and said she had to sign some papers.  When the two met for that purpose in Naru Shiobara station, the 1^st Defendant told the Plaintiff that he had to rush back to Tokyo.  He asked her to sign a few pieces of paper in a rush and did not explain their content or nature.  She did not understand what was happening and had no idea what the papers were.

(2)  On 11 May 2017, the 1^st Defendant visited the Plaintiff at her home in Nasu and asked her to sign some papers. The 1^st Defendant again appeared to be very hurried and left after 10 minutes.  He did not explain to the Plaintiff what the documents she was signing.

(3)  On 23 May 2017, the Plaintiff went to Tokyo and met the 1^st Defendant at Tokyo station at his request.  During their 5‑minute car ride to the Notary Public Office, the 1^st Defendant told the Plaintiff in a very serious manner that UEC faced a serious situation and unless she signed some documents, UEC could come to an end.  At the Notary Public Office, two lawyers representing the 1^st Defendant placed before the Plaintiff a lot of documents (most of which were in English) and hastily showed her the signing pages.  The Plaintiff duly signed them in the belief that they could save UEC.

24.  The Notices of Appointment had the effect of appointing Mr Takada and Mr Ishida to the Company’s Board.  On 12 May 2017, the 2 new directors issued a notice to Father informing him that he was removed as a director of the Company with immediate effect.

25.  On the face of the Trust Agreements, which the Plaintiff presumably signed on 23 May 2017, she (as settlor and beneficiary) transferred her Shares to the 1^st Defendant (as trustee) on trust.  The relevant terms of the Trust Agreements have the following effect:

(1)  The Plaintiff is bound by an irrevocable trust for 30 years, during which time the 1^st Defendant may at his discretion:

(a) exercise the voting rights pertaining to the Shares (Article 7(1)); and

(b) dispose of the Shares (Article 8(1)).

(2)  The Plaintiff has no right to give instructions to the 1^st Defendant in respect of the exercise of the voting rights or regarding the disposal of the Shares (Article 7(2) and 8(2)).

(3)  The 1^st Defendant as trustee is not liable for any damage or the like caused by his disposal or non‑disposal of the Shares (Article 8(2)).

(4)  The Plaintiff may not transfer, pledge or dispose of her beneficial interest in the Shares without the 1^st Defendant’s prior written consent (Article 10(1)).

(5)  The 1^st Defendant may carry out acts that create a conflict of interest in accordance with the provisions of the Trust Agreements if it is necessary in order to achieve the purpose of the Trust Agreements (Article 5).  The purpose of the Trust Agreements is stated to be (i) preventing damage to the value of the Company and (ii) seeking to maximize the profit of the Company (Article 1).

26.  Importantly, Article 22 of the Trust Agreements provides that the governing law is the laws of Japan while Article 23 is an exclusive jurisdiction clause in favour of the Tokyo District Court.  For ease of reference and in view of their importance, they are set out in full here:

“ Article 22 Governing Law; Language

1. This Trust Agreement is governed by and construed in accordance with the laws of Japan.

2. This Trust Agreement is executed in the Japanese language and in the English language, each in duplicate…. If there is a discrepancy between the Japanese‑language version and the English‑language version, the Japanese language version will prevail.

Article 23 Jurisdiction (“exclusive jurisdiction clause”)

Any dispute arising from or in connection with this Trust Agreement will be submitted to the exclusive jurisdiction of the Tokyo District Court as the court of first instance.”

27.  The Instrument of Transfer effected the transfer of the legal title of the Shares from the Plaintiff to the 1^st Defendant. The Plaintiff cannot recall when she signed this document.  The 1^st Defendant’s evidence is that the document was undated when he arranged for the Plaintiff to sign it on 14 June 2017.

28.  The Plaintiff only received copies of the Subject Documents from the 1^st Defendant’s legal representatives on 2 October 2017 upon her request, save that the Instrument of Transfer was obtained by Father’s legal representatives from the Companies Registry.

29.  At the suggestion of this court, after the hearing, Mr Shieh SC has filed a document dated 25 April 2018 setting out the Plaintiff’s causes of action in support of her claims for substantive relief.  They are:

(1)  Fraudulent misrepresentation made by the 1^st Defendant to the Plaintiff on 23 May 2017 to the effect that UEC faced a serious situation and unless the Plaintiff signed some documents, UEC could come to an end.  Acting in reliance on and induced by the representation, the Plaintiff signed some documents at the notary public office at the request of the 1^st Defendant’s lawyers which she subsequently found out to be the Trust Agreements.  On this basis, the Trust Agreements are and were void and of no effect; alternatively, the Plaintiff is entitled to rescind them.

(2)  The Plaintiff’s signing of the Trust Agreements was procured by the undue influence of the 1^st Defendant over her.

(3)  The Plaintiff signed the Trust Agreements under a mistake as to their nature and/or legal character.

30.  The 1^st Defendant’s case is that each of the Subject Documents, inter alia, had been properly explained to the Plaintiff before signing and no vitiating factors — whether fraud, undue influence or mistake — could have arisen.  

31.  The 1^st Defendant contends his case is inherently more credible than the Plaintiff’s and relies on, inter alia, the following matters in support:

(1)  The Subject Documents were either in Japanese or translated into Japanese if initially prepared in English.  The 1^st Defendant had also prepared and shown to the Plaintiff a memo summarising the key points of an earlier version of the Trust Agreements dated 2 March 2017, the contents of which are in substance the same as the Trust Agreements.  

(2)  The Trust Agreements were signed before a Japanese notary public who confirmed with the Plaintiff what she was signing.  In the present case, the notary public in question was a former public prosecutor in office for over 30 years.

(3)  The assertion that the Plaintiff did not know the documents she signed were legal documents beggars belief.  The documents were either in Japanese or were translated into Japanese.  Their titles, in particular, the Share Management and Disposal Trust Agreements and株式管理処分信託契約書 would have made it apparent that they were documents with legal effect.

The Applications

32.  There are 2 principal matters before the Court:

(1)  Whether the Court should stay the present proceedings in favour of the Tokyo District Court (“Stay Application”); and

(2)  whether the Court should grant interim relief sought in the Plaintiff’s Summons pending the determination of the substantive dispute between the parties, whether in the Japanese proceedings or in the Hong Kong proceedings (“Interim Relief Application”).

Stay Application

33.  The Stay Application is mounted on 2 alternative bases:

(1)  pursuant to the exclusive jurisdiction clause in favour of the Tokyo District Court in the Trust Agreements; and

(2)  on the ground of forum non conveniens.

34.  To begin with, the exclusive jurisdiction clause in the Trust Agreements is couched in wide terms and covers “Any dispute arising from or in connection with this Trust Agreement”.  It seems to this court quite clearly the wording of the exclusive jurisdiction clause is apt to cover the present substantive dispute between the Plaintiff and the 1^st Defendant ie the Plaintiff’s challenge to the validity of the Trust Agreements.

35.  In Fiona Trust & Holding Corporation v Privalov [2007] 4 All ER 951, the owners of eight vessels entered into charters with eight charterers.  The owners alleged that the charters were procured by bribery of the owners’ agent and sought to rescind them.  The charterers applied to stay the court proceedings on the basis that the matter should have been determined by arbitration.

36.  At [13] and [15], Lord Hoffmann made the following observations on the proper approach in construing Clause 41 of Shelltime 4 which contained a choice of law clause, a jurisdiction clause and an arbitration clause:

“ 13. In my opinion the construction of an arbitration clause should start from the assumption that the parties, as rational businessmen, are likely to have intended any dispute arising out of the relationship into which they have entered or purported to enter to be decided by the same tribunal. The clause should be construed in accordance with this presumption unless the language makes it clear that certain questions were intended to be excluded from the arbitrator's jurisdiction. As Longmore LJ remarked, at [17]: ‘[i]f any businessman did want to exclude disputes about the validity of a contract, it would be comparatively easy to say so.’

…

15. If one adopts this approach, the language of cl 41 of Shelltime 4 contains nothing to exclude disputes about the validity of the contract, whether on the grounds that it was procured by fraud, bribery, misrepresentation or anything else.  In my opinion it therefore applies to the present dispute.”

37.  Adopting the approach in Fiona Trust & Holding Corporation v Privalov, the exclusive jurisdiction clause similarly contains nothing to exclude disputes about the validity of the Trust Agreements.  In this court’s view, the exclusive jurisdiction clause must be held to cover the substantive disputes in the present case.

38.  The next question is whether the 3 causes of action relied upon by the Plaintiff to challenge the validity of the Trust Agreements ie fraudulent misrepresentation, undue influence and mistake, impugn both the substantive terms of the Trust Agreements as well as the exclusive jurisdiction clause.  On this question, Mr Hollanders QC relies on the well‑established doctrine of separability.  He submits that an exclusive jurisdiction clause, like an arbitration clause, is a separate agreement from the main agreement as a whole and hence disputes about the validity of the main agreement must be resolved pursuant to the terms of the exclusive jurisdiction clause. It is only if the exclusive jurisdiction clause is itself under some specific attack that a question could arise whether it is right to invoke it: Deutsche Bank AG v Asia Pacific Broadband Wireless Communications Inc [2008] 2 CLC 520.

39.  In Deutsche Bank AG v Asia Pacific Broadband Wireless Communications Inc, the claimant lenders made available a credit facility of some US$210 million to the first defendant.  The second defendant, which was the parent company of the first, guaranteed the loan and became a co‑obligor under the credit agreement.  At the time the agreement was made, both defendants were companies in the Rebar Group controlled by the Wang family.   The defendants defaulted under the credit agreement and the claimants issued proceedings relying on an exclusive English jurisdiction clause in it.

40.  The defendants’ case was that the transaction involving the credit agreement was entered into by the Wang family as part of a large scale fraud perpetrated by them upon the defendant companies.  It was said that the credit agreement was void because the members of the Wang’ family who executed the documents did not have the companies’ authority to do so, there being no effective board resolution authorising the transaction or the transaction not being in the best interests of the companies, to the claimants’ knowledge.  At issue was whether an exclusive jurisdiction clause, which covered any dispute as to the existence or validity of the contract, covered not merely claims advanced on the basis that the contract was a valid and subsisting one but also alternative claims advanced on the basis (asserted by the defendants but denied by the claimants) that the contract was of no effect.

41.  At [24]‑[26] and [29], Longmore LJ summarized the legal principles as follows:

“ 24. The next proposition is that a jurisdiction clause, like an arbitration clause, is a separable agreement from the agreement as a whole. This is uncontroversial both as a matter of domestic law (see Mackender v Feldia [1967] 2 QB 590, [1966] 3 All ER 847, [1967] 2 WLR 119 and Fiona Trust v Privalov [2007] UKHL 40, [2008] 1 Lloyd’s Rep 254, [2007] Bus LR 1719) and as a matter of European law (see Benincasa v Dentalkit SRL [1997] ECR I‑3767 and Briggs, Civil Jurisdiction and Judgments (4^th ed 2005) para 2 105 esp at p 131). It follows that disputes about the validity of the contract must, on the face of it, be resolved pursuant to the terms of the clause and, indeed, the last sentence of the clause expressly so provides. It is only if the jurisdiction clause is itself under some specific attack that a question can arise whether it is right to invoke the jurisdiction clause. Examples of this might be fraud or duress alleged in relation specifically to the jurisdiction clause. Another example might be if the signatures to the agreement were alleged to be forgeries, although no authority has so far so stated. Even in such a case someone has to decide whether the signatures were in fact forged. It might well be thought that a mere allegation to that effect could not have the effect of rendering a jurisdiction clause inapplicable.

25. The importance of this concept of separability is that it shows that it cannot be the case that every claim made on the basis that a contract is void or has never come into existence must fall outside the terms of a jurisdiction clause expressed as widely as that in the present case…

26. The judge accepted these propositions as a matter of construction of the agreement in paras 43‑46 of his judgment but decided against the Claimants because they had not established “a good arguable case as to the validity of the jurisdiction clause”. By this he meant that the Claimants had not been able to establish that the clause was “really agreed” because the Defendants were plausibly asserting that the agreement had been signed without authority. That is, however, the very conclusion that the doctrine of separability is designed to avoid. If, of course, (on analysis) it appears, as it did in Bols Distilleries, that no agreement was concluded because the parties were still in the realms of negotiation then one can see that there was no agreement about anything (including any jurisdiction clause which might well have been agreed as part of any concluded agreement)…

…

29. But I do not read the authorities [of the European Court requiring ‘real consent’] as laying down any requirement that such [jurisdiction] clauses are not to apply if there is a (plausible) allegation that the contracts, in which such clauses are contained, are vitiated by mistake, misrepresentation, illegality,lack of authority or lack of capacity. That would be to deny the concept of separability which is as much part of European law as English law. Separability was indeed a doctrine in many European jurisdictions well before it was acknowledged in English law, see Harbour v Kansa [1993] QB 701, [1993] 3 All ER 897, [1993] 3 WLR 42 especially per Leggatt LJ …” (emphasis added)

42.  In Fiona Trust & Holding Corporation v Privalov, Lord Hoffmann also had this to say on the principle of separability at [17] to [19]:

“ 17. The principle of separability[2]… means that the invalidity or rescission of the main contract does not necessarily entail the invalidity or rescission of the arbitration agreement. The arbitration agreement must be treated as a ‘distinct agreement’ and can be void or voidable only on grounds which relate directly to the arbitration agreement. Of course there may be cases in which the ground upon which the main agreement is invalid is identical with the ground upon which the arbitration agreement is invalid. For example, if the main agreement and the arbitration agreement are contained in the same document and one of the parties claims that he never agreed to anything in the document and that his signature was forged, that will be an attack on the validity of the arbitration agreement. But the ground of attack is not that the main agreement was invalid. It is that the signature to the arbitration agreement, as a ‘distinct agreement’, was forged …

18. … Even if the allegation is that there was no concluded agreement (for example, that terms of the main agreement remained to be agreed) that is not necessarily an attack on the arbitration agreement. If the arbitration clause has been agreed, the parties will be presumed to have intended the question of whether there was a concluded main agreement to be decided by arbitration.

19. … Mr Butcher QC, who appeared for the owners, said that but for the bribery, the owners would not have entered into any charter with the charterers and therefore would not have entered into an arbitration agreement. But that is in my opinion exactly the kind of argument which s 7 was intended to prevent. It amounts to saying that because the main agreement and the arbitration agreement were bound up with each other, the invalidity of the main agreement should result in the invalidity of the arbitration agreement. The one should fall with the other because they would never have been separately concluded. But s 7 in my opinion means that they must be treated as having been separately concluded and the arbitration agreement can be invalidated only on a ground which relates to the arbitration agreement and is not merely a consequence of the invalidity of the main agreement.” (emphasis added)

43.  Applying the legal propositions laid down in the aforesaid authorities, this court agrees with Mr Hollander QC that the exclusive jurisdiction clause does survive the Plaintiff’s attack on the Trust Agreements based on the 3 causes of action put forward and, if so, must be given effect to.

44.  In the present case, there is no dispute that the Plaintiff did sign the Trust Agreements.  She also signed a number of other legal documents relating to the Shares as stated in paragraph 20 above.  As Ribeiro PJ stated in Ming Shiu Chung & Ors v Ming Shiu Sum & Ors (2006) 9 HKCFAR 334 at [84] and [87]:

“ 84. …Reliance is universally placed on signatures appended to documents by persons of full age and understanding as signifying the signatory’s assent or adherence to what that document states. Where such a person has signed a document which purports to have legal effect, the law has never regarded it as enough to show that he signed without knowing its contents for the document to be disavowed.

…

87. The vitiating factors at common law include fraud, mistake, misrepresentation, non est factum, duress, undue influence and lack of mental capacity: see, for instance, Blay v Pollard and Morris [1930] 1 KB 628; and Gillman v Gillman (1946) 174 LT 272.  To disown a signed legal document, facts constituting the particular vitiating factor relied on must be pleaded and established by the evidence…”

45.  On the evidence, this court is not satisfied that the present case is one where it can be said the Plaintiff could not possibly have intended to enter into any sort of contract with legal effect when she was asked to and did sign the Trust Agreements.  In fact, the Plaintiff signed the Trust Agreements in Japan before a Japanese notary public.  The present case is certainly not a case of a contract signed by an agent totally without authority — the Trust Agreements were signed by the Plaintiff herself.  For the same reason, the present case also does not come close to a case of forged signature.  Mr Shieh SC submits that this is a case more akin to forgery.  With respect, this court cannot agree.  But then, even if Mr Shieh SC is correct, in a case where forgery is alleged, as Longmore LJ observed in Deutsche Bank AG v Asia Pacific Broadband Wireless Communications Inc at [24], someone has to decide whether the signature was in fact forged.  Hence, a mere allegation of forgery should not have the effect of rending a jurisdiction clause inapplicable.  A fortiori, the case is only “akin to forgery”, according to Mr Shieh SC.

46.  Importantly, the Plaintiff’s allegations of fraudulent misrepresentation, undue influence and mistake are not directed at the exclusive jurisdiction clause as such.  Rather, these vitiating factors are directed at the Trust Agreements as the “main contract”.  If this court were to rule that the exclusive jurisdiction clause should not be given legal effect, it would amount to saying that because the “main contract” and the exclusive jurisdiction clause are bound up with each other in the same document, the invalidity of the “main contract” should result in the invalidity of the exclusive jurisdiction clause so that the one should fall with the other because they would never have been separately concluded —  a proposition utterly rejected by Lord Hoffmann in Fiona Trust & Holding Corporation v Privalov at [19] quoted above.

47.  To conclude, this court does not accept the Plaintiff’s contention (specifically paragraph 13 of her skeleton submissions in opposition to the Stay Application) that the exclusive jurisdiction clause in the Trust Agreements has not been shown by the 1^st Defendant to be applicable.  In fact, this court is of the firm view that the exclusive jurisdiction clause must be given legal effect and the present proceedings should be stayed in favour of the Tokyo District Court.

48.  In view of the above conclusion, no useful purpose will be served by dwelling on the parties’ submissions on forum non conveniens, save for the points made in paragraphs 15 to 18 of the Plaintiff’s skeleton submissions in opposition to the Stay Application ie she is seeking in this action inter alia to rectify the Company’s register of members and her claim for this relief can only be brought in the Hong Kong Court and, in any event, the Company is not a party to the Japanese proceedings and hence will not be bound by any order made by the Tokyo District Court.  This makes Hong Kong the most natural and appropriate forum.

49.  The short answer from Mr Hollander QC at paragraphs 14 and 18 of his Reply submissions, which this court accepts, is these.

50.  First, the present action is essentially a dispute between the Plaintiff and 1^st Defendant concerning the validity of the Trust Agreements.  The Company is not a party to the Trust Agreements and has minimal, if any, role in the resolution of that dispute.

51.  Second, and importantly, rectification of the Company’s register of members is a relief which will only arise in the event that the Plaintiff succeeds on the substantive dispute regarding the validity of the Trust Agreements.  If the Plaintiff succeeds in the Tokyo District Court in challenging the Trust Agreements, then rectification of the Company’s register of members will follow as a matter of course and should be uncontroversial.  That can be done by for instance the simple means of lifting the stay in Hong Kong for the limited purpose of enforcing the Tokyo District Court’s Judgment.   

52.  In view of Mr Hollander QC’s acceptance that rectification of the Company’s register of members will follow as a matter of course if the Plaintiff succeeds on the Tokyo District Court, the fact that she is seeking to rectify a Hong Kong company’s register of members (plus relief ancillary thereto) is not an adequate or sufficient reason for the substantive dispute between the Plaintiff and the 1^st Defendant to be tried in Hong Kong instead of Tokyo.  If and when the Plaintiff succeeds in the Japanese proceedings, the stay of the present proceedings can be lifted to enable her to obtain rectification of the Company’s register as well as a transfer of the Shares back to her.

53.  For all the above reasons, this court shall grant a stay of the present proceedings in favour of the Tokyo District Court.

Interim Relief Application

54.  The next question is whether the Court should grant the Interim Relief sought in the Plaintiff’s Summons in aid of the Japanese proceedings.

55.  As a preliminary observation, given that (i) this court has granted the 1^st Defendant’s Stay Application, (ii) both the Plaintiff and the 1^st Defendant are ordinarily resident in Japan, (iii) the Interim Relief sought by the Plaintiff are orders of an in personam nature directed against the 1^st Defendant personally, and (iv) The Tokyo District Court is currently seised of the dispute between the parties, prima facie any interim relief that the Plaintiff seeks should, if so advised, be pursued in the Japanese proceedings.

56.  As stated in paragraph 6 above, the 1^st Defendant indicated there is no objection to the continuation of the undertaking he gave until the final determination of the AOS.  But he does oppose the rest of the Interim Relief sought.

57.  In essence, the Interim Relief sought by the Plaintiff is to (i) reconstitute the entire Board of the Company by appointing Father, the Plaintiff and 1^st Defendant as directors and by removing the Company’s existing directors (ii) exercise the Company’s majority shareholding rights to reconstitute the entire Board of UEC and to appoint new auditors of UEC.

58.  This court shall first remind itself of the governing legal principles.

59.  The relevant parts of s 21M of the HCO provide as follows:

“ 21M. (1) Without prejudice to section 21L(1), the Court of First Instance may by order appoint a receiver or grant other interim relief in relation to proceedings which—

(a) have been or are to be commenced in a place outside Hong Kong; and

(b) are capable of giving rise to a judgment which may be enforced in Hong Kong under any Ordinance or at common law.

(2) An order under subsection (1) may be made either unconditionally or on such terms and conditions as the Court of First Instance thinks just.

(3) Subsection (1) applies notwithstanding that—

(a) the subject matter of those proceedings would not, apart from this section, give rise to a cause of action over which the Court of First Instance would have jurisdiction; or

(b) the appointment of the receiver or the interim relief sought is not ancillary or incidental to any proceedings in Hong Kong.

(4) The Court of First Instance may refuse an application for appointment of a receiver or interim relief under subsection (1) if, in the opinion of the Court, the fact that the Court has no jurisdiction apart from this section in relation to the subject matter of the proceedings concerned makes it unjust or inconvenient for the Court to grant the application.”

60.  In Compania Sud Americana de Vapores SA v Hin‑Pro International Logistics Ltd (2016) 19 HKCFAR 586, Lord Philips of Worth Matravers NPJ set out the legal principles applicable to a s 21M application for interim relief[3] as follows:

“  47.The starting point is to consider whether, if the proceedings that have been or are to be commenced in the foreign court result in a judgment, that judgment is one that the Hong Kong court may enforce.  This is a precondition to the exercise of the jurisdiction and is underlined by section 21N of the High Court Ordinance, which provides:

‘ (1) In exercising the power under section 21M(1), the Court of First Instance shall have regard to the fact that the power is‑

(a) ancillary to proceedings that have been or are to be commenced in a place outside Hong Kong; and

(b) for the purpose of facilitating the process of a court outside Hong Kong that has primary jurisdiction over such proceedings.’

48. If the nature of the foreign proceedings is such that the Hong Kong court will not enforce any judgment to which they give rise — eg because the exercise of the foreign jurisdiction is exorbitant or for some other reason of public policy, then there can be no question of granting relief under section 21M.

49. Next the court should ask itself the same questions as it would if a mareva were sought in support of an action proceeding in the Hong Kong court…

…

54. The second stage of consideration of a section 21M application requires the court to consider whether the fact that the court has no jurisdiction apart from this section in relation to the subject matter of the proceedings concerned makes it “unjust” or “inconvenient” for the court to grant the application.  Mareva relief is discretionary in any event, but this provision in section 21M(4) underlines the fact that the court has a wide discretion to refuse to make the order sought if the fact that the substantive claim is being litigated in a foreign court has consequences that make the grant of a Mareva “unjust” or “inconvenient”.  It does not seem to me to be very helpful to try to formulate a list of circumstances where it will be unjust or inconvenient to grant the Mareva sought.  In Credit Suisse Fides Trust S.A. Lord Bingham of Cornhill CJ, when considering the similar question of whether it was “inexpedient” to make an Order under section 25 of the 1982 Act, stated: 

‘... it would obviously weigh heavily, probably conclusively, against the grant of interim relief if such grant would obstruct or hamper the management of the case by the court seized of the substantive proceedings (‘the primary court’) or give rise to a risk of conflicting, inconsistent or overlapping orders in other courts.’ ”

61.  With regard to the legal principles governing the grant of interim injunction in Hong Kong proceedings, they are well‑established.  The Court considers whether there is a “serious issue to be tried” and whether the “balance of convenience” lies in favour of granting the injunction sought.  Under the rubric of “balance of convenience”, the Court should consider (i) what harm would be caused to a plaintiff if the interim relief sought is refused and whether such harm could be adequately compensated by an award of damages; (ii) what harm would be caused to a defendant if the interim relief is granted and whether such harm could adequately be compensated by an award of damages; and (iii) other relevant considerations: Acropolis Ltd & Anr v W&Q Investment Ltd & Ors [2018] HKCA 184 at [47].  Since the Interim Relief involves restraining the parties to vote in respect of their own shares, this is something which cannot adequately or easily be compensated by an award of damages: Acropolis Ltd & Anr v W&Q Investment Ltd & Ors at [52].

62.  Ultimately, the guiding consideration is that the court should take whatever course “seems likely to cause the least irremediable prejudice to one party or the other” or “which appears to carry a lower risk of injustice if it should turn out to be wrong”: Aeso Holding Limited & Ors v Chan Siu Chung & Orsunrep, HCMP 1721 of 2017, 11 August 2017, Lisa Wong J at [39]; Acropolis Ltd & Anr v W&Q Investment Ltd & Ors at [47].

63.  Specifically in relation to the grant of interim relief in the form of appointing directors to the Board of a private company, Rogers VP had this to say in Re Chime Corp Ltd [2003] 2 HKLRD 905 at [25] and [26]:

“ 25. The final matter in dispute between the parties is whether an order should be made which would have the effect that the joint administrators or their representatives should be appointed to the boards of Chime and the other companies listed in the schedule to the summons. The judge refused the order on the basis that he did not consider that a successor‑in‑title to Mr Wang would have a right to be appointed as a director. He also considered that the appointment of the administrators to the board would be far more intrusive and was inappropriate for interlocutory relief.

26. Whilst not disagreeing with the judge in this respect I, for my part, also consider that it would be inappropriate for an order of that nature to be made. Although it is possible that the court could make an order which would have the effect of determining the composition of a board of directors as a matter of final relief on a 168A petition, I consider that it probably would only do so in very special circumstances. A company is a trading entity and those appointed to the board are there to supervise the company. The court would be in a difficult position to select those who were appropriate to conduct the commercial affairs of a company. A court should only interfere in the current management of a company if it is absolutely essential to do so.” (emphasis added)

64.  Similarly, in relation to the grant of interim relief in the form of appointing directors to a public company’s Board, in H v H (Public Company: Imposed Director) [2011] 1 HKLRD 1048 at [53], Yuen JA quoted with approval the following passage in the English Court of Appeal’s decision in Pringle v Callard [2008] 2 BCLC 505:

“ 53. The Court held per curiam that ‘in essence it was contrary to principle to impose a director on a company. It was highly impractical so to do in any event where there were disputes between the directors or indeed allegations of improper conduct. Accordingly the court would be extraordinarily cautious before imposing a director on a company by way of an interim remedy’ (paras 32 and 33).” (emphasis added)

65.  At [63]‑[64], Yuen JA further elaborated on the relevant considerations peculiar to a public company:

“ 63. As we have seen in the authorities discussed earlier (Pringle v Callard, Chime Corp, Muir v Lampl), the court will not lightly impose a director on a company in controversial circumstances in interlocutory proceedings. Unlike Poon v Poon, this is not a private family company. That factor was clearly material to Thorpe J’s judgment as he repeatedly emphasized it. In contrast, the Company here is a public company, with a substantial number of outside shareholders whose interests should also be taken into consideration…

64. Further, unlike the Husband’s position in Poon v Poon, the Wife’s interests, like the interests of outside shareholders, would be protected by the INEDS and any attempts by the Husband or other directors to “run down” the Company would be closely scrutinized by the regulatory authorities. There is far greater transparency with a public company than would be available with a private company, and so the argument by the Wife that she needed to be on the board to obtain access to information is far less strong than with a private company…”

66.  Mr Shieh SC submits that the Interim Relief sought is for the purpose of restoring a balance between the Plaintiff/Father’s camp and the 1^st Defendant’s camp in the Company’s and in UEC’s Board, pending resolution of this action.  He submits that there are serious issues to be tried based on the 3 causes of action he puts forward and that the Plaintiff is entitled to have the Company’s register of members rectified in order for her to be registered as a member.  He further submits that the balance of convenience lies decidedly in favour of granting the Interim Relief for inter alia the following reasons:

(1)  As a direct result of the purported transactions (which was indeed the very objective of the 1^st Defendant’s scheme), Father has been ousted from the management of the Company and UEC, a company he founded and has run for almost 50 years.

(2)  Father’s place was taken up by Mr Takada and Mr Ishida who are obviously backed by the 1^st Defendant but are strangers to the Company.  There was no way the Plaintiff would have agreed to oust Father and voted in support of them had she not been wrongfully deprived of her Shares and the voting rights attached to them.

(3)  The proposed restoration of Father and appointment of the Plaintiff to the Boards of the Company and UEC merely reflect how the Plaintiff would have exercised her voting rights as undisputed beneficial owner of the Shares.  It is also the only way to prevent the Plaintiff/Father from being completely disabled from monitoring the affairs of the 2 companies.

(4)  So far, the 1^st Defendant has not offered any undertaking not to prejudice the Plaintiff’s interests using his control of the Boards of the 2 companies.  The undertaking that is in place is expressly stated not to restrain him from exercising the voting rights attached to the Shares.  By contrast, the proposed reliefs sought by the Plaintiff would ensure a fair balance at the Boards of the 2 companies without either camp being in control.

(5)  The Interim Relief is sought for the purpose of protecting the Plaintiff’s proprietary rights in the Shares.  It is fashioned to ensure that the least harm is done to anybody’s interests in the meantime.

67.  With respect, this court is not persuaded that the Interim Relief sought is necessary for the protection of the Plaintiff’s proprietary rights in the Shares or that the balance of convenience lies in favour of granting it.  Indeed, this court is of the view that granting the Interim Relief in reconstituting the entire Board of the Company and UEC would be far too intrusive and wholly inappropriate at the interlocutory stage.

68.  As Mr Hollander QC submits, there is no evidence that the current directors of the Company and UEC have harmed or intend to harm the interest of the Company or UEC and consequently the value of the Shares.  Mr Takada and Mr Ishida are respectively a qualified lawyer and a qualified accountant.  Even assuming they are backed by the 1^st Defendant, there is no obvious reason why the 1^st Defendant who legally and beneficially owns 43.4% of the Company’s shares, or Mr Takada and Mr Ishida on his behalf, will take steps to harm the Company or UEC.

69.  So far, the Plaintiff’s only complaint against Mr Takada and Mr Ishida is that they have no past knowledge of the Company and UEC and they failed to inquire into UEC’s settlement with Wynn Resort Limited in a litigation in Nevada.  But UEC is a public listed company in Japan managed by its own board of directors.  The current Representative Director and President, Mr Fujimoto, was already the managing director of UEC in 2001 and has been leading it since 2011 with the highest executive power and authority.  As a public listed company, UEC is subject to close scrutiny of the Japanese regulatory authorities and the requirement of transparency imposed by the Tokyo Stock Exchange.

70.  Furthermore, the 1^st Defendant must exercise the rights over the Shares in accordance with the purpose of the Trust Agreements which is stated to be (i) preventing damage to the value of the Company and (ii) seeking to maximize the profit of the Company.  In light of the aforesaid, and given the undertaking offered by the 1^st Defendant that he will not take any steps to dispose of, encumber, diminish the value of, or otherwise deal with the Shares, and/or their traceable fruits, and/or proceeds or any part thereof, it is difficult to see why the Interim Relief is necessary for the protection of the Plaintiff’s interest in the Shares.

71.  By contrast, reconstituting the entire Board of the Company and UEC at this stage is likely to have a profound adverse effect on the operation and share price of UEC and consequently likely to harm the interest of UEC and hence the Company.  Given that UEC is a public listed company, the outside shareholders, whose interest should also be taken into account, will likewise be adversely affected.

72.  Mr Hollander QC submits that it is manifestly inappropriate to re-instate Father to the Board of the Company and UEC when he is the subject of multiple investigations for wrongdoings and that both UEC’s management and lenders have expressed the view that his participation in UEC’s management would be detrimental to its interest.  Obviously, this court is in no position to come to any conclusion on the alleged wrongdoings of Father.  Nevertheless, this court should not ignore the views of UEC’s management and lenders as to the desirability or otherwise of re‑instating Father to the Company and UEC.

73.  As far as the Plaintiff is concerned, by her own admission, she has very limited experience with English in the business context and has acquired little business experience in her previous employment.  She also does not have a deep understanding of what happens in UEC and has always led a simple lifestyle without active involvement in the management of UEC.  Until about 2015, the Plaintiff was a self‑employed dog breeder and trainer.  It is difficult to comprehend how the Plaintiff can be considered qualified to manage the Company as its director.  

74.  To conclude, this court is not minded to grant the Interim Relief sought in the Plaintiff’s Summons.  Not only has the Plaintiff failed to establish that interfering with the current management of the 2 companies “is absolutely essential”.  The Plaintiff has also failed to establish that granting the Interim Relief sought “appears to carry a lower risk of injustice if [the court] should turn out to be wrong”.

Disposition and costs order nisi

75.  This court hereby grants a stay of the present proceedings sought in the 1^st Defendant’s Summons and dismisses the Plaintiff’s Summons, with costs to the 1^st Defendant, with certificate for 4 counsel, on a nisi basis.  There be general liberty to apply.

76.  Lastly, this court thanks the legal representatives of both sides for their helpful assistance.