PT BALI HOSPITALITY UTAMA v. MATHIAS ECHENE AND OTHERS

HCA 604/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 604 OF 2009

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BETWEEN

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J U D G M E N T

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Introduction

1.  This is an application by the 2nd Defendant, Mr Laurent Lautier, to stay this action on the basis that Hong Kong is forum non conveniens in favour of the court at Denpasar, Bali, Indonesia. The Plaintiff is a company registered in Indonesia having its legal domicile in Bali. It provides management services for high quality villa developments in Bali by which the owners of such villas appoint it to let out their villa for them and to manage the letting by providing staff for the villa such as butlers, cooks, drivers, maids and security staff. In effect, the Plaintiff provides the staff and service that will create the luxurious ambience which enhances a resident’s stay at the villas.

2.  This case relates to Pantai Lima, a development of five luxury villas on the west coast of Bali which cost between US$3.7 million and US$3.4 million to buy and will let for between US$1,400 and US$2,200 a night depending on the time of year.

3.  The 2nd Defendant has been sued together with three other Defendants, all of whom are owners of a villa at Pantai Lima, for breach of a management agreement in writing, in the 2nd Defendant’s case, dated 13 March 2008. The agreement is at B/1-19. It is a comprehensive agreement, professionally prepared, no doubt by lawyers, on the Plaintiff’s behalf and proffered by it to the Defendants for their agreement and signature. The agreement is there to be read. Suffice it to say that in painstaking detail, it sets out the parties’ rights and obligations in which the Defendant has entrusted the management of his villa to the Plaintiff. Clause 13, which is of fundamental relevance to this application, relates to the governing law and dispute resolution in the event of any differences between the parties leading, as has now happened, to litigation between them. It says this:

“This Agreement is governed by the laws of the Republic of Indonesia and the parties submit to the jurisdiction of the courts of Denpasar, Bali for dispute resolution provided that the parties shall use their best endeavours to resolve disputes amicably before resorting to court action.”

Clause 14.1 says that:

“… this Agreement contains the entire agreement between the parties hereto with respect to the subject matter of the Agreement …”

4.  The statement of claim [A/5-25] pleads in great detail, the terms of the Agreement relied on by the Plaintiff and particularises the breaches complained of against all four Defendants. In essence, and I need not go further than this, the Plaintiff is suing for unlawful termination of the Agreement by the Defendants because they failed to give the length of notice required under the Agreement and in any event because there is no justification for such termination. There is also a claim in tort for damages for wrongful interference by the Defendants with the Plaintiff’s business, who are said to have induced the mass resignation of 46 of the Plaintiff’s employees who have been re-employed by another company doing the same work at the villas as they had done when the Plaintiff employed them.

5.  The Defendants say that the termination of the Agreement by them was both justified and necessary due to the Plaintiff’s bad management of the villa development. A trial of the action will therefore require a careful examination of the conduct of the Plaintiff in its performance of the Agreement and of its management of the Defendants’ villas under the Agreement.

6.  The Plaintiff’s claim, although substantial and to a great extent as yet unquantified because its alleged losses with require further investigation, is unlikely to be particularly large given the finite nature of the Agreement. It will largely be based on loss of income under the Agreement in terms of loss of fees and commission as well as damages to be assessed for wrongful interference with the Plaintiff’s business in the way that is alleged and which I have described in paragraph 4.

7.  Before I turn to the issues, it is worth observing that of the four Defendants only this, the 2nd Defendant, has been served with the writ. He has a home in Hong Kong and lives here for as much as half of the year. The nature of his work is that he is required to travel frequently and extensively. Of the other Defendants, and this appears in the writ [A/1], the 1st Defendant has a Hong Kong address, which is an industrial unit which he owns at Chai Wan; the 3rd Defendant is resident in Bali; and the 4th Defendant lives in London. Insofar as this aspect may have any significance, I will return to it presently.

The Argument

8.  Mr Yuen, SC in submitting that the action should be stayed in favour of the court at Denpasar contends that in the circumstances of this case, Clause 13 supra is to be construed as an exclusive jurisdiction clause by which the parties have agreed to resolve their differences only in that court and in accordance with Indonesian law. Mr Maurellet submits that on a plain and sensible reading of this clause, all that the parties had agreed to was a non-exclusive jurisdiction clause which would enable the party to proceed, if it was so disposed to do, in any other court which had competent jurisdiction over the other party to the action. In this case, the 2nd Defendant has been served in Hong Kong where he maintains a home and where he chooses to live for much of the year, in which case the Plaintiff is before the court as of right and from which it is not to be lightly removed.

9.  As the authorities show, if an applicant for a stay can demonstrate that the parties had agreed to an exclusive jurisdiction clause elsewhere then, in the absence of very good reason to do otherwise, they will be required to litigate in the jurisdiction which they have contracted for. That this is so is amply demonstrated in the judgment of Brandon J (as he then was) in The Eleftheria [1970] P94 at 99G-100C:

“The principles established by the authorities can, I think, be summarised as follows:  (1) Where plaintiffs sue in England in breach of an agreement to refer disputes to a foreign court, and the defendants apply for a stay, the English court, assuming the claim to be otherwise within its jurisdiction, is not bound to grant a stay but has a discretion whether to do so or not.  (2) The discretion should be exercised by granting a stay unless strong cause for not doing so is shown.  (3) The burden of proving such strong cause is on the plaintiffs.  (4) In exercising its discretion the court should take into account all the circumstances of the particular case.  (5) In particular, but without prejudice to (4), the following matters, where they arise, may properly be regarded:— (a) In what country the evidence on the issues of fact is situated, or more readily available, and the effect of that on the relative convenience and expense of trial as between the English and foreign courts.  (b) Whether the law of the foreign court applies and, if so, whether it differs from English law in any material respects.  (c) With what country either party is connected, and how closely.  (d) Whether the defendants genuinely desire trial in the foreign country, or are only seeking procedural advantages.  (e) Whether the plaintiffs would be prejudiced by having to sue in the foreign court because they would:  (i) be deprived of security for their claim; (ii) be unable to enforce any judgment obtained; (iii) be faced with a time-bar not applicable in England; or (iv) for political, racial, religious or other reasons be unlikely to get a fair trial.”

In the later case of The El Amria [1981] 2 Lloyds Reports119 at 123-124, Brandon LJ (as he had become) re-stated and adopted what he had said in “The Eleftheria”.

10.  Rightly, in my judgment, Mr Maurellet accepts that if Mr Yuen is right and Clause 13 is an exclusive jurisdiction clause, he has very real difficulties in resisting a stay.

Is This An Exclusive Jurisdiction Clause

11.  Mr Yuen says that it is notwithstanding that the word “exclusive” has not been used in Clause 13. The failure to use the word “exclusive” is not fatal in any sense. In this regard, Mr Yuen has referred to two Hong Kong cases, Yu Lap Man v Good First Harvest Ltd [1999] 1 HKC 622 (C.A.) and T&K Electronics Ltd v Tai Ping Insurance Co. Ltd [1998] 1 HKLRD 172 (Stone J) which have considered how the court should approach the question of whether a jurisdiction clause is exclusive or non-exclusive. In both of these cases reference was made to the judgment of Staughton LJ in Sohio Supply Co. v Gatoil (USA) Inc [1989] 1 Lloyds Reports 588 at 624E-F. At page 591, Staughton LJ said that the matter had to be approached as:

“… one of the construction of this contract and nothing more.”

He referred to and approved of the passage in Dicey and Morris, The Conflict of Laws referred to by Stone J in T&K Electrons Ltd v Tai Ping Insurance Co. Ltd supra. at 174H-J:

“It is a question of interpretation, governed by the law applicable to the contract, or more accurately, the law governing the jurisdiction agreement, whether a jurisdiction clause is exclusive or non-exclusive, ie whether it requires proceedings to be brought in a particular forum, or simply confers jurisdiction on the courts of a particular country without requiring proceedings to be brought there.  Some authorities suggest that the clause must provide in terms that the jurisdiction of the chosen court be exclusive, but it is submitted that the question is whether on its true construction the clause obliges the parties to resort to the relevant jurisdiction, irrespective of whether the word ‘exclusive’ is used.  It is also a question of interpretation whether the claim which is the subject matter of the action falls within its terms.  If there is no express choice of the law to govern the contract, the law of the country of the chosen court will usually, but not invariably, be the applicable law.”

12.  Mr Yuen submits that overwhelmingly, given all the circumstances of this case, the parties must have agreed to confer exclusive jurisdiction on the court at Denpasar. For this he puts forward three factors. Firstly, the legal relationship between the Plaintiff and the 2nd Defendant has come about as a result of this management agreement which is the basis of the action. Secondly, the subject matter of the dispute derives from the Plaintiff’s management of the 2nd Defendant’s villas. Mr Yuen submits that since the villa is located in Bali and the Plaintiff is incorporated in Indonesia and legally domiciled in Bali and the parties have chosen Indonesian law to resolve their disputes and have expressly submitted to the jurisdiction of the courts of Denpasar, Bali, it was quite unnecessary to have gone further and say that the Balinese courts had exclusive jurisdiction. That exclusiveness is so obvious in all of these circumstances that it did not require the parties to go any further than they did in Clause 13. The agreement being one prepared by the Plaintiff and proffered by it, it would have served the Plaintiff’s interests to keep the legal jurisdiction “in house”, as it were, in the local court. Put another way, the Plaintiff in wishing to protect itself would not have been interested or wished to be taken to litigation by one of its clients, who are almost exclusively expatriates, to some far-off jurisdiction. As it happens on this occasion, it is the Plaintiff that has decided to go “off-shore” and sue in Hong Kong because this happens to suit its purposes on this occasion where the 2nd Defendant resides and has property against which any judgment that the Plaintiff may obtain against him in this court can conveniently be enforced. That this has happened after the event is perhaps not something that it would have anticipated as likely to happen. Thirdly, and I have already referred to this — Mr Yuen reinforces his point that the court in Bali is to be seen as the court with exclusive jurisdiction because the parties have agreed that Indonesian law is to apply in resolving their dispute and it would be a court in Indonesia, at Denpasar in this case, which would be best placed to apply Indonesian law.

13.  It seems to me that Mr Yuen’s analysis is the correct one. Where everything about this dispute points to Bali, I am driven to the conclusion that by Clause 13, the parties had agreed to confer exclusive jurisdiction on the court at Denpasar. This is a Balimese Plaintiff, performing a contract to manage a property in Bali, agreeing to nominate Indonesian law in a contract proffered by it identifying the court in Bali as the one to whose jurisdiction the parties have agreed to submit. It seems to me inconceivable that had they been asked about it at the time that they had entered into their agreement that they would have said: “Oh yes, but we can also litigate any dispute that may arise between us in such other courts in overseas jurisdictions that are able to accept jurisdiction in our dispute.

14.  Given my finding that this is an exclusive jurisdiction clause, I need to apply the approach that I have already identified as expressed in “The Eleftheria” and in “El Amria” ibid which is that although I continue to retain a discretion as to whether to refuse a stay in favour of the court at Denpasar, I should only do so if there is “strong cause” for doing so.

15.  In this regard, Mr Maurellet accepts that where the court finds that another court has exclusive jurisdiction, this court does not have to apply the three stage examination that is required of it in forum non-conveniens applications, as has been set out by the House of Lord in “The Spiliada” [1986] 3 WLR 972 and adopted in Hong Kong by the Court of Appeal in cases such as The Adiguna Meranti [1987] HKLR 904.

16.  This having been said, Mr Maurellet has referred to a number of features, which he submits would provide “strong cause” for refusing a stay in the face of exclusive jurisdiction vested in a court elsewhere. These are points which clearly overlap and extend into an analysis of the situation where the court finds that there is a non-exclusive jurisdiction clause. I need to refer to them at this stage as well.

17.  He really starts from the position that the main witnesses will give their evidence in English. The Agreement itself and the other documents in the case such as invoices, correspondence, advertisements and the like are in English. A trial of this action in Bali would require the added expense of translation of documents into Indonesian and interpretation of the evidence of the main witnesses on both sides. In addition to which the main witnesses would not understand their own lawyers’ submissions to the judge and vice versa. Mr Yuen’s response to this is that such a problem is by no means insurmountable. It is right to say that trials in Hong Kong frequently create precisely these sort of problems which are very adequately resolved by translations and interpretations and so I do not consider this feature to provide any meaningful obstacle to a trial at Denpasar. Additionally, Mr Yuen says that in terms of the convenience of witnesses, there are about 46 local Balinese staff who left the Plaintiff’s employment and they are the subject matter of the claim for interference of the Plaintiff’s contractual relationships. Mr Yuen does not suggest that the 2nd Defendant is going to call all 46, but a number will be called. It is far more convenient and cheaper to have these witnesses give evidence in their local court and in their local language rather than to have to fly them to Hong Kong and accommodate them here. The force of that point is obvious and similar considerations apply to the evidence of the two Indonesian law experts having to come to Hong Kong. Presumably, they would not be needed for a trial in Bali.

18.  Mr Maurellet has also highlighted two other features of Indonesian law which he says should be taken into account. Firstly, and both experts are agreed on this, there is no formal discovery process in Indonesia although the Defendant’s expert points out that a party is able to review its opponent’s case and ask the judge to call for the production of documents. Mr Maurellet is concerned that in considering the Plaintiff’s damages claim, the Indonesian legal system would not be equipped procedurally to ensure that all relevant documents are before it. Mr Yuen submits that it should not be forgotten that our adversarial common law system is very different in its approach to the litigation process to that adopted by the inquisitorial civil code practised in Indonesia which is based on Dutch law. Notwithstanding those differences, there is no evidence to suggest that the court at Bali cannot do substantial justice to these parties in applying its own substantive law and its inquisitorial procedures.

19.  A further objection raised by Mr Maurellet is that Indonesian law does not provide remedies for the Plaintiff’s head of claim based on the economic tort of interference with the Plaintiff’s contractual relations. Again whilst the Defendant’s expert recognises that there is no exact parallel to this in Indonesian substantive law, the courts there are able to do justice between the parties by giving redress in a much broader, perhaps less refined, way than our courts are able to on a plea of interference with contractual relations. Mr Yuen responds by saying that substantial justice and overall recompense would be available to the Plaintiff if it were to succeed.

20.  Finally, attention has been drawn to the slowness of the legal system in Indonesia but Mr Maurellet has rightly not pressed this.

21.  Whilst there are considerable differences of approach and I suspect that the court at Denpasar is less used to substantial litigation than our Court of First Instance, Mr Maurellet has not been able to persuade me that substantial justice could not be done there. Mr Yuen submits that in any event, the parties must be taken to have assumed all of these difficulties in procedural and substantive law in Indonesia’s courts when they agreed to vest exclusive jurisdiction in the Court of Bali and in my judgment that is a correct submission.

22.  This being my view, I hold that the parties should be required to litigate at their nominated exclusive jurisdiction applying the laws of Indonesia. There are in this case no compelling reasons to exercise my discretion differently and so I propose to grant the 2nd Defendant his stay.

Alternative case

23.  For the sake of completeness and if it is found that I had erred in saying that Clause 13 is an exclusive jurisdiction provision, I will now investigate the matter on the basis described by Lord Goff of Chievely in “The Spiliada”. The single question to be answered is whether there is some other available forum having competent jurisdiction which is the appropriate forum for the trial of the action, that is, in which the case may be tried more suitably for the interests of all parties and for the ends of justice. In considering this question I propose to adopt the process adumbrated by Hunter JA in The Adiguna Meranti supra. at 907E:

“(I) Is it shown that Hong Kong is not only not the natural or appropriate forum for the trial, but that there is another available forum which is clearly or distinctly more appropriate than Hong Kong?  The evidential burden is here upon the applicant.  The emphasis is upon ‘appropriate’ rather than ‘convenient’ because this is not simply a matter of practical convenience.  The purpose is to identify the forum ‘with which the action has the most real and substantial connection’ per Lord Keith in the Abidin Daver [1984] AC 398.  Failure by the applicant at this stage is normally fatal.

(II) If the answer to (I) is yes, will a trial at this action forum deprive the plaintiff of any ‘legitimate personal or juridical advantages’?  The evidential burden here lies upon the plaintiff.

(III) If the answer to (II) is yes, a court has to balance the advantages of (I) against the disadvantages of (II), Abidin Daver per Lord Brandon at p.419.  Deprivation of one or more personal or juridical advantages will not necessarily be fatal to the applicant provided that the court is satisfied that notwithstanding such loss ‘substantial justice will be done in the available appropriate forum’.  The court must try to be objective.  Proof of this, which can fairly be called the ultimate burden of persuasion, rests upon the applicant for the stay.  By these means he establishes that on balance the other forum is more suitable ‘for the interests of all the parties and the ends of justice’.  This may be another way of saying that the plaintiff’s choice of forum has been shown to be so inappropriate as to deserve the pejorative description of ‘forum shopping’ and to be restrained accordingly, cp. Lord Reid in The Atlantic Star [1974] AC 436.”

24.  It needs to be remembered that the Plaintiff is here as of right and that it is not to be removed and forced to litigate elsewhere lightly. The burden therefore lies on the Defendant in seeking a stay to show that Hong Kong is not only not the natural or appropriate forum for the trial but that Denpasar is clearly or distinctly more appropriate than Hong Kong. To use the words of Lord Keith in The Abidin Daver [1984] AC 398, what need to be done is to identify the forum with which the action has the most real and substantial connection.

25.  In this regard, Mr Yuen has drawn attention to the connecting features of this case with Bali and the lack of any real connecting features with Hong Kong save for the appearance in the Hong Kong edition of the Tatler magazine of an article about this villa development and of course, the fact that the 2nd Defendant has a home here and spends an appreciable period of time in Hong Kong during which he was served with the writ. As Mr Yuen has correctly submitted, this is a Bali agreement in writing, for performance in Bali, relating to a property in Bali, in accordance with Indonesian law and, for the purposes of this part of the judgment, a submission to the non-exclusive jurisdiction of the court at Denpasar, Bali. The Plaintiff’s witnesses reside in Bali, although will willingly travel to Hong Kong to give evidence. The experts reside in Indonesia and will have to come here to give evidence and the Defendant would have to bring to Hong Kong several of the staff at the villa complex who reside in Bali to give evidence on the issue of staff performance and presumably, on the issue of interference with the Plaintiff’s contractual relations with them.

26.  Resoundingly, and on any basis of looking at this matter, this case and its trial is distinctly more closely related to Bali than it is to Hong Kong. The connection with Hong Kong is in my view entirely fortuitous by virtue of the 2nd Defendant’s residence here. This can be further underlined by the fact that although one other Defendant has an address, a commercial unit in Chai Wan, the other two live in Bali and London respectively. As to the Defendant living in Bali, it cannot possibly be said that there is a more closely connected jurisdiction for the trial against him than in Bali and for the London-based Defendant, I presume that if served with the writ in London, the Plaintiff would have to contend that the trial should take place there and fly out the experts and all the other witnesses to give evidence in the Royal Courts of Justice in the Strand.

27.  This all serves to demonstrate, in my judgment, that the Plaintiff is doing no more than forum shopping, it having decided that it can do much better here in terms of enforcing any judgment that it might obtain against the 2nd Defendant’s home in Deepwater Bay.

28.  Where the Plaintiff must be held to have failed badly at this first crucial hurdle, it seems to me that it ought to be obliged to litigate in Bali which is where and what this case is all about. Mr Maurellet must now, at stage two, try to show that in Bali his client will be deprived of legitimate personal or juridical advantages. I have already considered this aspect in the earlier part of the judgment when deciding whether the Plaintiff had shown good cause for my not exercising my discretion in his favour in circumstances where I had held that Clause 13 was an exclusive jurisdiction clause. It may well be that the common law adversarial system offers advantages over a continental inquisitorial one, but it can equally be said that such a conclusion is only arrived at by looking at the two systems subjectively through the eyes of a common lawyer. The fact is that the court in Bali is well able to deliver substantial justice between these parties in respect of a quintessentially Bali-based dispute. And so, even if the Plaintiff is able to show that at a trial in Bali, it will be deprived of some legitimate personal or juridical advantages which therefore require me to go to stage three and balance the advantages of my stage one conclusion against the disadvantages of two, I have to say that the court at Denpasar will be able to deliver substantial justice to the parties.

Conclusion

29.  It is plain that these four Defendants are mobile targets for this litigation and that the Plaintiff has sought, by dint of some highly persuasive submissions from Mr Maurellet, to bring this Defendant to trial here for a case that has no connection with this jurisdiction. I have no doubt that had the 2nd Defendant resided for part of the year and owned a valuable home, for instance in Singapore or for that matter elsewhere in Asia with an effective and efficient legal system, he would have suffered the same fate there. The Plaintiff must be restricted to litigating in the jurisdiction where this case belongs which is Bali. On either basis of an exclusive or a non-exclusive jurisdiction clause, the Plaintiff must fail. This in my judgment has been a more obvious case of forum shopping. The stay therefore will now go together with an order nisi that the Plaintiff must pay the Defendants’ costs to be taxed on a party and party basis.