TEH KIM SENG v. TRAN KWOK WAI, ROBERT

DCCJ 1380/2012

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 1380 OF 2012

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DECISION

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Introduction

1.  There are two summonses before me.  The Defendant’s came in first asking that these proceedings be stayed on forum non-conveniens on the ground that the High Court of Malaya at Kuala Lumpur (“the Malaysian Court”) is a more appropriate forum for the hearing of all matters between the parties herein (“Summons on Forum”).  The Plaintiff by way of his asked for summary judgment on his claim in this action, namely, repayment of a personal debt allegedly owed to him by the Defendant (“Summons on Summary Judgment”).

Background

2.  These are the undisputed facts.  The Plaintiff is a Malaysian national and the Defendant a PRC citizen. They had been friends for years before the Defendant joined Netrove Strategic Corporation (“Netrove Strategic”) as a Venture Partner Consultant.  Netrove Strategic was incorporated under the laws of the British Virgin Islands on 11 August 2006 carring on its business as a venture capitalist and corporate advisory firm in Asia; and the Plaintiff is the sole shareholder and director thereof.  For the purpose of the Defendant’s involvement in Netrove Strategic, a document entitled “Points of Agreement” was signed by the Defendant on one part and the Plaintiff on behalf of Netrove Strategic on the other on 23 November 2009.  Pursuant to clause 2 therein the Defendant was to be paid a base fee of HK$60,000 per month.  Profit sharing was set out in clause 3 by which the Defendant, for what is relevant to these applications, was to be entitled to 50% of the net realized proceeds from the free shares earned from Project Opal (“Opticmix shares”).

3.  It is also not disputed that there had been loans raised by the Defendant from the Plaintiff between July 2009 and October 2010.  After repayments for a total amount of $125,000, there is still an outstanding balance of HK$235,000 (“the Loan”).

4.  On 14 September 2010, the Plaintiff sent to the Defendant an email saying that the terms in the Points of Agreement would be changed in that there would no longer be any monthly base fees for the Defendant. 

5. The Defendant issued a writ in the Malaysian Court in December 2011 suing the Plaintiff, the Netrove Strategic and one Netrove Ventures Corporation (“the Netrove Ventures”) for loss and damage caused by their wrongful change of terms in the Points of Agreement and the eventual termination of the same (“the Malaysia Proceedings”). It is also said that some Optimix shares had been sold without his consent.

6.  On the other hand, the Plaintiff commenced this action against the Defendant on 25 April 2012.  The Defendant then took out the Summons on Forum on 11 July 2012 while the Plaintiff took out the Summons for Summary Judgment on 21 August 2012.

7.  For obvious reasons, the Defendant’s summons is to be dealt with first.

FORUM NON-CONVENIENS

Legal Principles

8.  The Defendant relies on the “3-stage approach” set out in The Adhiguna Meranti [1987] HKLR 904 at p904I. The Plaintiff has no dispute on the legal principles to be applied and I shall adopt the same in my decision.

Stage 1: Whether the Defendant has proved to the satisfaction of this court that the Malaysian Court is clearly and distinctly more appropriate than the Hong Kong courts.”

9.  There is no dispute that Hong Kong is the natural and appropriate forum for determination of the Plaintiff’s claim herein so at Stage 1 the only question to ask is whether I am satisfied that the Malaysian Court is clearly and distinctly more appropriate than Hong Kong.  Before I go into the Malaysian Proceedings, I would set out the salient facts of the Proceedings in Hong Kong first. 

The Hong Kong Proceedings

10.  The Defendant does not deny the existence of the Loan.  He said however in his affirmation dated 10 July 2012 that the Loan was in fact an integral part of a broader transaction agreed between the parties herein in that the Loan would not have been granted by the Plaintiff to him if the Plaintiff was not convinced that there was a source of repayment, namely, the monthly base fee of HK$60,000 to be paid by Netrove Strategic to him pursuant to the Points of Agreement.  In his second affirmation dated 21 September 2012 the Defendant went further to say that he had been asked to treat the money as part of the Plaintiff’s offer for him to bring in business to Netrove Strategic.  In his Defence, the Defendant pleaded in paragraph 6 that the Loan Agreement was signed on the basis that the Plaintiff would agree to settle the partnership dispute amicably with the Defendant. In his second affirmation the Defendant said that the Loan Agreement was signed on the representation made by the Plaintiff that he would be returned of his 50% shares in the Optimix project. 

11.  The Plaintiff’s case is that the Loan was made to the Defendant in November 2009 from him personally and there was no connection with the executed of the Points of Agreement. The Point of Agreement was made between the Defendant and Netrove Strategic. The parties involved in the two transactions were different. The Plaintiff also denies that the Loan Agreement was signed to resolve the dispute between the Defendant and Netrove Strategic.

The Malaysian Proceedings

12.  Pursuant to the jurisdiction clause in the Points of Agreement the Defendant commenced the Malaysian Proceedings.  The Defendant contends that the proceedings herein should be stayed pending determination of the Malaysian Proceedings. The Plaintiff is however of the view that the Malaysian Proceedings had in fact been struck out and therefore the Defendant could no longer rely on this point.

13.  The Defendant’s reply to this is that although the Malaysian Proceedings had been struck out for non-compliance with an order made on 24 July 2012 for him to pay security for costs, a second set of proceedings has just been commenced. The Defendant has on 19 November 2012, one day before hearing of these two summonses, filed a writ and a statement of claim with the Malaysian Court. The documents were produced at the hearing. I noticed that the translation of the relevant documents had not been certified. Mr Ng, acting for the Plaintiff, for obvious reason to save time and costs, indicated that they would not take issue on that and would agree that the causes of action pleaded in the 2^nd set of Malaysian Proceedings (“the 2nd Malaysian Proceedings”) are similar to those pleaded in the Malaysian Proceedings. I would not rely on the uncertified translation but would make reference to the certified translation provided with the Malaysian Proceedings as and when necessary.

14.  In the 2^nd Malaysian Proceedings the Defendant herein (to be referred to as the Defendant for easy reference) named the Plaintiff herein (to be referred to as the Plaintiff for easy reference) as one of the Defendants. Another Defendant Netrove Ventures Corporation (to be referred to as “Netrove Venture”) is also a company registered in the British Virgin Islands of which the Plaintiff is the sole shareholder and sole director.   It is alleged that the Plaintiff is liable for loss and damage suffered by the Defendant because he is the alter ego of Netrove Ventrue and he had made certain representations.

Discussion

15.  The real bone of the Defendant’s argument for stay of the Hong Kong Proceedings is that the Loan was part of a wider transaction which is now the subject of the 2nd Malaysian Proceedings.

16.  There is no dispute that the Loan was in fact made of various advancements since 2009. The Defendant referred to one of the advancement made to him in September 2009 which had formed a good part of the HK$360,000.  By an email dated 8 September 2009 (B42), the Defendant raised a loan of US$18,000 from the Plaintiff saying that the money was needed for his fathers’ surgery and that he was anticipating a cheque of HK$200,000 to come in October 2009.  He further ventured a promise to pay back HK$150,000 to HK$170,000 in October 2009 and the balance in November. To me, the cheque to come in October 2009 mentioned does not seem to be any reward for work done for the Plaintiff or the Netroves.  In reply, the Plaintiff offered to advance a loan of HK$110,000.  By another email sent out later on the same date, the Defendant listed some other forthcoming income.

17.  I am of the view that with these promises the Plaintiff would not have found it necessary to take the monthly base fee of the Defendant as security for the Loan.  In fact nothing was mentioned about any monthly base fee in any of the relevant emails as disclosed. It was two months later that the Defendant executed the Points of Agreement. Further although the Loan was still outstanding at the time the Points of Agreement was executed, repayment was never mentioned therein or in any other correspondences close to the date.  I could not find any evidence in support of his saying that the money was for his bringing in business to Netrove Strategic, in particular, not from the email exchange in early September 2009.  In fact these emails evinced a different version on how the Loan arose, ie, the need to finance his fathers’ surgery. 

18.  Last but not least it is obvious that the Loan was advanced to him by the Plaintiff in his personal capacity. Repayment was made to the personal bank account of the Plaintiff and even the Defendant himself called this a “personal loan” in his email dated 6 March 2011 (A/116). On the other hand the Point of Agreement which had created a partnership relationship as alleged by the Defendant apparently involved Netrove Strategic and the Defendant.  I am therefore of the view that the Defendant’s saying that the Loan was an integral part of the broader transaction was not believable.

19.  As to his saying that it was his understanding that the partnership dispute between them would be resolved amicably and that he would be returned the 50% Optimix shares upon signing the Loan Agreement, again, the emails leading to the signing of the Loan Agreement in no way supported such saying. One of the relevant emails I could read was dated 19 January 2011 in which the Plaintiff asked the Defendant to confirm the total amount of the various loans made to him and the time he expected to pay back.  The Plaintiff also asked for an IOU in the email.  Later on 24 January 2011 the Defendant came up with a total of HK$360,000 and suggested that this was to be repaid by 4 equal monthly installments. The Loan Agreement was executed on 8 February 2011.  As I could see from emails of the parties, there were heated arguments on 1 February 2011 when the Plaintiff had chosen to use some very impolite words.  So from the time the Plaintiff asked for an IOU until the time of the execution of the Loan Agreement, there were no signs of amicable settlement between the two. Arguments continued.  I do not see evidence in support of the Defendant’s understanding that the Loan Agreement was signed in return for amicable resolution of their differences not to say the return of the Optimix shares to the Defendant as alleged.

20.  Upon my finding that the Defendant’s allegation is not believable, I do not accept that there is any substantial connection between these proceedings and the 2^nd Malaysian Proceedings. Further, on the point of alter ego, I would agree with the Plaintiff’s submission that there is no evidence on the fact the Defendant is to rely on to make out his plea; nor is there any submission or evidence on the Malaysian Law in this regard for me to decide on this issue.  The burden is on the Defendant. For these reasons I do not agree that the Loan should be made part of the 2^nd Malaysian Proceedings for determination.  The answer to the question asked in Stage (1) must be no.

Stage 2: Will a trial at the Malaysian Court deprive the Plaintiff of any "legitimate personal or juridical advantages?

21.  If the answer to question raised at Stage (1) is yes, the next question to ask is “Will a trial at the Malaysian Court deprive the Plaintiff of any "legitimate personal or juridical advantages?”  Since the answer is in the negative, I do not think I need to go into Stage 2 and it is thus not necessary for me to do the balancing exercise which I should otherwise be doing in Stage 3.

Conclusion on Defendant’s application for stay

22.  For reasons set out in the above, I refuse to exercise my discretion to grant a stay of these proceedings.  The summons of the Defendant is dismissed.  

SUMMARY JUDGMENT

23.  The question to ask is whether the Defendant does have a fair or reasonable probability of having a real or bona fide defence. The Defendant takes no issue on the Loan advanced to him by the Plaintiff. He has however offered a few explanations to its nature.  I have however found his explanation not believable in my analysis set out above.

24.  Mr Hart for the Defendant submitted that summary judgment is generally not appropriate where there is a counterclaim.  He relies on Shenzhen Baoming Ceramics Co Limited v Companion – China Limited [2000] 2 HKC 790 at 796:-

“where the Defendant sets up a bona fide counterclaim arising out of the same subject matter as the action and connected with the grounds of defence, the order should not be for judgment on the claim subject to a stay pending trail of the counterclaim, but should be for unconditional leave to defend”.

Since it is my finding that there is no connection between the 2nd Malaysian Proceedings and the Hong Kong Proceedings, I do not see the Defendant could be assisted by the above principle.

25.  Mr Hart further submitted that I should consider set-off.  I read the Defence and could not see set-off being pleaded.  The defence as pleaded is that the Defendant is not indebted to the Plaintiff.  Even if what is pleaded amounts to a defence of set-off, I do not see he would have an arguable case as I have found his case not believable and that there is no connection between the proceedings in the two jurisdictions.

Conclusion on Plaintiff’s application for Summary Judgment

26.  To conclude, I find the Defendant’s case not believable and I am not satisfied that there is a fair or reasonable probability of the Defendant’s having a real or bona fide defence.  Further I do not find any connection between the 2^nd Malaysian Proceedings and these proceedings. 

27.  In such circumstances, I enter judgment for the Plaintiff in these proceedings for the balance of the Loan, namely HK$235,000 together with interest of HK$30,636.17; and interest at judgment rate from date of writ to date of judgment and at the same rate from date of judgment until full payment. 

Costs

28.  I see no reason that costs should not follow the event. There will accordingly be a costs order nisi that the costs of the two summonses be paid by the Defendant to Plaintiff.  I consider summary assessment of costs to be suitable.  For that purpose, unless an application to vary the costs order in this paragraph is made within 14 days herefrom :-

(i) the Plaintiff is at liberty to lodge with court and serve a statement of costs within 21 days from the date of decision; and

(2) the Defendant be at liberty to lodge with court and serve a statement of objections within 7 days thereafter.