WANG QIAN WEI v. 郭文雨 AND ANOTHER

HCMP 2700/2017

[2018] HKCFI 2253

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2700 OF 2017

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J U D G M E N T

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1.  The Plaintiff, a Mainland judgment creditor, by an originating summons dated 13 December 2017, pursuant to the Mainland Judgments (Reciprocal Enforcement) Ordinance, Cap 597 (“the Ordinance”), applied for registration of a judgment of the Intermediate People’s Court of Xiamen City, Fujian Province, the PRC dated 15 September 2015 (“the Mainland Judgment”).

2.  The application is opposed by the 1^st Defendant who is one of the Mainland judgment debtors on a number of grounds the details of which will be discussed below.

FACTUAL BACKGROUND

3.  The Defendants and one Xiamen Xiaxin Investment Group Company Limited (“Xiamen Xiaxin”) signed an investment agreement (“the Investment Agreement”) on 3 June 2010 whereby Xiamen Xiaxin agreed to make an investment of RMB 20,000,000 through which the Defendants could expand their holding companies’ businesses. In return, the Defendants agreed to pay Xiamen Xiaxin a sum of RMB 70,000,000 should the holding companies of the Defendants be listed in the Over the Counter Bulletin Board in the USA or in any other board.

4.  It was one of the terms of the Investment Agreement that in the event that the Defendants’ holding companies failed to be listed within one year, Xiamen Xiaxin had the right to terminate the Investment Agreement unilaterally and the Defendants should within 7 days repay Xiamen Xiaxin RMB 20,000,000 with interest at 20% per annum.

5.  The Defendants’ holding companies were not listed within one year.  Hence, on 6 July 2011, all parties signed another agreement (“the Agreement”) to extend the investment for another year from 4 June 2011 to 3 June 2012, and if the Defendants’ holding companies were still not listed within this year, Xiamen Xiaxin had the right to terminate the Agreement unilaterally and the Defendants should again within 7 days repay the RMB 20,000,000 to Xiamen Xiaxin together with interest at 30% per annum.

6.  As it turned out, the Defendants’ holding companies failed to be listed within the one year period.  On 25 March 2013, all parties signed a further agreement (“the 2^ndAgreement”) whereby the Defendants acknowledged that they were indebted to Xiamen Xiaxin in the sum of RMB 33,000,000 including interest thus far, and that the Defendants would, starting from 1 April 2013, pay Xiamen Xiaxin a monthly sum of RMB 400,000 and interest at 20% per annum on the principal of RMB20,000,000 and the interest must be paid annually.

7.  The Defendants further agreed to repay Xiamen Xiaxin the principal sum of RMB20,000,000 on or before 31 December 2013 and all remaining debts by 31 December 2014.  Should the Defendants fail to comply with any of the payment terms for more than 3 days, Xiamen Xiaxin would have the right to demand repayment of the full sum of the loan and interest immediately.

8.  It is important to note that Clause 8 of the 2^nd Agreement provides that:

「 若本協議履行發生爭議，應由雙方協商解決，協商不成各方均同意交由甲方所在地人民法院管轄審理」

(Emphasis added)

9.  There is no dispute that 甲方所在地 is Xiamen.

10.  The Defendants defaulted in their repayments and only paid a total of RMB 2,400,000 as interest to Xiamen Xiaxin.

11.  On 13 March 2014, Xiamen Xiaxin transferred all its debts at a consideration of RMB 20,000,000 to the Plaintiff and notices of such transfers and demands for repayment were duly sent to the Defendants.

12.  On 21 April 2014, the Plaintiff commenced legal proceedings before the Intermediate People’s Court of Xiamen City, Fujian Province, the PRC and obtained a judgment against the Defendants for the sum of RMB 20,000,000 as principal, RMB 10,600,000 as interest, interest at 20% per annum starting from 1April 2013 onwards and RMB 500,000 as legal costs (“the Judgment”).

13.  It is important to note that the Defendants were given 30 days to appeal against the Judgment.  No appeal was filed at all and the Judgment was certified by the Intermediate People’s Court of Xiamen City to be effective as from 28 February 2016.

14.  The Defendants did appeal to the Higher People’s Court of Fujian Province to have the case retried.  The application was heard and dismissed by the said Higher People’s Court on 23 November 2017.  There was no further appeal and no other applications were taken out by the Defendants in relation to the Judgment.

15.  In the circumstances, the Plaintiff applies for the Judgment to be registered as a judgment in the High Court of the Hong Kong Special Administrative Region pursuant to the Ordinance.

LEGISLATIVE REGIME OF THE ORDINANCE

16.  Section 5 of the Ordinance provides:

“ (1) A judgment creditor under a Mainland judgment may apply to theCourt of First Instance within the time limit specified in section 7 to have the judgment registered in the Court of First Instance.

(2) On an application made under subsection (1), the Court of First Instance shall order the Mainland judgment to be registered in accordance with this Ordinance if the judgment creditor has proved to the satisfaction of the Court of First Instance that the following requirements are satisfied –

(a) The judgment is given on or after the date of the commencement of this Ordinance by—

(i) a chosen court which is a designated court;

(ii) a designated court upon a transfer of the case under the law of the Mainland from a chosen court;

(iii) a designated court upon an appeal against a judgment of the case given by—

(A) a chosen court; or

(B) a court to which the case has been transferred under the law of the Mainland from a chosen court; or

(iv) a designated court upon a retrial of the case which has been tried in—

(A) a chosen court; or

(B) a court to which the case has been transferred under the law of the Mainland from a chosen court;

(b) the relevant choice of Mainland court agreement is made on or after the date of the commencement of this Ordinance;

(c) the judgment is final and conclusive as between the parties to the judgment;

(d) the judgment is enforceable in the Mainland; and

(e) the judgment orders the payment of a sum of money (not being a sum payable in respect of taxes or other charges of a like nature or in respect of a fine or other penalty).”

17.  There is no dispute in the present case that first, the Judgment dated 15 September 2015 was given after the date of commencement of the Ordinance.  Secondly, the Judgment was given by a chosen court which is a designated court, namely, Intermediate People’s Court of Xiamen City, Fujian Province, the PRC.  Thirdly, the Judgment is enforceable in the Mainland.  Fourthly, the Judgment is a monetary judgment in compliance with section 5(2)(e) of the Ordinance.  Finally, this application is made within the time limit as specified under section 7 of the Ordinance.

THE DEFENDANTS’ GROUNDS OF OBJECTION

18.  On 23 February 2018, the 1^st Defendant filed an affirmation inopposition.  In the said affirmation, three grounds of objection were set out: 

(1)  “there is no term of choice of Mainland Court ever agreed between the Plaintiff and me.”

(2)  “I have been advised by my Counsel and verily believe that Clause 8 of the 2^nd Agreement provides no exclusivity for the jurisdiction of the Mainland Court.”

(3)  “I have been further advised by my Counsel and verily believe that in neither of the 2^nd Agreement and Notice of Transfer,there is any choice of governing law ever agreed by the parties to them.”

19.  It is to be noted that there was no challenge to the finality of the Judgment until Ms Wong, counsel for the Defendants, filed her Skeleton Submissions on 20 September 2018.

20.  Ms Wong, on behalf of the 1^st Defendant, advanced three grounds of objections, namely:

(1)  The Plaintiff fails to satisfy the requirement of section 5(2)(b) of the Ordinance for want of “choice of Mainland court agreement” as defined in section 3(2) of the Ordinance in that no agreement was concluded between the Plaintiff and the 1^st Defendant on the choice of Mainland Court to determine a dispute (“Ground 1”).

(2)  Even if there was such an agreement, the relevant clause, upon its proper construction, did not confer exclusive jurisdiction on any Mainland court (“Ground 2”).

(3)  The Plaintiffs has failed to prove that the Judgment was “final and conclusive as between the parties to the judgment” as required under section 5(2)(c) of the Ordinance (“Ground 3”).

ANALYSIS

Ground 1

21.  The 1^st Defendant’s argument basically comes down to fact that there is no agreement between the Plaintiff, qua assignee, and the 1^st Defendant.

22.  This ground of objection can be disposed of fairly easily.  Under section 2 of the Ordinance, “judgment creditor” is defined as:

“ the person in whose favour a Mainland Judgment was given, and includes any person in whom the rights under the judgment have become vested by succession or assignment or otherwise.” (Emphasis added)

23.  In the present case, it is quite clear that the Plaintiff’s rights as an assignee were confirmed by the Judgment.  In the Judgment, it is clearly set out that the Plaintiff’s rights have become vested by way of assignment.  That is a complete answer to the 1^st Defendant’s objection.

24.  The Ordinance does not restrict the class of applicants to the original parties to any specified contracts.  If it is so restricted, there is no reason why the definition of judgment creditor is worded in such a way to include successors and assignees.  Section 3(2) of the Ordinance only requires that there be a “choice of Mainland court agreement”, namely, an agreement concluded by the parties to a specified contract and specifying the courts in the Mainland or any of them as the court to determine a dispute which has arisen or may arise in connection with the specified contract to the exclusion of courts of other jurisdiction.  There is no requirement that the judgment creditor must be also a party to the specified contract.

25.  The fact remains that the Plaintiff is a judgment creditor and there is a “choice of Mainland court agreement” between parties of the 2^nd Agreement to which, through the Judgment, the Intermediate People’s Court of Xiamen City, Fujian Province of the PRC had already vested rights upon the Plaintiff. 

26.  This Court also agrees with Mr Li, counsel for the Plaintiff’s submission that it is wrong and there is a high degree of artificiality in Ms Wong’s submission that albeit that the Plaintiff is a judgment creditor within the meaning of section 2 of the Ordinance which gives him the entitlement to apply for registration of the Judgment, but “he could not properly register the Mainland Judgment under the Ordinance as he was not a party to the relevant choice of court agreement.”

27.  Accordingly, this Court dismisses Ground 1 of the 1^st Defendant’s objection.

Ground 2

28.  On this ground, the 1^st Defendant first took the issue that as a matter of Hong Kong laws, Clause 8 is not an exclusive jurisdiction clause.  Paragraph 10 of the 1^st Defendant’s affirmation stated that as advised by counsel, Clause 8 of the 2^nd Agreement provides no exclusivity for the jurisdiction of the Mainland court.  The 1^st Defendant contended that Clause 8 does not contain the word “exclusive” or words to that effect to stipulate the exclusive jurisdiction of any chosen Mainland court to determine the dispute.

29.  This court is of the view that in determining whether a clause provides for exclusive jurisdiction, “the true question is whether on its proper construction the clause obliges the parties to resort to the relevant jurisdiction, irrespective of whether the word ‘exclusive’ is used.  The court looks at the substance and not the form of words used.”  (See Dicey, Morris & Collins on the Conflict of Laws, 15^th edition, §12-105.)

30.  On a proper construction of Clause 8, as a matter of Hong Konglaws, this Court agrees that the parties have positively agreed for the People’sCourt to have exclusive jurisdiction.  It is quite clear that it was envisagedthat if there were to be disputes, the parties would first resolve such disputesby way of mediation failing which the parties would have to resort to court proceedings in the People’s Court of Xiamen Xiaxin’s place of business, namely, Xiamen.

31.  Mr Li for the Plaintiff submitted that the above construction makes sense because all parties to the 2^nd Agreement either resided or operate their businesses in the PRC.  Clause of the 2^ndAgreement sets out their means of contact all of which are PRC addresses and phone numbers.  The 2^nd Agreement superseded two previous agreements related to commercial transactions in the PRC.  All the agreements were made in simplified Chinese.

32.  Mr Li also relied on the case of Bank of China Limited v Yang Fan [2016] 3 HKLRD 7 where Mr Justice To analysed a clause which provides that the People’s Court may (可以) determine dispute between the parties therein.  In that case, like the present case, no evidence of the Mainland laws were adduced, and the court had to apply Hong Kong laws to interpret the relevant clause.  Mr Justice To referred to the principles of interpretation and the factual matrix in that case and ruled that the relevant clause is an exclusive jurisdiction clause.  Mr Li, submitted that, a fortiori, applying the same principles of interpretation to Clause 8 and the factual matrix of the present case, in particular, bearing in mind that the parties did actually submit to the Intermediate People’s Courts in Xiamen and the Higher People’s Courts in Fujian to resolve their disputes, the only reasonable interpretationis that by Clause 8, parties did confer exclusive jurisdiction on the People’s Court of Xiamen, Xiaxin’s place of business.  I agree.

33.  However, in Ms Wong’s Skeleton Submissions, she raised an additional point that whether Clause 8 is an exclusive jurisdiction clause must be properly construed according to the governing law of the contract, in this case, the laws of the Mainland.  She further submitted that on the one hand the Plaintiff maintains that the governing law of the 2^ndAgreement is the laws of the Mainland, on the other hand, the Plaintiff had failed to adduce any expert evidence to construe the meaning of Clause 8 in accordance with the laws of the Mainland. Hence, Ms Wong submitted that without such evidence, it would not be proper for this court to construe Clause 8 on its own against the factual matrix of this case.

34.  First, this point was taken very late, virtually one day before the hearing.  Secondly, it is contrary to the 1^st Defendant’s position as stated in paragraph 10 of the 1^st Defendant’s affirmation that their challenge was based on Hong Kong counsel’s advice on the proper construction of Clause 8.  They have thus far not relied on the laws of the Mainland.  The Plaintiff is entitled to take the view that the 1^st Defendant had agreed to have this very issue resolved by applying the laws of Hong Kong.

35.  Thirdly, in the absence of sufficient proof of the laws of the Mainland, this court can apply Hong Kong laws and rule on this matter according to Hong Kong laws.  In Dicey, Morris & Collins, The Conflict of Laws, supra, §9-025, the learned editors stated:

“ The burden of proving foreign law lies on the party who bases his claim or defence on it. If that party adduces no evidence, or insufficient evidence, of the foreign law, the court applies English law. This principle is sometimes expressed in the form that foreign law is presumed to be the same as English law until the contrary is proved ….”

36.  Indeed, there is a long line of cases which in the absence of expert evidence on the laws of the Mainland, it is presumed that the laws of the Mainland are the same as Hong Kong laws.  (See Caspian Resources Development Pte Ltd v Fortune Oil Plc & Ors [2016] 3 HKC 13, per DHCJ Le Pichon at §30; Xiang Jun v Cheng Siu Tung Gregory HCA 47/2016 (unreported, 11 September 2017) per Master M Wong at §§45 – 49; Cheng Hang Chu & Ors v China Treasure Enterprise Ltd [2000] 2 HKC 814, per Chung J at 820B–D.)

37.  In Shenzhen Futaihong Precision Industry Co Ltd & Anor v BYD Co Ltd & Ors HCA 2114/2007 (unreported, 27 June 2008) Deputy High Court Judge Au (as he then was) at §63 said:

“ As mentioned above, for the identified issues in this action, the 1^st and 2^nd Defendants have not adduced any expert evidence to show that any applicable and relevant PRC laws are different fromHong Kong laws. As such, the relevant PRC laws are presumed to be the same as Hong Kong laws.”

38.  The same applies to the 1^st and 2^nd Defendants in the present case.  In the absence of any evidence showing how the laws of the Mainland would differ from Hong Kong laws on the construction of Clause 8, it is simply not open to the 1^stDefendant to argue that Clause 8 has a different meaning under the laws of the Mainland.  This is particularly so when all along it is the 1^st Defendant’s position that Clause 8 is to be construed according to Hong Kong laws.

39.  Mr Li also reminded this Court that in Bank of China Limited v Yang Fan [2016] 3 HKLRD 7, supra, the PRC legal opinion was only on the issue of “finality”.  Again in the absence of evidence in relation to the laws of the Mainland on the issue of exclusivity, the learned judge correctly applied Hong Kong laws in construing the relevant clause.

40.  For the above reasons, Ground 2 is also dismissed.

Ground 3

41.  On 11 September 2018, a few days before this hearing, the 1^st Defendant took out a summons to adduce a Mainland legal opinion on the finality of the Judgment within 21 days and for this hearing be vacated andadjourned to another date to be fixed in consultation with counsel’s diaries with an estimated length of two days.

42.  At the hearing, this court dismissed the 1^st Defendant’s said summons.  First, thus far, the 1^st Defendant has not taken any issue on the finality of the Judgment as a ground of opposition.  It is now far too late to raise such an objection and to have this hearing vacated.  Registration of judgment proceedings are supposed to be quick and effective.

43.  Secondly and importantly, Ms Wong submitted that the 1^st Defendant needs to file an expert report in response to the Mainland legal opinion exhibited to the 1^st Affirmation of Zhang Yi Chao.  Mr Li, for the Plaintiff, however, informed this Court that the Plaintiff does not need and will not rely on such Mainland legal opinion for the purpose of this hearing.  In the circumstances, there is no need for the 1^st Defendant to file his Mainland legal opinion.

44.  On the issue of finality of the Judgment, it is important to bear in mind the statutory provisions.  Section 6(1) of the Ordinance provides:

“ (1) For the purposes of section 5(2)(c), a Mainland judgment isfinal and conclusive as between the parties to the judgment if—

(a) it is a judgment given by the Supreme People’s Court;

(b) it is a judgment of the first instance given by a Higher People’s Court, an Intermediate People’s Court or a recognized Basic People’s Court and—

(i) no appeal is allowed from the judgment according to the law of the Mainland; or

(ii) the time limit for appeal in respect of the judgment has expired according to the law of the Mainlandand no appeal has been filed;

(c) it is a judgment of the second instance given by a designated court other than a recognized Basic People’s Court; or

(d) it is a judgment given in a retrial by a designated court of a level higher than the court whose judgment has given rise to the retrial.” (Emphasis added.)

45.  In present case, the Judgment was handed down on 15 September 2015.  In the Judgment, it is stipulated that parties have 30 days to lodge an appeal.  None of the defendants including the 1^st Defendant had appealed against the Judgment at all.  A certificate of effectiveness of the Judgment was issued by Intermediate People’s Court of Xiamen on 28 February 2016.

46.  The Defendants applied for a retrial before the Higher People’s Court of Fujian Province, the PRC.  The said application was dismissed on 23 November 2017.  There was no appeal against the said dismissal.

47.  In the circumstances, applying section 6(1)(b)(ii) of the Ordinance, it is clear that the Judgment is final and conclusive.  The 1^st Defendant’s Ground 3 is also dismissed.

48.  For the sake of completeness, this Court also notes that Ms Wong, for the 1^st Defendant, has fairly no longer pursued the governing law point as this point has been ruled by the Intermediate People’s Court of Xiamen which confirmed that the laws of the Mainland was the appropriate governing law for reasons of nexus.

DISPOSITION

49.  For the above reasons, this Court grants an order in terms of paragraphs 1 and 2 of the Originating Summons dated 13 December 2017 with a costs order nisi that all costs including costs of the 1^st Defendant’s Summons dated 11 September 2018 are to be paid by the 1^st Defendant to the Plaintiff forthwith, on a party to party basis, to be taxed if not agreed.  Unless any parties apply to vary the costs order nisi within 14 days after this judgment is handed down, the same shall become absolute upon the expiry of the 14-day period.

50.  Finally, it remains for me to thank Mr Li for the Plaintiff and Ms Wong for the 1^st Defendant for their helpful assistance rendered to the court.