MAYAR (HK) LTD v. NAROTAM SAYAL

HCA2801/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.2801 OF 2002

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J U D G M E N T

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1. The plaintiff is appealing against the decision of the Master in staying the proceedings on forum non conveniens in respect of a Profit Sharing Agreement (“PSA”).

Background

2. The plaintiff is a Hong Kong registered company and the defendant is an Indian national.  The plaintiff’s claim is based on the PSA dated 12 October 1999 entered into between the plaintiff and the defendant in Hong Kong.  The defendant disputed that the PSA was executed in Hong Kong as purportedly stated.

3. Clause I of the agreement headed “Sharing of Profits or Losses” stated that the parties agreed that the profits or losses of the Timber Division of the plaintiff shall be shared between the plaintiff and the defendant in the ratio of 51:49.

4. Clause II headed “Remittance of Profits or Reimbursement of Losses” stated that the defendant’s share of profits shall be paid each year within 60 days of the financial year ending 31 March and shall be remitted as per the instructions of the defendant to the plaintiff, subject to his contribution of the paid up share equity capital of Mayar Resources (Singapore) Private Limited (“Mayar Singapore”) as per Clause III.  Similarly losses incurred, if any, shall be made good by the defendant in the same ratio of 49%.

5. Clause III headed “Contribution of Capital” stated that the parties agreed to increase and contribute the paid up capital of Mayar Singapore to US$2 million by 30 September 2000 and the aforesaid equity capital shall be contributed by the plaintiff and the defendant in the ratio of 51:49.

6. Clause IV headed “Arbitration” stated that in case of dispute or difference arising between the parties, the decision of the plaintiff shall be final and binding on the parties to this agreement.

7. Clause IV headed “Jurisdiction” stated as follows :

“As dispute or difference arising between the parties out of this agreement shall be governed by the Laws of Hong Kong.”

8. In the Statement of Claim, the plaintiff pleaded that in purported performance of Clause III of the agreement, the defendant had caused one Ashita Impex Private Limited (“Ashita Impex”), an Indian company controlled by the defendant and his family to pay Mayar Singapore US$358,000 on 28 July 2000.   In 2001 Ashita Impex brought proceedings in Singapore against Mayar Singapore for the return of US$358,000, and on 21 November 2001 judgment was given in favour of Ashita Impex.  The plaintiff claims that the loss of the Timber Division in 2000/2001 amounted to US$4,630,148, and the defendant should be responsible to pay US$2,268,773 (49%) to the plaintiff.

9. The plaintiff gave credit to the US$358,000 due to Ashita Impex against its claim of share of losses against the defendant.

10. The plaintiff also alleged that the defendant had borrowed a “shareholder’s loan” of US$18,515 from the plaintiff.  The plaintiff somehow also gave credit for US$18,515 against its claim of share of losses.

11. As mentioned, the Master only stayed the claim in respect of the PSA.  The application to stay the shareholder’s loan (sic) was refused.

12. The Writ herein was issued on 19 June 2002.  The defendant was served personally outside the jurisdiction.  On 21 October 2002, judgment was in default of acknowledgement of service.  The default judgment was set aside on 10 February 2004.  On 16 March 2004, the defendant took out the present summons to stay the proceedings.

13. Mr Sussex, SC, for the plaintiff reserved without arguing the point against the defendant disputing jurisdiction under O.12, r.8, Rules of the High Court (Cap.4A), in the event the point needs to be revisited if the case proceeds further elsewhere.

14. Soon after the Writ was issued, the defendant took out proceedings in the High Court in Delhi against the plaintiff and other parties in India for an order cancelling the PSA, or a negative declaration that the PSA was not a legally binding agreement.  The defendant also obtained an injunction from the High Court in Delhi against the enforcement of the judgment, if any, of this Court.

15. The plaintiff has taken out an application to strike out the Indian proceedings, which is adjourned pending hearing in the Indian Court.

16. No defence has been filed.  Mr Smith, SC, for the defendant, outlined the issues raised by the defendant as follows :

(1)	whether the PSA was subject to a condition precedent that the defendant should obtain the approval of the Reserved Bank of India (“RBI”) in making foreign investment;
(2)	whether the PSA was treated as abandoned by both parties when they perceived that the approval by RBI would not be given;
(3)	if the PSA were valid, what were the losses to the plaintiff?

17. Mr Smith submitted that issue (1) did not touch upon the contractual capacity of the defendant.  The question was basically factual having the scheme of restrictions of the RBI as background.

18. The Singaporean action was not strictly relevant save that the contribution by Ashita Impex might be evidence that the PSA was no longer operative and another way had to be found to fund Mayar Singapore.

19. Mr Sussex pointed out that the defendant’s case on the RBI restrictions in his 3^rd Affirmation went much further:

“	16.	It was understood and discussed between Sud and myself that for the PSA to be effective the Reserve Bank of India (“RBI”) would need to grant approval for me as an Indian citizen to invest abroad.  To this end, PSA was drafted merely as an understanding or memorandum between the parties as it was proposed at that point in time and subject always to the express consent of RBI before it became a valid agreement in the eyes of the law. …”
		…
“	36.	The PSA is void and unenforceable because the statutory guidelines issued by the RBI and in force at that time in Indian in relation to direct investment in joint ventures and wholly owned subsidiaries abroad required that an ‘Indian party’, being a person residing in India, can only invest directly in the joint venture or wholly owned business subsidiary outside India if they obtained prior approval from the RBI.”

20. Mr Sud is the soul and mind behind the Mayar group of companies which the plaintiff belongs.

21. Mr Sussex submitted that the approval by RBI was not merely a factual issue of a conditional precedent and the subsequent failure thereof.  Points floated around may include the lack of intention to enter into a legally binding agreement, and/or the legal incapacity of the defendant, and/or the PSA being void for illegality.

Jurisdiction clause?

22. Mr Sussex’s first point was that Clause V is in fact a jurisdiction clause as opposed to a mere choice of law clause.  He submitted that the heading “Jurisdiction” must carry same weight in interpretation.

23. Mr Smith pointed out that Clause IV was purportedly an arbitration clause (albeit subject to an argument whether it is workable).  That explains why Clause V lacks the reference to any court.  Hence, Clause V was only a choice of law clause.

24. I find that by reference to its wording, and also to Clause IV, Clause V is only a choice of law clause.

Forum non conveniens

25. The law as to application by a defendant for the court to exercise the discretion to stay the proceedings as ground of forum non conveniens is set out by the House of Lords in Spiliada Maritime Corp. v. Cansulex Ltd (the “Spiliada”) [1987] 1 AC 460.  Lord Goff of Chieveley summarized the law at 476C to 478E.  With due deference, I recite those principles without citing in full what his Lordship said :

(1)	The basic principle is that a stay will only be granted on the ground of forum non conveniens where the court is satisfied that there is some other available forum, having competent jurisdiction, which is the appropriate forum for the trial of the action, i.e. in which the case may be tried more suitably for the interests of all the parties and the ends of justice.
(2)	In general, the burden of proof rests with the defendant to persuade the court to exercise its discretion to grant a stay while the evidential burden will rest on the party seeking to establish existence of certain matters which will assist him in persuading the court to exercise its discretion in its favour.
(3)	The burden resting on the defendant is not just to show that Hong Kong is not the natural or appropriate forum for the trial, but to establish that there is another available forum which is clearly or distinctly more appropriate than the Hong Kong forum.
(4)	Since the question is whether there exists some other forum which is clearly more appropriate for the trial of the action, the court will look first to see what factors there and which point in the direction of another forum.
(5)	The “natural forum” as referred to by Lord Keith of Kinkel in the Abidin Daver [1984] AC 398 is “that with which the action had the most real and substantial connection.  The connecting factors will include not only factors affecting convenience or expense (such as availability of witnesses), but also other factors such as the law governing the relevant transaction, and the places where the parties respectively reside or carry on business.
(6)	If the court concludes at that stage that there is no other available forum which is clearly more appropriate for the trial of the action, it will ordinarily refuse a stay.
(7)	If however the court concludes at that stage that there is some other available forum which prima facie is clearly more appropriate for the trial of the action, it will ordinarily grant a stay unless there are circumstances by reason of which justice requires that a stay should nevertheless not be granted.  In this inquiry, the court will consider all the circumstances of the case, including circumstances which go beyond those taken into account when considering the connecting factors with other jurisdictions.  One such factor can be the fact, if established objectively by cogent evidence that the plaintiff will not obtain justice in the foreign jurisdiction.  On this inquiry, the burden of proof shifts to the plaintiff.

26. The Spiliada has been applied in Hong Kong by the Court of Appeal in the “Adhiguna Meranti” [1987] HKLR 904 and in the “Lanka Muditha” [1991] HKLR 741.   A summary of the three stage process was set out in the “Lanka Muditha” per Nazareth J (as he the was) at 744B :

“	(I)	Is it shown that Hong Kong is not only not the natural and appropriate forum for the trial, but that there is another available forum which is clearly or distinctly more appropriate than Hong Kong …
	(II)	If the answer to (I) is yes, will a trial at the other forum deprive the plaintiff of any legitimate personal or juridical advantages.  The evidential burden here lies on the plaintiff.
	(III)	If the answer to (II) is yes, a court has to balance the advantages of (I) against the disadvantages of (II) … 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 … Proof of this … rests upon the applicant for the stay.”

27. In considering the issues of this action, Mr Sussex submitted that there are three matters which the Court will be called upon to consider :

(1)	the negotiations leading to the PSA : the witnesses are Mr Sud and the defendant, who are frequently travelled international businessmen, and their staff members;
(2)	events following the PSA : on the plaintiff’s case, the Timber Division and MRS were developed, and the witnesses were from Singapore and Indonesia; on the defendant’s case, the PSA was abandoned;
(3)	loss suffered by the plaintiff : the accounting and auditing evidence from Hong Kong.

28. The defendant said that his entire staff in India could be witnesses in the action.

29. It is observed under Clause II of the PSA, the share of profits shall be paid and remitted to the defendant as per instructions of the defendant to the plaintiff.  It is silent as to the place of payment or remittance, and in particular, there is no mention of India.  The defendant may give instructions as to any destination for the remittance.  On the other hand, losses incurred, if any, shall be made good by the defendant.  Again, there is no mention of any place of payment to the plaintiff.  Prima facie, in the ordinary course of events, the share of losses should be paid to the plaintiff in Hong Kong because the plaintiff is situated in Hong Kong.

30. In this case, the various connecting factors are :

(1)	the plaintiff is a Hong Kong company;
(2)	the defendant is a national and resident in India;
(3)	the choice or law for the RSA and/or the putative proper law of the validity of the PSA is Hong Kong law;
(4)	the profits and/or losses are derived from Singapore and/or Indonesia;
(5)	the place of performance of the PSA insofar as the contribution of capital is Singapore;
(6)	prima facie, the place of performance of the PSA insofar as the payment of the share of losses to the plaintiff is Hong Kong;
(7)	the witnesses on the negotiation of the PSA are in India;
(8)	the other witnesses and/or evidence relating to the Timber Division, MRS, and the loss incurred, will be from Hong Kong and Singapore; and
(9)	litigation costs will be lower in India save and except that if the plaintiff were to bring a counter claim for the share of loss, the ad valorem court fees will amount to US$18,000 to US$20,000.

31. The lis alibi pendens in India and in particular an injunction against the enforcement of any judgment of this Court is an additional factor relevant to the determination of the appropriate forum.

32. Mr Smith conceded that the plaintiff being a Hong Kong resident is a relevant factor.  But he pointed out that that the plaintiff was a member of a group of company in India, and Mr Sud, one of the two protagonist, is also a national and resident of India.  Although he and his witnesses are willing to come to Hong Kong to give evidence, there is no reason why he should impose this extravagance upon the defendant and the numerous defence witnesses.

33. Mr Smith accepted that the proper law for the PSA is Hong Kong law, and under the relevant conflict rules, the putative proper law for the validity of the PSA is also Hong Kong Law.  However, he submitted that unless it is shown by the party refusing the stay application that Indian law differs from Hong Kong law for the resolution of the issues at hand, the effect of the choice of law clause is neutral.

34. Mr Smith referred to Arata Potato Co. Ltd & anor v. Egyptian Navigation Co. (the “El Amria”) [1981] 2 LL Rep 119.  There the bills of lading included a jurisdiction clause providing that :“Any dispute arising under this Bill of Lading shall be decided in the country where the carrier has his principal place of business, and the law of such country shall apply …”.  The principal place of business of the defendant carrier is Alexandria, and hence the choice of law is Egyptian law.  The plaintiff sued for damage to the cargo in England, the country where the cargo was unloaded.  At first instance, Sheen J dismissed an application by the defendant for a stay on the ground of the foreign jurisdiction clause, and commented, inter alia, that there was no evidence to show that an Egyptian Court would have interpreted or applied the Hague Rules expressly incorporated by the bills of the lading any differently in any material respect from an English Court.   The appeal was dismissed.  It is noted from the judgment of Brandon LJ that where plaintiff sued in England in breach of an agreement to refer the dispute 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.  The discretion should be exercised by granting a stay unless strong cause for not doing so is shown, and the burden of proving such a strong case is on the plaintiff.  The Court may take into call the circumstances including whether the law of the foreign court applies and if so, whether it differs from English law in any material respects.

35. Mr Smith also referred to Konamaneni & Ors v. Rolls-Royce Industrial Power (India) Ltd & Ors [2002] 1 All ER 979, the claimants were minority shareholders in Spectrum Power Generation Ltd (“SPGL”), an Indian company.  They brought a derivative claim in England against two English companies, seeking to enforce a claim by SPGL in respect of bribes allegedly paid by the English companies to SPGL’s managing director, an Indian living in India.  The master granted an order to serve SPGL outside jurisdiction.  On appeal, Lawrence Collins J found the Indian connection were overwhelming, and the order of the master was set aside.  On the consideration of the applicable law, his lordship said at 1019 para. 170 :

“Applicable Law

[170]  This is not a factor of great significance in this case because there is no evidence of any difference between English law and Indian law on the relevant matters.  But the case does involve some developing and controversial areas of law such as the scope of the right to bring derivative actions and the law of bribery.  I have expressed the view that the question of the right to bring a derivative action is governed by Indian law, and it is likely that the bribery issues are governed by Indian law (see Arab Monetary Fund v. Hashim [1993] 1 Lloyd’s Rep 543; affirmed on this aspect [1996] 1 Lloyd’s Rep 589).  To the extent that there are controversial issues it would be better for them to be decided by the court which can authoritatively rule on them, and whose judgments are subject to appeal.  But since there is no evidence of any differences, and since the application of foreign law is an everyday occurrence in English courts, this is not a significant pointer to India as the proper forum.”

36. In Chellaram & Anor v. Challeram & Ors (No. 2) [2002] 3 All ER 17, Lawrence Collins J at 50 para. 170 said that the governing law is not a weighty factor when there is no reason to suppose that the law applicable in the competing jurisdiction is any different.

37. Mr Smith further referred to New Link Consultants Limited v. Air China & Ors, HCA515/2001(date of decision 3 May 2004).  The plaintiff entered into a joint venture agreement with wholly owned subsidiaries in China of the three defendant airlines to form a joint venture company for the supply of aviation parts to the airlines.  The joint venture agreement was governed by the law of Hong Kong.  The joint venture failed and the plaintiff alleged breaches by the defendants in unfailing to procure from or utilize on a priority basis all aviation parts and equipment from the joint venture company before considering any other sources.  Deputy Judge Poon found that performance of the agreement was in Beijing and that was a strong pointer in favour of the courts in Beijing and Hong Kong was not the forum conveniens.  On the consideration of the proper law, Deputy Judge Poon said at para. 83 :

“(b)  Proper Law

It is the plaintiff’s contention that the proper law of the Agreements sued upon is Hong Kong law.  The defendants argue that it is PRC law.  There is, however, no suggestion that there is any material difference in Hong Kong law and PRC law relating to the Agreements.  It is therefore a neutral factor.  It is not necessary and I do not propose to make any finding on this question of proper law of contract.”

38. Mr Smith pointed out that in the ordinary course, foreign law will be presumed to be the same as the domestic law unless proven by actual expert evidence.

39. Mr Smith submitted that since the plaintiff does not concede the RBI restrictions on foreign investment by Indian nationals, insofar as this issue is relevant as background of the condition precedent or credibility of the parties, the Indian Court would more readily see whether in fact Indian law precluded the defendant from entering into the PSA.

40. He further that the onus cannot be on the applicant for the stay to prove that the laws are of no difference, but it must be for the party resisting the stay to state the difference, such as in the case of a negative averment.

41. On the other hand, Mr Sussex submitted that in an application for stay where there is no jurisdiction clause,  the onus is on the applicant to prove forum non conveniens.  As the proper law is a relevant connecting factor, the onus must be on the applicant to show the foreign law and the chosen law are the same.

42. Be that as it may, Mr Sussex submitted that insofar as the defendant appears to be saying that he was under a contractual incapacity under Indian law, that would not impact upon a contract subject to Hong Kong law as our conflict rules on contractual capacity aim to preserve rather than destroy contracts as it can be determined either on the proper law of the contract or the law of the domicile and residence of the party.  He referred to Dicey & Morris on the Conflict of Laws (Vol. 2, 11^th Ed., 1987), Rule 182 :

“Rule 182. An individual’s capacity to enter into a contract is governed by the system of law with which the contract is most closely connected or by the law of his domicile and residence.

If he has capacity to contract by the system of law with which the contract is most closely connected, the contract will (semble) be valid so far as capacity is concerned.

If he has capacity to contract by the law of his domicile and residence, the contract will (semble) be valid so far as capacity is concerned.”

43. Hence, it is submitted that the application of Hong Kong law and Indian law would differ as to the contractual capacity.  Likewise, it is submitted that PSA will not be illegal under Hong Kong law.

44. With regard to the fact that it may be less costly to litigate in India than Hong Kong, Mr Sussex submitted that the question at issue is not “mere practical convenience”.

45. Mr Smith submitted that in addition, where proceedings already on foot in another jurisdiction, special considerations apply.  He referred to the Hong Kong Civil Practice 2004, para. 11/1/11 :

“The fact that foreign proceedings have been under way for a substantial time, have involved the parties in substantial costs and are ready for trial, will be strong factors in favour of the grant of the (Hong Kong) proceedings.”

46. In Subhash Chandra & Anor v. Michael Johnson, HCA900/1995 (date of decision 10 January 1997), Cheung J (as he then was) cited the Abidin Daver op. cit. per Lord Diplock at 411G to 412A :

“Where a suit about a particular subject matter between a plaintiff and a defendant is already pending in a foreign Court which is a natural and appropriate forum for the resolution of the dispute between them, and the defendant in the foreign suit seeks to institute as plaintiff an action in England about the same matter to which the person who is plaintiff in the foreign suit is made defendant, then the additional inconvenience and expense which must result from allowing two sets of legal proceedings to be pursued concurrently in two different countries where the same facts will be in issue and the testimony of the same witnesses required, can only be justified if the would-be plaintiff can establish objectively by cogent evidence that there is some personal or judicial advantage that would be available to him only in the English action that is of such importance that it would cause injustice to him to deprive him of it.”

47. His Lordship further cited de Dampierre v. de Dampierre [1988] 1 AC 92, per Lord Goff at 108C to D :

“However, the existence of such proceedings may, depending on the circumstances, be relevant to the inquiry.  Sometimes they may be of no relevance at all, for example, if one party has commenced the proceedings for the purpose of demonstrating the existence of a competing jurisdiction, or the proceedings have not passed beyond the stage of the initiating process.  But if, for example, genuine proceedings have been started and have not merely been started but have developed to the stage where they have had some impact upon the dispute between the parties, especially if such impact is likely to have a continuing effect, then this may be a relevant factor to be taken into account when considering whether the foreign jurisdiction provides the appropriate forum for the resolution of the dispute between the parties.”

48. In Hing Fat Plastic Manufacturing Co. Ltd v. Advanced Technology Products (HK) Ltd [1992] 2 HKLR 351 per Keith J at 352 line 43 to 353 line 16 :

“I have no doubt that it is highly undesirable to have concurrent actions in Hong Kong and the PRC between the same parties where the claims in each action are identical.  The defendant has to expend double the time and double the expense in defending both sets of proceedings.  Moreover, there is the possibility that at the end of it all conflicting decisions will be pronounced.  To avoid that, the parties may be tempted to engage in an unseemly race to obtain judgment in one jurisdiction so as to utilise that judgment and plead either res judicata or issue estoppel in the other.  As Mr Wong rightly submits, all that puts pressure on the defendant to settle the plaintiff’s claim on less favourable terms than it might otherwise have done if the claim was proceeding in one jurisdiction only.

However, the undesirability of concurrent actions in different jurisdictions does not automatically justify an order whose effect is to prevent both actions continuing at the same time.  The proper test was discussed by the House of Lords in The Abidin Daver [1984] AC 398.  At pp.411G-412A, Lord Diplock took the view that a plaintiff should be allowed to proceed with both actions only if there was a personal or juridical advantage which the plaintiff would derive from proceeding with both actions, and which is of such a fundamental nature that to deny the plaintiff that advantage would amount to a positive injustice.  However, at p.419G-H, Lord Brandon applied a more flexible approach.  He regarded the exercise of the court’s discretion as involving the balancing of all the relevant factors on either side, those favouring allowing the plaintiff to proceed simultaneously in different jurisdictions, and those militating against it.”

49. Mr Sussex submitted that the Indian proceedings praying for a negative declaration that the PSA is not legally binding was really for the purpose of forum shopping and creating a competing jurisdiction.  He referred to Sapiem SpA v. Dredging V02 BV & Anor (the “Volvox Hollandia”) [1982] 2 LL Rep 361 per Kerr LJ said at 371 :

“… Claims for declarations, and in particular negative declarations, must be viewed with great caution in all situations involving conflicts of jurisdictions, since they obviously lend themselves to improper attempts at forum shopping.”

50. It is noted that in the Volvox Hollandia, the shipowners had only claimed that they were entitled to limit their liability in the Dutch Courts and under Dutch law.  The plaintiff, on the other hand, sought declarations that the shipowners were not entitled to limit their liability in England under English law.  No claim to the effect had ever been asserted by the shipowners.  The English Court of Appeal (Kerr and Nicholls LJJ, Dillon LJ dissenting) held that it had no jurisdiction to grant the declaration.

51. Nevertheless, Mr Sussex pointed out that the Indian proceedings were issued after the proceedings herein and not vice versa, and the issues were not the same.

52. At present, the plaintiff (as defendant in the Indian proceedings) has no subsisting counterclaim.

53. According to the Ms Acharya, the plaintiff’s Indian lawyer, under the Indian Limitation Act, 1963, the period of limitation for compensation for breach of contract is three years.  Under section 14, the Court has a discretion to extend the period of limitation :

“Exclusion of time of proceeding bona fide in court without jurisdiction

(1)  In computing the period of limitation for any suit the time during which the plaintiff has been prosecuting with due diligence another civil proceeding, whether in a court of first instance or of appeal or reversion, against the defendant shall be excluded, where the proceeding relates to the same matter in issue and is prosecuted in good faith in a court which, from defect of jurisdiction or other cause of a like nature, is unable to entertain it.”

54. Mr Sussex pointed out that as of right, the plaintiff’s prospective counterclaim in the Indian proceedings is time barred.  Even with the discretion to extend time, there is a serious risk of the plaintiff’s claim being time barred.  Mr Smith submitted that there is no suggestion of the plaintiff proceeding in bad faith in Hong Kong and the plaintiff’s argument is simply disingenuous.  But Mr Smith conceded that there is no corresponding expert evidence for the defendant on this point as to Mr Sussex’s concern being negligible.

55. Mr Sussex submitted that the Court finds against him on forum conveniens, he relied on two fall back points of deprivation of personal or juridical advantages before the Indian Court :

(1) the limitation point; and

(2) delay inherent in the Indian legal system.

56. On delay, Ms Acharya documented evidence of the typical flow of litigation in India and examples of delay, and said the time for adjudication of the matter may be up to 15 years.

57. The defendant filed an opinion of Mr Y.V. Chandrachud, former Chief Justice of India, that the Indian legal system has undergone radical reform, as in 1999 procedural reform analogous to the Civil Justice Reform in England, as well as in 2002 the increase of the jurisdictional limit of the District Court.  The time from commencement until adjudication has been reduced to three to four years.  Mr Smith also referred to comments of Hong Kong and English judges on the Indian judicial reform and improvement of delays and the Courts have stayed domestic proceedings in deference to Indian proceedings (see Subhashi Chandra v. Michael Johnson op. cit. per Cheung J; Radhakrishna Hospitality Service v. EIH Ltd [1999] 2 LL Rep 249 per Newman J; Konamanei v. Rolls Royce op. cit. per Lawrence Collins J).

Consideration

58. On the proper law point, it is noted that the defendant’s evidence as to the alleged RBI restrictions came from his knowledge and belief without any legal opinion from his lawyers in India.  I doubt whether if similar restrictions were in force in Hong Kong, the impact will be on illegality as opposed to contractual incapacity.  Be that as it may, assuming the defendant’s evidence on the RBI restrictions to be correct, under Hong Kong law, illegality is seen at the place of performance, and prima facie, the PSA is not illegal if performed in Hong Kong.  This is of itself a point in favour of the plaintiff.   However, there is also the question of how illegality will be resolved under the Indian conflict rules, evidence of which is lacking.  In the circumstances, Indian Law is presumed to be the same as our own.  Hence, it is not a matter of burden of proof.  Further, although the overall burden of proof is on the defendant, one must not lose sight of the evidential burden at the instance of the party seeking to establish existence of certain matters for the court’s consideration.

59. Be that as it may, taking into account all the circumstances, I find sufficiently strong connecting factor in favour of Hong Kong being the natural forum, or at any rate India not being the natural form, in that prime facie, the place of performance of the PSA insofar as to the share of losses is Hong Kong.  After all, the action is about sharing of the losses.

60. I have considered the existence of lis alibi pendens, and in particular the injunction against enforcement of any judgment of this Court in India.  The injunction is subsisting and I cannot second-guess the decision of the Indian Court in the pending application for striking out.  However, there is no suggestion that a judgment in favour of the plaintiff, if any, will be rendered futile in the absence of any execution in India. 

61. I also note the countervailing consideration of loss of juridical advantage to the plaintiff (at least procedurally) in the stay of a cause of action already commenced in Hong Kong in return for a discretionary remedy of extension of the period of limitation for the same cause of action in India.

62. Even if I be wrong on the choice of forum conveniens,I am satisfied that the plaintiff has discharged the burden in persuading me to exercise the discretion in not staying the proceedings because of the loss of juridical advantage.  I wish to add that this conclusion is reached without accepting the plaintiff’s assertion of any inherent delay in the Indian legal system.

63. In the premises, I shall allow the appeal and set aside the order of the Master.

64. I shall make an order nisi that the defendant do pay the costs herein and below to the plaintiff, to be made absolute after 14 days.

65. May I thank Mr Sussex and Mr Smith for their helpful submissions.