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Chinachem Financial Services Ltd v Century Venture Holdings Ltd

Judgment Cited authorities 12 Cited in Precedent Map Related
Vincent
Judgment Date08 January 2015
Year2015
Judgement NumberHCA410/2013
Subject MatterCivil Action
CourtHigh Court (Hong Kong)
HCA410B/2013 CHINACHEM FINANCIAL SERVICES LTD v. CENTURY VENTURE HOLDINGS LTD

HCA 410/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 410 OF 2013

____________

BETWEEN

CHINACHEM FINANCIAL SERVICES LIMITED Plaintiff
and
CENTURY VENTURE HOLDINGS LIMITED
 Defendant

____________

Before: Deputy High Court Judge Marlene Ng in Chambers
Date of Hearing: 28 October 2014
Date of Handing Down Decision: 8 January 2015

__________________

D E C I S I O N

__________________

I. INTRODUCTION

1. The plaintiff (“P”) was/is a Hong Kong company within the Chinachem group of companies (“Group”). The defendant (a BVI company, “D”) specialised/specialises in handling of claims and debt disputes in Mainland China (“PRC”).

2. In 2001, China Small and Medium Enterprise Investment Co Ltd (“China SME”) sued P in the Beijing Municipal Higher People’s Court (“Beijing HPC”) with respect to a dispute (“MinshengDispute”) arising out of P’s alleged investment in China Minsheng Bank Corporation Limited (“Bank”) (“Minsheng Litigation”). On 8 July and 2 August 2002, the Beijing HPC made a first instance judgment and civil order (collectively, “1st Minsheng Judgment”). On 15 July 2002, P appealed to the Supreme People’s Court (“SPC”) (“Minsheng Appeal”).

3. P (Party A) and D (Party B) entered into a “委托索償債權協議” dated 25 August 2009 (“Agreement”) whereby D agreed inter alia to provide services to P in relation to the Minsheng Appeal/Dispute upon inter alia terms/clauses in the Annex to this Decision. Mr Chan SC (and Mr Suen with him), counsel for D, submitted that the Agreement was predicated on P retaining Beijing Dishi Law Firm (“Dishi”) as their PRC lawyers. For convenience, reference to “Clause xx” in this Decision is a reference to the relevant clause in the Agreement.

4. On/about 12 January 2010, P and D entered into a supplemental agreement (“Supp Agt”), which amended inter alia Clause 10(c) to the effect that P would be entitled to terminate the Agreement if D failed to obtain the “Desired Second Instance Result” provided for in Clause 5.2 within 12 months from the date of the Agreement.

5. P claimed D was not entitled to any remuneration pursuant to the Agreement:

(a) P was entitled to terminate the Agreement because D failed to procure the “Desired Second Instance Result” within 12 months from signing the Agreement (ie by 25 August 2010);

(b) when the Agreement expired by effluxion of time under Clause 9 upon expiry of 18 months from signing the Agreement on 25 February 2011 (i) D had failed to ensure P prevailed in the Minsheng Appeal[1] and obtained the “Desired Second Instance Result”, (ii) the SPC had not delivered judgment in the Minsheng Appeal, (iii) the Minsheng Dispute had not been settled by mediation or otherwise and/or (iv) P had not obtained benefits more favourable than the 1st Minsheng Judgment;

(c) at a meeting in Beijing on/about 21 June 2012 (“Beijing Meeting”), P confirmed to D the Agreement had expired or had been terminated.

6. On 4 February 2013, Dishi and D as co‑claimants commenced legal proceedings at the Beijing HPC against P for P’s breach of the Agreement (“PRC Litigation”). On 7 March 2013, P commenced the present action against D (“HK Action”) for negative “no liability” declarations that (a) the Agreement had expired by effluxion of time on 25 February 2011 and in any event had been terminated no later than on 21 June 2012, and (b) D was not entitled to remuneration from P pursuant to the Agreement (collectively, “P’s Claims”). The writ of summons was served on D’s appointed agent for such purpose in Hong Kong.

II. SUMMONS

7. On 18 June 2013, D applied by summons (“Summons”) to stay all further proceedings in the HK Action on the grounds that:

(a) the Beijing HPC would determine P’s claims in the HK Action together with Dishi’s claim against P (governed by PRC law and intimately related to the dispute between P and D) in the PRC Litigation;

(b) the dispute between P and D had limited (and indeed no real) connection with Hong Kong;

(c) D’s key witnesses all resided in the PRC;

(d) D was a BVI company with their primary place of business in the PRC;

(e) vast documents concerning the dispute between P and D were in simplified Chinese with expressions used in the PRC;

(f) it would be in the interests of justice for the claims between P and D and between P and Dishi to be adjudicated/resolved by the same court within the same forum in the PRC;

(g) it would be more appropriate/convenient for the dispute between P and D to be decided in the PRC.

8. For the Summons, D would not dispute (a) the writ of summons in the HK Action was served on their authorised agent in Hong Kong as of right, (b) Clause 15 being inter alia a Hong Kong non‑exclusive jurisdiction clause (“NEJC”) was an essential feature, and (c) they had to demonstrate exceptional circumstances to support a stay. But D argued:

(a) There was nexus of contractual rights/obligations among P, D and Dishi under their agreements which together constituted a tripartite agreement with common/overlapping issues about the HK Action and PRC Litigation such that it would be against the interests of justice for such matters to be determined in isolation of one another in different forums given the high risk of inconsistent findings in Hong Kong and PRC proceedings in the absence of a stay.

(b) The HK Action would not obviate the need for the PRC Litigation, especially when such litigation between P and Dishi could only be adjudicated in the PRC, and P had not issued proceedings against Dishi in Hong Kong. So if the HK Action were not stayed, there would be duplicity of proceedings in Hong Kong and the PRC on overlapping issues.

(c) The scope of the HK Action was fully covered by the PRC Litigation, and there would not be any remaining dispute that must be litigated in Hong Kong if a stay was granted.

9. P disagreed, and claimed Hong Kong would be the appropriate forum given (a) the parties’ intention via the NEJC to resolve disputes within the Hong Kong jurisdiction, (b) the want of identity in parties/issues, and (c) Hong Kong being a convenient jurisdiction to resolve the dispute.

10. On 18 June 2013 and 23 October 2014, D filed the 1st and 2nd affirmations of Mr Lam Yee Hung (D’s director and sole shareholder, “YH Lam”) in support of the Summons (“Lam 1st and 2nd Affs”). On 7 August 2013, P filed the affirmation of Chan Kam Por (P’s director, “Chan”) in opposition (“Chan Aff”). On 25 March 2014, DHCJ Ramanathan SC struck out parts of the Lam 1st Aff. Mr Chan SC assured this court that the pending appeal against such decision had no impact on the Summons.

11. The hearing of the Summons came before me on 28 October 2014 (“Hearing”). Shortly before the Hearing, D sought to rely on the 3rd affirmation of YH Lam (“Lam 3rd Aff”) and the affirmation of D’s solicitor Mr Ma Wan Hin (“Ma Aff”) that exhibited a draft affirmation of Dishi’s Mr Jiang Xueping (“Jiang”). Mr Ho SC (and Mr Dawes with him), P’s counsel, had no objection, but asked the court to note P had no opportunity to respond to certain observations in Jiang’s draft affirmation. I granted leave accordingly, and on 28 October and 11 November 2014 D filed the Lam 3rd Aff, Ma Aff and Jiang’s affirmation (“Jiang Aff”).

12. Neither Mr Chan SC nor Mr Ho SC asked me to delve into the substantive merits of P’s Claims or D’s potential defence (and counterclaim). They are content to proceed on the basis that neither party’s case can be said to be untenable or, to put it in another way, that there is arguable claim and defence. Therefore, there is no need for me to pass comment on the substantive merits of the HK Action.

III. D’s AFFIRMATION EVIDENCE

(a) Minsheng Litigation

13. In/about late 1995, the Group through P advanced funds to and entrusted China SME to acquire/hold shares in the Bank (“Minsheng Shares”) for them, but China SME alleged P only advanced funds to them as loans. The Minsheng Shares appreciated in value, so in 2001 China SME sued P to confirm the alleged loan agreement was of no effect and P counterclaimed to confirm the alleged investment trust agreement was effective (ie the Minsheng Litigation). P successfully applied to freeze the Minsheng Shares (then held by the Shanghai branch of China Securities Depository and Clearing Co, Ltd) until the conclusion of the Minsheng Litigation.

14. By the 1st Minsheng Judgment, the Beijing HPC held that P (a foreign enterprise) could not invest in PRC financial institutions without prior government approval, so (a) P was in breach of financial regulatory control, (b) the investment trust agreement was of no legal effect, and (c) P could only receive the principal investment sum and compensation but could not claim for return of the Minsheng Shares. P appealed to the SPC, but after seven years (ie by 2009) the Minsheng Appeal was not yet concluded.

(b) Group’s request for assistance

15. As a result of probate litigation following the death of the Group’s chairperson Mrs Nina Wang, the court appointed administrators pendente lite. In September 2008, 許業榮先生 (“Hui”) was engaged as CEO of the Group. He sought assistance from彭振聲先生 (D’s director and Hong Kong general manager, “Pang”) for the Minsheng Litigation. Pang recommended YH Lam and his brother Lam Yee Kung (“YK Lam”), who had broad connections in the PRC, to Dr Kung Yan Sum (P’s director and chairman of the Group’s Executive Committee (“Exco”), “Kung”) and Hui. In October/November 2008, Pang and/or YH Lam met Kung and his sisters to discuss inter alia how to progress the Minsheng Litigation.

16. Hui recommended and Kung agreed that P should appoint appropriate persons to handle the Minsheng Litigation on a profit-sharing basis...

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