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New Link Consultants Ltd v Air China And Others

Judgment Cited authorities 8 Cited in Precedent Map Related
Vincent
Judgment Date03 May 2004
Subject MatterCivil Action
Judgement NumberHCA515/2001
CourtHigh Court (Hong Kong)
HCA000515/2001 NEW LINK CONSULTANTS LTD v. AIR CHINA AND OTHERS

HCA000515/2001

HCA515/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.515 OF 2001

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BETWEEN
NEW LINK CONSULTANTS LIMITED Plaintiff
AND
AIR CHINA 1st Defendant
CHINA SOUTHERN AIRLINES COMPANY LIMITED 2nd Defendant
CHINA EASTERN AIRLINES CORPORATION LIMITED 3rd Defendant

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Coram: Deputy High Court Judge Poon in Chambers

Dates of Hearing: 28-30 October, 27 and 28 November 2003

Date of Handing Down Decision: 3 May 2004

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D E C I S I O N

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APPLICATIONS

1. There are two applications before me. The first application is made by the 1st defendant for (1) an order that the service of the writ be set aside under Order 12, rule 8(1)(a), Rules of the High Court; or alternatively (2) a declaration that the court has no jurisdiction over the 1st defendant in respect of the subject matter of the claim or the relief or remedy sought in the action under Order 12, rule 8(1)(g) on the grounds that :

(a) the writ was not served on the 1st defendant in accordance with Order 10, or Order 11; and/or

(b) no ground exists for service of the writ under Order 11.

I will call this "the Order 12 Application".

2. The second application is made by all the three defendants, seeking a stay of the proceedings on the ground of forum non conveniens in that the Beijing 2nd Intermediate People's Court or the Beijing High People's Court ("the Beijing Courts" collectively) is a clearly and distinctly more appropriate forum for the resolution of the action. I will call this "the Forum Application".

THE PROTAGONISTS

3. The 1st defendant is a state owned enterprise. So were China Southern Airlines and China Eastern Airlines. I will refer to these three Airlines as "the Airlines" collectively in the rest of this judgment. At all material times, each of the Airlines had a wholly-owned subsidiary acting as its own purchasing arm for the supply of aviation parts. They were Air China Group Import and Export Trading Corporation, China Southern Airlines Import and Export Trading Corporation and China Eastern Aviation Import and Export Trading Corporation respectively ("AIE", "SIE", "EIE" individually and "the IE Companies" collectively).

4. In 1994, the IE Companies and the plaintiff entered into a joint venture for the supply of aviation parts to the Airlines. They incorporated in Hong Kong a joint venture vehicle, United Aero-Supplies System of China Limited ("UASSC").

5. In 1995, China Southern Airlines and China Eastern Airlines went through demerger. By a demerger agreement dated 25 March 1995 ("the CSA Demerger Agreement"), China Southern Airlines was spilt into two entities : China Southern Airlines Company Limited, the 2nd defendant herein, and the Southern Airlines (Group). By a demerger agreement dated 14 April 1995 ("the CEA Demerger Agreement"), China Eastern Airlines was likewise spilt into two entities : China Eastern Airlines Corporation Limited, the 3rd defendant herein, and China Eastern Airlines (Holdings) Company (later Eastern Airline Group Limited). It is the plaintiff's case but denied by the 2nd and 3rd defendants that by virtue of the demergers, the 2nd and 3rd defendants had succeeded to the assets and liabilities of China Southern Airlines and China Eastern Airlines respectively.

THE JOINT VENTURE

6. This action arose out of the disputes in connection with the aforesaid joint venture. For present purposes, it is useful to briefly describe the events pertaining to it. For convenience, I will set them out, as far as possible, in a chronological order.

(1) The Letter of Intent

7. In January 1994, the IE Companies and the plaintiff signed a letter of intent for the establishment within the Mainland a consignment warehouse for the supply of aviation parts manufactured by foreign suppliers ("the Letter of Intent"). The main purposes of the intended joint venture can be found in Clause 2 of the Letter of Intent, which read :

"二、合资各方一致认为该寄售仓库的含义为：

在中国境内设立海关监管仓库，将外国厂商所生产的航空器材和设备从其原产国调入监管库寄售。同时，引进外资以及国外先进的管理经验和操作方式，对中国市场(首先是合作方所属的航空公司)所需要的零备件和设备统一库存、统一管理、集中进货、集中供货、以便减少有关方航空公司在航材方面资金的占用，减少不必要的重复备件，缩短订货(特别是AOG订货)的周期，提高飞机的利用率，并可以利用中国政府有关合资的优恵政策及待遇，为合资各方和有关航空公司创造可观的经济效益。"

8. The parties further agreed to set up the consignment warehouse in Beijing first and later in Guangzhou and Shanghai if necessary and that any existing warehouse of the parties could be used for the purpose of setting up the consignment warehouse.

(2) The JV Agreement

9. On 9 April 1994, acting according to the Letter of Intent, the IE Companies and the plaintiff signed in Shanghai a handwritten joint venture agreement. They subsequently signed the typed version of the joint venture agreement in Beijing on 19 April 1994. I will call this "the JV Agreement". Clause 4 of the JV Agreement stated the objectives of the joint venture in these terms :

"4. 合作目的
4.1 通过寄售的形式帮助航空公司降低现有航材的库存量，从而大大减少航空公司流动资金的积压。
4.2 减少航空公司AOG和紧急定货。
4.3 缩短航空公司飞机停场维修周期。
4.4 提高航空公司的飞机利用率。
4.5 引进国际标准的航材管理体系(A.I.M.S.)，改善其管理水平的管理效率。"

As can be readily seen, these objectives incorporated the main purposes as expressed in Clause 2 of the Letter of Intent : see paragraph 7 above.

10. The JV Agreement further provided that it should be governed by Hong Kong law.

(3) Setting up UASSC

11. Pursuant to the JV Agreement, the IE Companies and the plaintiff incorporated UASSC in Hong Kong with a share capital of HK$1 million, holding 250,000 shares each.

(4) The Beijing Office

12. On 18 July 1994, UASSC opened a representative office in Beijing ("the Beijing Office"). On 6 December 1994, UASSC obtained a Registration Certificate of Foreign Enterprises Permanent Office in China for the Beijing Office. According to this certificate, the scope of business of the Beijing Office was communication work relating to import and export of aviation parts and equipments. On 4 January 1995, UASSC obtained a tax registration certificate for the Beijing Office.

(5) The General Agreements

13. By a letter dated 26 July 1994, a Mr Peter Lam of the plaintiff wrote to the 1st defendant, eliciting support for UASSC. Presumably upon such approach, each of the Airlines signed a general agreement with UASSC dated 18 August 1994 in identical terms ("the General Agreements"). The General Agreements re-iterated the objectives of establishing UASCC thus :

"The principle objective for establishing UASSC is to provide an aviation parts consignment warehouse and management system for the Member Airlines (i.e. Air China, China Eastern Airlines, China Southern Airlines) and to provide services intended to minimize operational cost and maximize economic efficiency. As a secondary objective, UASSC will provide parts and services to the Non-Member Airlines on a charge basis which will increase revenue and profit for the Member Airlines on a non-interference basis."

14. The Airlines also agreed to fully support UASSC by :

"1) Procuring from or utilizing on a priority basis of all aviation parts and equipment needed from consigned, supplied or warehoused parts provided under the UASSC joint partner agreement before considering any other sources.
2) Release to UASSC all data and information relevant to aviation parts and equipment usage in order to help UASSC to maintain high competitiveness in the market.
3) Assist UASSC in providing consignment warehouse spaces, obtaining licenses, certificates, or other relevant documents (with or without signature depending on the requirement), from related parties / authorities as necessary for the consignment and handling of aviation parts.
4) Authorize UASSC to act on Air China's behalf, in managing, marketing and selling of the surplus aviation materials and stocks."

15. The General Agreements were silent on the choice of law.

(6) The Appointment Letter

16. At the same time, the Airlines also signed an appointment letter ("the Appointment Letter"), appointing UASSC, inter alia, to (1) act as their exclusive representative for the handling and management of all aviation parts consignment operations for them; and (2) to act and negotiate on behalf of the Airlines with all aviation parts manufacturers/producers, suppliers and other relevant parties regarding any matter related to aviation part consignment operations. The Airlines also agreed to first procure from or utilise aviation parts consigned to UASCC before procuring from the other sources.

(7) The Consignment Agreements and consignment warehouses

17. UASSC and AIE entered into a consignment agreement on 12 December 1994. According to this agreement, AIE would set up a consignment warehouse in the Beijing International Airport area ("the Beijing Warehouse"). UASSC would deliver aviation parts and equipments according to the need of China Airlines to the Beijing Warehouse and such goods were to be stored in the bonded area therein. The Beijing Warehouse was opened on 25 May 1995.

18. On 5 May 1995, UASSC entered into a similar consignment agreement with SIE. Under this agreement, SIE would set up a consignment warehouse in Guangzhou ("the Guangzhou Warehouse"). UASSC would deliver to the Guangzhou Warehouse aviation parts and equipments required by Southern China Airlines. It is the 2nd defendant's case that the Guangzhou authority gave formal approval for the operation of the Guangzhou Warehouse on 28 October 1996 but by then the plaintiff had already indicated its intention to withdraw from UASSC.

19. UASSC also entered into a similar consignment agreement...

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