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CACV 398/2007
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF APPEAL
CIVIL APPEAL NO. 398 OF 2007
(ON APPEAL FROM HCA NO. 285 OF 2007)
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| BETWEEN |
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NOBLE POWER INVESTMENTS LIMITED |
1st Plaintiff |
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KYOBI PRINTING CO LTD |
2nd Plaintiff |
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and |
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NISSEI STOMACH TOKYO CO LTD |
Defendant |
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Before : Hon Ma CJHC, Tang VP & Stone J in Court
Date of Hearing : 24 April 2008
Date of Judgment : 24 April 2008
Date of Handing Down Reasons for Judgment : 27 June 2008
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REASONS FOR JUDGMENT
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Hon Ma CJHC :
1. The main issue raised in the present appeal is the proper approach of the courts to contractual non-exclusive jurisdiction clauses within the context of challenges to jurisdiction. In the present case, the challenge came in the form of an application by the Defendant to set aside the leave that had been granted to the Plaintiffs to serve the Writ of Summons in the present action out of the jurisdiction under RHC O.11.
2. At the conclusion of submissions in this appeal on 24 April 2008, we allowed the Plaintiffs’ appeal with costs here and below, indicating that the Reasons for Judgment would be handed down in due course.
3. Before dealing with the issues, it is convenient first to set out the nature of the claim and defence in the action, and also the proceedings leading up to this appeal.
Claim and defence
4. As the learned Recorder below noted, the Plaintiffs are companies registered, respectively, in the British Virgin Islands and Japan. The Defendant is a Japanese company. None of the parties carries on business in Hong Kong nor is any of them registered under Part XI of the Companies Ordinance, Cap.32.
5. The Plaintiffs’ case is that the parties made a written agreement on 5 June 2006 (headed “Co-Operation Agreement”), to co-operate in the carrying out of a plasterboard waste recycling business in Japan. The intention was to make use of a unique system that had been invented in Denmark for the recycling of plasterboard waste. Essentially, the 1st Plaintiff would purchase the recycling equipment from a Danish company and, together with the 2nd Plaintiff and the Defendant, develop and carry on the recycling business in Japan. The Defendant was to provide factory premises for the business, apply for and keep in force all necessary licences, permits and consents, liaise with suppliers, and render logistical support, among other obligations. The 2nd Plaintiff was to install the recycling equipment and provide staff to operate it. The parties had other responsibilities under the Co-Operation Agreement but it is unnecessary to set them out for present purposes.
6. Of particular importance in the present context is the non-exclusive jurisdiction clause within the Agreement : -
“27. Governing Law
27.1 This Agreement shall be construed and governed in accordance with the laws of Hong Kong and the parties hereto submit to the non-exclusive jurisdiction of the courts of Hong Kong.
27.4 Nothing contained in this Clause shall limit the right of any party to take any suit, action or proceedings arising under this Agreement against the other parties in any other court of competent jurisdiction, nor shall the taking of any suit, action or proceedings arising under this Agreement in any one or more jurisdictions preclude the taking of any suit, action or proceedings arising under this Agreement in any other jurisdiction, whether concurrently or not, to the extent permitted by the law of that jurisdiction.”
There are no clauses 27.2 and 27.3 in the Agreement.
7. Although none of the parties was based in Hong Kong and all principal obligations thereunder were to take place in Japan, the Co-Operation Agreement was in English, and all negotiations leading up to it took place in Hong Kong. The Agreement was also signed here. In their affidavit evidence, the Plaintiffs point to the fact that a number of the persons who conducted the negotiations leading to the conclusion of the Co-Operation Agreement are based in Hong Kong and are Hong Kong permanent residents. The relevance of this was to demonstrate a Hong Kong connection so that it could not be suggested (nor was it in fact so suggested by the Defendant) that the choice of Hong Kong law and jurisdiction was somehow fanciful.
8. The disputes leading up to the present proceedings originate from a letter in Japanese dated 6 July 2006 from the Defendant to the 2nd Plaintiff, in which the Defendant effectively stated that it was not going to perform its obligations under the Co-Operation Agreement. The Plaintiffs regarded this letter as a repudiation of the Agreement, and they accepted it. The damages claimed by the Plaintiffs comprise wasted expenditure and loss of profits.
9. In view of the stage reached in the present proceedings, no defence has yet been filed. However, on the material so far before us, it appears that the defence (or one of them) is the absence of authority on the part of the person (one Mr Kubota) who signed the Co-Operation Agreement purportedly on behalf of the Defendant so to commit the Defendant. It is said that at no stage was Mr Kubota authorized by the Defendant’s board of directors to sign the Co-Operation Agreement. There is before us an affirmation from a Japanese attorney going into aspects of Japanese law.
The judgment below
10. The Writ was issued on 8 February 2007. However, as the Defendant was a Japanese company, leave to serve out of the jurisdiction was required. This was obtained ex parte from Master Betty Kwan on 6 March 2007. Service having then been effected, the Defendant issued a summons on 24 July 2007 applying for the setting aside of the order giving leave to serve the Writ out of the jurisdiction, and for the consequent dismissal of the action. The application was taken out on the basis of forum non conveniens; the alternative forum was said to be the Tokyo District Court in Japan.
11. The summons was heard by Mr Recorder Jat Sew Tong, SC on 21 November 2007. By a judgment handed down on 30 November 2007, the learned Recorder set aside the order of Master Kwan granting leave to serve the Writ out of jurisdiction. It was from this order setting aside Master Kwan’s order that the Plaintiffs appealed.
12. The learned Recorder concluded that the Plaintiffs (as the parties who had invoked the jurisdiction of the Hong Kong courts) had failed to demonstrate that Hong Kong was clearly and distinctly the appropriate forum. He took the view that the non-exclusive jurisdiction clause in the Co-Operation Agreement (Clause 27.1) was merely a factor to be weighed in the scales going to the appropriateness of forum, and that it was not to be regarded as a powerful factor in the circumstances of the case. The learned Recorder drew a distinction between non-exclusive jurisdiction clauses and exclusive jurisdiction clauses, and maintained in the present case that clause 27.1 could not be said to “crown” Hong Kong as the primary forum for the resolution of disputes under the Co-Operation Agreement.
13. This being the law in his analysis, the learned Recorder then found on the facts that Japan undoubtedly was the more appropriate forum; certainly, it had not been demonstrated that Hong Kong was clearly and distinctly so. Indeed, such was the view on the facts taken by the learned Recorder that he was of the view that even if the non-exclusive jurisdiction clause could be regarded as a “strong prima facie factor” in favour of Hong Kong jurisdiction, the Plaintiffs would still have failed on the facts. He was particularly impressed with the following facts : -
(1) The negotiations leading up to the conclusion of the Co-Operation Agreement were conducted in Japanese.
(2) The existing practice and law in Japan regarding authority to sign contracts would be better resolved by the Japanese courts, although this was not regarded as a particularly weighty factor.
(3) The evidence of any damages suffered by the Plaintiffs would largely emanate from Japan since the place of performance under the Co-Operation Agreement was Japan. Japanese courts would therefore be better placed than the Hong Kong courts to evaluate such evidence.
The issues in the appeal
14. The Plaintiffs have challenged the learned Recorder’s conclusions both on the law and the facts. Their primary position was that the learned Recorder had wrongly analyzed the effect of the non-exclusive jurisdiction clause in the circumstances of the present case. The following matters therefore fell for determination in this appeal : -
(1) The effect in law of non-exclusive jurisdiction clauses.
(2) Application of the principles to the facts.
15. Before dealing with these issues, I should briefly go into the relevance of issues of jurisdiction and forum in the context of the present case, for, as stated earlier, these issues arise in the court’s consideration of whether service out of the jurisdiction should be permitted under RHC O.11.
The relevance of jurisdiction and forum in the context of O.11 applications
16. Where a defendant is not a resident in Hong Kong, leave is required from the court to serve process out of the jurisdiction. RHC O.11 is the principal provision going to this question. Whether or not leave is to be given by the court is a matter of discretion. There are, however, two matters which I wish to highlight.
17. First, in an action begun by writ, it must of course be shown that one of the sub-heads of O.11, r.1(1) is engaged. In the present case, O.11, r.1(1)(d)(i), (iii) and (iv) are engaged : -
“1. Principal cases in which service of writ out of...
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