High Hope Zhongding Corporation v. 廈門墩峰進出口有限公司 and Others

HCA 2485/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2485 OF 2015

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DECISON

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1.This is an application by the 4^th and 5^th Defendants by way of summons dated 25 November 2015 seeking for a stay of these proceedings in favour of the Nanjing City Intermediate People’s Court of Jiangsu Province (“the Nanjing Court”) on the ground of forum non conveniens and under O 12 r 8(2)(b) of the RHC.

BACKGROUND

2.In these proceedings, the Plaintiff claims a sum of RMB24,747,408.46 and damages to be assessed against the 1^st to 5^th Defendants.

3.As against the 1^st Defendant, the Plaintiff’s claim is based on a claim for damages arising out of the 1^st Defendant’s breach of a repayment agreement dated 7 May 2015 (“the Repayment Agreement”).

4.As against the 2^nd and 3^rd Defendants, the Plaintiff’s claim is based on 2 respective written guarantees dated 29 October 2014 which had been executed by the 2^nd Defendant (a Mainland company) and the 3^rd Defendant (a BVI company).

5.As against the 4^th and 5^th Defendants, the Plaintiff’s claim is based on the obligations of the 4^th Defendant (a Hong Kong company) and the 5^th Defendant (a Hong Kong resident) as additional guarantors under the Repayment Agreement.

(i)   The contracts between the Plaintiff and the 1^st Defendant and the guarantees of the 2^nd and 3^rd Defendants

6.On 6 June 2014, the Plaintiff and the 1^st Defendant, both being Mainland companies, entered into an import agency contract (No. 14CUH0681003)(“003 Contract”) in Nanjing whereby the 1^st Defendant engaged the Plaintiff to import 52,000 wet metric tonnes of nickel for a consideration of US$5,356,000.  The salient terms of the 003 Contracts include:

(i)   the 1^st Defendant shall pay to the Plaintiff within 3 days 10% of the contract price as security deposit;

(ii)   in the event of a drop in the market price of nickel, the 1^st Defendant shall increase the security deposit proportional to the decrease in market price of nickel as may be demanded by the Plaintiff;

(iii)   if the 1^st Defendant fails to meet its obligations under (ii), the Plaintiff has the right to discharge the contract and to dispose of the goods on its own; and

(iv)   the 1^st Defendant shall bear the loss, if any, suffered by the Plaintiff under (iii).

7.The 003 Contract also stipulates that: (i) such Contract was made pursuant to the Contract Law and the relevant laws and regulations of the Mainland; and (ii) the parties should resolve any dispute arising out of the 003 Contract by negotiation, failing which either party may commence proceedings in the People’s Court in the place whether the 1^st Defendant is situated.[1]

8.On 17 June 2014, the Plaintiff and the 1^st Defendant entered into another import agency contract (No. 14JCUH0681006)(“006 Contract”) in Nanjing for the import of another 50,000 wet metric tonnes of nickel for a consideration of US$4,250,000.   Under the 006 Contract, the 1^st Defendant shall pay to the Plaintiff within 3 days 20% of the contract price as security deposit.  Similar terms relating to the parties’ obligations in the event of a drop in the market price were included in the 006 Contract.  It also contains similar governing law clause and non-exclusive jurisdiction clause.

9.In June and July 2014, the nickel contracted for under the 003 and 006 Contracts was imported at the ports of Zhoushan in Ningbo as well as Jingjiang and Lianyungang in Jiangsu.

10.Meanwhile, the 003 Contract was varied on 20 June 2014 by a supplemental contract (No. 14JCH0681003-1) executed in Nanjing with the price of the nickel consignment varied to US$4,420,000.

11.The 006 Contract was also varied on 30 September 2014 by a supplemental contract (No. 14JCUH0681006-1) executed in Nanjing.  The revised terms include: (i) the quantity be varied to 54,345 metric tonnes; (ii) the contract price be varied to US$4,667,692.05; (iii) final payment due date be deferred from 30 September 2014 to 20 October 2014; and (iv) payment of outstanding sums to be made in RMB.

12.Upon the 1^st Defendant’s failure to take full delivery of the nickel and pay all outstanding sums, the 2^nd and 3^rd Defendants each signed a letter of guarantee on 29 October 2014 (“the 2^nd Defendant’s Guarantee” and “the 3^rd Defendant’s Guarantee” respectively) in favour of the Plaintiff guaranteeing the 1^st Defendant’s performance of its obligations under the 003 and 006 Contracts (as varied) for a period of 2 years.

13.On or around 5 November 2014, the Plaintiff and the 1^st Defendant entered into a supplemental agreement with the reference number 20141029 to supplement the 003 and 006 Contracts (as varied) which was signed in Nanjing.

14.Despite a letter of demand dated 9 April 2015 from the Plaintiff to the 1^st Defendant demanding payment of RMB20,814,489.38 as additional security deposit proportional to the drop in market price of nickel as agreed under the 003 and 006 Contracts (as varied), the 1^st Defendant failed to comply with the Plaintiff’s demand.

(ii) The 1^st Nanjing proceedings against the 1^st and 2^nd Defendants

15.On 16 April 2015, the Plaintiff commenced proceedings against the 1^st and 2^nd Defendants in the Nanjing Court (“the 1^st Nanjing Proceedings”), seeking for, inter alia:

(i) as against the 1^st Defendant, compensatory damages in the sum of RMB35,497,023.23;

(ii) as against the 2^nd Defendant, honouring of its obligations under the 2^nd Defendant’s Guarantee; and

(iii) as against the 1^st and 2^nd Defendants, an order to preserve or  freeze their assets up to the value of RMB36,000,000.

16.The Nanjing Court issued a preservation order on 21 April 2015 as per the Plaintiff’s application and issued a notification on 27 April 2015 to the effect that it only managed to freeze a total sum of RMB29,322.14 and US$0.07 in the 1^st Defendant’s 5 accounts for a period of 12 months.

(iii) The Repayment Agreement between the Plaintiff and all the Defendants

17.Subsequently on 7 May 2015, with a view to settle the 1^st Nanjing Proceedings, the Plaintiff and all the 5 Defendants entered into the Repayment Agreement which includes the following terms:

(i) the amount of debt owing by the 1^st Defendant to the Plaintiff as at 5 May 2015 under the 003 and 006 Contracts (as varied) was agreed at RMB42,552,443.84 excluding overdue interests;

(ii) the 1^st Defendant shall settle the outstanding debt by 30 August 2015;

(iii) the 1^st Defendant shall pay RMB3,000,000 to the Plaintiff as additional security deposit by 8 May 2015;

(iv) prior to full settlement of the outstanding debt, the 1^st Defendant shall pay the Plaintiff at the end of each month interest accrued on the outstanding debt at the rate of 1.5% per month;

(v) the 1^st Defendant shall take delivery of and pay for the remaining nickel in accordance with an agreed schedule with due dates falling on 30 May, 30 June and 30 August 2015 respectively;

(vi) the Plaintiff shall apply to the Nanjing Court to withdraw the 1^st Nanjing Proceedings and to discharge the preservation order;

(vii) both the 2^nd and 3^rd Defendants affirm their obligations as guarantors under the 2^nd and 3^rd Defendants’ Guarantees for a period of 2 years; and

(viii) both the 4^th and 5^th Defendant shall guarantee for a period of 2 years that the 1^st Defendant would meet its payment obligations to the Plaintiff under the 003 and 006 Contracts (as varied).

18.On 13 May 2015, upon receipt of RMB313,055 from the 1^st Defendant as settlement of legal fees, the Plaintiff applied to the Nanjing Court for withdrawal of the 1^st Nanjing Proceedings against the 1^st and 2^nd Defendants which was approved on the following day.

19.However, the 1^st Defendant continued to default under the Repayment Agreement.  By July 2015, the 1^st Defendant failed to pay interests due by the end of May and June 2015, or to take delivery of or to pay for the nickel by the end of June 2015.

(iv) The 2^nd Nanjing proceedings against all the Defendants

20.On 4 August 2015, the Plaintiff commenced fresh proceedings against all the Defendants in the Nanjing Court (“the 2^nd Nanjing Proceedings”), seeking for, inter alia:

(i) the 1^st Defendant’s continued fulfilment of its obligations under the Repayment Agreement;

(ii) the 1^st Defendant’s payment of RMB17,081,804.62 together with overdue interest of RMB3,435,623.92; and

(iii) the 2^nd to 5^th Defendants’ honouring of their obligations as guarantors.

21.Further, the Plaintiff applied to the Nanjing Court on 7 August 2015 for an order prohibiting the 5^th Defendant from leaving the Mainland to avoid the proceedings.  The order was granted on 21 August 2015 and took effect for the initial period from 25 August to 25 November 2015 and subsequently for the extended period from 26 November 2015 to 26 February 2016.

22.The Plaintiff also applied to the Nanjing Court on 1 September 2015 for an order preserving the assets of all the Defendants up to the value of RMB21,000,000, which was granted on 15 September 2015.

23.On 26 November 2015, the Nanjing Court issued a notification to the effect that it only managed to freeze a nominal sum of RMB364.93 in the 1^st Defendant’s bank account in Xiamen (for a period up to 13 October 2016) and 2 landed properties held by the 5^th Defendant in Xiamen (for a period up to 13 October 2018).  Subsequently, land search records indicated that the 2landed properties held by the 5^th Defendant in Xiamen (with an estimated total value of about RMB10,000,000) had been charged to a Mainland bank on or about 12 August 2015 to the value of RMB10,361,700 which exceeded their estimated total market value.

(v)   The present proceedings

24.The Plaintiff took the view that the Mainland proceedings were ineffective in securing remedies, and so the Plaintiff commenced the present proceedings against all the Defendants on 27 October 2015 claiming for, inter alia, loss and damage in the sum of RMB24,747,408.46 pursuant to the Repayment Agreement.

25.On 21 December 2015, the Plaintiff applied to the Nanjing Court for the withdrawal of the 2^nd Nanjing Proceedings against all the Defendants which was approved on the same day.

26.Meanwhile, in response to the 1^st Defendant’s application to discharge the preservation order against it and the 5^th Defendant’s application to discharge the preservation and prohibitory orders against him, the Nanjing Court approved on 15 January 2016 to discharge the preservation order against all the 5 Defendants.

27.The writ of the present proceedings was properly served on the 4^th and 5^th Defendants in Hong Kong.  They now seek to stay the proceedings on forum non conveniens grounds.

LEGAL PRINCIPLES FOR FORUM NON CONVENIENS APPLICATION

28.The legal principles for forum non conveniens applications are well settled:[2]

(i) The single question to be decided is whether there is some other available forum, having competent jurisdiction, which is the appropriate forum for the trial of an action, i.e. in which the action may be tried more suitably for the interests of all the parties and the ends of justice?

(ii) In order to answer this question, the applicant for the stay has to establish that first, Hong Kong is not the natural or appropriate forum (“appropriate” in this context means the forum has the most real and substantial connection with the action) and second, there is another available forum which is clearly and distinctly more appropriate than Hong Kong. Failure by the Applicant to establish these two matters at this stage is fatal.  This stage of the inquiry is commonly described as “Stage I” inquiry;

(iii) If the applicant is able to establish both of these two matters, then the plaintiff in the Hong Kong proceedings has to show that he will be deprived of a legitimate personal or juridical advantage if the action is tried in a forum other than Hong Kong.  This stage of the inquiry is commonly described as “Stage II” inquiry; and

(iv) If the plaintiff is able to establish this, the court will have to balance the advantages of the alternative forum with the disadvantages that the plaintiff may suffer.  Deprivation of one or more personal advantages will not necessarily be fatal to the applicant for the stay if he is able to establish to the court’s satisfaction that substantial justice will be done in the available appropriate forum.  This stage of the inquiry is commonly described as “Stage III” inquiry.

MERITS OF THE STAY APPLICATION

(i)   Stage I inquiry

29.For Stage I inquiry, Mr Ho, counsel for the 4^th and 5^th Defendants, submits that the following factors show that the Nanjing Court is clearly and distinctly the more appropriate forum:

(i) the relevant contracts, guarantees and the Repayment Agreement were all made in the Mainland;

(ii) the 003 and 006 Contracts refer to the Mainland law as the governing law and provide that the parties can commence legal proceedings in the Nanjing Court;

(iii) the Plaintiff had previously chosen to commence the 1^st and 2^nd Nanjing Proceedings in the Nanjing Court, showing that the latter is the more appropriate forum to resolve the dispute between the parties;

(iv) the Plaintiff and the 1^st Defendant are Mainland companies carrying on their businesses in the Mainland;

(v) though the 5^th Defendant is a Hong Kong resident, he has a residential address in Xiamen and his properties were once frozen in the 2^nd Nanjing Proceedings in the Nanjing Court;

(vi) the underlying transaction relating to the import of nickel was carried out in the Mainland with payments made and to be made in the Mainland; and

(vii) all the possible witnesses (except the 5^th Defendant though he has a Mainland address) and the relevant documentary evidence are located in the Mainland.

30.Despite Mr Ho’s able submission, the fundamental problem with the stay application is that, as pointed out by Mr Chan, counsel for the Plaintiff, the 4^th and 5^th Defendants (and indeed all the Defendants) have not raised or identified any defence to the Plaintiff’s claim at all.  Without such information, the court will not be able to know whether there are any real issues to be tried between the parties or to assess the appropriateness of the forum from the point of view of the trial of the action.

31.As observed by DHCJ To (as he then was) in Botanic Ltd v China National United Oil Corporation:[3]

“The approach in forum non conveniens applications is not just to load up factors which point to any particular forum, but to take a broad overall view of the factual circumstances bearing in mind the nature of the controversy in dispute and focus on appropriateness from point of view of the trial of the action. ... ... The burden of proof is on the Defendant and it is a very high burden.”

32.The Defendants here have made no attempt to raise or identity any defence to the Plaintiff’s substantive claims, whether in the affirmations filed in support of the stay application or in counsel’s submissions.  As pointed out by DHCJ To, this exercise is not just about a loading up of various factors which point to any particular forum.  Without knowing the nature of the controversy, the court is not in a position to assess the appropriateness of the forum from the point of view of the trial.

33.The absence of an arguable defence was “weighed firmly” by the court in Bayer Polymers Co Ltd v Industrial and Commercial Bank of China, Hong Kong Branch[4] in refusing a forum non conveniens application.  Stone J observed that:[5]

“The defendant ... ... has made no real attempt to justify its actions, in reality there is no arguable defence (albeit currently there is no application for summary judgment before the court), and it follows that the issue of a stay should not seriously arise in this case.”

34.Similarly, DHCJ Carlson in Chow Fu Hsien v K Vision International Investment (H.K.) Ltd held that:[6]

“... ... the applicant for a stay should identify its defence with sufficient particularity to demonstrate a real issue requiring resolution between the parties. If there is no bona fide defence then a challenge based on forum non conveniens grounds will fail.”

35.More recently in Xu Ziming v Ruifeng Petroleum Chemical Holdings Ltd[7], DHCJ W Chan (as he then was) also refused another stay application on the ground that the defendant had failed to state the nature of the controversy in dispute between the parties:[8]

“In my view, the loading up by the defendant of factors which may point to the PRC as the appropriate forum is quite meaningless, when the defendant has simply failed to state ‘the nature of the controversy in dispute’ between the parties ... ... In the circumstances, the court is simply not in a position to focus on appropriateness of the forum ‘from point of view of the trial of the action’.”

36.This is exactly what happens in the present case.  There may be a lot of different possible scenarios: the Defendants may challenge underlying transactions (which is unlikely because the rights and obligations of the parties under the underlying transactions have been redefined in the Repayment Agreement), or they may just challenge the obligations of the guarantors under the various guarantees, or they may not have any defence at all.  So far as the appropriateness of the forum is concerned, different considerations may apply depending on the scenarios.  Without knowing the nature of the dispute, the court would not be in a position to know how the “connecting” factors put forward by the 4^th and 5^th Defendants would affect the conduct of the trial.  In other words, the court is not able to conduct the 3-stage inquiry without such crucial information.  I therefore agree with Mr Chan that omission to put forward the defence is fatal to the stay application.

37.Even if the court has to engage in the 3-stage inquiry, I also find that the 4^th and 5^th Defendants have failed to discharge the burden of showing that: (i) the Hong Kong court is not the natural or appropriate forum for the adjudication of the dispute; and (ii) the Nanjing Court is clearly and distinctly more appropriate than the Hong Kong court as a forum to try this case.

38.For the first limb as to whether Hong Kong is the natural and appropriate forum, the Court of Final Appeal in SPH v SA[9] had affirmed that “appropriate” in the present context means having the most real and substantial connection with the action.

39.In this regard, the Court of Appeal in SPH v SA[10] and RI v SSH[11] had emphasised that an action commenced as of right should not be lightly dislodged and must be given recognition in the “real and substantial connection” deliberation.

40.In OTC International AG v Perfect Recovery Ltd[12], Stone J also observed that:[13]

“ ... ... it has always struck this court that litigation founded as of right in Hong Kong is deserving of being allowed to run its course unless strong reasons are established in favour of disturbing the norm ... ... jurisdiction thus established as of right against a Hong Kong company ‘could and should not be easily displaced’... ...”

41.The 4^th Defendant is a Hong Kong company and the 5^th Defendant is a Hong Kong resident.  It cannot be disputed that the Plaintiff instituted the present proceedings against them as of right, and the writ has been properly served on them in Hong Kong.  This is thus a situation in which the jurisdiction of the Hong Kong court is established as of right, at least so far as the claims against the 4^th and 5^th Defendants are concerned, and considerable weight and serious recognition should therefore be given to this right of the Plaintiff.  The burden lies squarely on the 4^th and 5^th Defendants to convince the court to exercise its discretion to depart from the norm which is not an easy burden.

42.Further, although the 1^st, 3^rd and 4^th Defendants are separate companies incorporated in 3 different jurisdictions, based on the evidence adduced by the Plaintiff, there is reason for the court to believe that the 5^th Defendant is in control of all these corporate entities whilst he is a Hong Kong resident himself.  The 5^th Defendant was also the “legal representative”(法人代表) of the 1^st Defendant until 17 September 2015.  Being given the opportunity, the 5^th Defendant has not put forward any evidence in his affirmations to rebut these allegations.  Neither did he give any explanation about his involvement in the 1^st Defendant at least before 17 September 2015.  Hence, there is some weight in the Plaintiff’s complaint that the 5^th Defendant is the mastermind in Hong Kong behind all these contractual disputes, with the corollary that Hong Kong is the natural and appropriate forum for the adjudication of the Plaintiff’s claims against the Defendants.

43.In respect of the second limb as to whether the Nanjing court is clearly and distinctly the more appropriate forum, the 4^th and 5^th Defendants have put forward a number of “connecting” factors pointing to the Nanjing Court as the appropriate forum including, inter alia, the presence of the governing law clause and the non-exclusive jurisdiction clause in the 003 and 006 Contracts.

44.Although there is no governing law clause in the Repayment Agreement itself, Mr Ho relies heavily on decisions such as Amin Rasheed Corp v Kuwait Insurance[14] and Hung Fung Enterprises Holdings Ltd v The Agricultural Bank of China[15]and argues that, as a matter of “Hong Kong rules of conflict of laws”, the Repayment Agreement is “clearly” governed by Mainland law.  Further, he relies on the opinion given by the Mainland law expert of the 4^th and 5^th Defendants and submits that, even according to Mainland law[16], in the circumstances of the present case where there has been no agreement on the applicable law in respect of the Repayment Agreement and the related guarantees, Mainland law shall apply.

45.However, one should not lose sight of the fact that the rights and obligations of the parties have been redefined in the Repayment Agreement which contains no governing law clause.  Further, unlike the 003 and 006 Contracts which involved only Mainland entities, the Repayment Agreement involved different parties which were corporations incorporated in different jurisdictions and non-Mainland resident.  In such circumstances, the governing law clause in the previous agreements should carry very little weight and one cannot assume that Mainland law is automatically the law governing the Repayment Agreement and the related guarantees.

46.Further, Article 41 of “Law of the People’s Republic of China on the Laws Applicable to Foreign-related Civil Relations” (中华人民共和国涉外民事关系法律适用法) provides that in the absence of any choice by the parties, the law of the habitual residence of a party whose performance of obligation is most characteristic of the contract or the law that most closely connected with the contract shall be applied.  In the present case, Hong Kong is the place where the 4^th and 5^th Defendants habitually reside, and they are the parties whose performance of the contractual obligations is most characteristic of the contracts of guarantee in question.  Hence, it is very arguable that the applicable law determining the obligations under the guarantees is Hong Kong law.

47.More importantly, even assuming that the governing law for the guarantees under the Repayment Agreement is Mainland law, which I do not accept it to be the case, that would only be one but not the decisive factor in determining whether a stay should be granted on forum non conveniens grounds.  As observed by the courts in different cases[17], Hong Kong courts are accustomed to deal with aspects of foreign law and therefore it does not follow that once it is shown that issues of foreign law arise, this will be a decisive factor in favour of a stay.  In particular, this factor should carry very little weight in the present case as the court, without being told the nature of the controversy between the parties, does not know whether there would be any issues of law that requires adjudication by the court, or what would be the point of law involved.

48.I then turn to the non-exclusive jurisdiction clause in the 003 and 006 Contracts.  In this regard, Mr Ho is not challenging the principles enunciated in Noble Power Investments Ltd v Nissei Stomach Tokyo Co Ltd[18] that: (i) the existence of a non-exclusive jurisdiction clause is only one of the factors to be weighed in the inquiry; and (ii) the applicant for a stay application still has the burden of persuading the court that Hong Kong is the forum non conveniens.

49.Again, I am of the view that the presence of the non-exclusive jurisdiction clause should carry very little weight in the balancing exercise under the Stage I inquiry.  Firstly, the non-exclusive jurisdiction clause only appears in the 003 and 006 Contracts.  There is no such clause in the Repayment Agreement which redefines the rights and obligations of the parties.  Further, the Repayment Agreement involved other parties which were not entities or persons in the Mainland, and so one cannot assume that the parties had even preference for the disputes under the Repayment Agreement to be resolved in the Mainland courts.  Further, the 4^th and 5^th Defendants still have the burden of persuading the court that Hong Kong is the forum non conveniens.  Without knowing the nature of the controversy between the parties, the court is not able to answer this particular question.  Hence, the non-exclusive jurisdiction clause in the previous contracts cannot assist the stay application.

50.The 4^th and 5^th Defendants also put forward other connecting factors such as the location of the witnesses and documents and the currency for the debt settlement (i.e. RMB).  Again this is meaningless loading up of factors.  Apart from not informing the court about the nature of the controversy, the 4^th and 5^th Defendants have not provided any convincing explanation for the difficulties for the Mainland witnesses to come to Hong Kong or for the relevant documents to be delivered to Hong Kong for the purpose of the trial.  The currency for the debt settlement is also a non-factor.  Hong Kong courts can always grant judgments in foreign currency.  Further, Hong Kong is an international financial centre and the world’s largest offshore RMB business hub and world’s largest offshore pool of RMB liquidity.  Without specific explanation given by the 4^th or 5^th Defendant, cross-border remittance of payment should pose no difficulty to the Plaintiff or the Defendants.

51.For the above reasons, whatever “connecting” factors put forward by the 4^th and 5^th Defendants such as the presence of the governing law clause or the non-exclusive jurisdiction clause, they are not strong enough to establish that the Hong Kong court is not the natural or appropriate forum for the adjudication of the dispute, or the Nanjing Court is clearly or distinctly more appropriate than the Hong Kong court as a forum to try this case.  Neither are they strong enough to dislodge the right of the Plaintiff to commence proceedings against at least the 4^th and 5^th Defendants in Hong Kong.  They therefore fail in the Stage I inquiry which is then fatal to the stay application.

(ii)   Stage II and III inquiry

52.In the unlikely event that the inquiry reaches Stage II and III, I also find against the 4^th and 5^th Defendants on the related issues.

53.These two stages of the inquiry require the court to examine, assuming that the Nanjing Court is clearly and distinctly the more appropriate forum, whether the Plaintiff would suffer any juridical disadvantage if the dispute is adjudicated in the Nanjing Court, the burden of which is on the Plaintiff to establish.  If the answer is yes, the court then proceeds to balance the advantages of the alternative forum with the disadvantages that the Plaintiff may suffer.

54.First, there is no serious dispute between the Mainland law experts on both sides that Mainland laws are handicapped in assisting the Plaintiff to enforce any Mainland judgments which the Plaintiff may obtain against the 4^th or 5^th Defendant by way of winding up or bankruptcy proceedings respectively. 

55.Apart from such juridical disadvantage, it is also alleged that the Plaintiff would lose a legitimate personal advantage if the present proceedings in Hong Kong were stayed.  According to the Plaintiff, there are substantial business operations and presence of the 5^th Defendant and the Dunfeng Group owned or controlled by him in Hong Kong, an allegation which is not seriously disputed by the 4^th or 5^th Defendant.  Under such circumstances, the commencement of legal proceedings in Hong Kong would likely to bring significant pressure on the 4^th and 5^th Defendants from a commercial perspective.  Such kind of pressure may result in a more expedient resolution of the Plaintiff’s claim against the Defendants, whether by way of an earlier out-of-court settlement or a higher prospect of successful enforcement of any judgment sum in Hong Kong, for example by way of garnishee proceedings.  These are legitimate considerations of the Plaintiff.

56.According to the 4^th and 5^th Defendants, the financial condition of the 1^st Defendant is healthy.  It was only because the Plaintiff could not identify the location of the 1^st Defendant’s assets that the two sets of Mainland legal proceedings did not produce much fruitful result.  However, if the Defendants were not evasive about their assets, I cannot think of any logical reason as to why the Plaintiff would not have continued the legal proceedings in the Mainland, as it had already commenced not just one but two set of legal proceedings against them in the first place.  One must bear in mind that the Plaintiff had already made two attempts to sue the Defendants in the alternative forum but without much result.   Hence, the Plaintiff’s complaint about the loss of juridical advantages is one with substance and I also find in favour of the Plaintiff in the Stage II inquiry.

57.I turn proceed to Stage III.  Whilst one may certainly argue that the juridical disadvantages suffered by the Plaintiff are not particularly serious, the fundamental problem remains, without knowing the nature of the dispute between the parties, the court would not be able to assess the advantages if the trial is conducted in the Nanjing Court.   The court is therefore not in a position to conduct the balancing exercise under the Stage III inquiry.  In my judgment, as the 4^th and 5^th Defendants should be held responsible for failing to put forward the crucial information necessary for the conduct of the balancing exercise, the court should also find in favour of the Plaintiff in the Stage III inquiry.  Hence, the 4^th and 5^th Defendants fail in all stages of the inquiry.

58.For the above reasons, I dismiss their stay application and order them to file the Defence within 28 days.  I also make a costs order nisi that the costs of the summons be paid by them to the Plaintiff which shall be made absolute 21 days after the date of the handing down of this Decision.

Mr Samuel KY Chan, instructed by Christine M Koo & Ip, for the Plaintiff

Mr Leon Ho, instructed by Darin Leung & Partners, for the 4^th & 5^th Defendants