Poon Cho Fai v. East Pacific (Holdings) Ltd

HCA 1194/2014

[2019] HKCFI 2786

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1194 OF 2014

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JUDGMENT

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1.This is an appeal against the order of Master R Lai dated 15 November 2017 (“the Order”).

Background of the Plaintiff’s claim

2.The background of the Plaintiff’s claim can be set out as follows.

3.The Plaintiff, a Hong Kong resident, intended to purchase a unit in a residential development in Shenzhen, namely “East Pacific International Residence” (“EPI Residence”), in 2013.  “East Pacific” is also the name of the Defendant, i.e. East Pacific (Holdings) Limited.

4.In about May 2013, the Plaintiff visited East Pacific International Centre in Shenzhen, together with Mr Steven Shih (“Mr Shih”), to view the show flats of EPI Residence.  The Plaintiff also met the Defendant’s representatives and discussed various aspects of the intended purchase.

5.On 5 June 2013, the Plaintiff issued a cheque in the sum of HK$1,250,000 as deposit (“the Deposit”) for the purchase of a unit in EPI Residence, i.e. Unit 43G Tower A of EPI (“the Property”).  According to the Plaintiff, he and the Defendant by then entered into an agreement in writing (“the 5 June Agreement”) whereby the Defendant agreed and confirmed that the Deposit “will be refunded” in the event of “any disagreement” in relation to the signing of the formal sale and purchase agreement in Shenzhen (“the Formal SPA”).  The 5 June Agreement was signed by Madam Chung Yuk Mei on behalf of the Defendant and stamped with its company chop.

6.It was stated in the 5 June Agreement that:

“As Agreed:

This cheque forms the deposit and consideration for the purchase of Unit 43G Tower 'A' of EPI RESIDENCE.

...

This deposit agreement is subject to the signing of [the Formal SPA] in Shenzhen. In the event of any disagreement – this deposit will be refunded (with no interest).

This amount: HK$1,250,000 is equivalent to a RMB 1,000,000 payment towards the purchase of the price of the Unit.”

7.It is the Plaintiff’s case that the Defendant was the contracting party of the 5 June Agreement.  Nowhere in the 5 June Agreement was the name of any other company (other than the Defendant) ever mentioned.  Neither was there any reference in the 5 June Agreement that the Defendant was acting for any other party.

8.The Defendant’s case is that it was acting for a related Mainland company named “Tian Qi Real Estate Development Ltd” (“Tian Qi”) as vendor in the intended sale and purchase of the Property.   The records show that both the Defendant and Tian Qi were owned and managed by the same people, i.e. Mr Wong Cho Bau (黃楚標), Ms Lai Wai Kwan (黎慧群) and Mr Albert Li Chee Man (李治民).  According to the Plaintiff, he was never informed that the Defendant was actually acting for and on behalf of any other party.  Neither did he know about the relationship between the Defendant and Tian Qi.  This fact has never been disputed.

9.It is the Plaintiff’s case that where the principal is undisclosed at the time of contracting, the contract is made with the agent and he is personally bound by it.

10.Because of the Mainland laws and regulations restricting Hong Kong residents from purchasing properties in their personal names, the Defendant suggested a purchase structure which would involve the Plaintiff’s acquisition of 2 corporate vehicles, i.e. a Hong Kong corporate vehicle and a Mainland corporate vehicle.

11.Further, the Plaintiff claims that the Defendant made the following representations (“the Representations”) to him:

(i)     The Defendant had a team of legal advisers who would arrange and organise a purchase structure (together with execution of documents) for the purchase of the Property which was legal and acceptable to all regulatory bodies in the Mainland (“Representation A”).

(ii)     The Deposit paid by the Plaintiff in the sum of HK$1,250,000 was refundable and the Defendant would be liable to refund the same to the Plaintiff if there were any disagreements in respect of the intended purchase of the Property (“Representation B”).

(iii)     The terms of the 5 June Agreement would not be affected by the execution of the new conveyancing documents (“Representation C”).

12.The Plaintiff claims that, relying on the Representations made by the Defendant, he then signed further documents in Shenzhen in connection with the intended purchase, including “認購書” (“the Purchase Agreement”), “補充協議” (“the Supplemental Agreement”), and “付款說明及承諾書” (“the Undertaking”).

13.Under Clauses 4 and 5 of the Purchase Agreement, a further sale and purchase contract was to be signed within 7 days from 15 June 2013, and if the purchaser failed to do so the Deposit would not be refunded.

14.Under Clause 4 of the Supplemental Agreement, the further sale and purchase contract to be signed was to be in the form strictly in accordance with the standard form agreement on display and the parties could not refuse to sign it for failure to come to agreement on the terms. Clause 6.1 provided for the balance of the purchase price to be paid within 7 days from 15 June 2013.  Further, Clauses 6.3 and 8 provided for the mechanism for forfeiture of the Deposit and resale of the Property by Tian Qi if the balance of the purchase price remained unpaid for more than 7 days.

15.Pursuant to the suggestion made by the Defendant relating to the purchase structure, the Plaintiff nominated a mainland company called “錦科科技發展(深圳) 有限公司” (“Jin Ke”), of which another Hong Kong company called “Elite Supreme Inc Limited” (“Elite Supreme”) was and is the sole shareholder, to purchase the Property.

16.The Defendant also asked the Plaintiff to sign a regulatory undertaking (“the Regulatory Undertaking”) which, if signed, would confirm the Plaintiff’s acknowledgement that Hong Kong citizens were not allowed to purchase real properties in Shenzhen.  The Plaintiff refused to sign the Regulatory Undertaking as this caused him considerable concern as to whether this would shift all the risks to him in the event that the transaction could not be legally completed.  Apart from the Regulatory Undertaking, there were other disagreements on various aspects and terms of the Formal SPA which could not be resolved by the parties.  In the circumstances, the negotiations broke down and the transaction fell through with no Formal SPA signed by the parties.

17.The Defendant has failed to return the Deposit to the Plaintiff. In April and May 2014, the Plaintiff, through lawyers, issued demand letters to the Defendant but to no avail.  Hence, the present action was commenced in Hong Kong in June 2014 as of right, given that both the Plaintiff and the Defendant were, and still are, in Hong Kong.  In this action, the Plaintiff asks for, amongst others, return of the Deposit in the sum of HK$1,250,000 on the basis of the 5 June Agreement.  The Plaintiff also claims for damages resulting from misrepresentations.

18.In 2015, Tian Qi commenced court proceedings in Shenzhen (“the Mainland Proceedings”).  In the Mainland Proceedings, Tian Qi claimed that it, and not the Defendant, was the actual vendor of the intended transaction and it sought primarily an order that the Plaintiff was in breach by failing to proceed with the purchase and to sign the Formal SPA.  The Shenzhen Futian People’s Court (“the Futian Court”), and upon appeal the Shenzhen Intermediate People’s Court (“the Shenzhen Court”), ruled in favour of Tian Qi.

19.While the decision of the Futian Court was still pending, the Defendant already applied to stay the present action on the basis of the pending Mainland Proceedings and also on the ground of forum non conveniens. Once the decisions were given by both the Futian Court and the Shenzhen Court (collectively “the Mainland Courts”), the Defendant applied to amend the summons seeking to strike out or stay the present action (“the Subject Application”).

20.For the purpose of the Subject application, the Defendant alleges that the claims in this action had already been determined in the Mainland Proceedings and hence the continuation of the action in Hong Kong would amount to a “collateral attack” on the judgments of the Mainland Courts (“the Mainland Judgments”), thereby constituting an abuse of the process of the court.

21.On 15 November 2017, Master R Lai, after hearing arguments from the parties, refused to strike out the claim but made an order staying further proceedings of this action.  The learned Master took the view that the action was properly commenced at the outset, but the continuance of the proceedings would amount to a collateral attack on the Mainland Judgments.  He therefore stayed the proceedings instead of striking out the claim.  This is the appeal against the Order.

22.It is common ground that forum non conveniens is no longer an issue in the Subject Application or this appeal.

Principles for the striking out of a claim based on “collateral attack” on a previous decision and abuse of the process of the court

23.There is no serious dispute about the following legal principles relating to the striking out of a claim based on “collateral attack” on a previous court decision and abuse of the process of the court:

(i)     It is only in plain and obvious cases that the court should exercise its summary powers to strike out any pleading.  The claim must be unarguably bad and it must be impossible, not just improbable, for it to succeed before it may be struck out.

(ii)     Where an action was commenced as of right, the court should only grant a stay where there are “very good reasons” and in “rare and compelling circumstances”.  A stay shall not be granted if it will cause injustice to the plaintiff.[1]

(iii)     The jurisdiction of the court to prevent the continuation of civil proceedings on the ground of abuse of process must be exercised with extreme caution.  It is a very serious matter to prevent a party from commencing litigation or pursuing it and this should only be done where the court considers that it is the court’s duty rather than a discretion exercised by the court.[2]

(iv)     The doctrine against an abuse of process by way of collateral attack is founded on the extension to the res judicata doctrine.  It recognises that where res judicata does not strictly apply, there might be circumstances in which a collateral challenge to a previous decision offends the principles underlying the doctrine.  The objective is to prevent an abuse of the court’s process by seeking to re-litigate a decided issue, even though not between the same parties.[3]

(v)     The burden of establishing abuse rests on the party who has chosen to raise the allegation.  The court will scrutinise the relevant facts and all the circumstances carefully.  The resolution of the question whether or not a collateral attack constitutes an abuse will be “highly fact sensitive” and “peculiarly a matter or judicial application to the facts of each case”.[4]

(vi)     It is not every collateral attack that will be held to be an abuse of process by the court.  It will only be an abuse where the court finds that there will be “manifest unfairness” or “the bringing of justice into disrepute” if a plaintiff is allowed to continue with subsequent proceedings.[5]

The Mainland Proceedings

24.In order to determine whether the continuance of the Hong Kong proceedings would amount to a collateral attack on the Mainland Judgments, the court has to look at the nature of the Mainland Proceedings in some details.

25.In the action commenced in the Futian Court in Shenzhen (“the Futian Action”), Tian Qi claimed against the Plaintiff and Jin Ke for orders that the Purchase Agreement and the Supplemental Agreement had been terminated and that the Deposit would not have to be refunded.

26.On the basis that the Deposit having been received by the Defendant on behalf of Tian Qi in the first place, the Defendant was also joined as a party to the Futian Action.

27.Despite the Plaintiff’s challenge to the jurisdiction of the Futian Court, the Futian Court confirmed that it had jurisdiction to hear and determine the dispute, for the reason that the subject matter of the dispute concerned landed property contract dispute and the landed property was situated in the Mainland.  The Plaintiff’s appeal in relation to his jurisdictional challenge was also dismissed by the Shenzhen Court.

28.Following such ruling, the Plaintiff defended Tian Qi’s claim in the Futian Action.  It also lodged a counterclaim against Tian Qi for the double return of the Deposit.

29.It was Tian Qi’s contention in the Futian Action that:

(i)     The Purchase Agreement and the Supplemental Agreement were binding agreements made by the Plaintiff and Jin Ke for purchasing the Property.

(ii)     The Plaintiff and Jin Ke were in breach by failing to proceed with the purchase under those agreements, and therefore the Deposit was to be forfeited.

30.In the counterclaim and at the trial of the Futian Action, the Plaintiff contended, inter alia, that:

(i)     No agreement or consensus had been reached with Tian Qi for purchasing the Property.

(ii)     It was illegal to make use of Jin Ke as his corporate vehicle to purchase the Property.

(iii)     When he signed the various documents in Shenzhen on 15 June 2013, including the Purchase Agreement and the Supplemental Agreement, etc., he thought that the counterparty to the transaction was the Defendant, and so he only had paid the Deposit to the Defendant.

(iv)     On that basis, the Plaintiff further argued that Tian Qi had acted in breach of the Purchase Agreement and that Tian Qi should compensate him with double the amount of the Deposit paid.

31.The Defendant’s position in the Futian Action was that it only acted on behalf of Tian Qi in receiving the Deposit from the Plaintiff, and that the Defendant had nothing to do with the sale and purchase of the Property.

32.After trial, the Futian Court made the following findings in its judgment (“the Futian Judgment”):

(i)     On 15 June 2013, the Purchase Agreement was signed between Tian Qi and the Plaintiff (with Jin Ke as his nominee).[6]

(ii)     On the same day, the Supplemental Agreement was similarly signed between the parties.[7]

(iii)     Further on 15 June 2013, the Undertaking was signed by the Plaintiff.[8]

(iv)     On 3 June 2013, Tian Qi had appointed the Defendant to receive the Deposit on Tian Qi’s behalf.  On 5 June 2015, the Plaintiff had paid the Deposit to the Defendant by cheque, and the Deposit received by the Defendant was subsequently paid over to Tian Qi.^[9]

(v)     On 15 June 2013, Tian Qi issued the receipt to the Plaintiff for the Deposit for the purchase of the Property, which had been received in Hong Kong on its behalf on 5 June 2013.[10]

(vi)     By 24 or 25 June 2013, the Plaintiff became the sole shareholder and sole director of Elite Supreme, which in turn was the sole shareholder of Jin Ke.[11]

(vii)     As confirmed by the statement of Mr. Shih submitted by the Plaintiff, in May 2013, the Plaintiff had already visited the sales office in Shenzhen and had already been told that the Plaintiff could purchase the Property using a Mainland company, held by a Hong Kong company, as the corporate vehicle.[12]

33.On the basis of these findings, the Futian court held that:

(i)     The Purchase Agreement and the Supplemental Agreement signed by Tian Qi with the Plaintiff were legal, valid and binding agreements, and they reflected the true intention of the parties.[13]

(ii)     When the Plaintiff signed the Purchase Agreement and the other documents on 15 June 2013, he knew that he could not purchase the Property in his personal name but he accepted the arrangement for purchasing the Property using a Mainland company as the corporate vehicle.[14]

(iii)     It was not against the law or administrative regulations of the Mainland for the Plaintiff to use Jin Ke as the corporate vehicle for purchasing the Property.[15]

(iv)     By 25 June 2013, the Plaintiff had become the sole shareholder and the person in control of Elite Supreme.  With Elite Supreme being the sole shareholder of Jin Ke, the Plaintiff also became the person in control of Jin Ke, and by which time the Plaintiff could have continued, and there would be no breach on his part if he were to continue, with the purchase of the Property with Tian Qi.[16]

(v)     There was no disagreement between the parties which would have entitled the Plaintiff to refuse to complete the purchase of the Property.[17]

(vi)     The Plaintiff acted wrongfully and in breach of the agreements in refusing to complete the purchase.[18]

(vii)     The Deposit paid by the Plaintiff should be forfeited to Tian Qi.[19]

34.The Plaintiff appealed to the Shenzhen Court.  In dismissing the appeal in the judgment dated 23 February 2017 (“the Appeal Judgment”), the Shenzhen Court affirmed the findings made by the Futian Court.  The court also made the following observations in the Appeal Judgment:

(i)     The Plaintiff did reach agreement or consensus with Tian Qi for purchasing the Property.^[20]

(ii)     There was no agreement made between the Plaintiff and the Defendant on 5 June 2013 in relation to the purchase of the Property, and the Defendant only received the Deposit on behalf of Tian Qi.[21]

Is the continuance of the present proceedings a collateral attack on the Mainland Judgments?

35.Mr Khaw, SC, counsel for the Plaintiff, submits that the continuance of the Plaintiff’s claim in this action is not a collateral attack on the Mainland Judgments.  According to him, the Plaintiff’s claim for the return of the Deposit against the Defendant on the basis of the 5 June Agreement has never been determined by the Mainland courts for the following reasons:

(i)     The focus of the Mainland Proceedings commenced by Tian Qi and the Mainland Judgments was on Tian Qi’s rights and obligations under the Purchase Agreement, the Supplemental Agreement and the Undertaking (collectively referred as “the 15 June Agreements”), as opposed to the 5 June Agreement to which Tian Qi was simply not privy.

(ii)     Although Tian Qi added the Defendant as the “third party” to the Mainland Proceedings, the Defendant remained throughout as a nominal party therein, in that it did not seek any relief and no issue was determined in relation to the Defendant’s position under the 5 June Agreement.

(iii)     The Defendant’s rights and obligations under the 5 June Agreement have never been considered or determined in the Mainland Judgments.

36.According to the Plaintiff’s case, at the time when the 5 June Agreement was entered into, he had no knowledge of the relationship or the agreement or arrangement made between Tian Qi and the Defendant.  This is not contradicted by the Defendant.  Moreover, all the salespersons who met the Plaintiff during the sales process handed out business cards with the title “East Pacific”, which led the Plaintiff to believe that he was contracting with the Defendant when the 5 June Agreement was made.

37.Further, the Plaintiff contends that the ruling of the Mainland Courts that the Defendant received the sum of HK$1,250,000 on behalf of Tian Qi does not absolve the Defendant’s personal liability to repay the Deposit to the Plaintiff under the 5 June Agreement:

(i)     First, it is trite law that an agent can be personally liable on the contract which he has made for his principal, or upon a separate but related contract.[22]

(ii)     In this regard, the question whether the agent is to be deemed to have contracted personally, in the case of a contract in writing, depends upon the intention of the parties, as appearing from the terms of the written agreement as a whole, the construction of which is a matter of law.[23]

(iii)     If the contract is signed by the agent in his own name without qualification, he is deemed to have contracted personally unless a contrary intention plainly appears from other portions of the document.[24]

(iv)     It is well-established that where the principal is undisclosed at the time of contracting, the contract is made with the agent and he is personally liable under such contract.[25]

(v)     In the present case, the Defendant signed the 5 June Agreement in its own name without any qualification at all.

(vi)     As a matter of principle, where the agent received money under a pre-contract situation in the sale of land “subject to contract” (as in this case), even if the agent accepted it without indication as to the capacity in which he has taken, he holds the money as a stakeholder and is under a duty to return the money to the prospective purchaser unless he has paid money away in accordance with instructions.[26] It is irrelevant that he has paid the deposit over to his principal, for he would act wrongly if he did so.  His liability is a personal one to the payor (i.e. the Plaintiff), whether in contract or in restitution.[27]

38.Furthermore, apart from the Defendant’s separate contractual liability in its own capacity, it is the Plaintiff’s case that the Defendant is also liable in tort for negligent misstatements.

39.In §11 above, I have already set out the Representations allegedly to have been made by the Defendant.

40.The Plaintiff has obtained opinion from Mainland legal expert that the purchase structure arranged by the Defendant was illegal under Mainland laws because:

(i)     Only Mainland supervised financial institutions are allowed to take deposits for real estate transactions in the Mainland.  The Defendant was not such an institution.

(ii)     According to the purchase structure proposed by the Defendant, the Plaintiff would indirectly own the Property through the acquisition of a Hong Kong corporate vehicle and a Mainland corporate vehicle.  However, for the structure to be legally completed, the Mainland company (i.e. Jin Ke) would need to be properly capitalised in accordance with the relevant Mainland rules and regulations governing acquisition of a property by a Mainland company.  In the circumstances, conversion of Hong Kong Dollars into Renminbi (“RMB”) and injection of RMB from the Hong Kong corporate vehicle (i.e. Elite Supreme) into Jin Ke would be an essential part of the process in the implementation of the purchase structure.

(iii)     Foreign companies (for example, the Hong Kong corporate vehicle, namely “Elite Supreme” in the present case) planning to convert foreign currency into RMB to inject capital into a Mainland subsidiary for the purpose of buying commercial property for self-use must obtain foreign exchange approval from the State Administration of Foreign Exchange and engage an approved Chinese bank who would execute the foreign exchange transaction.  The corporate vehicles involved, including “Elite Supreme” under the purchase structure, did not have any of these approvals.  The purchase structure involved payment of all proceeds in Hong Kong Dollars to the Defendant without these approvals would constitute a black market and illegal foreign exchange transaction under the Mainland regulations.

41.According to the Plaintiff, he relied on the Representations in signing the 15 June Agreements.   He claims that Representation A was clearly false and made negligently.  Moreover, the Defendant shall be liable for Representations B and C for the reason that the Defendant has failed to honour its promise to refund the Deposit or any part thereof to the Plaintiff.

42.As this is a striking out application, subject to perhaps express factual findings made by the Mainland Courts as opposed to legal conclusions, I have to put the Plaintiff’s factual allegations at their highest.  At this stage, the Plaintiff’s claims on personal liability based on contract, restitution and misrepresentations are certainly arguable.  The main questions are, therefore, whether these claims have already been determined in the Mainland Proceedings, and if not, whether these claims and the related allegations should have been raised in the Mainland Proceedings.

43.I have considered the Mainland Judgements in some details.  There is nothing in such judgments which deals with or addresses the Plaintiff’s case that the Defendant undertook a separate and distinct obligation towards the Plaintiff and that it shall be personally liable for the return of the Deposit in the case of any disagreement in relation to the intended purchase.  Further, the Defendant’s tortious liability for negligent misrepresentation is clearly not an issue canvassed or decided in the Mainland Judgments.

44.As the Mainland Courts found that the sale and purchase agreement for the Property was made between the Plaintiff and Tian Qi and the Defendant only received the Deposit on behalf of Tian Qi, Mr Lee, counsel for the Defendant, argues that there is a danger of inconsistent judgments if the Plaintiff is allowed to pursue the present claims against the Defendant.  I disagree.

45.With the finding of the Mainland Courts that the sale and purchase agreement was made between the Plaintiff and Tian Qi, the Plaintiff’s existing position is that Tian Qi was the undisclosed principal.  Under the common law, the agent may have incurred personal liability despite the fact that he is making the contract on behalf of the undisclosed principal.  The Mainland Judgments only affirm that Tian Qi was the principal but they had not dealt with the Defendant’s possible personal liability as agent in the circumstances.  Further, the Mainland Judgments have not dealt with the issues as to: (i) whether, vis-à-vis the Plaintiff and the Defendant, the Defendant had wrongfully handed the Deposit to Tian Qi; and (ii) whether the Defendant should be liable for misrepresentation.

46.Mr Lee relies heavily on the observations made by the Shenzhen Court that there was no agreement made between the Plaintiff and the Defendant on 5 June 2013 in relation to the purchase of the Property and that the Defendant by then only received the Deposit on behalf of Tian Qi.

47.However, the Mainland Courts had only been asked to determine the rights and liabilities between the Plaintiff and Tian Qi under the sale and purchase agreement of the Property.  On such issue, the Shenzhen Court made the observation that there was no such agreement made on 5 June 2013, and the 15 June Agreement were the only agreements made between them for the sale and purchase of the Property.  Despite that, there may still be personal liability on the part of the Defendant in respect of the handling of the Deposit and the Representations made by it, whether such liability arose out of a separate agreement made on 5 June 2013 or otherwise.

48.As stated in Bowstead & Reynolds on Agency[28]:

“... the existence of a contractual situation does not bar an action against the agent of one of the contracting parties. The mere fact that the agent acts for one party does not prevent his owing, in appropriate cases, a duty of care to the other. Such liability is most likely to occur in connection with negligent misrepresentation...”

49.The classic principle for negligent misstatement has been set out in the seminal case of Hedley Bryne & Co Ltd v Heller & Partners Ltd[29]:

“If, in the ordinary course of business, including professional affairs, a person seeks advice or information from another, who is not under any contractual or fiduciary obligation to give it, in circumstances in which a reasonable man so asked would know that he was being trusted or that his skill or judgment was being relied on, and such person then chooses to give the requested advice or information without clearly disclaiming any responsibility for it, then he accepts the legal duty to exercise such care as the circumstances require in making his reply; and for a failure to exercise that care an action for negligence will lie if damage results.”

50.The reference to “skill” in the Hedley Bryne principle does not necessarily require that the defendant possessed some particular professional qualification or expertise.  The term is widely construed, and embraces circumstances where the defendant had particular knowledge by virtue of his occupation or position.  As noted by the House of Lords, the concept of “special skill” must be understood broadly, certainly broadly enough to include special knowledge.[30]  Hence, negligent misstatements are not only confined to professional.[31]

51.The Mainland Judgments had dealt with the rights and liabilities vis-à-vis the Plaintiff and Tian Qi only under the sale and purchase agreement for the Property.  They had not dealt with the rights and liabilities vis-à-vis the Plaintiff and the Defendant under the said common law principles.  Hence, there is no question of inconsistent judgments.

52.It seems that the main argument relied on by the Defendant is that the Plaintiff should have raised the issues about the personal liability of the Defendant under the 5 June Agreement, the claim against the Defendant for negligent misstatements and the illegality of the funding arrangement in the Mainland Proceedings.  As the Plaintiff had failed to do so, it would be manifestly unfair to the Defendant as it has to deal with all these claims again in the Hong Kong proceedings.

53.I do not accept these contentions.

54.First, I am not certain whether the Plaintiff could have made the claims against the Defendant in the Mainland Proceedings. Though the Defendant might have made submissions and adduced evidence at the trial, I do not know its exact role in the Mainland Proceedings.  Further, I have no idea as to whether the Mainland Courts were prepared to deal with the Plaintiff’s claims under the said common law principles against the Defendant. In refusing the jurisdictional challenge, the Mainland Courts proceeded on the basis that the sale and purchase agreement for the Property, which was the only subject matter in the Mainland Proceedings, was made in Shenzhen.  The Mainland Courts had not considered that the Plaintiff might have separate claims under common law principles against the Defendant, with the incident giving rise to such claims arguably occurring in Hong Kong.

55.As mentioned above[32], the burden of establishing abuse rests on the party who has chosen to raise the allegation, and whether or not a collateral attack constitutes an abuse will be “highly fact sensitive” and “peculiarly a matter or judicial application to the facts of each case”.  Without knowing the conflict of law principles under the Mainland law and the legal procedures in the Mainland Courts, I am not sure whether the Plaintiff could have made the aforesaid claims, which are based on common law principles, against the Defendant in the Mainland Proceedings.

56.Secondly, even if the Defendant was allowed to make such claims against the Defendant in the Mainland Proceedings, there is no reason why the Plaintiff should have been compelled to litigate such claims in the Mainland Courts.

57.As the Plaintiff’s claims are based on common law principles and the Defendant is a Hong Kong company, there would be juristic disadvantages to the Plaintiff if he were to pursue the claims against the Defendant in the Mainland.  Injustice to the Plaintiff is certainly a relevant consideration in the Subject Application.

58.In particular, the Plaintiff has a claim as of right against the Defendant in Hong Kong.  As mentioned above[33], where an action was commenced as of right, the court should only grant a stay where there are “very good reasons” and in “rare and compelling circumstances”.  A stay should not be granted if it would cause injustice to a plaintiff, which is exactly the case here.  On the other hand, there is no manifest unfairness to the Defendant as: (i) it is a local company; (ii) the acts which form the basis of the claims arguably occurred in Hong Kong; and (iii) in the event that the dispute relating to the personal liability of the Defendant could be adjudicated together with the main dispute in the Mainland Proceedings, knowing the Plaintiff’s claim against it in Hong Kong, the Defendant could have likewise made a request to the Mainland Courts to resolve their dispute and yet it had not done so in the circumstances.

59.Mr Lee argues that, by claiming for “rescission” of the “Chinese Agreements” (i.e. the 15 June Agreements) for misrepresentation and the related reliefs, the Plaintiff is seeking to disown, inter alia, the 15 June Agreements.  This should not be allowed, as the Mainland Courts have already decided not only that the 15 June Agreements are all valid and binding on the Plaintiff, but also that such agreements reflected and expressed the true intention of the Plaintiff and Tian Qi.

60.There is some merit in such argument.  In fact, I note from the submissions of Mr Khaw that the Plaintiff is not now seeking for the rescission of any agreements.  By relying on the principle of issue estoppel, it is quite arguable that the Plaintiff’s claim for rescission of the 15 June Agreements is inconsistent with the Mainland Judgements.  If the Plaintiff does not seek to amend his pleading, the Defendant will be at liberty to make further application to the court to strike out part of the Plaintiff’s claim.  Despite that, it is still open to the Plaintiff to pursue the remaining claims against the Defendant.  So far as these other claims are concerned, there is no question of inconsistent judgments or abuse.

61.Based on such ruling, it is not necessary for me to consider the Plaintiff’s argument that the Mainland Judgments are not final decisions because of the possibility of a “re-trial” under the “Civil Procedure Law” of the Mainland.

62.In any event, I do not accept that the Plaintiff can rely on such argument.  Though the Plaintiff submits that this is a fact-sensitive issue which requires the hearing of evidence, it is trite law that an appeal or the possibility of an appeal does not render a valid and binding court decision otherwise than “final”.[34] Further, it is one thing whether a Mainland judgment is “final and conclusive” for the purpose of the enforcement of such judgment in Hong Kong, an issue which had to be decided in most of the authorities cited by the parties[35], it is quite another thing whether the Hong Kong court should strike out a claim based on collateral attack of a Mainland judgment thereby constituting an abuse of the process of the court.  Unless the Mainland Judgments are set aside, they are still valid judgments for the purpose of the Subject Application.  Furthermore, due to the lapse of time, the chance of having any review or retrial is simply too remote.  If there are indeed such proceedings, the Defendant can always apply to stay the present action pending their result.

63.For the above reasons, I allow the appeal.  I set aside the Order and dismiss the Subject Application.  I also make a costs order nisi that the costs of the appeal and the costs of the Subject Application in the court below be to the Plaintiff with no certificate for 2 counsel.

64.As the Plaintiff’s claim now falls within the jurisdiction of the District Court, I also make an order nisi that this action be transferred to the District Court.

65.The said order nisi shall be made absolute 21 days after the date of the handing down of this Judgment.

Mr Richard Khaw, SC and Mr Alan Kwong, instructed by Lim & Lok, for the Plaintiff

Mr Lee Tung Ming, instructed by Fairbairn Catley Low & Kong, for the Defendant