China National Geological & Mining (HK) Ltd v. Tianjin Hopetone Co., Ltd

HCA 1589/2018

[2020] HKCFI 1338

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1589 OF 2018

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BETWEEN

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Before: Deputy High Court Judge Le Pichon in Chambers

Date of Hearing: 3 June 2020

Date of Decision: 24 June 2020

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DECISION

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1.This is a summons dated 11 July 2019 taken out by Tianjin Hopetone Co Limited (“the Defendant”) (a) to set aside the order dated 26 July 2018 of Master Chow granting leave to China National Geological & Mining (HK) Ltd ( “the Plaintiff”) to issue a concurrent Writ of Summons and to serve the same on the Defendant out of the jurisdiction; alternatively, (b) to stay the action on the ground of forum non conveniens. At the conclusion of the hearing, the decision was reserved which I now give.

BACKGROUND FACTS

2.The Plaintiff is a company incorporated in Hong Kong.  Zhu Bin (“Zhu”) is the sole director and shareholder of the Plaintiff.

3.The Defendant is a state-owned enterprise incorporated in the PRC and a member of a group of companies headed by Tianjin Tewoo Group Co Limited.

4.On 10 July 2018, the Plaintiff issued a generally endorsed writ claiming unpaid commission in excess of US$122 million for sales agency services provided by the Plaintiff to the Defendant, calculated at 0.8% of the value of the transactions.

5.The Plaintiff’s application for an order pursuant to RHC Order 11, rule 1 (1) (d) was heard by the Master on 26 July 2018.  It was supported by an affirmation of Cheng Shui Tai, the Plaintiff’s solicitor exhibiting 3 collaboration or cooperation agreements made between the Plaintiff and the Defendant respectively dated 30 December 2009 (“the 1^st Agreement”), 28 December 2012 (“the 2^nd Agreement”) and 30 December 2015 (“the 3^rd Agreement”) (collectively “the Agreements”) under which the Plaintiff was appointed sales agent of the Defendant.

6.Each of the Agreements contained a clause to the effect that when a dispute arises between the parties and negotiation fails, any party has the right to initiate legal proceedings at the legal institutions within the jurisdiction where it is situated: see §V (3) of the 2009 and 2012 Agreements, and §V (4) of the 2015 Agreement.

7.The rate of commission payable is not stated in any of the Agreements.

8.The statement of claim (“SOC”) was filed on 14 February 2019.  The Plaintiff relies on the Agreements pursuant to which it claims to have acted and provided agency services as the Defendant’s agent for intermediary trade in metal, agency sales in zinc and copper and warehouse financing.  It is further alleged that the parties had orally agreed a rate of commission at 0.8% prior to the 2009 Agreement.  Alternatively, the rate claimed was an implied term and/or based on an estoppel and/or quantum meruit basis.

O. 11, r. 1 APPLICATIONS

9.The principles are well established.  It is common ground that the applicant has the burden of showing that

(1) there is a good arguable case that the case falls within one of the gateways in O 11 r 1 relied on;

(2) there is a serious issue to be tried on the merits of the underlying case; and

(3) Hong Kong is the appropriate forum under the principle governing forum conveniens for the trial of the action.

10.In Brownlie v Four Seasons Holdings Inc [2018] 1 WLR 192 Lord Sumption considered Waller LJ’s use of “good arguable case”[1] a serviceable test explaining[2] what it meant (at §7):

“(i) … the claimant must supply a plausible evidential basis for the application of a relevant jurisdictional gateway;

(ii) if there is an issue of fact about it, or some other reason for doubting whether it applies, the court must take a view on the material available if it can reliably do so; but

(iii) the nature of the issue and the limitations of the material available at the interlocutory stage may be such that no reliable assessment can be made, in which case there is a good arguable case for the application of the gateway if there is a plausible (albeit contested) evidential basis for it.”

11.Lord Sumption’s reformulation of the effect of the “good arguable case” test in Brownlie was unanimously endorsed by the Supreme Court in Goldman Sachs International v Novo Banco SA [2018] 1 WLR 3683.  The reformulation was as to the effect of the test.  It did not rewrite the test.  Baroness Hale[3] did not consider Lord Sumption’s “explication” as glossing the test.

12.In Newocean Petroleum Company Limited v Rio Tinto Shipping (Asia) PTE Ltd, CACV 122/2018, [2019] HKCA 897 which was an application for leave to appeal, the applicant sought to rely on Brownlie in support of one of the intended grounds of appeal but the Court of Appeal decided that it was not a matter that was appropriate for it to consider without the benefit of argument in the court below.  In passing, counsel’s submission to the effect that there is a difference in the applicable rules in England as a result of the reformulation was mentioned but there was no further elucidation.

13.In the present case, the parties are agreed that the emphasis on the word “much” that had been used by Waller LJ is now generally considered “unhelpful[4]” and “can now safely be taken as consigned to the outer darkness[5]”.

14.For present purposes, it is common ground that being able to show a good arguable case generally means that the party has “the better of the argument” and that is the standard to be adopted.

THIS APPLICATION

(1) Order 11 rule 1 (1) (d)(iii) and (iv)

15.In its summons for leave, the Plaintiff did not specify the relevant sub-rule(s) of O 11, r 1(1)(d) on which it relied.  It only became apparent in its written submissions for this hearing that, apart from the jurisdiction clause contained in the Agreements which would render sub-rule (iv) applicable, it also relied on sub-rule (iii) on the basis that notwithstanding the absence of any governing law, the agency services to be performed and the Agreements were to be performed in Hong Kong.

16.Mr Rimsky Yuen SC, leading counsel for the Defendant, objected to the new gateway sought to be relied on, namely, sub-rule (iii) since no evidence was adduced in the supporting affirmation at the ex parte stage before the Master.

17.In view of the Court of Final Appeal’s judgment in Kayden Ltd v Securities and Futures Commission (2010) 13 HKCFAR 696, the Plaintiff did not pursue this gateway at the hearing.

18.The Defendant’s written submissions focused on sub-rule (iv).  The Defendant submitted that the Plaintiff cannot show that there is a good arguable case that its case comes within sub-rule (iv) because the jurisdiction clause in the Agreements the Plaintiff relies on is “immaterial”.

19.Whether sub-rule (iv) is applicable appears to be the main bone of contention.

(i) Whether the jurisdiction clause is “immaterial”

20.The Defendant adduced evidence to the effect that the Agreements were signed as a result of a bribe offered by Zhu to Xu Jianhua (“Xu”) who, at all material times, was the chairman and legal representative[6] of the Defendant.

21.Xu is the central character who explained why the Agreements came into existence in 2016 in these terms:

“it is because [Zhu] had previously promised to give me no more than 30% of shares in Guangxi Guangming Wharf[7]” [“GGM”], that I, driven by personal interests, pushed the signing of the agency agreements not conforming to the fact”.

22.The Defendant submitted that the separability doctrine has no application where the challenge is to the very existence of the Agreements including the jurisdiction clause contained therein.

23.In response to the court’s question, Mr Yuen stated that he relied on 3 authorities.  The first was Mackender & Ors v Feldia AG [1967] 2 QB 590 where Lord Denning MR drew a distinction between void and voidable contracts.  But Mackender concerned a contract that was voidable for non-disclosure rather than void and was not about bribery and its effect.  The court (in Mackender) rejected the plaintiff’s submission that because of the non-disclosure, there was no true contract – no true consent.

24.Next, the Defendant relied on the following passage from the speech of Lord Hoffmann in Fiona Trust & Holding Corp v Privalov [2007] UKHL 40: is whether based on those matters, the doctrine of separability is not applicable. The Defendant relied on the following passage from the speech of Lord Hoffmann in Fiona Trust  

“[16] The next question is whether, in view of the allegation of bribery, the clause is binding upon the owners. They say that if they are right about the bribery, they were entitled to rescind the whole contract, including the arbitration clause. The arbitrator therefore has no jurisdiction and the dispute should be decided by the court.

[17]    The principle of separability enacted in s 7 means that the invalidity or rescission of the main contract does not necessarily entail the invalidity or rescission of the arbitration agreement.  The arbitration agreement must be treated as a ‘distinct agreement’ and can be void or voidable only on grounds which relate directly to the arbitration agreement.  Of course there may be cases in which the ground upon which the main agreement is invalid is identical with the ground upon which the arbitration agreement is invalid.  For example, if the main agreement and the arbitration agreement are contained in the same document and one of the parties claims that he never agreed to anything in the document and that his signature was forged, that will be an attack on the validity of the arbitration agreement.  But the ground of attack is not that the main agreement was invalid.  It is that the signature to the arbitration agreement, as a ‘distinct agreement’, was forged.  Similarly, if a party alleges that someone who purported to sign as agent on his behalf had no authority whatever to conclude any agreement on his behalf, that is an attack on both the main agreement and the arbitration agreement.”

25.Fiona Trust was a case where a shipowner sought to avoid a charterparty which contained a jurisdiction agreement on the ground that as the substantive contract had been procured by bribery, once the bribery had come to light and the entire contract had been rescinded, the shipowner had been freed from the constraint of the jurisdiction clause.

26.The question presented was whether a jurisdiction clause is applicable when a contract, the original making of which is not in dispute has been rescinded, or avoided, or frustrated, or terminated.

27.As Lord Hoffmann explained, Parliament adopted the principle of separability in enacting section 7 of the Arbitration Act 1996.  Prior to Fiona Trust, construction of arbitration clauses turned on fine distinctions and linguistic nuances that “reflects no credit upon English commercial law[8]”. Fiona Trust restated the law: thenceforth, as a matter of English law the proper approach to jurisdiction clauses start from the assumption that the parties, as rational businessmen, are likely to have intended any dispute arising out of the relationship into which they have entered or purported to enter to be decided by the same tribunal.

28.Lastly, the Defendant referred to Gain Park Holdings Limited & Anor v Eversino Investments Limited & Ors, unrep., HCA 1638/2013, 26 November 2014 where the 2^nd plaintiff sought to set aside agreements signed involuntarily rendering them voidable (under duress), or alternatively void, (by non-est factum).

29.The agreements signed by the 2^nd plaintiff contained a non-exclusive jurisdiction clause in favour of Hong Kong.  The defendants who were served out of the jurisdiction applied to set aside the leave to serve out obtained under Order 11, rule 1. The judge agreed with the defendants in that case that the non-exclusive jurisdiction clause was immaterial and, on the facts, concluded that the applications were to be decided on the existing pleadings.

30.It is unclear what assistance the court is to derive from that decision since it was a case where the plaintiff was seeking to disown the agreements that contained the non-exclusive jurisdiction clause.

31.The Defendant submitted that as the Agreements were fabricated, there never was any agreement between the parties and the position was the same as for non-est factum.  Given the circumstances in which the Agreements came to be executed, the Defendant submitted that they are “invalid and unenforceable[9]” and that the jurisdiction clauses contained in them are “not genuine contracts[10]”.  Its case is that bribery alleged rendered the Agreements void in their entirety.

32.I turn to consider the Defendant’s case outlined in §21 above and the parties’ evidence.

33.According to Xu, between August and September 2016, 2 individuals were privy to the proposed agreements, namely, Liu Heng (“Liu”), ie the Deputy General Manager of the Defendant, and Hu Jiye (“Hu”), Deputy Manager of the Trade Department.

34.Xu’s evidence shows that the outline of the contents[11] of the Agreements was orally conveyed by him to Hu in Liu’s presence.  After Hu had prepared the written drafts, Xu made some corrections and Hu then sent them to Zhu for signature.

35.On that evidence, Xu was the “author” of the Agreements, seemingly without any input at all from, or reference to, Zhu. That is somewhat odd since one would expect the party offering the bribe to have set out or communicated what was required.

36.The Plaintiff maintains that each of the Agreements was executed on the date it bears.  It denies that any bribe was offered to Xu.

37.While Hu’s evidence corroborates Xu’s, Liu’s affirmation directly contradicts Xu and Hu’s account.  He denies having been present at or participated in any meeting with Xu and Hu regarding the Agreements or any knowledge of Xu’s instructions to Hu in August and September 2016. Liu first became aware of the Agreements only in 2017.

38.Xu’s evidence as to the circumstances surrounding the signing of the Agreements sometime after National Day in 2016 involving Zhao Zecheng (“Zhao”) and Liu is equally controversial.  He stated that he had a discussion with Zhao Zecheng (“Zhao”) (who had delivered the Agreements) and Liu before signing the Agreements of his own accord without informing the Defendant’s management or without authorisation.  Zhao disclaims knowledge of the contents of the sealed envelope that he had handed to Hu and denies participating in any discussion with Xu or meeting Liu on that occasion.

39.Plainly, the disputed evidence can only be resolved at trial.  What is clear is that it cannot be said at this stage either that the Defendant’s case is so strong as to warrant summary judgment or, conversely, that the Plaintiff’s case is bound to fail.

40.The Defendant adduced an expert report dated 10 July 2019 (“Mr Liu’s report”) on PRC law of Liu Sheng Liang (“Mr Liu”).  Mr Liu was appointed to provide professional opinions on, inter alia, the following issue:

“5.(a) if [Xu], driven by personal interests because [Zhu] promised to give him shares in [GGW], pushed the signing of [the Agreements], what impact will this have on the validity and legal effect of [the Agreements]?”[12]

41.Under the heading “(1) Opinions on the validity of the [Agreements]”, 3 matters were considered including the following:  

“(b) The act of malicious collusion between a legal representative and a counterparty to sign a contract on behalf of a company which jeopardize the interests of the State and the company may render the contract invalid[13].

(c) A civil juristic act that violates party’s true expression of intention can also be determined to be invalid.”

42.The discussion under (b) and the conclusion that the contract may be invalid because of malicious collusion was not about or because of Xu’s lack of authority to enter into the Agreements.  Under (c), Mr Liu stated (at §25) that Xu, as the legal representative of the Defendant would in general have the right to make an expression of intention on behalf of the company and enter into civil contracts with external parties.  His conclusion (at §26) that the Agreements would be considered “invalid or not binding” on the Defendant was because bribery would vitiate Xu’s expression of intention on the Defendant’s behalf and not because of any want of authority.

43.Mr Liu’s conclusion is that as a matter of PRC law, the Agreements are likely to be “invalid” as a result of the alleged bribery.  

44.The report of the Plaintiff’s expert Wu Yingpeng (“Mr Wu”), which addressed the issue of Xu’s signing authority referred (at §22 of his report) inter alia to Article 43 of the General Principles of Civil Law, viz: “an enterprise as legal person shall bear civil liability for the operational activities of its legal representatives and other personnel”.  (emphasis added)

45.Mr Liu’s report in reply did not dispute that Xu had authority to sign the 2^nd and 3^rd Agreements as legal representative of the Defendant as Xu became the Defendant’s legal representative in May 2011.  However, Mr Liu did not address the effect of Article 43 (raised by the Plaintiff’s expert) and failed to explain why, as head of the Financial Settlement Centre and general manager assistant of the Defendant when the 1^st Agreement was signed, Xu did not come within Article 43 when he signed the 1^st Agreement on the Defendant’s behalf.

46.Mr Anson Wong SC, leading counsel for the Plaintiff, submitted that the Defendant’s characterisation of the Agreements being void for want of authority is wrong: at most, they can be vitiated if the bribery alleged is made out.

47.He also took issue with the Defendant’s proposition that once the validity and unenforceability of the Agreements is challenged, the jurisdictional clauses become “immaterial” in that it is unsupported by authority.

48.The Plaintiff submitted that the fact that the validity/ enforceability of the Agreements is challenged does not automatically render the jurisdiction clauses contained in them null and void, unless the court is able to conclude on an interlocutory basis and without a trial that the Plaintiff’s claim based on the jurisdiction clause is bound to fail.

49.In view of §39 above, if that were the correct approach, the present case is not suitable for summary judgment.

50.The Plaintiff referred to the judgment of the English Court of Appeal in Deutsche Bank AG and Ors v Asia Pacific Broadband Wireless Communications Inc [2008] EWCA 1091 which was considered and applied in Hiromi Okada v Tomohiro Okada [2018] HKCFI 2310.  The issue was whether an exclusive jurisdiction clause, which covers any dispute as to the existence or validity of the contract, covers not merely claims advanced on the basis that the contract is a valid and subsisting contract but also alternative claims advanced on the basis (asserted by the defendant but denied by the claimant) that the contract is of no effect.

51.The legal principles are stated in [24-27] and [29] of the judgment of Longmore LJ:

“24. The next proposition is that a jurisdiction clause, like an arbitration clause, is a separable agreement from the agreement as a whole. This is uncontroversial … as a matter of domestic law (see Mackender v Feldia and Fiona Trust v Privalov) … and Briggs, Civil Jurisdiction and Judgments (4th ed 2005) para 2 105 esp at p 131). It follows that disputes about the validity of the contract must, on the face of it, be resolved pursuant to the terms of the clause and, indeed, the last sentence of the clause expressly so provides. It is only if the jurisdiction clause is itself under some specific attack that a question can arise whether it is right to invoke the jurisdiction clause. Examples of this might be fraud or duress alleged in relation specifically to the jurisdiction clause. Another example might be if the signatures to the agreement were alleged to be forgeries, although no authority has so far so stated. Even in such a case someone has to decide whether the signatures were in fact forged. It might well be thought that a mere allegation to that effect could not have the effect of rendering a jurisdiction clause inapplicable.

25. The importance of this concept of separability is that it shows that it cannot be the case that every claim made on the basis that a contract is void or has never come into existence must fall outside the terms of a jurisdiction clause expressed as widely as that in the present case…

26. The judge accepted these propositions as a matter of construction of the agreement in paras 43 – 46 of his judgment but decided against the Claimants because they had not established ‘a good arguable case as to the validity of the jurisdiction clause’. By this he meant that the Claimants had not been able to establish that the clause was ‘really agreed’ because the Defendants were plausibly asserting that the agreement had been signed without authority. That is, however, the very conclusion that the doctrine of separability is designed to avoid. If, of course, (on analysis) it appears, as it did in Bols Distilleries that no agreement was concluded because the parties were still in the realms of negotiation then one can see that there was no agreement about anything (including any jurisdiction clause which might well have been agreed as part of any concluded agreement). But that is not the present case where an agreement was undoubtedly concluded but the only question is whether it was an authorised agreement. By virtue of the separability principle there can be little doubt that the English court has jurisdiction to determine that question; once that conclusion is reached it must, to my view, also have jurisdiction to determine the consequences of any such decision.

27. In paras 17 and 18 of Fiona Trust Lord Hoffmann drew a distinction between cases of ‘no authority whatever’ (eg an agreement signed by the office cleaner) and cases of ‘excess of authority’ [2008] 1 Lloyds Rep 257 – 258.

‘17. …If a party alleges that someone who purported to sign as agent on his behalf had no authority whatever to conclude any agreement on his behalf, that is an attack on both the main agreement and the arbitration agreement.

18. On the other hand, if (as in this case) the allegation is that the agent exceeded his authority by entering into a main agreement in terms which were not authorised or for improper reasons, that is not necessarily an attack on the arbitration agreement. It would have to be shown that whatever the terms of the main agreement or the reasons for which the agent concluded it, he would have had no authority to enter into an arbitration agreement.’

The present case falls more naturally within the second category than the first, since there can be no doubt that, in general terms, the Chairman of a company has authority to enter into loan agreements on the company's behalf. As a matter of English law, therefore, there can be little doubt that the alternative claims would be covered by the jurisdiction clause …

29.   But I do not read the authorities as laying down any requirement that such clauses are not to apply if there is a (plausible) allegation that the contracts, in which such clause are contained, are vitiated by mistake, misrepresentation, illegality, lack of authority or lack of capacity.  That would be to deny the concept of separability …”

52.In summary, the following propositions may be derived from Deutsche Bank:

(a) the existence of general grounds for impeaching an agreement does not mean that the jurisdiction clauses contained therein are also impeached: at §25;

(b) it is only if the jurisdiction clause is itself under some specific attack that a question can arise whether it is right to invoke the jurisdiction clause: at §24; and

(c) a plausible, but general, allegation of mistake, misrepresentation, illegality, lack of authority, lack of capacity, or even fraud or forgery of the main agreement does not disapply the jurisdiction clause: at §29.

53.As to whether the Plaintiff or the Defendant has the better argument on the material available, based on the available evidence and the respective submissions of the parties, I consider that the Plaintiff has the better argument for the following reasons.

54.The Agreements appear to conform with normal formal requirements.  They bear the parties’ signatures and are “chopped”.  Xu who signed the Agreements had ostensible authority to enter into them on behalf of the Defendant.

55.Applying the Brownlie approach, there is a good arguable case.  The challenge to the jurisdiction clause is based on a bare allegation of bribery, without supporting evidence, and sparse on specifics[14] of the understanding/agreement between Xu and Zhu.

56.There is also the somewhat unusual manner in which the Agreements came into existence: see §§34-35 above.

57.Nor has it been shown that, as a matter of law, a bare allegation of bribery without more would automatically render the contracts including the jurisdiction clause null and void.  The cases relied on do not support such a proposition.

(ii) The relevant jurisdiction clause

58.On the basis that the Agreements are to be accepted at face value, the Defendant’s fallback position is that the relevant jurisdiction clause is not that on which the Plaintiff relies[15] (“the 2^nd jurisdiction clause”).  Rather, it should be § IV (1) of the 2015 Agreement (“the 1^st jurisdiction clause”).

59.The 1^st jurisdiction clause reads as follows:

“If for the reason of one Party, leads to the incurrences of risks on goods and funds of the other Party, the breaching party shall bear all liability. Liability includes but not limited to the financial loss caused by the breaching party and other responsibilities, the Party suffering loss has the right to initiate legal proceedings at the courts within the jurisdiction where the breaching Party is situated”.

60.The Defendant submitted that the 1^st jurisdiction clause is the appropriate one because the Defendant’s failure to pay agency commission would create risks in respect of the Plaintiff’s finance (irrespective of whether such risks have or have not materialized).

61.The Plaintiff, submitted that § III of the Agreements informs the context of § IV (1) and its subject matter.  § III (1) concerned the Plaintiff’s duties as agent in relation to dealings with the Defendant’s goods whilst § III (2) concerned the Plaintiff’s duties as agent in relation to the operation of the Defendant’s funds.

62.It was submitted that the 1^st jurisdiction clause is directed at controlling risks arising out of those obligations.  Thus, breaches would lead to “risks on goods and funds of the other party”.  In that context, a provision to enable the innocent party to seek relief on an urgent basis (such as an interim injunction for the preservation of property) in the courts within the jurisdiction where the wrongful party is situated is comprehensible and makes sense.

63.There would be no need for 2 different jurisdiction clauses in the same agreement unless they are intended to cater for different scenarios.  The Plaintiff’s claim for agency commission in the present case is a personal claim, in effect it is seeking remuneration from the Defendant.  As such, the claim cannot fall within the 1^st jurisdiction clause since the Plaintiff is not asserting a proprietary claim. 

64.In this regard, I find the Plaintiff’s analysis to be the more convincing.

(iii) Conclusion

65.Accordingly, for the reasons set out above, I take the view that the Plaintiff has shown that it has a good arguable case within Order 11, rule 1 (1) (d) (iv).

(2) Whether there is a serious issue to be tried

66.The nub of the Defendant’s submission is that because the Plaintiff only relied on the Agreements in its writ in which there is no mention of the rate of commission, much less at 0.8%, it cannot salvage its case through claiming a collateral oral agreement to establish the rate, it being inherently incredible that such a key term would have been overlooked and not incorporated in to the Agreements, and further, its claims based on implied terms are lacking in evidential basis.

67.Each of the Agreements contained an express provision for the payment of fees to the Plaintiff in relation to agency sales: see §II (2) of the 2009 Agreement, §II (1) of the 2012 Agreement, and §II (1) of the 2015 Agreement.

68.The Plaintiff cited the following passage from Bowstead & Reynolds on Agency (21^st Edition) (at §7-004) for the proposition that the absence of agreement as to the rate of commission does not render the agency contract void for uncertainty:

“In respect of some contracts, failure to agree on a price would be a strong indication that no contract had been concluded. In the case of the contract of agency, however, the question of the agent’s remuneration is less central and if it is found that remuneration was intended, its amount can be determined by reference to scales or even by what is reasonable … In the absence of a contrary indication as to the amount payable, the term which will be implied is for a reasonable sum on reasonable terms. What is reasonable will depend upon all the circumstances of the case.”

69.It was submitted that even if the Plaintiff fails to make good its plea of a collateral oral agreement, it does not mean that the Plaintiff does not have a valid cause of action against the Defendant for breach of contract for failing to pay agency fees.  What would be a reasonable sum would be determined by the court.  It cannot mean that a dispute over what is “reasonable” renders the Plaintiff’s cause of action unsustainable.

70.In the absence of any authority to the contrary, given the express terms of the Agreements for the payment of agency fees, I am of the view that has been shown that there is a serious issue to be tried.

(3) Whether Hong Kong is the appropriate forum

71.This issue does not arise unless, contrary to my view, the jurisdiction clauses do not apply.

72.On the assumption that they do not apply, the burden falls on the Plaintiff to show that Hong Kong is the appropriate forum for the trial of this action.  Where, as here, the Agreements do not contain a governing law clause, they would be governed by the law of the jurisdiction with which they have the closest and most real connection.  In the present case, the choice is between Hong Kong and the PRC.

73.The issues to be decided are (i) whether Xu had actual or ostensible authority to enter into the Agreements to bind the Defendant; (ii) whether the Plaintiff provided agency services to the Defendant; and (iii) what should be the reasonable remuneration for such services.

74.The Defendant maintained that the nub of the dispute concern the circumstances surrounding the execution of the Agreements which took place in China rather than Hong Kong.  However, even on the basis of the Defendant’s version of events, there is no evidence that the Plaintiff signed the Agreements in China rather than in Hong Kong where the Plaintiff has its principal place of business.

75.But the dispute is not limited to the issue of whether Xu had actual or ostensible authority to bind the Defendant.  The Defendant also disputes the Plaintiff’s claim that it has provided agency services.

76.That the parties have over the course of the years engaged in many transactions with each other is not disputed.  The question is whether they traded as principals (per the Defendant) or whether those trades were undertaken under the framework provided for by the Agreements (per the Plaintiff).

77.The Plaintiff’s case is that the bulk of its services provided to the Defendant is performed in Hong Kong and the commercial reason which made it crucial for the Defendant to conduct its trading in metals through the Plaintiff as an intermediary for purchases was because the Plaintiff often took on a short-term financier role.  That also applied to its role in conducting warehouse financing of copper metals for the Defendant.

78.It is common ground that given current day technology, where most of the witnesses reside or where the documents are situated are not weighty factors.  By the same token, the fact that expert witnesses are involved makes little difference.

79.The key witness in this case is Xu.  Currently, he is detained in custody in the PRC and assuming he remains in custody at the time of the trial, regardless of the stage of detention or post-conviction, he will be able to come to Hong Kong to testify in person.

80.The Plaintiff’s expert opined that in those circumstances, it is feasible on a case-by-case application, to have Xu give evidence by special means such as videoconferencing and to arrange a video conference for evidence-taking after obtaining the approval from courts of the Mainland and other departments (such as judicial administration, prison, et cetera).

81.If the proceedings were to take place in the PRC, the Plaintiff’s expert opined that it is rare for a detainee to testify as a witness in civil litigation in the PRC but it would be feasible to apply to the People’s Court and with approval from the detention authority, Xu could give evidence in writing or through videoconferencing.

82.The Defendant’s expert does not disagree with the opinion expressed by the Plaintiff’s expert.

83.The Plaintiff submitted that, at this stage, it is impossible to say with any certainty that Xu will still be in detention at the time of the trial.  But if that were to be the case, it may still be possible to obtain his written testimony or through videoconferencing, although whether the Mainland court will agree to the Hong Kong court’s request is uncertain.  In the view of the Defendant’s expert, the chances of it so doing are not high.

84.Even if the proceedings were to take place in the PRC, given that it is rare for a detainee to testify as a witness in civil litigation, one is confronted with the same uncertainty as to whether videoconferencing would be allowed.

85.Balancing all the relevant considerations, I am of the view that Hong Kong is the appropriate forum for resolving the disputes.

MATERIAL NON-DISCLOSURE

86.The Defendant makes 2 complaints in this regard.

87.First, the Plaintiff failed to inform the Court that, arguably, the Agreements might be governed by PRC law.

88.The non-exclusive jurisdiction clauses are contained in the Agreements made between the Plaintiff and a foreign party.  The possibility of the governing law not being Hong Kong law is inherent in the nature of the Agreements.

89.It is unclear what else the Plaintiff should have disclosed at the time of obtaining ex parte leave in July 2018.

90.Second, the Plaintiff failed to disclose that previous documents exchanged between the parties make no reference at all to any agency fee and some had stated a different rate of agency charges.

91.In view of §§67-69 above, I agree with the Plaintiff that dispute over the rate of commission does not destroy the viability the its cause of action.

92.In any event, I am prepared to re-grant leave should it be necessary to do so.

THE DEFENDANT’S STAY APPLICATION

93.This is an alternative to the Defendant’s application to set aside the order granting leave under O 11 r 1(1)(d)(iv).  Given my conclusion as to the governing law, I do not consider that the Defendant has made out a case for a stay: see §§72-85 above.

94.It follows that the stay application has not been made out.

ORDER

95.The Defendant’s summons dated 11 July 2019 be dismissed.  There is to be an order nisi of costs in favour of the Plaintiff with certificate for 2 counsel, such costs to be summarily assessed and payable forthwith.

96.Directions for summary assessment will be given separately.

Mr Anson Wong SC and Mr Alexander Tang, instructed by S T Cheng & Co, for the plaintiff

Mr Rimsky Yuen SC and Mr Jason Lee, instructed by Miao & Co, for the defendant