China International Fund Ltd v. West China Cement Ltd and Another

HCA 1889/2019

[2020] HKCFI 2976

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1889 OF 2019

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BETWEEN

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Before:  Deputy High Court Judge Burns SC in Chambers

Date of Hearing:  8 October 2020

Date of Judgment:  4 December 2020

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J U D G M E N T

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Introduction

1.By summons issued on 23 January 2020, the Defendants, West China Cement Limited (“WCC”) and West International Holding Limited (“West International”) apply for a stay of these proceedings on the grounds of forum non conveniens.

2.In this action the Plaintiff (“CIF”) sues WCC and West International for damages for an alleged unlawful means conspiracy. In essence it is CIF’s case that WCC and West International conspired with Gestao e Investimentio S.A.R.L (“SPI”), a company incorporated in Mozambique and the former joint venture partner of CIF, and others, in effect to unlawfully dispose of or procure the disposal of the interest of CIF in a joint venture for the construction of a cement production plant in Maputo, Mozambique from which, it is alleged, CIF was wrongly ousted.

3.CIF is a company incorporated in Hong Kong; WCC is a company listed on the Main Board of the Hong Kong Stock Exchange and West International, a company incorporated in Hong Kong in September 2019, is a wholly owned subsidiary of WCC.

The Factual Background

4.By a partnership agreement dated 13 April 2008 (“Partnership Agreement”), CIF and SPI agreed to establish a joint venture company (“CIF-MOZ”) to construct a cement plant in Maputo, Mozambique (“the Project”). The Partnership Agreement is expressed to be governed by Mozambique law. CIF-MOZ was subsequently incorporated in Mozambique. Until November 2017, CIF and SPI held 80% and 20% interests respectively in the joint venture.

5.In 2016, CIF experienced difficulties in financing the Project and Li Yizi, who had overall responsibility of the Project on behalf of CIF (and who is now alleged to be one of the alleged conspirators) embarked on attempts to secure funding from external investors. The Project had been on hold since 2014.

6.On 27 November 2017, SPI convened a general meeting of CIF-MOZ in Maputo, Mozambique (which was attended only by representatives of SPI and at which CIF was absent) and passed a resolution thereat for the increase of CIF-MOZ’s share capital and for the dilution of CIF’s shareholding in CIF-MOZ from 80% to 1% (“the 2017 Resolution”).

7.On 1 February 2018, SPI convened another general meeting of CIF-MOZ in Maputo and passed a resolution for the transfer of 45% of CIF-MOZ’s capital to Guhava Servicos S.A. (a special purpose vehicle intended to represent CIF’s interests), the intention being to prevent CIF-MOZ from being contaminated by the debts of CIF.

8.During meetings in the PRC in 2018, WCC and a company named Compact Metals Industries Limited, a company listed on the Singapore Stock Exchange, (“CMI”) met with representatives of SPI to explore the possibility of investing in the Project and both WCC and CMI signed a non-disclosure agreement in respect thereof.

9.On 27 June 2018, CMI and SPI executed a term sheet for the acquisition by CMI of a 51% interest in CIF-MOZ (“the CIF-CMI Term Sheet”). According to WCC’s evidence, it was not, at this time, interested in overseas projects and therefore did not participate.

10.In the knowledge of the fact of the signing of the CIF-CMI Term Sheet, solicitors for CIF sent letters before action to WCC’s Hong Kong office and CMI’s Singapore office, calling on them to refrain from acquiring CIF-MOZ’s shares.

11.On 8 October 2018, CMI announced that it would not proceed with the acquisition of any interest in the Project.

12.On 4 February 2019, SPI obtained final judgment from the Mozambique court, declaring that SPI held 99% of the shares in CIF-MOZ (“the Mozambique Judgment”).

13.On 24 May 2019, CIF and SPI executed Heads of Agreement (“HoA”), which was expressed to be governed by Mozambique law, by which:

13.1  subject to the terms of the HoA and entry into other formal agreements (defined as “Definitive Agreements”), SPI agreed to transfer 79% of the shares in CIF-MOZ back to CIF;

13.2  CIF undertook, inter alia, to start construction work within 6 months of the Definitive Agreements and to work with Mozambique government agencies to comply with Mozambique laws and regulations, failing which it would waive its rights to the 79% shareholding.

14.In the event, the Definitive Agreements to which the HoA referred did not materialise and SPI made it known to CIF that it would resume the Project without CIF and would explore other avenues to resolve the issues affecting the Project.

15.In mid-2019 WCC and SPI resumed contact with each other and between July 2019 and September 2019 negotiations took place between WCC and SPI for the acquisition of an interest in the Project. For the purposes of CIF’s conspiracy claim, particular reliance is placed on a meeting held in the PRC on 2 August 2019 at which, it is alleged, SPI explained the status of SPI’s disputes with CIF including the dilution of CIF’s shares and the HoA.

16.Ultimately, WCC’s management decided to invest in the Project and on 2 August 2019 a memorandum of understanding (“the MOU”) was signed in Xi’an, PRC between WCC’s main operating entity, Yaobai Special Cement Group Co Ltd, (“Yaobai”) and SPI, pursuant to which Yaobai was to perform due diligence, negotiate further with SPI and, subject to a satisfactory investigation result, conclude a formal agreement with SPI.

17.On 5 September 2019, the board of WCC met in Xi’an and agreed to pursue the proposal for investment in the Maputo project and authorised negotiations to ensue to achieve that end.

18.Following due diligence by WCC/Yaobai in Mozambique in August and September 2019 and discussions in Maputo concerning the key terms and structure of a new joint venture, an agreement (“the Co-Operation Agreement”) was made between WCC and SPI (and others) dated 20 September 2019, whereby it was agreed that a joint venture company would be incorporated for the construction of the cement plant in which West International would have a 60% interest.

The Conspiracy Claim

19.The elements of the tort of an unlawful means conspiracy are as follows:

19.1  an express or tacit agreement or understanding between the defendant and another or others to injure the plaintiff by unlawful means, whether or not the intention to injure is the predominant purpose;

19.2  the use of unlawful means;

19.3  resulting loss or damage caused thereby.

[See Pido v Compass Technology Co Ltd [2010] 2 HKLRD 537, at §17]

20.CIF says that the gravamen of its complaint which is at the heart of this case is that SPI, with the duplicitous assistance of CIF’s employees, Mr Li Yizi (stationed in Beijing) and Mr Sa Qi (sent by CIF from China to Mozambique), conspired with the Defendants and CMI to procure the disposal of CIF’s interests in CIF-MOZ to other parties.

21.CIF further contends that the alleged conspiracy arose from the tacit agreement and/or agreement by conduct of the alleged conspirators between November 2017 and July 2019; that the agreement of WCC to the alleged conspiracy is to be inferred from its knowledge of SPI’s alleged wrongdoing and that, armed with that knowledge, WCC engaged in discussions and negotiations with SPI, leading to WCC’s decision to acquire its stake in the joint venture for the development of the cement production plant and supplant CIF in that respect.

22.On the other hand, the Defendants argue that CIF’s real grievance is with SPI and its actions in forming a “plot” to oust CIF from CIF-MOZ by diluting its shareholding and the steps it took to transfer that shareholding to other parties.

23.The difference between the parties as to the true characterisation of CIF’s claim becomes relevant when considering where the natural forum is for the determination of the parties’ disputes and the identification of the forum with which the action has the most real and substantial connection. However, before considering this issue further, it is necessary to summarise the established principles which guide the court in determining the appropriate forum for the determination of disputes in any particular case.

Principles On Forum Non Conveniens

24.The following summary of the principles in The “Spiliada” [1987] AC 460 was adopted by the Court of Final Appeal in SPH v SA (2014) 17 HKCFAR 364, per Lord Collins NPJ at §51:-

“1. 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 ie in which the action may be tried more suitably for the interests of all the parties and the ends of justice?

2. 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 or distinctly more appropriate than Hong Kong. Failure by the applicant to establish these two matters at this stage is fatal.

3. 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.

4. 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.”

25.In The “Spiliada” Lord Goff considered it pertinent to ask whether the fact that the plaintiff has founded jurisdiction as of right of itself gives him an advantage in the sense that the English court will not lightly disturb jurisdiction so established (at p.476F-G). After examining the authorities, Lord Goff held that the test was as follows (at p.477B):-

“In my opinion, the burden resting on the defendant is not just to show that England is not the natural or appropriate forum for the trial, but to establish that there is another available forum which is clearly or distinctly more appropriate than the English forum. In this way, proper regard is paid to the fact that jurisdiction has been founded in England as of right…” (emphasis added)

26.This has since become the established test for stay applications based on forum non conveniens.  Where jurisdiction is founded in Hong Kong as of right, the party seeking the stay has to establish that there is another available forum which is “clearly or distinctly more appropriate” than the Hong Kong forum (see SPH v SA at §52).

27.The words clearly or distinctly suggest that the onus is not to be lightly discharged.  As Litton VP, as he then was, explained in The “Kapitan Shvetsov” [1997] HKLRD 374 at 377E-378A:-

“Each party preferred its own chosen forum and was exercising an undoubted right of access to that forum: a right which the court will not lightly disturb [cites Spiliada]…

Obviously from the Singapore owners’ point of view, Singapore is the more convenient forum as compared with Hong Kong. But the question at issue is not one of “mere practical convenience”, it is whether there is another available forum which is clearly or distinctly more appropriate than the one chosen by the respective parties. It must not be forgotten that the jurisdiction to stay proceedings springs from the inherent jurisdiction of the court: The doctrine of forum conveniens, which became an integral part of English law since the decision of the House of Lords in The Atlantic Star [1974] AC 436, is merely an enlargement of the principle that an action will be stayed if it is vexatious or oppressive or an abuse of the process of the court…” (original emphasis)

28.Consistent with these views, the burden of proof on the defendant in a stay application has been described as “a very high burden”: High Hope Zhongding v 廈門墩峰 (unrep, HCA 2485/2015, 16 January 2017) §§31, 41 per Lok J, Xu Ziming v Ruifeng Petroleum (unrep, HCA 450/2013, 27 August 2014) §15 per DHCJ Wilson Chan, as he then was, Botanic v China National United Oil (unrep, HCA 1852/2005, 25 August 2008) §82 per DHCJ To.

29.There is no dispute that Ds have been served as of right in this jurisdiction.

30.The jurisdiction in which the tort has been committed is prima facie the natural forum for the determination of the dispute. However, it is important to examine just how close a connection there really exists between the place where the tort was committed and any given forum: The Peng Yan [2009] 1 HKLRD 144 at §§24-28.

31.In considering the appropriate forum, the purpose is to identify the forum with which the action has the most real and substantial connection. This is not a matter of mere practical convenience: Rambas Marketing Co LLC v Chow Kam Fai David [2001] 3 HKC 250, 254A-F (Recorder Geoffrey Ma SC (as he then was).

Stage 1: Is Maputo Clearly and Distinctly a More Appropriate Forum Than Hong Kong?

32.The Defendants argue that Mozambique is clearly and distinctly more appropriate than Hong Kong for the determination of the disputes between the parties in this action because Mozambique is the forum with which the action has the most real and substantial connection. This is largely because, so the Defendants argue, CIF’s real grievance is with SPI; the role played by WCC/West International was peripheral; Mozambique was the “centre of gravity” of the alleged conspiracy and, in substance, that is where CIF’s cause of action arose.

33.The Defendants also contend that:

33.1  CIF’s claim is for damages to its economic interests in the Project and the alleged damage necessarily occurred in Mozambique;

33.2  the alleged damage was largely caused by the 2017 Resolution; the dilution of CIF’s interest from 80% to 1% and the execution of the Co-operation Agreement), all of which took place in Mozambique;

33.3  each of the agreements relevant to the alleged conspiracy (the Partnership Agreement, the HoA and the Co-operation Agreement) are expressly governed by Mozambique law.

34.On the other hand, CIF contends that, as the gist of the tort of conspiracy is the agreement which forms the essential basis of the cause of action, the place where the agreement was formed (which on CIF’s case is Mainland China) is the most relevant consideration (and the consideration which should be given particular weight) in determining the forum with which the action has the most real and substantial connection. In this respect, CIF relies upon the following authorities:

34.1  Galsworthy Ltd v Estate of Liu Cheng Chan [2019] HKCFI 297 at §§422-426:

“422… In respect of a conspiracy to injure, Lord Wright in Crofter Hand Woven Harris Tweed Company, Limited & ors v Veitch & anor noted a conspiracy consists not merely the intention of 2 or more but an agreement of 2 or more to do an unlawful act or to do a lawful act by unlawful means, but such civil right of action is not complete unless the conspirators do acts in pursuance of their agreement to the damage of the plaintiffs. It was said as follows:

“In this sense the conspiracy is the gist of the wrong, though damage is necessary to complete the cause of action… The rule may seem anomalous, so far as it holds that conduct by two may be actionable if it causes damage, whereas the same conduct by one, causing the same damage, would give no redress. In effect the plaintiff’s right is that he should not be damnified by a conspiracy to injure him, and it is in the fact of the conspiracy that the unlawfulness resides…”…

426….In light of the discussion above and bearing in mind that the conspiracy was the gist of the wrong even though damage was necessary to complete the cause of action, there was cogent basis to say the conspiracy in question being the gist of the wrong was masterminded in this jurisdiction, so Hong Kong was (the place of commission of the tort) even though some unlawful acts took place elsewhere.” (emphasis added)

34.2  廈門新景地集團有限公司 v Eton Properties Limited (unrep, CACV 158/2012, 15 April 2016. In this case, the plaintiff alleged an unlawful means conspiracy arising from, inter alia, a decision to renunciate or discontinue performance of a contract. On the basis that the decision to renege on the contract was made during a meeting in Xiamen which was then implemented in Xiamen, Yuen JA accepted that the conspiracy in relation to the renunciation of the contract occurred in the PRC (see Judgment at §§261-262).

35.CIF therefore contends that the substance of the conspiracy was committed in the PRC because that was where the Defendants acquired knowledge of the Project and of the disputes between SPI and CIF; where the allegedly conspiratorial agreement was made among principally PRC based entities and individuals on the one hand and SPI on the other; where the MOU was signed by WCC’s primary operating entity, Yaobai and SPI and where WCC’s board approved the investment in the Project. Whilst CIF accepts that SPI carried out acts in Mozambique in anticipation or and/or in furtherance of the alleged conspiracy, it contends that these acts do not shift the gravity of the tort (the agreement) from the PRC to Mozambique.

36.Heavy reliance is placed by CIF on the judgment of Mimmie Chan J in DP World Djibouti v China Merchants [2020] 1 HKC 224. In that case, the plaintiff alleged that the tort of knowing inducement of a breach of contract was committed by a PRC based company in the Republic of Djibouti. At issue was the question as to whether the Republic of Djibouti was the natural forum for the determination of the dispute by reason of the fact that the acts complained of constituting the tortious cause of action took place in Djibouti. In concluding that the Republic of Djibouti was not the natural forum, Mimmie Chan J. focused on the fact that one of the key decisions at trial would be the issue as to the defendant’s knowledge and decision making process, viz (at §57):

“ The consideration of the appropriateness of a forum is from the point of view of the trial of the action, and in the present case, an important issue to be decided at trial is whether the Defendant had knowledge of the relevant contractual obligations between the Plaintiffs and the Republic, and had knowingly procured the breaches of such contracts. As the Plaintiffs pointed out, this involves the Court looking at the decisions made, and instructions given, by the individuals forming the Defendant’s management. Such individuals are based either in Hong Kong or in Shenzhen. I accept the Plaintiffs’ submissions, that although the implementation of the management decisions of the Defendant - in the operation of the ports and the Free Trade Zone in Djibouti, the negotiation and signing of the relevant agreements, and the operation of the day to day affairs of the subsidiary of the Defendant which held the shareholding interests in PAID, may have occurred in Djibouti, the fact and occurrence of these matters are not controversial. The material issue is the state of knowledge and the decision making in respect of the wrongful acts as alleged by the Plaintiffs, and these largely if not entirely took place in Hong Kong and/or Shenzhen. Shenzhen is not asserted by the Defendant as the alternative forum.” (emphasis added)

37.Mr Jat, senior counsel for the Defendants submitted that DP World is distinguishable, principally on the ground that the cause of action in DP World (the tort of interference with a contractual relationship and inducing/procuring a breach of contract) is different in nature from the cause of action in the present case which comprises the tort of conspiracy and that whereas knowledge of the alleged breach of contract is critical in respect of the former, it is not the most important factor which is at the forefront of the elements necessary to constitute a cause of action for conspiracy.

38.Whilst I agree that the cause of action in DP World is different from that which is relied upon by CIF in the present proceedings and that the issue of knowledge of a breach of contract is more directly relevant to the tort of inducing or procuring a breach of contract than it is to the tort of an unlawful means conspiracy, it remains a relevant factor to the latter, particularly in the present case where an important part of CIF’s case is that WCC proceeded with the acquisition of shares in the joint venture notwithstanding the knowledge of CIF’s complaints concerning the dilution of its shares in the joint venture which it gained during discussions in the PRC.

39.I therefore accept that the above remarks of Mimmie Chan J in DP World are applicable to the present case where, apart from the issue as to the Defendants’ knowledge of CIF’s allegations of wrongdoing on the part of SPI, important issues relevant to the conspiracy claim concern the negotiations leading to the Defendants participation in the joint venture and the decision making of the Defendants in respect thereof. In this connection important factors in determining the question as to the appropriate forum for the determination of the disputes between the parties in this action are that the Defendants’ management was at the material times based in Mainland China and the negotiations and the decision making process leading to the decision in principle to invest in the Project largely occurred in Mainland China.

40.As it is the agreement forming an alleged conspiracy which is the gist of the cause of action for an unlawful means conspiracy, it follows in my judgment that the governing law of the cause of action is prima facie the place at which that agreement is formed. On the basis of the evidence filed on behalf of the parties in respect of this application, it would appear that, up until early August 2019, when the MOU was signed, all negotiations and decision making on the part of the Defendants which eventually concluded with the Co-operation Agreement were carried on or made in Mainland China and it was only in the month leading to the signing of the Co-operation Agreement that due diligence was carried out and the final stages of negotiations took place in Mozambique. On balance therefore I conclude that CIF’s conspiracy claim is principally governed by PRC law.

41.I am mindful of the Defendants’ complaints that CIF’s argument that PRC law governs its conspiracy claims is not expressly pleaded in CIF’s Amended Statement of Claim; that the Defendants have been taken by surprise by it and that they have been deprived of the opportunity of considering whether or not a cause of action in conspiracy is viable under PRC law and of addressing the court on this question. These complaints however go largely to the merits of CIF’s claims in this action and, in any event, do not in my view preclude the Court from considering and reaching at least a preliminary view as to which law governs the claims. This is a necessary part of the consideration and determination of the appropriate forum for this litigation which arises from the Defendants’ summons.

42.In any case, as observed by Nourse LJ in Kuwait Oil Tanker Co SAK and another v Al Bader and others [2000] 2 All ER (Comm) 270, at [184]:

“Since English courts proceed on the basis of a presumption that foreign law is the same as English law unless the contrary is proved as a fact, it seems clear that, whether or not the claimant incorporates in his pleading an averment that the matters relied on are civilly actionable under the lex loci delicti, the burden in practice is upon the defendant to plead and prove that his conduct was not actionable under the lex loci delicti. That being so, the debate appears to be a somewhat arid one.”

43.In the Kuwait Oil Tanker case, Nourse also noted the view expressed at para 2.20 of the Law Commission Working Paper No. 87 on Private International Law: Choice of Law in Tort and Derelict (1984) that:

“.....it is not necessary for the plaintiff to plead the existence of civil liability under the lex loci delicti: he may rest his case on the basis of English law alone and leave it to the defence to raise any questions of foreign law. if the defence does not do so, the case will be disposed of without any reference to foreign law”

44.In Eton Properties (supra), Yuen J. A. concluded that, on the basis of the defendant’s expert evidence, to the effect that there was no liability for conspiracy under PRC law (and the fact that this was not challenged on appeal),  the plaintiff had failed to satisfy the “double-actionability” test (requiring that, in order for tortious liability to be established, the matter must be actionable under both the lex fori and lex loci delicti) and that, accordingly, the plaintiff’s cause of action in conspiracy was not actionable in Hong Kong (see Judgment at §§261-262).

45.Whilst it may be said that CIF might be at risk of its conspiracy claim meeting the same fate as that advanced by the plaintiff in Eton Properties, this is not in my judgment a relevant factor to take into account on this forum application.

46.If PRC law does principally governs the conspiracy claim, as I consider to be the case, the only issues of Mozambique law which are likely to arise will be as follows:

46.1  Whether SPI breached its duties of good faith and loyalty under the Partnership Agreement, and

46.2  whether SPI breached the HoA.

47.The Hong Kong courts are accustomed to dealing with and applying aspects of foreign law and rarely will the need to do so be a decisive factor favouring a stay of proceedings: see Rambas Marketing Co LLC v Chow Kam fai David [2001] 3 HKC 250.  In particular, Hong Kong courts are well equipped in dealing with and applying Mainland Chinese Law (whereas, the Maputo court might not be). On the other hand I do not consider that the aspects of Mozambique law on the questions which I have identified in the pre-ceding paragraph are so complex or foreign to Hong Kong law principles that any insuperable difficulty will be encountered in applying that law if the matter were to proceed in Hong Kong.

48.As to the availability of witnesses:

48.1  There would appear to be no difficulty in all potential witnesses attending a trial in Hong Kong. In particular, the on-going commercial relationship between the Defendants and SPI would suggest that there is unlikely to be any difficulty in the Defendants calling representatives of SPI to give evidence.

48.2 Conversely however, it does seem to me that there is an appreciable risk that difficulties may be encountered in arranging for the attendance of CIF’s witnesses to attend a trial in Maputo. This arises by reason of the fact that some of CIF’s potential witnesses have signed statements to the effect that they will not agree to attend trial there because of concerns about their own safety.  According to these statements, this fear arises from “....the behaviour of the Mozambique government last year of harassing, threatening and forced eviction of CIF’s employees (including the makers of the statements) from the Maputo Cement Plant”.

48.3  In an email dated 1 September 2019 from one of the CIF employees, formerly stationed at the Maputo Cement Plant, to Mr Sun Siu Kong, the deponent to the affirmation filed on behalf of CIF in opposition to the Defendants’ present application, a copy of which is exhibited to the affirmation, reference is made to the “clearing of the Maputo Cement Plant on 31 August 2019” and, in that connection, the following was stated:

“1. As understood from the sound recording obtained on-site today and the Ministry of the Interior personal who went to the plant and were responsible for sending our staff to the airport, this was an organized and planned action by SPI;

2. We did not receive any repatriation documents and were being cleared only at the command of the Ministry of the Interior personnel and security guards who had guns;

3. Staring from 11 a.m. on 31 August, the security guards sent by SPI restricted our on-site staff’s entry and exit, in suspicion of false imprisonment.

4. SPI did not handle the handover procedures with us.

5.While we were having a meeting,[at] 9 o’clock local time our staff were, under the situation of being threatened, rushed into cars and sent to the airport.”

48.4  it was submitted on behalf of the Defendants that the statements of CIF’s potential witnesses to the effect that they will not attend a trial in Mozambique because of concerns over their safety are inadmissable because they are not properly attested and that no weight should be placed on them. I do not accept this. These statements have been exhibited to affidavit evidence and in my view are admissable as hearsay evidence. There is no reason to disbelieve or doubt the genuineness of the statements of intention contained therein.

48.5  The Defendants adduced expert evidence to the effect that the Monzambique courts allow witnesses outside Monzambique to testify remotely by electronic means. However it would appear that this is dicretionary and it is by no means certain that, in lieu of CIF’s witnesses giving viva voce evidence in Maputo, they will be permitted to give evidence either by electronic means or pursuant to the letter of request procedure.

48.6  In all the circumstances I accept that there is force in CIF’s concerns about the availability of witnesses should this action be tried in Mozambique and I accept that this is a factor to which weight should be given in determining the Defendants’ forum application.

49.It seems to me that no difficulty is likely to arise concerning the availability of documents, whether the trial is conducted in Hong Kong or Maputo and that this is a neutral factor as regards the question of the appropriate forum for the determination of the disputes between the parties.

50.On balance, having regard to all the circumstances of this case (in particular, the fact that much of the negotiations culminating in the MOU took place in the PRC; the fact that the decision making process on the part of the Defendants to proceed with the proposed investment in the Project took place in the PRC; the fact that the cause of action which is advanced by CIF is likely to be governed principally by PRC law and because of the potential difficulties which I accept might be encountered in arranging for CIF’s witnesses to give evidence at trial in the event of a trial taking place in Mozambique, I conclude that the Defendants have failed at Stage 1 of the Spiliada test to demonstrate that the City Court of Maputu is distinctly or clearly the more appropriate forum.

Stage 2: Deprivation of Legitimate Juridical Advantage

51.In view of the conclusion I have reached to the effect that the Defendants have failed at Stage 1 of the Spiliada test to demonstrate that the City Court of Maputu is distinctly or clearly the more appropriate forum, it is not strictly necessary for me to go on to consider the question as to whether or not CIF would be deprived of a legitimate personal or juridical advantage in the event that the action were to be tried in Maputo - the failure of the Defendants to show that the court of Maputu is distinctly or clearly the more appropriate forum is fatal to the Defendants’ application for a stay of these proceedings.

52.However, in deference to counsel’s submissions on this question and in case this matter should go further, I will briefly address this issue.

53.CIF contends that there is a serious risk that a fair trial cannot be had in Maputo in this case. This is because:

53.1  SPI is the financial and investment arm of FRELIMO, which has been the ruling party of Mozambique since 1975;

53.2  Given the strategic importance of the Project, there is a real risk that FRELIMO would pressure the Mozambique courts to dismiss any claim that CIF might bring in Mozambique, and

53.3  there is evidence to show that the Mozambique courts are susceptible to political influence by FRELIMO.

54.In support of the assertion that SPI is the investment arm of FRELIMO, CIF has produced in evidence (a) an email dated 3 July 2018 from Ms Safura (who represented SPI at, inter alia, a meeting with WCC in 2018) to CIF describing SPI as “the Mozambican Party’s holding”, (b) an email from Mr Tomas Timbane (SPI’s lawyer) to CIF dated 8 August 2019 claiming that Mr Vitor (who represented SPI in negotiations with WCC in mid 2019) was unable to meet CFI in Lisbon because “[FRELIMO’s] election campaign is approaching and SPI is involved in its preparation.” and (c) secondary literature. That SPI is the financial and investment arm of FRELIMO is not seriously disputed by the Defendants and I accept that it is.

55.CIF relies upon the following to demonstrate the strategic importance which FRELIMO attaches to the Project:

55.1 The letter from Ms Safura to Mr Li Yizi dated 3 December 2017, where she emphasized that the Maputo Project will “have a huge financial and social impact to the country” [B1/48/235]and “a priority to the Government of Mozambique” [B1/48/236].

55.2  The email from Ms Safura to Gary Sun dated 3 July 2018, where she stressed that the Maputo Project “will have a huge economic and political impact in Mozambique” [B2/79/407] and warned that intervention by FRELIMO and the Communist Party of China might be necessary.

55.3  The email from Mr Vitor to Gary Sun dated 11 July 2019, where he claimed that SPI had been receiving “pressure from (the Mozambique) government because of all the implications that the stoppage is causing” [B2/63/348].

55.4  The email from Mr Vitor to, inter alios, Chui King dated 19 July 2019, where he claimed that the Maputo Cement Plant was politically sensitive as failure to complete it on time would “give a negative signal to the country and may penalize the Frelimo party in an election year” [B5/88/1174].

56.In response to these points, the Defendants argue that, as CIF’s claim is for damages for conspiracy, the litigation does not concern any national interests in Mozambique. I do not accept this. In my view it follows from the fact that SPI is the financial and investment arm of FRELIMO and that the Project is clearly of considerable importance both to SPI and FRELIMO that the litigation does concern Mozambique’s national interests.

57.As regards the evidence purporting to show that the Mozambique courts are susceptible to political influence by FRELIMO, CIF relies on the following:

57.1  The Bertelsmann Stiftung’s Transformation Index (“BTI”) 2018, a report by Bertelsmann Stiftung, an independent non-profit research foundation headquartered in Gütersloh, German commented that:-

(a)  Whilst there is a formal separation of powers in Mozambique, judges are subject to the influence of FRELIMO [A/11/158/§81.2(1)(a)]; [B3/84/525].

(b)  Owing to the financial and/or material dependence of the Mozambique Court on the Government, the judiciary “remains weak and does not provide the necessary checks and balances” [A/11/158/§81.2(1)(b)]; [B3/84/525].

(c)  There is a lack of judicial independence as membership of FRELIMO is a de facto prerequisite for any career in the justice system: cf D’s expert [A/13/222].  In particular, the Mozambique Ministry of Interior “has a reputation for interfering in the course of justice” [A/11/159/§81.2(1)(c)]; [B3/84/525].

57.2  The Rule of Law Index 2020 (a report by the World Justice Project, an independent non-profit foundation headquartered in Washington DC founded by the American Bar Association) and the Corruption Perception Index 2019 (a report by Transparency International an independent non-profit foundation headquartered in Berlin, Germany) both ranked Mozambique on the very low end in terms of public sector corruption and respect for law [A/11/159/§§81.2(2), (3)].

57.3  The Corruption Perception Index 2019, a report by Transparency International, an independent non profit foundation headquartered in Berlin, Germany which ranked Mozambique 146th out of 180 countries in terms of perceived levels of public sector corruption.

57.4  the Mozambique Judgment which, CIF argues, is so plainly wrong (the 2017 General Meeting  clearly not being quorate and SPI as minority shareholder plainly not having the necessary votes to dilute CIF’s shares) that it is appropriate to infer judicial impropriety.

58.In Ferrexpo AG v Gilson Investments [2012] EWHC 721, in which the Corruptions Perceptions Index was cited in expert evidence on an application challenging the English court, Andrew Smith J stated that, although he had no reason to doubt the standing of the compilers of that index, in the absence of information as to their standing, he was unable to accept the index as being cogent evidence of the risk of injustice in the jurisdiction in question, adding that the court should be “cautious” about relying upon material drawn from the internet from organisations about which it is given no information. Similarly, had it been necessary for me to determine the question as to whether or not CIF would be deprived of a legitimate personal or juridical advantage in the event that the action were to be tried in Maputo, whilst I would have accorded some weight to these reports/indeces, I would not have regarded them as being anything like conclusive.

59.As regards the Mozambique Judgment, whilst no direct evidence was adduced on the Defendants’ forum application to show that, in reaching its judgment, the Mozambique court was subject to any undue influence or was biased, the fact remains that it is difficult to understand how it could have been concluded that the 2017 Resolution was valid and effective when it would seem that the meeting was not quorate and that as a minority shareholder, SPI did not have sufficient votes to dilute CIF’s shares. Whist therefore, I do not consider that it would be right to draw an inference from the Mozambique Judgment on its own that there would be a risk of judicial impropriety in any litigation between CFI and SPI in Mozambique, the concerns that there must be as regards the soundness of the Mozambique Judgment would in my view be a factor which it would be appropriate to take into account in reaching an overall determination as to whether or not there would be a risk that CIF would be deprived of a juridical advantage were this action to be tried in Mozambique.

60.Having regard to all the circumstances (taken together), and in particular, the risk that I consider there would or might be as regards the availability to CIF of witnesses, I am satisfied that CIF has shown that, in the event that the action were to be tried in Maputo, CIF would be deprived of a legitimate juridical advantage. Had I taken the view that the Defendants had overcome Stage 1 of the Spiliada test (which, in my judgment, they haven’t) and it had then been necessary for me to balance the advantages of Mozambique as the forum for the dispute with the disadvantages that CIF might suffer in that forum, I would have been driven to the conclusion that, in this particular case, there would have been a significant risk that substantial justice would not be available in that forum and, accordingly I would not have granted a stay of the present proceedings.

Conclusion

61.In all the circumstances I therefore dismiss the Defendants’ application for a stay of the present proceedings. I make an order nisi that the costs of the Defendants’ summons and the application made therein should be paid by the Defendants to the Plaintiff in any event, to be taxed if not agreed. This order will become final unless, within 14 days of the handing down of this Judgment, an application is made by either the Plaintiff or the Defendants to vary it.

Mr William Wong SC, Mr Jason Yu and Mr Lai Chun Ho, instructed by Li & Partners, for the Plaintiff

Mr Jat Sew Tong SC and Mr Peter Dong, instructed by Davis Polk & Wardwell, for the 1^st and 2^nd Defendants