Chen Lingxia v. 中國金谷國際信託有限責任公司 and Others
Read the full judgment text of HCA 2012/2018 on BabelCite. This High Court CFI judgment was delivered on 14 April 2021.
1. There are two Summonses before me:
Cited by 4 cases · Cites 5 cases
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HCA 2012/2018 [2021] HKCFI 982 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 2012 OF 2018 ______________
______________ Before: Hon K Yeung J in Chambers Dates of Hearing: 9‑10 December 2020 Date of Decision: 14 April 2021 ______________ DECISION ______________ The Summonses 1.There are two Summonses before me:
2.Mr Jonathan Wong with Ms Nicole Li appeared for the plaintiff (“P” or “Chen”), Mr Laurence Li SC[1] leading Ms Esther Mak for D1, and Mr Ambrose Ho SC leading Mr Gary C C Lam for D3 to D6. 3.In §1 of D1’s Summons, a declaration is sought that in the circumstances of the case the Court has no jurisdiction over D1 in respect of the subject‑matter of P’s claim or the relief sought. At the commencement of the hearing, Mr Li confirmed that that declaration would no longer be pursued. Both Summonses hence now raise the same point, namely the present action be stayed on the ground of forum non conveniens in favour of the Xicheng Court in Beijing. The pleadings and affirmatory evidence 4.The Writ of Summons was issued on 27 August 2018. The Statement of Claim (“SOC”) is dated 13 September 2018. 5.P has filed one affirmation, which is her 4th one filed on 22 May 2019 (“P/4”). 6.On behalf of D1 there are:
7.On behalf of D3 to D6, there are:
8.At different places of the hearing bundles there are altogether 10 legal opinions on Mainland law. Parties have in the course of the hearing informed me that only the following are relevant:
9.Both in his written submissions[7] and in the course of the hearing, Mr Wong suggested that D3 to D6 had withdrawn their reliance upon Deng/Opinion3. Mr Ho has informed this Court in clear terms that they have not. I proceed on the basis that they have not been. The parties 10.P’s claim concerns 2,550,000 shares in D7 (the “Subject Shares”), being 51% of the shareholding in D7. 11.P is a businesswoman and resident in Xiamen[8]. 12.D1 is a company incorporated in Xicheng, Beijing. 13.The 2nd defendant (“D2” or “Silver Grant”) is a Hong Kong company. It has been acting as D1’s nominee in respect of the Subject Shares. 14.D3 is a company incorporated in Guangzhou. D4 is a Hong Kong company. D5 is a company incorporated in Xiamen. D6 is a company incorporated in Guangzhou. D4, D5 and D6 have been acting as D3’s nominees in respect of the Subject Shares. 15.D7 is a Hong Kong company. Its key asset is a wholly owned subsidiary set up in the Mainland called香山國際遊艇俱樂部（厦門）有限公司 (“XS International”). XS International was incorporated in Xiamen on 4 July 2005. It was set up as a corporate vehicle in the form of a wholly owned foreign enterprise (“WOFE”) for D7’s plan to develop a yacht club in Xiamen under the project of 香山遊艇俱樂部項目 (the “Project”). 16.In respect of the shareholding in D7:
17.P was at the material time also a director of D7, and a director and the legal representative of XS International. P’s pleaded case 18.P’s pleaded claim, as summarized in the SOC[10], goes as follows:
The Agreements between the parties 19.To understand what the Loan Arrangements and the Share Pledge Arrangement as pleaded by P in the SOC were (or were not), it is important to go to the agreements that the parties have reached. There are quite some of them. §11 of Zhang/2 contains a table which usefully sets them out with some brief descriptions of their main effects. Set out below are the main ones that are material to this hearing. 20.In early 2010, D7 and XS International required funding for the development of the Project. A series of agreements were subsequently entered into between variably D1, D7, XS International, P, Fang and Wu. At its core, it was a financing loan in the sum of RMB 2,300,000,000 from D1 to XS International, with shares in D7 as guarantee. 21.The first and main agreement was the “戰略合作協議” dated 15 January 2010 between D1 (as “甲方”), XS International (as “乙方”) and D7 (as “丙方”)[11] (“SCA”). Under the same:
22.On 26 May 2010, pursuant to the SCA, D1 and XS International entered into an earning assignment agreement (遊艇泊位收益權轉讓合同)[14] (the “EAA”). The following clauses are material:
23.Also on 26 May 2010, Fang executed a保證合同in respect of the indebtedness of XS International[16]. Clauses 11.1 and 11.2 are the Choice of Law Clause and the Jurisdiction Clause. Their terms and effects are materially the same as those in the SCA. 24.Under the SCA, as mentioned above, it was contemplated that D7 would transfer 51% of its shareholder in XS International to D1 as security. As things turned out, and because of XS International’s status as a WOFE, parties encountered difficulties in effecting the transfer as contemplated. On 24 December 2010, D1, D7, XS International and P entered into an agreement to supplement the SCA — the《〈戰略合作協議〉之補充協議》(the “SCA/S1”)[17]. There is no dispute that the only material change effected thereby was that P was to, in lieu of the transfer by D7 contemplated by the SCA, transfer her 51% shareholding in D7 to D1 as guarantee. The net effect so achieved would be the same. 25.The following terms of the SCA/S1 are material (“甲方” being D1, “乙方” being XS International, “丙方” being D7, and “丁方” being P):
26.According to an Instrument of Transfer dated 31 December 2010[18], P transferred 2,550,000 shares in D7 (ie the Subject Shares) to D2 as nominee for D1. According to §22 of the SOC, 2,050,000 of those shares came from P, while the balance of 500,000 came from Wu who had transferred the same back to P on 30 December 2010. 27.On 4 January 2011, the transfer of the Subject Shares to D2 was approved by the board of D7. 28.On 12 January 2012:
29.In January 2012, D1 (as “甲方”), XS International (as “乙方”), D7 (as “丙方”), Wu (as “丁方”), P and Fang (P and Fang together as “戊方”) entered into a second agreement to supplement the SCA (“SCA/S2”). It became necessary for Wu to be supplemented a party as he had provided 500,000 of the 2,550,000 Subject Shares. The following clauses in SCA/S2 are material:
30.In addition to the above, various security agreements and confirmation agreements had also been entered into. These agreements all contain clauses similar to the Choice of Law Clause and the Jurisdiction Clause (§§25 to 28 of Ji/Aff). Enforcement of the Loans, and the legal proceedings in the Mainland that ensued 31.On 10 April and 15 May 2015, D1 issued to XS International, D7, P and Fang 2 Debt Repayment Notices. According to the one dated 15 May 2015[21], XS International as at 30 April 2015 owed D1 under the various agreements RMB 1,909,932,541.62. 32.On 26 May 2015, and upon D1’s application, the Beijing Notary Public granted in favour of D1 a certificate of enforcement[22](the “Certificate of Enforcement”) against inter alios XS International, P and Fang. 33.Upon the Certificate of Enforcement, the Higher People’s Court of Fujian Province (the “Fujian Court”) on 5 and 10 June 2015 granted a Notice of Enforcement in favour of D1 as the “申請執行人” and against inter alios XS International, P and Fang as the “被執行人”[23]. 34.On 4 August 2015, P (amongst others) applied to the Fujian Court for non‑execution of the Certificate of Enforcement (the “Non‑Execution Application”)[24]. 35.On 15 December 2015, the Fujian Court handed down its decision[25] refusing the Non‑Execution Application. 36.P appealed. On 28 October 2016, the Supreme People’s Court handed down its decision[26] setting aside the Fujian Court’s refusal of the Non‑Execution Application. The matter was remitted back to the Fujian Court for a re‑determination. 37.On 7 November 2018, by《執行裁定書》of the Intermediate People’s Court of Xiamen City, Fujian Province, D3 was allowed to substitute D1 as the “申請執行人”[27], which was immediately enforceable. 38.On 26 December 2018, the Fujian Court upon a re‑determination dismissed the Non‑Execution Application[28]. 39.On 12 January 2019, P applied to the Supreme People’s Court again for a review[29]. 40.By its decision dated 11 November 2019 (the “SPC Decision”), the Supreme People’s Court dismissed P’s application for review[30]. It is material to note that in the decision, D3 was named as the “申請執行人”. 41.P has exhausted her appeal in relation to the Non-Execution Application. 42.At §§35 to 39 of the SOC, P, with reference to her Non‑Execution Application, pleads that the matter was pending retrial, that that D1 “was and is not entitled to dispose of or otherwise deal with inter alia the Loans, the underlying security, and by reason thereof, the Subject Shares”. 43.That plea has been superseded by events, and has been put to rest by the SPC Decision. The auction of the Subject Shares 44.In the meantime, between 22 and 23 November 2017, D1 on the Taobao website auctioned off inter alia the debts owed to it by XS International under the EAA (as subsequently supplemented) together with its incidental rights under it, SCA/S1 and SCA/S2. The successful bidder was D3 at RMB 2,839,910,000. 45.Subsequently, D1 (together with another entity) by an agreement signed on 29 November 2017[31] (the “Debt Assignment Agreement”) transferred their rights in the Loans to D3. Pursuant to the same, D2 transferred 850,000 of the Subject Shares to each of D4, D5 and D6 as D3’s nominees. 46.Clauses 13 and 14 of the Debt Assignment Agreement are the choice of law clause and the jurisdiction clause. Their terms and effects are materially the same as those in the SCA. Other relevant legal proceedings in the Mainland 47.On 9 July 2018, P filed a《民事起訴狀》in the北京市西城區人民法院 (the “Xicheng Court” and the “Xicheng Proceedings”). 48.In respect of the Xicheng Proceedings:
49.P claims in P/4[33] that the Xicheng Proceedings were taken out in urgent circumstances when she was not familiar with Hong Kong law and had not instructed Hong Kong lawyers. I note that by that stage, P had already undertaken multiple legal steps in respect of the Certificate of Enforcement. She had had ample time to consider the legal steps she might take. I accept Mr Ho’s submission that P’s purported explanation in this regard is not credible at all. 50.Further, according to Zhang/3[34], P commenced another action in June 2019 before廣東省廣州市中級人民法院against, inter alios, D1, D3 and D7 in relation to the transfer of the debt package and alleged tortious action (the “GZ IPC Action”). Zhang described that action as being the same as the present action. The concept of “alienation guarantee” 51.The parties have adduced before me expert evidence on various aspects of Mainland law. One aspect relates to the concept of “alienation guarantee”. 52.According to the SCA and SCA/S1, the Subject Shares were transferred as security for the Loans. The general consensus amongst the experts is that the orthodox principles on guarantee under Mainland law do not apply. Rather, the transfer was in the form of an “alienation guarantee”. 53.The issue then arises as to, according to the Mainland law governing “alienation guarantee”, what the transferee’s interest was in the Subject Shares. 54.The issue is not a straightforward one. To start with, an alienation guarantee is not regulated, created or catered for by any statutory provision , but have been developed as a matter of practice of the Judges in the Mainland[35]. An alienation guarantee is lawful if that is the real intention of the parties[36]. 55.The issue is further complicated by the fact that there have been two transfers in the present case: the transfer by P to D2 as D1’s nominee, and the further transfer via the Taobao Auction by D2 to D4 to D6 as the nominees for D3. The rights, obligations and interests of D1 and D2 of the one part, and D3 to D6 of the other are different. 56.The experts’ views on the effects of an “alienation guarantee” and the rights of the assignees thereunder differ:
The intended defence of D1 and D2 57.As can be gleaned by the expert evidence adduced by D1 and D2, their intended defence is that what they have done was not any exercise of ownership right in the Subject Shares, but was lawful and permissible assignment of the contractual debt and the incidental rights thereto (including its right to the alienation guarantee). The intended defences of D3 to D6 58.At §15 of Zhang/2, Zhang outlines the intended defences of D3 to D6, as follows:
Legal principles relating to forum non conveniens 59.The applicable legal principles are not in dispute. I have been cited Spiliada Maritime Corp v Cansulex Ltd[1987] AC 460 at 476-478 per Lord Goff, and the summary at Hong Kong Civil Procedure 2021 Vol 1 §11/1/66. I shall not repeat them, save that I remind myself that the onus is on the defendant to show not merely that Hong Kong is not the natural or appropriate forum for the trial, but that there is another available forum which is clearly and distinctly more appropriate than the Hong Kong forum. The standard of proof is one of “good arguable case”: China Reliance Finance Co Ltd v China Three-Gorge Economic Development Corp, Guangdong Corp, unrep, CACV 296/2004, 25 May 2005, §6 per Rogers VP. Parties’ submissions 60.Mr Li highlighted the following points in support of D1’s stance, that:
61.Mr Ho summarized his grounds in support as follows:
62.Mr Wong’s main submissions may be summarized as follows:
Discussion 63.I deal first of all with and get out of the way the term “Share Pledge Arrangement” used by P in the SOC:
64.Mr Wong’s main submission is that the overarching governing law is Hong Kong law, by reason of the fact that property and contractual claims to shares in a company should be determined by the lex situs. 65.On 15 February 2019, Mimmie Chan J handed down her Decision[44] allowing P’s application for an injunction relating to the Subject Shares. At §17 of the Decision, in the course of considering whether there was any serious issue to be tried, Her Ladyship observed that:
66.Mr Wong relies on those observations. 67.In context, Mimmie Chan J was there not deciding the governing law. That becomes quite clear when §17 is read together with §§16 and 18 of the Decision, where Her Ladyship recited also the parties’ stances under Mainland law, and what the position would be if Mainland law applied. 68.But in any event, the mere fact that there are competing claims to the Subject Shares is not conclusive on the governing law. It remains relevant to consider the bases of the competing claims. I accept Mr Ho’s submission[45] that this Court cannot decide the question of ownership in a vacuum. 69.To determine the applicable law, the courts adopt the three‑stage approach set out in Macmillan Inc v Bishopsgate Investment Trust Plc (No 3) [1996] 1 WLR 387, at 391 per Staughton LJ (as adopted by the Court of Appeal in First Laser Ltd v Fujian Enterprises (Holdings) Co Ltd [2011] 2 HKLRD 45 (CA) at §49), that:
70.I first of all characterize the issues before the court. 71.Having considered the pleadings and the expert evidence that has been placed before me, I agree with Mr Li[46] that the issues may be framed as follows:
72.The consideration and resolution of those issues involve the consideration of the agreements between the parties, and in particular the SCA and SCA/S1. Those issues are in my view contractual in nature. 73.I bear in mind also the opinion of Deng, that the intention of the parties as ascertained from the SCA and SCA/S1 is also relevant when it comes to consider the lawfulness of the “alienation guarantee”. 74.I move to the second and third limbs in Macmillan. 75.The transfer of the Subject Shares by P to D2 as D1’s nominee was done pursuant to the SCA and SCA/S1. I have dealt with the term “Share Pledge Arrangement” pleaded in the SOC. I have stated my view that the use of that term adds nothing to the analysis. 76.In the SCA, there is both the Choice of Law Clause and the Jurisdiction Clause. 77.According to the expert evidence before me, under Mainland law, the Jurisdiction Clause is an exclusive jurisdiction clause. 78.Mr Wong relies on the fact that while the SCA contains the Choice of Law Clause and the Jurisdiction Clause, P is not a party to SCA. The SCA/S1, of which P is a party, does not contain any such clauses. He also submits that the change of transferor from D7 to P was an uncontemplated event which should be taken into account. He submits that the Choice of Law Clause and the Jurisdiction Clause are not binding on P. 79.I do not accept Mr Wong’s submissions in this regard. I have set out the SCA/S1 Legal Effect Clause above. I accept Mr Ho’s submission that the parties must have intended that the same Choice of Law Clause and Jurisdiction Clause were applicable to SCA/S1, as by SCA/S1, the parties merely changed the identity of the transferor due to difficulties which XS International’s WOFE status had given rise to. 80.As submitted by Mr Li[47], which I accept, and bearing in mind the similarity between the Rome I Regulation and the rules on choice of law developed under common law[48], where a right to be assigned was created by a contract, the mutual obligations of the assignor and assignee are governed by the law which applies to the contract[49]. 81.As I have observed above, any competing claims over the Subject Shares cannot be considered in vacuum. Any assertion of a proprietary right over the same can only be decided upon with reference to the underlying agreements. 82.In my view, there is no merits in Mr Wong’s submission that Hong Kong law is to apply merely because the shares of a Hong Kong company are involved. 83.In this regard, I also accept Mr Li’s submissions that even if this Court applies the lex situs of the Subject Shares, Mainland law will still be engaged. As explained in Briggs, Agreements on Jurisdiction and Choice of Law (2008) at §10.76:
84.Hence, even if the lex situs of the Subject Shares is technically to be applied, the issues remain engaged as to whether the parties had intended the SCA and SCA/S1 to be an “alienation guarantee”, and if so, its effect under Mainland law. 85.Related to the concept of “alienation guarantee” are the following matters:
86.I also accept Mr Ho’s submission that in so far as the Taobao Auction is concerned, it is indeed P’s own case that Mainland law applies, to the extent that she took the challenge all the way up to the Peoples’ Supreme Court. 87.In all the circumstances, I am of the view that the governing law of the issues identified above is Mainland law. 88.P has herself started the Xicheng Proceedings before the Xicheng Court. Although she has withdrawn the claim, the expert evidence suggests that she is entitled to relaunch it. 89.Other connecting factors also point to the Xicheng Court being a forum that is clearly and distinctly more appropriate than the Hong Kong forum:
90.On the evidence before me, and given in particular the SPC Decision dismissing P’s appeal in relation to the Non‑Execution Application, I accept also Mr Li’s submission[54] that P’s initiation and pursuit of present action is forum shopping. 91.P has not pointed to any material juridical advantage which she may lose if the claim is stayed. As Mr Ho and Mr Li have submitted, P has herself commenced multiple actions in the Mainland in relation to the Subject Shares, and she has submitted to the jurisdiction of the Mainland Courts. 92.In all the circumstances, I conclude that D1, and D3 to D6, have successfully discharged the burden of showing not merely that Hong Kong is not the natural or appropriate forum for the trial, but that the Xicheng Court as a forum which is clearly and distinctly more appropriate than the Hong Kong forum. Disposition 93.For reasons set out above, I grant an order:
94.I make a costs order nisi that P shall bear the costs of both Summonses, with certificates for two counsel.
Mr Jonathan Wong and Ms Nicole Y T Li, instructed by Tung, Ng, Tse & Lam, for the Plaintiff Mr Laurence Li SC, leading Ms Esther H K Mak, instructed by Fangda Partners, for the 1st Defendant The 2nd Defendant, was not represented and did not appear Mr Ambrose Ho SC, leading Mr Gary C C Lam, instructed by Lo Lau Lawyers, for the 3rd to 6th Defendants F. Zimmern & Co for the 7th Defendant did not appear Attendance of the 8th Defendant was excused [1] The written submissions filed were signed by Mr Victor Dawes SC and Ms Esther Mak, which Mr Li adopts. [2] [B4/1322-1361]. [3] [B4/1362-1394]. [4] [B1/1-72]. [5] [B5/1608‑2046]. [6] [B7/2594‑2636]. [7] §17(6). [8] §1 of SOC. [9] §11 of SOC. [10] The executive summary at§13. [11] [B1/110-121]. [12] [B1/114]. [13] [B1/114], D1 being “甲方”, XS International “乙方”, and D7 “丙方”. [14] [B1/122-141]. [15] [B1/134, 136]. [16] [B1/188-203]. [17] [B1/204-207]. [18] [B2/567]. [19] [B1/212-217]. [20] [B1/221-230]. [21] [B2/580]. [22] [B1/313-322]. [23] [B1/323]. [24] [B1/326-332]. [25] [B1/333-342]. [26] [B1/345-361]. [27] [B1/381-384], and see Deng/Opinion1 §§3.17 to 3.18 [B1/25]. [28] [B4/1561-1576]. [29] [B4/1578-1585]. [30] [B7/2554-2569]. [31] [B2/526-544]. [32] See in particular the last paragraph of the《民事起訴狀》at [B1/378]. [33] §33 [A/164]. [34] §12 [A/178]. [35] Deng/Opinion2, §§2.2 to 2.4 [B5/1616-1618]. [36] Deng/Opinion2, §2.3 [B5/1616]. [37] Xu/Opinion1 at [B4/1328]. [38] Luo/Opinion2, §32 at [A/207]. [39] Luo/Opinion2, §§23-25, 33-34 at [A/204-206, 208]. [40] Luo/Opinion2, §36 at [A/209]. [41] Deng/Opinion1, §§2.12 & 3.10 at [B1/16 & 23]. [42] [B5/2085], produced at Zhang/3, §13(e). [43] [A/38]. [45] At §53 of his written submissions. [46] §35 of his written submissions. [47] §39 of his written submissions. [48] Dicey, Morris & Collins on the Conflict of Laws (15th edn) §24-051 at p 1356. [49] Dicey §§24R-050, 24-062 and 24-063. [50] §17 of his written submissions. [51] Namely that the Court is entitled and indeed obliged to use its legal training in so far as it may have a bearing on the resolution of dispute. [52] Luo/Opinion2, §78 at [A/225]. [53] §73(2) of his written submissions. [54] §64 of his written submissions. | |||||||||||||||||||||||||||||||||||
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