Minting Dome Holding Llc v. Deng Jie and Another
Read the full judgment text of HCA 1202/2023 on BabelCite. This High Court CFI judgment was delivered on 7 June 2024.
1. For determination in this Decision is the summons issued by the 1 st Defendant (“ Deng ”) on 14 September 2023 seeking an order:
Cited by 1 case · Cites 4 cases
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HCA 1202/2023 [2024] HKCFI 1558 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 1202 OF 2023 _______________________
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________________________ D E C I S I O N ________________________ 1.For determination in this Decision is the summons issued by the 1st Defendant (“Deng”) on 14 September 2023 seeking an order:
2.Deng said Minting Dome commenced this action in breach of the exclusive jurisdiction clause in favour of the People’s Court of Jiangxi Province (respectively “the EJC” and “the PRC JX Court”) contained in and being Clause 5 of the “Refund Agreement” dated 9 July 2023 entered into by Minting Dome and Deng (“the Settlement Agreement”). 3.Placed before this Court by Minting Dome are the 1st and 2nd Affidavits of Soshkin (the draft of which were considered by DHCJ Pow SC on 1 August 2023) and the 6th Affidavit of Soshkin filed on 16 January 2024; and by Deng are the 1st and 2nd Affirmations of Deng respectively filed on 20 September 2023 and 26 February 2024. 4.In Deng’s affirmations, Deng essentially only spoke about matters concerning the interpretation and scope of the EJC and his complaint about non-disclosure by Minting Dome before DHJ Pow SC and did not depose to any fact to dispute with Soshkin on the factual matters set out in the next 2 sections. The background 5.For the purpose of this Decision, the background may be succinctly stated, as follows. 6.Minting Dome was and is a company registered under the laws of Delaware, U.S.A. operating a brokage business sourcing and reselling crypto mining machines. 7.Mr Igor Soshkin (“Soshkin”), a manager of, and one of the ultimate investors in, Minting Dome was introduced by his ex-colleague Bao Shicun (“Carl”) to Chengduchenxiyu Technology Co., Ltd (“CTC”), a company registered in the Mainland and to Deng who claimed to be one of the owners of CTC. 8.In late June 2023, Minting Dome placed the following 3 orders with CTC through Deng:
9.Upon the instruction of Deng, Minting Dome made the following payments of USD Coins (“USDC”) to the “exchange wallet” (address: 0x0a7f2fE49b2f71C740F424eF510aa2[xxxxxxxxxx])(“OKX Exchange Wallet”) operated by the 2nd Defendant (“D2”) through its exchange platform known as OKX:
10.On 27 June 2023, Carl on behalf of Minting Dome visited a site in Yuen Long (at which the mining machines were stored). Carl reported to Soshkin that day that he had inspected 495 units of crypto mining machines, and that Deng told him that 1,200 more units of machines would be loaded onto the Yuen Long site on 28 June 2023. 11.Upon that report and on 27 June 2023, Minting Dome signed an “Agreement of Consignment Release” with CTC and made Payment 4. 12.However, on the next day, ie. 28 June 2023, Deng told Carl that he was unable to contact the owner of the machines and that the machines could not be released to Minting Dome. Carl also confessed to Soshkin that he had in fact only inspected around 170 units at the Yuen Long site. According to Soshkin, Carl so lied because he would be receiving a kick-back commission from Deng, which Carl denied. When further demanded by Carl, Deng said that even the 170 machines did not belong to the owners and that he himself was also deceived. 13.At about 2pm on 28 June 2023, Carl made a report to the Hong Kong Police. Minting Dome then instructed its solicitors to further liaise with the Hong Kong Police and D2. The Settlement Agreement 14.According to Soshkin :
15.Relevantly, it is Soshkin’s evidence[4] that GLLF had pointed out to CIU that (a) Deng used a fake ID, (b) Deng used a de-registered company (CTC), and (c) Deng signed the Agreement of Consignment Release on 27 June 2023 concerning the machines which were not even CTC’s property. 16.On 8th July 2023, upon CIU’s willingness to mediate, GLLF met Deng at the police station mediation room. The parties discussed for an hour and a half without resolution. GLLF, Soshkin and Deng continued their negotiation through messaging in a WeChat group. 17.Eventually, in the evening of 9 July 2023, Deng and GLLF (on behalf and with the authority of Minting Dome) signed the Settlement Agreement which was entitled “退款协议”[5]. 18.The pre-emble of the Settlement Agreement mentioned that certain sale and purchase contracts were reached between Minting Dome and Deng and that Minting Dome had paid to seller’s wallet cryptocurrency in the total amount of US$2,310,750 (though only 3 of the 4 Payments were mentioned)[6], and then it was stated, among others, :
19.The Settlement Agreement then provides:
20.In the same evening the Settlement Agreement was signed, Minting Dome received from Deng USDT at US$300,000, pursuant to Clause 1(a) of the Settlement Agreement. 21.It is Minting Dome’s case that thereafter Deng made up the excuse that Soshkin’s personal identification documents were required to unfreeze the USDC in the OKX Exchange Wallet, and that it was a lie from Deng, and accordingly no such document was provided by Soshkin to Deng or OKX. 22.It is common ground that the USDC in OKX Exchange Wallet have not been unfrozen pursuant to Clause 1(b) of the Settlement Agreement and no further payment has been made by Deng. The present action and some relevant procedural history 23.On 1 August 2023, Minting Dome commenced this action against Deng and D2. 24.On the same day, Minting Dome by an ex parte application obtained a proprietary injunction prohibiting D2 from disposing of USDC in the amount of US$2,310,750 (“the Proprietary Injunction”) and obtained the leave to serve a concurrent Writ out of jurisdiction to Deng and D2. 25.The Proprietary Injunction was continued until trial or further order by this Court on 25 August 2023. 26.The General Endorsement on the Writ stated that the causes of action pursued by Minting Dome against Deng in this action are deceit, unjust enrichment and constructive trust (“the Present Causes of Action”). In the Amended Statement of Claim, Minting Dome sought as against Deng (a) a declaration that the USD Coins at the total amount of US$2,310,750 transferred by it to the OKX Exchange Wallet have been held on constructive trust in its favour, (b) an order compelling Deng to take steps to deliver up the said USD Coins to Minting Dome, and (c) damages. Minting Dome claims against D2 for tracing the USD Coins, their return from D2 as constructive trustee receiving them knowingly, or restitutionary damages. 27.As mentioned, on 14 September 2023, Deng issued the present summons. 28.On 20 October 2023, Minting Dome filed its Statement of Claim, which was amended on 22 November 2023. 29.On 18 January 2024, Minting Dome obtained from this Court an order, among others, authorizing (notwithstanding the Proprietary Injunction) and compelling D2 to convert the said USD Coins into fiat currency of USD and pay the same into the Hong Kong Court of First Instance. 30.D2 filed its Acknowledgment of Service on 9 February 2024. 31.On 14 February 2024, the execution of the order mentioned in paragraph 29 above was stayed upon the joint application of Minting Dome and D2 by consent. The discretion whether to grant a stay where there is an applicable exclusive jurisdiction clause 32.The parties are agreed that where there is an applicable exclusive jurisdiction clause naming a foreign forum, although the court has a discretion as to whether to stay proceedings brought in breach of that exclusive jurisdiction clause, the discretion should be exercised by granting a stay unless “strong cause” for not doing so is shown (Hong Kong Civil Procedures 2024 §11/1/148, and the cases there cited). The proper interpretation of the EJC 33.The parties disputed on the interpretation of the EJC. Minting Dome contended that this Court should adopt the Narrow Construction of the EJC. 34.Mr Ng (Ms Tsai with him), on behalf of Minting Dome, contended that the phrase in the EJC – “协议产生或与之相关的任何争议” – which defines the disputes falling within the EJC should be construed thus : that the word “之” on proper construction refers to “协议产生的任何争议”, such that the phrase means “协议产生或与协议产生的任何争议相关的任何争议”. Therefore, only disputes “arising out of” the Settlement Agreement or disputes “in connection with any disputes arising out of” the Settlement Agreement are caught by the EJC (“the Narrow Construction”). 35.Mr Ng contended that consequent upon adopting the Narrow Construction, the key controlling criterium governing the disputes the EJC applies to is “arising out of the Settlement Agreement”; and as the Present Causes of Action all arose in terms of time before the Settlement Agreement was signed, they therefore were not, and could not be, “arising out of” the Settlement Agreement, therefore they are outside of the scope of the EJC. 36.Mr Liu, on behalf of Deng, contended that the phrase “协议产生或与之相关的任何争议”on proper construction simply means “disputes arising out of and in connection with the Settlement Agreement”. 37.It is provided by Clause 5 of the Settlement Agreement that its governing law is PRC Law. It is common ground therefore that the EJC is to be interpreted according to PRC law. 38.Both parties have produced their respective expert reports on the relevant PRC law and their opinion on the interpretation, namely the report of Madam Luo Mengni for Minting Dome (“Madam Luo”) and the report of Mr 萧文全 for Deng (“Mr Xiao”). 39.Before I go into them, I will allude to the following principles which were cited by Mr Ng and not disputed by Mr Liu:
40.Both Madam Luo and Mr Xiao agreed that the relevant provision in PRC Law governing the interpretation of the EJC is 《中华人民共和国民法典》第一百四十二条第一款 (“民法142条”) promulgated in 2020 :
41.The reasoning of Madam Luo in support of the Narrow Construction is this (§§5 to 7 of her report[7]). She approached the interpretation by, firstly, interpreting the word or phrase according to its literal meaning; and secondly, if encountering difficulty or unreasonableness, then “则应当结合相关条款、行为的性质和目的、习惯以及诚信原则，确定意思表示的含义”. She then proceeded to interpret the EJC literally. She opined that, according to syntax, it was more reasonable to read the word “之” as referring to “本协议产生的任何争议”. She then opined that the other factors set out in 民法142条need only to be considered in combination to confirm when the interpretation could not be attained through understanding the normal literal meaning (“只有无法按照通常理能进行解釋时，才需要结合综合情况予以认定”). As she opined that the Narrow Construction was reasonable, she did not continue to identify and consider the other factors identified in 民法142条. 42.Mr Xiao in gist made reference to[8] (a) the purpose of the Settlement Agreement – to settle all matters of controversy between the parties relating to the purchase and payment of the mining machines, (b) the parties’ discussion to achieve resolution immediately prior to the signing of the Settlement Agreement, and (c) Clause 3 (the entire agreement clause) “本协议涉及事项达成的完全理解” (my emphasis) which stated that the Settlement Agreement was the complete understanding or resolution of all related matters. He then opined that under 民法142条the above matters were factors to be considered together, which led to his conclusion that the phrase should be interpreted as “本协议产生的争议或与本协议相关的任何争议” 。 43.Mr Xiao further opined that despite the Settlement Agreement, Minting Dome was now suing Deng in Hong Kong for the Present Cause of Action, that was against what was expressed in the Settlement Agreement – that the parties have achieved a resolution per the terms provided therein. Moreover, Mr Xiao opined that Minting Dome’s such conduct was against the “诚信原则” as one of the factors set out in 民法142条 governing interpretation. 44.In my view, the reasoning of Madam Luo was flawed in that her reasoning was not in accordance with what 民法142条provides, which is to interpret by considering the literal meaning together or in combination with (结合) “相关条款、行为的性质和目的、习惯以及诚信原则”, which is not her 2-step approach giving precedence to the literal meaning and relegating the other factors as merely confirmatory and relevant only when the interpretation could not be attained through ascertaining the normal literal meaning. 45.Moreover, Madam Luo in her reasoning did not recognize, as Mr Xiao opined and I think rightly and fairly not seriously disputed by Mr Ng, that there is a second option of literal interpretation in that as a matter of syntax the word “之” in the phrase may also be referring to “本协议”. Not recognizing that second option, Madam Luo did not consider and opine on it at all. 46.On the other hand, I consider Mr Xiao has applied correctly 民法142条. I also accept that the matters Mr Xiao has taken into account are those required under 民法142条to be considered together. In this regard, I specifically reject Mr Ng’s submission that Clause 3 (the entire agreement clause) was not relevant in this interpretation exercise as 民法142条provides that “相关条款” should be considered together with the clause in question. 47.I therefore prefer the opinion of Mr Xiao over that of Madam Luo. 48.Moreover, I also consider the following 2 matters apposite, which point against the Narrow Construction. 49.First, various accusations of deceit were already made by Minting Dome to CIU against Deng at the time and immediately before the Settlement Agreement was signed (see §15 above). They were the principal allegations made to CIU against Deng which, as narrated above, brought about the mediation and discussion leading to the signing of the Settlement Agreement. It is wholly unrealistic not to take into account such accusations against Deng made to CIU and their resolution as part of the “行为的性质和目的”, which is one of the relevant factors named by 民法142条. 50.Second, if the phrase is construed by the Narrow Construction, the second part of the phrase so construed – “协议产生的任何争议相关的任何争议”– would be rendered redundant and otiose, and therefore rather meaningless, because the first part of the phrase - “协议产生的任何争议”- would already have included all the disputes covered by the second part of the phrase. It is a basic tenet of construction that an equally viable version of construction that would not render some words redundant would be preferred over the version that would. Evidently, the construction contended by Deng would not do so, as under such construction, the 2 parts of the phrase refer to 2 different criteria defining the disputes, namely, “arising out of” and “in connection with”. 51.Next, Mr Ng contended that the fact that PRC law “does not recognize validity of crypto-transactions” should be taken into account in the interpretation of the EJC. 52.However, Madam Luo did not exactly opine so. She merely opined that there was a possibility that civil actions involving crypto currencies might not be accepted by the PRC Courts (不被法院受理的风险), and further that there might be a question that Minting Dome might not be able to obtain relief even it if should win the action against Deng commenced in the PRC JX Court[9]. 53.Mr Xiao referred to 3 recent cases in the Mainland:
54.Mr Xiao also cited :
55.Mr Xiao therefore opined that it could not be concluded that the validity of crypto-transactions is not recognized in PRC. Such notwithstanding, Mr Xiao fairly accepted that the doctrine of stare decisis was not part of the PRC legal system, and therefore there necessarily would be some uncertainty regarding such proceedings commenced in the PRC JX Court. Mr Xiao mentioned, as is common ground, that Minting Dome have not tried to commence proceedings there. 56.Mr Xiao also opined that such uncertainty should not be a matter to consider in the interpretation of the EJC as Minting Dome was legally represented in the negotiation and conclusion of the Settlement Agreement, and therefore such uncertainty should have been within Minting Dome’s contemplation. 57.I accept Mr Xiao’s such opinion that (a) crypto-currency transactions are indeed recognized and enforced in the People’s Court of the major cities of Shanghai, Shenzhen and Tianjin, (b) it seems that such transactions will be so enforced generally if such cases fall within the directive given by the said《全国法院金融审判工作会议纪要 (征求意见稿) 》, and (c) there is still a degree of uncertainty as to whether the present transaction would be recognized or enforced in the PRC JX Court. I also accept that Minting Dome should be taken to have understood the state of PRC law when it entered into the Settlement Agreement. Moreover, I also think that the said uncertainty is not a relevant consideration in deciding whether to adopt the Narrow Construction or whether to adopt Deng’s construction, as the same uncertainty would still exist regardless of which of the two rival constructions is adopted. 58.In the premises, I hold in favour of Deng’s construction and reject the Narrow Construction. The scope of the EJC 59.Minting Dome contended that the EJC applies to contractual disputes between the parties and not to the Present Causes of Action, which are tortious claims and are “underlying rights” of Minting Dome, and therefore they are outside the scope of the EJC. 60.In answer to that Mr Liu referred to Fiona Trust & Holding Corporation and Others v Privalov and Others [2007] 4 All ER 951 in which the English House of Lords held that “the construction of an arbitration clause should 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. The clause should be construed in accordance with this assumption unless the language makes it clear that certain questions were intended to be excluded from the arbitrator’s jurisdiction” (§13, per Lord Hoffmann). 61.This assumption was applied in Quaestus Capital Pte Ltd v Everton Associates Ltd & Another [2021] 4 HKC 605 to an exclusive jurisdiction clause. In Quaestus Capital, the 2nd defendant there applied for a stay of the action on the ground that there was an exclusive jurisdiction clause which provided “each of the parties … consents to the exclusive jurisdiction of the courts sitting in London, England … for the purpose of any suit, action or other proceedings by any party … arising out of or related in any way to this … Agreement, or any related documents”. Noteworthily, the plaintiff in that case also claimed fraud and misrepresentation on the part of the 1st and 2nd defendants in relation to the commercial transaction the parties have entered. 62.Similar to the arguments presented by Mr Ng in the present case, there, senior counsel for the plaintiff contended that the fraud claims did not arise out of and did not relate to the relevant commercial agreement (containing the exclusive jurisdiction clause), and further that the commercial agreement was not entered into between “rational businessmen” (as referred to in Fiona Trust), but between a victim of fraud (the plaintiff) and “crooks” (the defendants). 63.There, G Lam J (as the learned JA then was) referred to the holding of Lord Hoffman in Fiona Trust (quoted above) and applied it and held that
64.Mr Liu submitted that under Deng’s interpretation (which I hold in favour above), the wording of the EJC was similar to, and was equally wide as, that in Quaestus Capital. Mr Liu invited me to equally apply the presumption and come to the same conclusion as that in Quaestus Capital as the language of the EJC does not contain any words, not to say clear words, to the effect that the EJC is not applicable to the Present Causes of Action. 65.Mr Ng argued by characterizing the Present Causes of Action as “underlying rights”. He then submitted that as these are “rights”, the court should not construe any contractual provision as taking them away unless there were clear words to that effect. In my view, this argument based on such characterization was in substance but an attempt to effectively reverse the above-mentioned presumption of construction such that disputes arising in a particular cause of action would not be captured by the exclusive jurisdiction clause unless there are clear words saying so. There was no authority cited by Mr Ng in support of contention. I reject Mr Ng’s such contention as being directly contradictory to the clear and high authority of Fiona Trust and Quaestus Capital (and the cases therein cited). 66.I thus accept Mr Liu’s submission and would therefore apply the presumption in Fiona Trust as applied in Quaestus Capital. Since Mr Ng raised no dispute, save the above arguments, that the Present Causes of Action would otherwise fall within “disputes in connection with the Settlement Agreement”, I hold that the Present Causes of Action are within the scope of the EJC. I would also state expressly that in the present interlocutory stage, I cannot assume that Deng is a fraudster, as Mr Ng has strenuously emphasized that Deng was at the hearing. Strong cause shown for not granting a stay ? 67.Mr Ng relied on §11/1/158(xii) in Hong Kong Civil Procedure 2024 where it was noted :
68.He submitted that Deng has demonstrated an intention not to be bound by the EJC based on §122 of the 1st Affidavit of Soshkin in which it was alleged that Deng lied to ask for Soshkin’s identification documents with a view to seek the release of the USD Coins in alleged breach of the Settlement Agreement. And as Deng sought to so breach the Settlement Agreement, Soshkin said that “it is highly doubted whether [Deng] has genuine intention to perform his obligations under the Settlement Agreement”. With respect to Mr Ng, such bare and speculative allegation on Minting Dome’s part is far from sufficient to show that Deng has demonstrated an intention not to be bound by the EJC. Such does not constitute a strong cause. 69.Mr Ng next submitted that if the Court granted a stay and Minting Dome sought redress in the PRC JX Court, there would be multiplicity of proceedings as Minting Dome has already commenced this action as against D2 and has obtained various injunctive orders against it. It was said that as the claim against D2 was based on the same set of facts and allegations, this could lead to inconsistency of findings. 70.The relevance of multiplicity of proceedings lies not simply in the multiplicity per se, but in the attendant problems such multiplicity might bring, including potentially the risk of inconsistent findings, unnecessary complexity and expenses and such. 71.As discussed between the bench and Mr Ng during the hearing, the possibility of inconsistent findings in the present case would only arise if D2 decided to contest substantively with Minting Dome over the latter’s allegations of deceit as against Deng and if Minting Dome chose to contest with Deng and D2 over these matters parallelly in Mainland and in Hong Kong. 72.Having heard a number of applications by Minting Dome for orders as against D2 and for the following reasons, I am not persuaded that there would be any attendant problem of any significant degree brought about by such multiplicity in this case.
73.In the round, I am not persuaded that there is a strong cause not to grant the stay brought about by multiplicity of proceedings. 74.Minting Dome also contended that “evidence of fraud creates a strong cause not to enforce an exclusive jurisdiction clause”[10]. 75.Similar contentions were advanced in Quaestus Capital. There, the learned Judge (now JA) referred to a number of cases applying to jurisdiction clauses the doctrine of separability as expounded in Fiona Trust : that an arbitration clause
and that
76.The learned Judge then applied the doctrine to the exclusive jurisdiction clause before him and held in §43 :
77.It is therefore clear from authorities that unless Minting Dome’s case is that the agreement on exclusive jurisdiction itself was impeached by fraud, any other challenge, be it based on fraud or otherwise, on the original transactional agreement or arrangement will not do. 78.Here, there is clearly no allegation that the Settlement Agreement, particularly the EJC, was procured or otherwise impeached by fraud. On the contrary, as narrated above, Minting Dome was legally represented, was receiving advice from GLLF, and was well informed when it entered into the Settlement Agreement. I thus hold that the so-called fraud challenge by Minting Dome against the EJC does not constitute a strong cause not to grant the stay. 79.Mr Ng also asked me to take into account that Hong Kong was the natural forum and on that basis refuse the stay. I make no finding that Hong Kong is the natural or convenient forum. It is clear from the authorities that the fact (even if true) that Hong Kong is the natural forum per se does not amount to a strong cause. On the facts, I would also hold that such (even if true) is not sufficient to affect my exercise of discretion to grant the stay. 80.Though Minting Dome did not specifically put forth as a strong cause its contention that crypto-transactions are not recognized or enforced in the Mainland, since general reliance was placed on that contention by Minting Dome, for completeness I would mention that, if it were put forth as a strong cause, I would have held against it for the reason (as discussed in paragraphs 51 to 57 above) that I do not consider it has been sufficiently and clearly shown that crypto-transactions are not recognized or enforced in the PRC JX Court. Setting aside the Leave for material non-disclosure in the ex parte application before DHJ Pow SC 81.I can dispose of this briefly as arguments in support have not been developed in Deng’s Skeleton Submissions and it has not been seriously pursued at the hearing. 82.It is not disputed that Minting Dome has disclosed and drew the attention of DHJ Pow SC to the existence of the EJC, albeit that it then advanced certain arguments in favour of Minting Dome for the learned Deputy Judge’s consideration, which arguments were essentially the same as those advanced here. 83.As the fact of the existence of the EJC was disclosed and drew to the attention of the learned Judge, I do not find there was material non-disclosure. Disposal 84.In the premises, I dismiss §1 of Deng’s summons seeking to set aside the Leave and service, I give an order in terms of §2 of the summons granting a permanent stay of this action as against Deng. 85.Cost normally should follow the event. As Deng fails in setting aside the Leave, I think provisionally that he should be deprived of some costs. I will order on nisi basis that Minting Dome do pay Deng 90% of his costs of the summons (including all costs reserved, if any) to be taxed if not agreed. This nisi order will become absolute in 14 days unless any party applies by summons to vary within that time. 86.Lastly, I thank Mr Ng, Ms Tsai and Mr Liu for their assistance.
Mr Ng, Felix L.H. and Ms Tsai, Wing Ki Athene, instructed by ONC Lawyers, for the Plaintiff Mr Liu, Yichong Charlie, instructed by SSW & Associates, for the 1st Defendant [1] Hearing Bundles B/228 [2] Hearing Bundles B/230 [3] Hearing Bundles B/232 [4] §107 of his 1st affirmation at Hearing Bundles A/134 [5] Hearing Bundles B2/430 & 431 [6] There was apparently a slip in the pre-emble in that Payments 1,3 and 4 were recited, but the sum total of Payments 1 to 4 was correctly stated as US$2,310,750. Nothing turns on this slip. [7] Hearing Bundles B2/487-488 [8] Hearing Bundles B3/604 - 606 [9] Hearing Bundles B2/490 – 496, see the concluding §23 at B3/496 [10] §68 of Mr Ng’s Skeleton Submissions | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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