Minting Dome Holding Llc v. Deng Jie and Another

HCA 1202/2023

[2024] HKCFI 2074

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1202 OF 2023

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DECISION

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1.In this decision I will continue to adopt the abbreviations used in the Decision herein handed down on 7 June 2024 (“the Decision”).

2.By the Decision, I acceded to Deng’s application and granted a permanent stay of this action as against him based on an exclusive jurisdiction clause in favour of the People’s Court of Jiangxi Province which I found was engaged.  I will not repeat here the background, Minting Dome’s claim, the procedural history and the Settlement Agreement. They have been set out in the Decision.

3.By summons dated 21 June 2024, Minting Dome applies for leave to appeal against the Decision.  The leave application is opposed by Deng.

4.Two grounds of appeal are advanced in the draft Notice of Appeal:

“1. In ordering a permanent stay of proceedings against the 1^st Defendant, the learned judge acted on wrong legal principles in the exercise of his discretion. At paragraphs 77 and 78 of the Decision, the judge erred by having wrongly assumed that, unless the agreement on exclusive jurisdiction was procured or impeached by fraud, the fraudulent nature of the original transaction agreement or arrangement does not suffice to constitute a strong cause for refusing stay of proceedings.

2. Having acted on wrong legal principles, the learned judge has erred in the exercise of discretion by failing to take into account (or give sufficient weight to) the fraudulent nature of the original transaction which preceded the settlement agreement dated 9 July 2023 (“the Settlement Agreement”), which allegations of fraud were left wholly unaddressed and unanswered by the 1^st Defendant in all rounds of affirmation evidence filed for D1’s Summons”.

5.The contention of Mr Ng made on behalf of Minting Dome, as I understand it, runs thus

a.  Minting Dome acknowledges the doctrine of separability which requires direct impeachment of EJC (as opposed to the underlying transaction or agreement) before it can be set aside, Minting Dome says that this only goes to the validity of the EJC;

b.  there still exists the principle that the fraud in underlying transaction, of itself, could and should be considered as constituting a strong cause not to enforce (Mr Ng’s emphasis) the EJC, and this Court having analysed according to the doctrine of separability assumed that the fraud in the underlying transaction cannot constitute a strong cause; and

c.  this Court erred in not taking into account the principle in (b) above and thus had given no weight to the fraud, and had this Court had, this Court would have found for Minting Dome’s contention of the existence of “underlying right”, would not have “mis-evaluated” the effect of fraud on the conduct of proceedings, and would have refused the stay.

6.In the Decision, this Court has not assumed anything as Mr Ng now complains.

7.First, in §74 of the Decision, this Court quoted Minting Dome’s contention : “evidence of fraud creates a strong cause not to enforce an exclusive jurisdiction clause” and went on to consider it by reference to Quaestus Capital Pte Ltd v Everton Associates Ltd & Another [2021] 4 HKC 605, a case cited and relied on by Mr Ng.  There, G Lam J (as the learned JA then was) considered the matter under the heading “Whether the exclusive jurisdiction clause is not binding because of fraud” and (as I set out in §§75-76 of the Decision) considered that the general principle relevant and applicable was the doctrine of separability under Fiona Trust.

8.In so considered, the learned judge (at §41) referred to and endorsed what was said in Deusche Bank AG & Ors v Asia Pacific Broadband Wireless Communication Inc & Anor [2008] 2 CLC 520 §24:

“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.” (my emphasis)

9.It is therefore clear, as in line with the general rule that an exclusive jurisdiction clause would be enforced unless there is a strong cause not to, that a general allegation of fraud in the underlying transaction or agreement is not of itself a sufficient reason not to allow the jurisdiction clause to be invoked.

10.Second, as would be evident from the Decision, in considering all the other contentions advanced by Mr Ng, this Court bore very much in mind Minting Dome’s case, which was repeatedly emphasized, that there was a fraud perpetrated by Deng.  Indeed, this Court considered it an important context that the Settlement Agreement was entered into when Minting Dome has discovered the various alleged fraudulent conducts of Deng and had made formal complaints about them through lawyers to the PRC authorities.  In other words, the fact that fraud has been allegedly perpetrated by Deng was well within the contemplation of Minting Dome and Deng at the time they entered into the Settlement Agreement.

11.I do not consider Minting Dome’s grounds of appeal have any reasonable prospect of success, for these reasons :

a.  Mr Ng’s only argument in support of his proposition that the fraud in the underlying transaction of itself can constitute a strong cause to refuse to enforce the EJC is

“In Quaestus, … However, G Lam J refused to enforce the exclusive jurisdiction clause in that case – strong cause based on fraud of the underlying transaction – is made out” (§11 of Mr Ng’s written submission and citing Quaestus Capital at p.626F-627I)

b.  I accept the submission of Mr Liu, counsel for Deng, and with respect to Mr Ng, that quite clearly from reading p.626F-627I of the judgment in Quaestus, the learned judge there refused the stay based on the consideration of multiplicity of proceedings. The allegation of an “overall fraudulent scheme” was merely a context on the facts of that case in which the learned judge assessed the impact of multiplicity of proceedings.  Therefore, the learned judge there did not refuse the stay because “strong cause based on fraud of the underlying transaction is made out” as now submitted by Mr Ng.

c.  Save Quaestus Capital, there is no authority cited by Mr Ng in support of his proposition.

d.  In light of the authorities cited in Quaestus Capital and Quaestus Capital itself, Minting Dome’s proposition in my view is not a correct statement of the law.

12.For completeness, I will also mention the following :

a.  It is said in §15 and §16 of Mr Ng’s submissions that the stay ought to have been refused taking into account the real possibility of multiplicity of proceedings/inconsistent decisions. However, no ground of appeal was advanced on that, I do not need to deal any further with it.

b. I accept what Mr Liu points out, that Deng in his 1^st affirmation has already stated clearly that his not responding to the substantive allegations by Minting Dome should not be taken as any admission, and that Mr Liu also stated very clearly at the outset of the hearing for the stay that Deng did not so respond because as discussed and held by the CA in Re Guy Lam [2022] 4 HKLRD 793 at§28 to§42 that the lack of a credible defence per se cannot be said to be an unforeseeable factor at the time of the contract and does not amount to a strong cause.  I accept Mr Liu’s submission to the effect that the repeated emphasis by Minting Dome on “allegations of fraud were left wholly unaddressed and unanswered by the 1^st Defendant” is misplaced.

13.In the premises, I refuse Minting Dome’s application for leave to appeal with costs to be summarily assessed.

14.Deng has lodged his Statement of Costs.  Minting Dome has not had the opportunity to lodge its List of Objections, but the sum sought by Deng is modest and seems to me reasonable at HK$51,035.  To save time and costs, I will summarily assess it here provisionally at HK$48,000.  The above costs order and provisional summary assessment are on nisi basis, any party may seek to vary by letter (with succinct reasons stated) within the next 14 days, and if Minting Dome seeks to vary the amount, it should enclose with its letter a List of Objections and the amount would be assessed on paper.  Failing such application to vary within next 14 days they will become absolute.

15.Lastly, I thank counsel for their assistance.

Mr. Felix NG and Ms. Polly LI, instructed by ONC Lawyers, for the Plaintiff

Mr. Charlie LIU, instructed by SSW & Associates, for the 1^st Defendant