Beijing Renji Real Estate Development Group Co., Ltd v. Zhu Min
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CACV 182/2022, [2024] HKCA 878 On Appeal from [2022] HKCFI 1027 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL CIVIL APPEAL NO 182 OF 2022 (ON APPEAL FROM HCMP NO 361 OF 2020) ________________________
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________________ J U D G M E N T ________________ Hon Chow JA (giving the Judgment of the Court): INTRODUCTION 1.The question which arises for determination in this appeal is whether, in relation to a claim by a creditor against a guarantor founded upon a written contract of guarantee governed by Mainland law, although the contract does not contain any express designation of the Mainland court(s) as having exclusive jurisdiction to determine any dispute arising in connection with the contract, there exists nevertheless a “choice of Mainland court agreement” within the meaning of the Mainland Judgments (Reciprocal Enforcement) Ordinance, Cap 597 (“the Ordinance”) between them because, by the operation of a substantive rule of Mainland law, an exclusive jurisdiction clause in favour of the Mainland court(s) contained in the principal contract between the creditor and principal debtor is applicable to the legal relationship between the creditor and guarantor arising under the contract of guarantee which, under Mainland law, is regarded as being subordinate or subsidiary to the principal contract. The answer to this question depends on the true construction of the definition of the expression “choice of Mainland court agreement” in the Ordinance. 2.In what follows, unless the context indicates otherwise, references to “Section” or “s” shall be to the Ordinance. BACKGROUND FACTS 3.The relevant facts of this case have fully been set out in the written judgment of G Lam JA (sitting as an additional judge of the Court of First Instance) dated 7 April 2022 (“the Judgment”), and will not be repeated here. For the purpose of disposing of the present appeal, the following brief summary, taken largely from the Judgment, should suffice. 4.The Plaintiff is a Mainland company which carries on the business of real estate management. 5.The Defendant, a Chinese national and a Mainland resident, is the founder of a group of companies called the Cybernaut Investment Group, which run a private equity and venture capital business.
6.On 18 August 2011:
7.The Partnership Agreement, signed in Huairou District, Beijing (北京市懷柔區), contained a choice of jurisdiction clause (“Clause 90”), as follows:
8.In due course, the Plaintiff made the investment of RMB 150 million in accordance with the Partnership Agreement. 9.The intended initial public offering failed to materialize. Apparently, it was rendered impossible because on 29 September 2011, a storm hit Hainan and damaged the assets of the Fishery Centre. In around April 2013, the Plaintiff decided to recover its capital investment in the project. 10.On 18 October 2013, Hainan Zhongtou (through its Director of Investment, Shang Xuanyu (尚選玉) (“Shang”)) entered into a repurchase agreement with Zheng Ligang (“Zheng”), the controller of Siyuan, who agreed to repurchase 40% of the equity of Siyuan for RMB 150 million. The money was transferred by Zheng to bank accounts controlled by Shang. 11.On 29 November 2013:
12.By an agreement called 補充協議 dated 5 December 2013 (“Nomination”) entered into between the Plaintiff, Hainan Zhongtou and a shareholder of Hainan Zhongtou called Hainan Gusheng Enterprise Investment Ltd (“Gusheng”), Hainan Zhongtou nominated Gusheng to receive the Plaintiff’s interest in the Fishery Centre under the Capital Transfer Agreement. 13.Subsequently, the Plaintiff alleged that it had been defrauded by one of its own officers, Liu Yue (劉悅) (“Liu”), whom the Plaintiff said had been bribed and colluded with Shang, into executing the Capital Transfer Agreement, Undertaking and Nomination. The Plaintiff said that Liu concealed the fact that Shang had received RMB 150 million from Siyuan and led the Plaintiff into believing that it could only recover RMB 50 million of its investment due to the damage caused by the storm. As a result, the Plaintiff was paid off with only RMB 50 million from Gusheng. 14.In 2016, the Plaintiff commenced arbitration proceedings in Beijing against Hainan Zhongtou and Gusheng, seeking to rescind the Capital Transfer Agreement, Nomination, and Undertaking on the basis that the Plaintiff had been deceived by Liu and Shang into executing those documents (“the Beijing Arbitration”). On 29 November 2016, the arbitral tribunal in the Beijing Arbitration (“the Arbitral Tribunal”) issued an award in favour of the Plaintiff, holding the 3 documents in question to be invalid on, inter alia, the ground that the Plaintiff issued the Undertaking under the deception of Liu and Shang (“the Arbitral Award”)[1]. 15.In the meantime, the Mainland authorities began criminal investigation into the conduct of Liu and Shang. On 27 February 2017, Liu, on his own admission, was convicted by the People’s Court of Longhua District, Haikou City of receiving a bribe of RMB 20 million from Shang. On the other hand, the criminal investigation against Shang was eventually withdrawn by a decision of the Haikou City Public Security Bureau dated 22 March 2017, which absolved Shang of the offence of fraud (“不具備涉嫌合同詐騙罪的主觀故意和客觀行為”). 16.In February 2017, the Plaintiff commenced proceedings against Hainan Zhongtou in the No 3 Intermediate People’s Court of Beijing Municipality (“Intermediate People’s Court”) for the sum of RMB 150 million and damages of RMB 60 million under the Supplemental Agreement, and also against the Defendant and Hangzhou Cybernaut under the Guarantee. Hangzhou Cybernaut raised a jurisdictional challenge in those proceedings, contending that Clause 90 of the Partnership Agreement did not apply to it as a guarantor under the Guarantee and it should not be sued in Beijing but should instead be sued in Hangzhou, its place of incorporation. Hangzhou Cybernaut’s jurisdictional challenge was rejected by the Intermediate People’s Court on 3 July 2017. Its appeal against the decision of the Intermediate People’s Court was dismissed by the Higher People’s Court of Beijing Municipality (“Higher People’s Court”) on 20 November 2017 (“BHPC Jurisdiction Decision”). 17.The Plaintiff’s claims against Hainan Zhongtou, the Defendant and Hangzhou Cybernaut were initially dismissed by the Intermediate People’s Court in December 2018 (“BIPC Judgment”). However, the Higher People’s Court, by a judgment dated 13 August 2019 (“BHPC Judgment”), allowed the Plaintiff’s appeal and held that Hainan Zhongtou, the Defendant, and Hangzhou Cybernaut were jointly and severally liable to the Plaintiff for RMB 150 million together with interest thereon (which was capped at RMB 60 million and later calculated to be RMB 51,769,932), totalling RMB 201,769,932. 18.On 17 September 2019, the Defendant and Hangzhou Cybernaut applied to the Supreme People’s Court for an order for a retrial of the Plaintiff’s claim against them. However, that application was dismissed on 27 December 2019, although the Defendant said that he did not receive notification of the dismissal until 30 March 2020. 19.On 16 April 2020, the Plaintiff applied by way of an ex parte originating summons in the Court of First Instance (HCMP 361/2020) for the BHPC Judgment to be registered in Hong Kong pursuant to the Ordinance. An order for registration was made by Master Hui on 13 May 2020. By a summons dated 9 September 2020, the Defendant applied for the registration to be set aside. 20.The Judge heard the Defendant’s application and another matter (which is not relevant for the present purpose) in May 2021. By the Judgment, the Judge upheld the Defendant’s application and made an order setting aside the registration of the BHPC Judgment (“the Order”), holding that the BHPC Judgment was not registrable under the Ordinance because the Guarantee, being the relevant agreement on which the Plaintiff founded its claim against the Defendant, did not “specify” the courts in the Mainland or any of them as the court to determine the dispute which had arisen between them under the Guarantee to the exclusion of courts of other jurisdictions. THE STATUTORY FRAMEWORK 21.In order to understand the Judge’s reasoning for holding that the BHPC Judgment was not registrable under the Ordinance, we shall first set out the relevant statutory framework for the registration of a Mainland judgment under the Ordinance. 22.As stated in its long title, the Ordinance is enacted to “give effect to the Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters by the Courts of the Mainland and of the Hong Kong Special Administrative Region pursuant to Choice of Court Agreements between Parties Concerned made between the Supreme People’s Court of the People’s Republic of China and the Government of the Hong Kong Special Administrative Region (as amended from time to time)” (“the 2006 Arrangement”). 23.The following statutory definitions in ss 2 and 3 are relevant for the present purpose:
24.By s 5(1), a judgment creditor under a Mainland judgment may apply to the Court of First Instance within a specified time limit to have the judgment registered in the Court of First Instance. 25.Section 5(2) sets out five requirements (“Requirement (a)” to “Requirement (e)”) which must be satisfied before a Mainland judgment may be registered under the Ordinance. Section 5(2) states, so far as relevant, as follows:
26.Section 18(1) provides that the registration of a Mainland judgment may be set aside on an application in that behalf made by any party against whom a registered judgment may be enforced if the Court of First Instance is satisfied that, amongst other grounds:
THE JUDGMENT 27.There is no dispute that:
within the meaning and for the purpose of the Ordinance. 28.There is also no dispute that Requirements (d) and (e) are satisfied in the present case. 29.One of the issues dividing the parties is whether there exists a “choice of Mainland court agreement” between them satisfying the criteria in the Ordinance; in particular, whether there exists between them “an agreement … specifying the courts in the Mainland or any of them as the court to determine a dispute which has arisen or may arise in connection with the [Guarantee] to the exclusion of courts of other jurisdictions”. If the answer to this question is “no”, the Intermediate People’s Court would not be a “chosen court”, and Requirements (a) and (b) would not be satisfied. 30.Although the Guarantee does not contain any express choice of jurisdiction, the Plaintiff relies on Clause 90 of the Partnership Agreement as the relevant choice of Mainland court agreement for the purpose of satisfying Requirements (a) and (b). This is disputed by the Defendant. 31.The Judge held that Clause 90, which was contained in the Partnership Agreement between the Plaintiff and Hainan Zhongtou, applied to the legal relationship between the Plaintiff and the Defendant arising from the Guarantee. 32.However, the Judge considered that the Guarantee did not specify the courts in the Mainland or any of them as the courts with jurisdiction to resolve the disputes between the Plaintiff and the Defendant, and thus there was no relevant “choice of Mainland court agreement” between them. The Judge considered that there was considerable force in the Defendant’s argument that since Clause 90 was not found in the Guarantee itself, but was only deemed by the operation of Mainland principles of construction or substantive legal rules to be applicable as between the Plaintiff and the Defendant in relation to the Guarantee, there was no “choice of Mainland court agreement” between them within the meaning of s 3(2). His reasoning is set out at §§33-43 of the Judgment, as follows:
THE NOTICE OF APPEAL 33.Dissatisfied with the Judgment, the Plaintiff lodged a Notice of Appeal dated 5 May 2022, which contains only one substantive ground of appeal, namely, that the Judge erred in holding that there was no relevant “choice of Mainland court agreement” between the Plaintiff and the Defendant as required for the registration of the BHPC Judgment under s 5(2)(b), despite the present dispute being governed by a Mainland exclusive jurisdiction clause (ie Clause 90) by way of incorporation. In particular, it is contended that the Judge’s interpretation of s 5(2)(b) is erroneous and contradicts the (i) express language, (ii) legislative materials, and (iii) policy of the Ordinance, as set out at §§1(4) to (14) of the Notice of Appeal. THE PARTIES’ RESPECTIVE SUBMISSIONS 34.In Mr Wong, SC’s submissions for the Plaintiff, he identifies the sole legal issue raised in the Plaintiff’s appeal as follows: where (1) an exclusive jurisdiction agreement is evidenced in writing in a principal contract (ie the Partnership Agreement), and (2) by the effect / operation of Mainland law, such exclusive jurisdiction agreement is held to be applicable to or incorporated into a subsidiary contract (ie the Guarantee), is there “a choice of Mainland court agreement” between the parties to the subsidiary contract within the meaning of s 3(2)? 35.Mr Wong says that the answer to this question is “yes”, and the Judge erred in holding that Clause 90 (as incorporated into the Guarantee) was not a “choice of Mainland court agreement” within the meaning of s 3(2) for the following reasons. 36.First, Mr Wong submits that the language of the Ordinance permits “a choice of Mainland court agreement” to be constituted by the incorporation of a written term under the operation / effect of Mainland law:
37.Second, Mr Wong prays in aid the statutory purpose of the Ordinance and submits that:
38.Third, Mr Wong submits that the proper interpretation of a statutory provision should as far as the wording allows accord with common sense, and avoid results which are absurd, irrational or illogical. In this case:
39.In response, Mr Man, SC (for the Defendant) submits that:
DISCUSSION 40.The present appeal raises a short point of statutory construction. The principles for the construction of a statute are well-established, and do not have to be repeated here. When interpreting the expression “choice of Mainland court agreement” in s 3(2), one should have regard to the context and purpose of the Ordinance as well as the language used by the legislature. 41.The context in the present case is the reciprocal registration and enforcement of judgments in civil or commercial matters given by Mainland courts in Hong Kong, and vice versa. 42.The purpose of the Ordinance, as stated in its long title, is to implement the 2006 Arrangement. The purpose of the 2006 Arrangement is to facilitate the mutual recognition and enforcement of judgments given by the Mainland courts in Hong Kong (and vice versa), having regard to the fact that:
See the Legislative Council Brief for “Reciprocal Enforcement of Judgements in Commercial Matters Between the Mainland and the Hong Kong Special Administrative Region” dated 13 July 2006 (“the Legco Brief”), at §§2-5 and 11. 43.Nevertheless, the registration and enforcement of Mainland judgments in Hong Kong (and vice versa) under the 2006 Arrangement was never intended to be without restriction or limit. In particular, in order to address various concerns raised by (inter alia) the Legislative Council’s Panel on Administration of Justice and Legal Services concerning the enforcement of Mainland judgments in Hong Kong, a restriction was included in the 2006 Arrangement that there should be an express designation of the Mainland court(s) as having exclusive jurisdiction to determine the relevant dispute between the parties before a Mainland judgment could be registered and enforced under the 2006 Arrangement:
44.The need for such express designation of choice of court is spelt out in Article 3(1) of the 2006 Arrangement, which requires the parties to agree in writing to designate any people’s court in the Mainland or any court in Hong Kong to have exclusive jurisdiction over the subject matter of dispute before a judgment of the Mainland court or Hong Kong court may be recognised and enforced in the jurisdiction of the other party under the 2006 Arrangement:
45.Insofar as the language of the statute is concerned, the statutory definition of the expression “choice of Mainland court agreement” refers to an agreement concluded by the parties “specifying the courts in the Mainland or any of them as the court to determine a dispute … to the exclusion of courts of other jurisdictions (該協議指明由內地法院或某內地法院裁定在或可能在與該指明合約有關連的情況下產生的爭議，而其他司法管轄區的法院則無權處理該等爭議)”. This definition should be read in tandem with the statutory definition of the expression “chosen court”, which refers to “the court or any of the courts specified in a choice of Mainland court agreement … as the court to determine a dispute to which the agreement applies (… 指明的作為裁定該協議所適用的爭議的法院)”. It is also relevant that s 3(3) requires a choice of Mainland court agreement to be concluded or evidenced (a) in writing, or (b) by any electronic means by which the agreement is capable of being displayed in visible form, or (c) by any combination of the above means. This requirement would enable the existence or otherwise of a choice of Mainland court agreement to be readily ascertainable. A natural and ordinary reading of the above provisions would suggest that, to qualify as a “choice of Mainland court agreement” within the meaning of the Ordinance, the relevant choice of court must, subject to a possible qualification mentioned in §56 below, be expressly agreed or designated in the agreement (which, by virtue of s 3(4), may be concluded or evidenced in one document or several documents) between the parties. The context and purpose of the Ordinance mentioned above are also consistent with, and support, this interpretation of the expression “choice of Mainland court agreement” in the Ordinance. 46.In the present case, it is not in dispute that the agreement between the Plaintiff and the Defendant (ie the Guarantee) does not expressly designate the Mainland courts (or any of them) as having jurisdiction to determine any disputes between them arising in connection with the Guarantee. As pointed out by the Judge, the Guarantee is completely silent on the parties’ choice of court. Clause 90 of the Partnership Agreement is applicable to the disputes between the Plaintiff and Defendant under the Guarantee because (and only because) of the effect of Mainland law, in particular Article 5 of the Guarantee Law of the PRC and Paragraph 1 of Article 129 of the SPC Interpretation. The Judge also pointed out that, as explained by the Higher People’s Court, such conclusion is based on the effect of Mainland law, not the provisions of the Guarantee[4]. 47.We agree with the Judge that the agreement between the Plaintiff and the Defendant does not “specify” the Mainland courts or any of them as the court with jurisdiction to resolve their disputes under the Guarantee. It follows that the Intermediate People’s Court cannot be regarded as the “chosen court”, and there is no relevant “choice of Mainland court agreement” between the Plaintiff and the Defendant, for the purpose of the Ordinance. Hence, the BHPC Judgment is not registrable under the Ordinance. 48.We shall now deal with various specific arguments raised by Mr Wong in support of the Plaintiff’s appeal. 49.First, in respect of Mr Wong’s point that the language of the Ordinance permits “a choice of Mainland court agreement” to be constituted by the incorporation of a written term under the operation / effect of Mainland law[5], it is, in essence, a negative point. If the language of a statute precludes a construction advanced by a party, plainly such construction should be rejected, for it is well established that “[o]ne cannot give a provision a meaning which the language of the statute, understood in the light of its context and purpose, cannot bear”: see Chan Ka Lam v The Country and Marine Parks Authority (2020) 23 HKCFAR 414, at §27. However, the contrary does not hold true. The mere fact that the language of a statute may permit a construction contended for by a party does not mean that such construction is the correct one. It is still necessary to determine the true meaning of the statute by the application of the well-established principles for the interpretation of legislation. 50.Second, in respect of the statutory purpose of the Ordinance relied upon Mr Wong[6], we refer to the discussion at §§42-44 above. As pointed out by the Judge and as clearly shown by the background legislative materials referred to above, the Ordinance does not make all Mainland judgments registrable in Hong Kong, but only those that satisfy the specific requirements laid down in s 5(2). Mr Wong’s emphasis on the risk of parallel proceedings is not to the point. That risk is addressed by the “exclusivity”, not “specificity”, requirement of a choice of Mainland court agreement. 51.Third, in respect of Mr Wong’s submission that the Judge’s interpretation would frustrate the legitimate expectations of Mainland contracting parties, and lead to absurd and/or illogical consequence(s)[7], we do not accept this submission. While a Mainland party (and his lawyer) may well understand that an exclusive jurisdiction clause in a principal contract will also govern disputes arising out of its subsidiary contract, there is no proper basis to believe that they would have any expectation, or legitimate expectation, that any judgment given by a Mainland court under the subsidiary contract would be registrable and enforceable in Hong Kong under the Ordinance regardless of whether the requirements for registration laid down by s 5(2) are satisfied (which is a question of Hong Kong law). We also do not accept that the Judge’s interpretation would lead to absurd, irrational or illogical results. It is a simple matter for Mainland contracting parties, if they wish to take advantage of the regime of registration and enforcement under the Ordinance, to make an express designation of the courts in the Mainland or any of them as the court with exclusive jurisdiction to determine any dispute which has arisen or may arise out of their contract. 52.Mr Wong, in response to Mr Man’s argument that the basis of the Ordinance was “freedom of contract”, relies on the following statements in the minority judgments of Lord Millett and Lord Hope of Craighead in Agnew v Lansforsakringbolagens AB [2001] 1 AC 223 in support of the proposition that where a dispute resolution clause is incorporated or implied by the effect of Mainland law, freedom of contract is not compromised because the parties have voluntarily undertaken the obligation to resolve their dispute in a particular way:
53.In our view, the key issue in the present appeal is not about any notion of “freedom of contract”, but simply whether the agreement between the Plaintiff and Defendant specifies (指明) that the Mainland courts (or any of them) as having exclusive jurisdiction to determine any disputes between them arising in connection with the Guarantee. 54.In passing, we observe that the above statements by Lord Millett and Lord Hope in Agnew should be read in their proper context. In that case, the plaintiffs (who carried on reinsurance business in the London market) sought to avoid various reinsurance contracts that they had entered into with the defendant (incorporated and domiciled in Sweden) on the ground that they had been induced to enter into the reinsurance contracts by material misrepresentations and non-disclosure during negotiation and presentation of the risks in London. One of the issues which the House of Lords had to decide was whether the English High Court had jurisdiction to entertain an action by the plaintiffs against the defendant under Article 5 of the Lugano Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters 1968 (set out in Schedule 3C to the Civil Jurisdiction and Judgments Act 1982), which provided that –
55.The defendant argued that the “obligation in question” for the purpose of Article 5(1) of the Lugano Convention must be a contractual obligation which the defendant had voluntarily undertaken by his contract and not one imposed by law as an incident of pre-contractual negotiations, or “ab extra by law”. It was in relation to this argument that Lord Millet made the general statement that all contractual obligations, whether express or implied (by law or otherwise), were voluntary, and Lord Hope said that the ordinary meaning of the word “obligation” extended to implied terms (by the common law or by statute) as well as terms which the parties had made express provisions in their contract. These statements are not controversial or exceptional, but do not assist the Plaintiff in the construction of the expression “choice of Mainland court agreement” in the Ordinance in the present case. 56.We should also mention that Mr Man has expressly left open the question of whether an “implied” choice of exclusive jurisdiction based on a process of construction of the terms of a written contract (as opposed to one imposed by the legal system of the governing law of the contract) can satisfy the “specificity” requirement of a “choice of Mainland court agreement” for the purpose of the Ordinance. He argues that Clause 90 cannot be regarded as an implied term of the Guarantee because, under Mainland law, it may operate to override even an express agreement of the parties to the contrary[8]. For the purpose of disposing of the present appeal, it is not necessary for us to decide whether the “specificity” requirement of a “choice of Mainland court agreement” may be satisfied by an “implied” choice of exclusive jurisdiction based on the true construction of a written contract, and we do not propose to express any final view on this issue, since it is clear that Clause 90 is applicable to the Guarantee not by any process of construction of the terms of the Guarantee, but simply because this is the effect of Mainland law as explained by the Judge at §42 of the Judgment. 57.In all, the Plaintiff’s appeal is rejected. THE RESPONDENT’S NOTICE 58.Having reached the above conclusion, it is strictly speaking not necessary to consider the Respondent’s Notice dated 20 May 2022. For the sake of completeness, we shall deal with it briefly. The Defendant raises 4 additional or alternative grounds in the Respondent’s Notice to contend that the Judgment should be affirmed, namely:
59.In respect of Ground (1), there are, in our view, two distinct questions of conflict of laws involved. The first question concerns the ascertainment of true nature and extent of the parties’ agreement, including the question of whether Clause 90 is applicable to disputes arising under the Guarantee. This is a question of Mainland law, being the governing law of the Guarantee: see Dicey, Morris & Collins, The Conflict of Laws (16th ed), Vol 1, at §12-081[9]; Sea Powerful II Special Maritime Enterprises (ENE) v Bank of China Ltd [2016] 1 HKLRD 1032, at §19; and Agnew, at 264F per Lord Millett. Having ascertained the true nature and extent of the parties’ agreement, the second question is whether there exists between the Plaintiff and the Defendant a “choice of Mainland court agreement” within the meaning of the Ordinance. This is a question of Hong Kong law. The Judge correctly applied the relevant governing laws when answering the two questions. In relation to the first question, the Judge, applying Mainland law, held that Clause 90 applied to the legal relationship between the Plaintiff and the Defendant arising from the Guarantee[10]. We do not understand this conclusion to be challenged by Mr Man. In relation to the second question, the Judge considered that whether the facts of a particular case satisfied the requirements of a “choice of Mainland court agreement” was a matter of interpreting the Ordinance applying Hong Kong law[11], and came to the conclusion that the “specificity” requirement was not satisfied. We agree with this conclusion of the Judge. 60.In respect of Ground (2), the Judge identified the relevant issue as “whether, as a matter of construction, clause 90 relevantly specifies the Beijing courts ‘to the exclusion of courts of other jurisdictions’ within the meaning of section 3(2)”[12], and held that Mainland law, being the governing law of the relevant contracts (ie the Partnership Agreement, Supplemental Agreement and Guarantee), governed how Clause 90 was to be construed. He further held that, upon the true construction of Clause 90, it had the requisite exclusivity[13]. Mr Man argues that this conclusion is wrong because Article 129 of the SPC Interpretation does not require all disputes relating to the Guarantee to be referred to the court specified in Clause 90. Instead, under the second sentence of Article 129 of the SPC Interpretation, where only the guarantor is sued, jurisdiction shall be determined by the residence of the guarantor rather than at the “chosen court”. Hence, the “Beijing court” is not the exclusive choice. We are not prepared to accept this argument based on the second sentence of Article 129 of the SPC Interpretation. Mr Man’s argument is not supported by either party’s expert opinion, and the meaning of the second sentence of Article 129 of the SPC Interpretation is far from clear. On the other hand, the opinion of the Plaintiff’s expert (Professor Lin) indicates that the choice of court in the principal contract (ie the Partnership Agreement) would govern any dispute arising under the subsidiary contract (ie the Guarantee)[14]. 61.In respect of Ground (3), the short answer is that even if the Defendant is correct in his contention that Clause 90, otherwise applicable to the Guarantee as held by the Beijing court, had been superseded by the arbitration provision in Clause 8 of the Capital Transfer Agreement (an issue which it is not necessary for us to decide), he did not raise any jurisdictional challenge in the Beijing courts, or make any application to stay the Plaintiff’s action against him in the Intermediate People’s Court in favour of arbitration. On the contrary, he participated substantively in the Mainland proceedings referred to in §§16-18 above. The Defendant has also not suggested that the Higher People’s Court had no jurisdiction to give the BHPC Judgment against him. In these circumstances, we can see no basis for the Defendant’s argument that the enforcement of the BHPC Judgment against him would be contrary to public policy. 62.In respect of Ground (4), the Defendant’s complaint is that he was not a party to the Beijing Arbitration and thus the Arbitral Award is not binding on him, but, under Mainland law, a non-party like him cannot apply to set aside the Arbitral Award. Yet, the Mainland courts (in particular the Higher Peoples’ Court) assumed that the Undertaking was invalid because of the rulings in the Arbitral Award. Hence, says Mr Man, enforcement of the BHPC Judgment would be contrary to public policy and registration of the BHPC Judgment should be set aside under s 18(1)(j). The answer to this complaint is that the Defendant did raise before the Mainland courts (including the Higher Peoples’ Court) the argument that the Undertaking remained valid vis-à-vis him because (a) he was a bona fide third party not involved in the fraud against the Plaintiff; and (b) he was not a party to the Beijing Arbitration and therefore the Arbitral Award which set aside the Undertaking had no legal effect on him[15]. However, as found by the Judge, the Higher Peoples’ Court did not consider that the Arbitral Award was binding on the Defendant as such; instead it agreed with and adopted the Arbitral Tribunal’s conclusion that the Undertaking as a juristic act ought to be set aside because of the fraud of Liu and Shang, and held that the Undertaking could not be utilized by the Defendant as a defence to the Plaintiff’s claim on the Guarantee. The Higher Peoples’ Court did not simply “assume” that the Undertaking was invalid, or consider that it was bound by the ruling in the Arbitral Award[16]. DISPOSITION 63.The Plaintiff’s appeal is dismissed with costs to the Defendant, to be taxed if not agreed.
Mr William Wong SC, Mr Lai Chun Ho and Mr Joshua Yeung, instructed by Nixon Peabody CWL, for the Plaintiff Mr Bernard Man SC and Mr Danny Tang, instructed by Jones Day, for the Defendant [1] Gusheng’s subsequent application to the No 3 Intermediate People’s Court of Beijing Municipality to set aside the Arbitral Award was rejected in June 2018. [2] 1 August 2008. [3] 29 January 2024. [4] See §§36, 37 and 42 of the Judgment. [5] See §36 above. [6] See §37 above. [7] See §38 above. [8] See §37 of the Judgment (“… paragraph 2 of Art 129 of the Judicial Interpretation of the Supreme People’s Court on Some Issues Regarding the Application of the Guarantee Law of the PRC states that: ‘Where the courts of jurisdiction selected in the principal and guarantee contracts are different, the jurisdiction shall be determined based on the principal contract’”), and the Legal Opinion on Chinese Law of Professor Lin Feng (the Plaintiff’s expert) dated 25 February 2021, at §111. [9] At §34 of the Judgment, the Judge referred to the corresponding passage in the 15th Edition of Dicey, Morris & Collins on The Conflict of Laws, §12-104. [10] See §§34-37 of the Judgment. [11] See §40 of the Judgment. [12] See §44 of the Judgment. [13] See §§45-48 of the Judgment. [14] See the Legal Opinion on Chinese Law of Professor Lin Feng (the Plaintiff’s expert) dated 25 February 2021, at §112. [15] See §51 of the Judgment. [16] See §§53 and 56 of the Judgment. | |||||||||||||||||||||
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