Ing Bank N.V. v. Industrial and Commercial Bank of China Ltd

HCCL 2/2023

[2024] HKCFI 3454

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO. 2 OF 2023

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D E C I S I O N

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1.This is ICBC’s[1] application for leave to appeal against the Decision of this court dated 23 August 2024 by which its application for stay on the ground of FNC was dismissed.

2.The determination of a FNC stay is quintessentially an exercise of discretion by the court. The scope for challenging such a decision is limited: see Spiliada Maritime Corporation v Cansulex Ltd [1987] 1 AC 460 at 465F and Bright Shipping Ltd v Changhong Group (HK) Ltd (No 2) [2019] 5 HKLRD 30, CA, [5]-[11].

3.The court was also referred by Mr Jat SC, who appeared with Mr Lam for ING, to VTB Capital plc v Nutritek International Corpn [2013] 2 AC 337, [68]-[69] per Lord Mance JSC and [81], [92]-[94], [96]-[99], [101] and [113] per Lord Neuberger PSC for the proposition that even if the lower court had made an error, the appellate court would refrain from interfering unless satisfied that the error was significant or, I would add, one which would have affected the outcome of the application.

4.In VTB, the first instance court erroneously identified the governing law, but also addressed the alternative putative governing law and concluded that it would have come to the same conclusion. The Supreme Court held that the lower court’s exercise of discretion could not be faulted.

5.There are 10 grounds of appeal which have been set out in a revised draft Notice of Appeal. The revision was made in response to this court’s misgivings on the original proposed grounds.

6.It is unnecessary to address each of the grounds. Typically, in a case of substantial value like the present, the Decision was pored through and each conceivable point is taken. In his viva voce submissions, Mr Yu SC, who appeared with Mr Lam for ICBC, addressed the following issues: (1) governing law (the topic which occupied the pride of place at the hearing of the stay application[2]) (Ground 1); (2) the place of performance of the Collection Instructions (Ground 3); (3) “distorted interpretation of the URC” (Grounds 6.4 and 6.5) (4) proper defendant (Ground 7); and (5) fresh evidence for the intended appeal (Ground 9). These issues embrace the substance of the intended appeal and will be addressed below.

Governing law

7.The issue raised concerns the proper approach of the court when faced with rival contentions on the proper law of contract. The court was unable to agree with ICBC that Hong Kong law was irrelevant and, after evaluation, decided for the purpose of the interlocutory application that there was a good arguable case that Hong Kong law applies to the contracts between ING and ICBC[3].

8.As pointed out by Mr Yu, the court was not referred to the dicta of Waller LJ in Canada Trust Co v Stolzenberg (No 2) [1998] 1 WLR 547 at 555G, affirmed in [2002] 1 AC 1, 13H per Lord Steyn, which was cited by Mr Jat in the present application.

9.However, the decision by the court to decide what the proper law of contract is on a good arguable case basis is one consistent with the authorities now before the court. I therefore fail to see what error of principle there is.

10.Mr Yu relies upon an older CA authority of Islamic Arab Insurance Co v Saudi Egyptian American Reinsurance Co [1987] 1 Lloyd’s Rep 315, 317 (col 2) for the proposition that the standard of “good arguable case” is such that there can be rival contentions both of which would meet this standard.

11.First, this was not the argument advanced by ICBC at the hearing of the stay application. Second, with great respect, I am inclined to agree with Mr Jat that the position has moved on in light of the later authorities. Third, it would not have been possible to resolve the central issue of the stay application without taking a provisional view on which of the rival contentions was the better argument.

Place of performance

12.The court fully accepted the importance of place of performance in the evaluation on proper law of contract[4]. However, (a) in this case, performance of the Collection Instructions was not confined to getting payment; and (b) it is not my understanding of the law that, in the circumstances of this case, the place of collection alone is decisive or trumps any other considerations. The court took a holistic view of the relevant circumstances and came to the conclusion that there is at least a good arguable case that Hong Kong law governs the contracts between ING and ICBC[5].

13.The circumstances of First Laser Ltd v Fujian Enterprises (Holdings) Co Ltd (2012) 15 HKCFAR 569 were different to those of the present case[6].

14.In any event, the court went on to consider the case where Mainland law is to apply to the contracts and took the view that Hong Kong court is capable of dealing with the Mainland law issues raised by ICBC[7], which are less complex than suggested.

15.I am not satisfied that there is any material error of principle.

“Distorted interpretation of the URC”

16.It was ING’s argument in resisting the stay application that insofar as Mainland law applied a distorted interpretation of the URC, ie, allowing ICBC to disregard Art. 4(a)(iii)[8] and act on the instructions of Triway to release the collection documents without payment, the validation principle might be invoked such that Hong Kong law should apply to the contracts[9].

17.Mr Yu submitted that the URC can only exist in a system of law and hence insofar as URC is applied under Mainland law, there can be no distorted interpretation. Rather, the Mainland law interpretation is the only interpretation.

18.It should be remembered that the Collection Instructions from ING to ICBC specifically referred to the URC. In reply, IBCB agreed that the collection documents would be handled in accordance with the same[10]. Art. 4(a)(iii) is quite clear, third party instructions are to be ignored. It is difficult to imagine that reasonable businessmen would have agreed to have a system of law applied to their contracts which nullifies their very agreement. This is the essence of the validation principle, which is consonant with the inferred common intention of ING and ICBC[11].

19.Further, I agree with Mr Jat that the principle that the URC must exist in a system of law insofar as it legally governs a collection transaction is not inconsistent with the fact that there is indisputably an international consensus as to how the URC ought to be interpreted, irrespective of which national laws apply. It would be artificial and wrong to ignore that consensus.

20.ICBC also argues that any “distorted interpretation” is something that was first raised by it in these proceedings and could not have been a relevant consideration for the parties at the time of contract. Firstly, if Mainland law permits a “distorted interpretation”, such state of law must have existed at the time of contract (in the absence any contrary suggestion).

21.Secondly, I agree with ING that under the validation principle, the court may consider the terms of the contract and how those terms would be interpreted and applied in the putative foreign law; and the foreign law is presumed to have not been intended as the governing law if it would make any term “invalid or ineffective”: Enka Insaat Ve Sanayi AS v OOO “Insurance Co Chubb” [2020] 1 WLR 4117, [95]-[96] per Lord Hamblen and Lord Leggatt JJSC.

22.Again, I fail to see how the court had erred in principle in relying on the validation principle.

Proper defendant

23.This issue was relied upon by ICBC as a defence[12]. There was before the court a substantial volume of expert evidence from both sides covering, inter alia, this issue. The court was clearly entitled to take a provisional view on the evidence and make a decision for the purpose of the interlocutory application. I do not believe that ICBC is entitled to re-argue the matter before the Court of Appeal.

24.I see no reasonable prospect of success in Ground 7.

Fresh evidence

25.First, there is no real evidence to support the contention that He is a material witness for ICBC. Second, if He is an important witness, a resourceful litigant like ICBC would have spared no effort to locate him, especially in light of the publicity that he had disappeared since October 2023. There is no satisfactory evidence to explain why the evidence in question could not have been obtained for use at the hearing of the stay application with reasonable diligence.

26.ICBC’s evidence is that “previously” (without stating when) its Shaanxi Branch was “aware that He had been known to be uncontactable and was believed to have been in police custody in Xi’an”. On 19 August 2024, 4 days before the resumed hearing of the stay application, Shaanxi Branch wrote to the police to enquire about He.

27.In light of these deficiencies, I am far from satisfied that there is a reasonable prospect that ICBC will be able to satisfy the Ladd v Marshall test.

28.At the risk of stating the obvious, the remainder of the Grounds do not, in my view, advance this application any further.

Disposition

29.In the premises, this application is dismissed with costs to ING and a certificate for 2 counsel. Such costs are to be taxed if not agreed.

30.I am grateful to counsel for their assistance.

Mr Jat Sew-Tong SC and Mr Julian Lam, instructed by Reed Smith Richards Butler LLP, for the Plaintiff

Mr Benjamin Yu SC and Mr Keith Lam, instructed by King & Wood Mallesons, for the Defendant