Hing Fat Plastic Manufacturing Co. Ltd. v. Advanced Technology Products (HK) Ltd.

HCA003104/1992

HEADNOTE

    Lis alibi pendens - identical actions in PRC and Hong Kong Defendant has assets in PRC and Hong Kong - whether concurrent proceedings in different jurisdictions justified to enable Plaintiff to execute on all Defendant's assets.

No. A3104 of 1992

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

BETWEEN

___________

Coram: The Hon. Mr. Justice Keith in Chambers

Date of Hearing: 29 June 1992

Date of Handing Down Judgment: 23 July 1992

_______________

J U D G M E N T

_______________

1. The Plaintiff and the Defendant are companies incorporated in Hong Kong. On 10th April 1992, the Plaintiff commenced proceedings against the Defendant in the Middle Court of the People's Court, Dongguan City, Quangdong Province in The People's Republic of China. The Plaintiff claimed the price of goods sold and delivered to the Defendant amounting to HK$893,457.58 and US$53 427.00, together with interest. On 6th May 1992, the Plaintiff commenced identical proceedings against the Defendant in this court. In the summons now before me, the Defendant seeks either a stay of the proceedings in this court, or an injunction restraining the Plaintiff from continuing the proceedings in the PRC.

2. I should state at the outset that I am not concerned with what is the more appropriate forum for the litigation (the "forum conveniens" point). I am only concerned with whether two identical actions in different jurisdictions should continue contemporaneously (the "lis alibi pendens" point). I say that for three reasons:-

(i) Mr. Wong for the Defendant disavowed any suggestion of forum shopping. He told me that although the Defendant regarded the courts in the PRC as the more appropriate forum, the Defendant was equally happy with the litigation being resolved in the courts of Hong Kong. It was for this reason that the alternative forms of relief are sought in the summons.

(ii) The evidence before me only addresses the question of whether two identical actions in different jurisdictions should continue contemporaneously. The thrust of the Defendant's evidence, which consists of an affirmation from its Managing Director, is that it is highly undesirable for identical actions to continue in different jurisdictions. The thrust of the Plaintiff's evidence, which consists of an affirmation from its Accountant, is that it needs to proceed in both jurisdictions in order to effect execution on the Defendant's assets.

(iii) With the possible exception of para. 8 of the affirmation of the Defendant's Managing Director, none of the evidence goes to the question of what the more appropriate forum is. There is no evidence, for example, of whether there were any terms of the contract between the Plaintiff and the Defendant as to where disputes should be litigated, or what the governing law of the contract was. Nor is there any evidence as to where the party's contractual obligations as to delivery and payment were to be performed.Indeed, apart from the fact that there is evidence that delivery was effected in the PRC, there is no evidence at all as to the country with which the action has the most real and substantial connection.

3. For these reasons, if it is right that I should make an order whose effect is to prevent both actions continuing at the same time, I propose to put the Plaintiff to its election rather than to decide what the more approriate forum is. I do not overlook Mr. Wong's submission that if the Plaintiff elects to continue the proceedings in Hong Kong, and if I therefore restrain the Plaintiff from continuing the proceedings in the PRC, the Defendant will not be able to recover the legal costs incurred so far in the proceedings in the PRC. I reject that submission for two reasons:

(i) Although para. 7 of the affirmation of the Defendant's Managing'Director tells me that the Defendant has instructed Chinese lawyers,I supect that the costs incurred so far are minimal. The litigation is, after all, in its early stages. If the costs incurred so far are not minimal, it was incumbent on the Defendant to tell me that. It has not done so.

(ii) Even if the Defendant has incurred more substantial costs, there is no evidence before me that those costs are not recoverable. The Defendant has not adduced any evidence that in the PRC the legal costs of a Defendant will not be paid by the Plaintiff when the Plaintiff has been prevented by a foreign court from continuing with its claim.

4. I have no doubt that it is highly undesirable to have concurrent actions in Hong Kong and the PRC between the same parties where the claims in each action are identical. The Defendant has to expend double the time and double the expense in defending both sets of proceedings. Moreover, there is the possibility that at the end of it all conflicting decisions will be pronounced. To avoid that, the parties may be tempted to engage in an unseemly race to obtain judgment in one jurisdiction so as to utilise that judgment and plead either res judicata or issue estoppel in the other. As Mr. Wong rightly submits, all that puts pressure on the Defendant to settle the Plaintiff's claims on less favourable terms than it might otherwise have done if the claim was proceeding in one jurisdiction only.

5. However, the undesirability of concurrent actions in different jurisdictions does not automatically justify an order whose effect is to prevent both actions continuing at the same time. The proper test was discussed by the House of Lords in The Abidin Daver [1984) AC 398. At . pp.411G - 412A, Lord Diplock took the view that a Plaintiff should be allowed to proceed with both actions only if there was a personal or juridical advantage which the Plaintiff would derive from proceeding with both actions, and which is of such a fundamental nature that to deny the Plaintiff that advantage would amount to a positive injustice. However, at p. 419G - H, Lord Brandon applied a more flexible approach. He regarded the exercise of the court's discretion as involving the balancing of all the relevant factors on either side, those favouring allowing the Plaintiff to proceed simultaneously in different jurisdictions, and those militating against it.

6. The personal and juridical advantage which the Plaintiff claims it would lose if it was forced to proceed either in Hong Kong or in the PRC relates to its ability to effect execution on all the Defendant's assets. The Defendant has assets in both the PRC and in Hong Kong. In the PRC, it is said to own a factory with machinery in it worth at least $200,000.00. In Hong Kong, it owns a factory in Kwai Chung which it purchased in December 1988 for $1,030,000.00, but which has admittedly been mortgaged. None of those assets, whether taken alone or together, are likely to satisfy the judgment which the Plaintiff hopes to obtain against the Defendant. However, if the proceedings in Hong Kong are stayed, the Defendant's factory in Hong Kong, it is said, will not be available for execution. That is because there is no enactment providing for the registration in Hong Kong of a judgment obtained in the PRC. By the same token, if the Plaintiff was ordered to discontinue the proceedings in the PRC, neither the Defendant's factory in the PRC nor the machinery there will be available for execution. That is because, according to the Plaintiff's Chinese lawyers, a judgment obtained in Hong Kong cannot be enforced in the PRC: what thev say is that "there is no treaty made between Hong Kong and China in relation to this matter, and there is no precedent of [recognition] and execution by the law courts in Dong Guan of the judgment made by the law courts of Hong Kong". Accordingly, the Plaintiff contends that the juridical advantage which it derives from suing the Defendant in both jurisdictions is that only then will it be able to effect execution on all the Defendant's known assets.

7. I do not regard those considerations as sufficient to justify the continuance of both sets of proceedings, whether on Lord Diplock's approach or that of Lord Brandon. Despite the absence of an enactment providing for the registration in Hong Kong of a judgment obtained in the PRC, such a judgment can still be enforced in Hong Kong. The Plaintiff can bring an action in Hong Kong based on that foreign judgment, and can obtain summary judgment under Ord. 14 without a consideration of the merits of the underlying dispute. That is because the judgment is conclusive in Hong Kong (unless it is impeachable, for example, for fraud) and not merely prima facie evidence of the Defendant's liability. Mr. Leong for the Plaintiff, while conceding the Plaintiff's ability to bring an action in Hong Kong based on a judgment in the PRC, asserted that the circumstances prevailing in the courts of the PRC would give the Defendant many opportunities to impeach such a judgment. He instanced bribery as an example. Not only do I find that an unattractive stance to adopt, but (a) bribery or some other procedural unfairness amounting to fraud is a ground for setting aside the registration in Hong Kong of a foreign judgment to which the Judgments (Facilities for Enforcement) Ordinance (Cap. 9) and the Foreign Judgments (Reciprocal Enforcement) Ordinance (Cap. 319) apply (see Sections 3(2)(d) and 6(1)(a)(iv) of those ordinances respectively), and (b) in The Abidin Daver at pp. 410F-G and pp. 424F-425C Lords Diplock and Brandon both deprecated any attempt to compare the capacity of local and foreign courts to try justly and satisfactorily the dispute between the parties. In Lord Diplock's memorable phrase, "judicial chauvinism has been replaced^. by judicial comity" (p. 411F).

8. Mr. Wong took the further point that it cannot be right that simply because a Defendant has assets in more than one jursidction, it can be forced to defend identical . proceedings in all those jurisdictions so that the Plaintiff can obtain execution on those assets. After all, the dispute may not have anything at all to do with some of those jurisdictions. Mr. Leong did not quarrel with that proposition as a matter of principle. What he submitted was that where, as here, the Plaintiff proceeds in just two jurisdictions., where the Defendant's combined assets are not enough to satisfy the judgment sought by the Plaintiff, the desirability of ensuring that the Plaintiff is not denied the fruits of its judgment outweighs the objection that the floodgates will be open to permit a multiplicity of proceedings. I agree with Mr. Leong that each case has to be considered on its merits, but I regard the Plaintiff's ability to execute on the Defendant's assets in Hong Kong (even if the Hong Kong proceedings were stayed) by the simple expedient of utilising the common law to enforce any judgment obtained in the PRC by suing in Hong Kong on that judgment as compelling.

9. I do not overlook the three cases cited by Mr. Leong which decided, or contained dicta to the effect, that assets of a Defendant in diferent jurisdictions justify a Plaintiff in proceeding in those jurisdictions. However,

(i) in Lord Dillon v. Alvares (1798) 4 Ves. Jun. 357, the Lord Chancellor gave no reasons for his one sentence judgment that "where a man has an estate in England and another in Ireland, the suit must go in both countries",

(ii) in both Peruvian Guano Co. v. Bockwoldt (1883) 23 Ch. D. 225 and Ionian Bank Ltd. v. Couvreur [1969] 1 WLR 781, the test which the Court of Appeal applied was that both sets of proceedings could continue unless the Defendant proved that the continuation of the English proceedings was vexatious or oppressive - an approach rendered obsolete by a trilogy of cases in the House of Lords culminating in The Abidin Daver.

Indeed, it is instructive that when Lord Goff in his speech in Spiliada Maritime Corporation v. Cansulex Ltd. [1987] AC 460 gave examples at pp.482B-484D of the kinds of personal and juridical advantage which a Plaintiff might lose if it were forced to proceed in one jurisdiction and not another, he did not mention ease of execution as an example at all.

10. For these reasons, I conclude that it would be wrong to allow the Plaintiff to continue the current proceedings in both Hong Kong and the PRC simultaneously. Mr. Leong told me that if I propose to make an order whose effect was to prevent both actions continuing at the same time, and that if the Plaintiff had therefore to elect which of the proceedings it proposed to continue, the Plaintiff would elect to continue the proceedings in Hong Kong. That is, at first blush, a surprising election in view of the Plaintiff's own case that the judgment in Hong Kong cannot be enforced in the PRC, whereas the common law can be used to enforce in Hong Kong a judgment obtained in the PRC, but the election reflects the Plaintiff's concern about the Defendant's ability to impeach in Hong Kong a judgment obtained.in the PRC. However, since I am not deciding which is the more appropriate forum, I give effect to the Plaintiff's election, and I order that the Plaintiff be restrained from continuing and/or taking any further steps to prosecute the proceedings against the Defendant in the Middle Court of the People's Court, Dongguan City, Quangdong Province. If the Plaintiff had elected to continue the proceedings there, I would have dismissed the action in Hong Kong, and not merely stayed it, as Sir Nicholas Browne - Wilkinson V.-C. (as he then was) did, in not dissimilar circumstances, in Australian Commercial Research and Development Ltd. v. ANZ McCaughan Merchant Bank Ltd. [1989] 3 All E.R. 65.

11. As to costs, I make an order nisi that the Plaintiff pays to the Defendant the costs of the summons on an indemnity basis. I adopt the reasoning of Sir Nicholas in the ANZ case at p. 73 b-c:

"The plaintiff should not have commenced two sets of proceedings relating to the same subject matter, either in the same jurisdiction or in two different jurisdictions. By so doing it has duplicated the costs which will have to be incurred by the defendant. In those circumstances, it seems to be right that the defendant should recover fully the,costs thrown away since they need never have been incurred at all but for the plaintiff's act."

12. Finally, the facts of this case are by no means unusual, and with the consent of the parties, this judgment may be circulated for the benefit of practitioners generally.

Representation:

Mr. Alan K.K. Leong instructed by Messrs. M.K. Lam & Co. for Plaintiff

Mr. Horace Wong instructed by Messrs. Kenneth K.C. Wong & Co. for Defendant.