Noble Power Investments Ltd and Another v. Nissei Stomach Tokyo Co Ltd
Read the full judgment text of HCA 285/2007 on BabelCite. This High Court CFI judgment was delivered on 30 November 2007.
1. This is an application under RHC O 12 r 8 to set aside the ex parte order of Master Kwan made on 6 March 2007 giving leave to serve the writ of summons on the Defendant in Japan, and the subsequent service of the writ pursuant to such leave.
Cites 4 cases
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HCA 285/2007 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO. 285 OF 2007 ______________________ BETWEEN
______________________ Before : Mr Recorder Jat, SC in Chambers Date of Hearing : 21 November 2007 Date of Judgment : 30 November 2007 ______________________ J U D G M E N T ______________________ 1.This is an application under RHC O 12 r 8 to set aside the ex parte order of Master Kwan made on 6 March 2007 giving leave to serve the writ of summons on the Defendant in Japan, and the subsequent service of the writ pursuant to such leave. 2.The Defendant’s main contention is that the Plaintiffs have failed to demonstrate that Hong Kong is clearly and distinctly the forum conveniens so as to justify the Hong Kong court exercising “long-arm” jurisdiction over the Japanese Defendant. The thrust of the Defendant’s case is that this case has overwhelming connections with Japan, which is clearly the more appropriate forum for the resolution of this dispute. The Plaintiffs’ claim 3.The 1st and 2nd Plaintiffs are companies incorporated in the British Virgin Islands and Japan respectively. The Defendant is a company incorporated in Japan. None of them have any business in Hong Kong or filed any registration under Part XI of the Companies Ordinance. 4.The Plaintiffs’ pleaded claim against the Defendant is a simple one for the alleged breach of a written Co-Operation Agreement (“Agreement”), apparently signed in Hong Kong on 5 June 2006, in relation to certain plasterboard waste recycling business to be carried out in Japan at premises to be provided by the Defendant. 5.It is the Plaintiffs’ pleaded case that pursuant to the Agreement, they have entered into contractual relationships with third parties and incurred expenditure:
6.The Plaintiffs further claim that by a letter dated 6 July 2006, Mr Kubota Susumu, a director of the Defendant, informed them that the Defendant was not going to perform its obligations under the Agreement. The Plaintiffs accepted that repudiation. Hence they claim damages for breach of the Agreement, including loss of expenses incurred and future profits from the intended business. The Agreement 7.The Agreement is in English. Recitals D to F state that:
8.Clause 3(a) of the Agreement provides, inter alia, that the Defendant was to provide factory premises in Tokyo, for the installation of recycling equipment to be purchased by the 1st Plaintiff and to obtain all necessary licences and approvals from local (ie Japanese) government authorities, and for supporting services relating to supply of materials and distribution of end-products. 9.Clause 3(b) and (c) of the Agreement provide for obligations on the part of the 1st and 2nd Plaintiffs in relation to the acquisition and supply of the necessary machinery and licence, personnel and technical support for the operation of the factory and the business. 10.Clause 12 of the Agreement stipulates that payments to be made between the parties by way of profits sharing would be calculated in Japanese Yen. 11.It is thus reasonably clear that in terms of the performance of the Agreement, the major obligations are to be performed in Japan with little substantial connections with Hong Kong. 12.Clause 27 is the clause most relied on by the Plaintiffs. It provides as follows:
13.Mr Robert Whitehead SC, leading Mr Steven Kwan on behalf of the Defendant, drew my attention to some curious features in the Agreement. It was pointed out that the pages of the Agreement had not been stamped with any company chop or seal of the Defendant, as would be the customary practice of Japanese nationals in executing international contracts in non-Japanese language (according to affidavit evidence on this point). In contrast, the GRI Contract was initialled on every page. 14.To these curious features one might also add that Mr Kubota’s signature on the Agreement was not accompanied by any seal or chop of the Defendant, as one might expect in the case of someone signing on behalf of a Japanese corporation. It is noted that the signature of Mr Kaneko bore the seal of the 2nd Plaintiff. The Defendant’s challenge 15.The applicable legal principles are not in dispute. The Plaintiffs accept that the burden is on them to show:
16.As to jurisdiction, the Plaintiffs relied on RHC O 11, r 1(1)(d)(i), (iii) and (iv) in support of their application for leave to serve out:
17.The Defendant does not dispute that the Hong Kong courts have jurisdiction under the sub-rules relied upon. Nor is it contended that the Plaintiffs’ case has no merits warranting proper judicial consideration. The Defendant’s main contention is that the Plaintiff has failed to show that Hong Kong is clearly and distinctly the forum conveniens so that the court should not exercise its jurisdiction. 18.In the affidavits filed in support of the summons, other than relying on matters showing that the case had no or no substantial connection with Hong Kong, the Defendant did not make clear what were the defences it proposed to rely upon. The identification of the proposed defences is of importance in an application like this because it is necessary for the court to know what are going to be the issues in dispute at trial, as explained by Recorder Geoffrey Ma SC (as he then was) in Rambas Marketing Co LLC v Chow Kam Fai David [2001] 3 HKC 250 at 261F-263H. 19.Be that as it may, Mr Whitehead in his skeleton submissions identified the principal issues between the parties as follows:
The evidence 20.In summary, the Defendant’s evidence is that it had negotiations with the 2nd Plaintiff but not with the 1st Plaintiff or any other investor from outside Japan, save possibly for one possible introduction to a representative of the 1st Plaintiff in Hong Kong. 21.According to Mr Akiyama, the Defendant’s managing director, in the negotiations the Defendant was represented by Mr Hatakeyama, who is described as the Defendant’s owner, and Mr Akiyama, with Mr Hatakeyama taking the leading role. It would appear to be Mr Akiyama’s evidence that Mr Kubota, a director of the Defendant, was also involved. Their counterpart was Mr Kaneko of the 2nd Plaintiff. 22.It is not disputed that Mr Kubota was a director of the Defendant at the material time, but the Defendant claims that he had no authority to enter into the Agreement on behalf of the Defendant and there was no board minute empowering him to do so. At the moment there is no evidence from the Defendant or from Mr Kubota himself as to whether Mr Kubota had signed the Agreement, or if he did, the circumstances under which he did so. 23.The Plaintiffs, on the other hand, relied on hearsay evidence adduced via their solicitor that various people from Hong Kong were “involved in the negotiations, preparation and execution of the [Agreement] on behalf of the 1st Plaintiff, the 2nd Plaintiff and the Defendant”. The persons representing the 1st Plaintiff were:
24.However, the Plaintiffs’ affidavits have not explained what were the roles or involvements of these individuals in the negotiations. 25.There is one aspect of the evidence which I should mention. The letter of repudiation dated 6 July 2006 relied on by the Plaintiffs is written in Japanese. The translation of that document reads as follows:
26.It would therefore appear from this letter that there are two versions of the Agreement, one in English and one in Japanese. However, neither side mentioned anything about the existence of a Japanese version, or, if there is no such document, explained what was the “difference for the company name of the agent” referred to in the Defendant’s letter. Parties’ contentions 27.Mr Whitehead submitted that this case cries out for adjudication in Japan, as virtually everything to be done under the Agreement (if it is binding in the first place) is to be performed in Japan. He submitted that in the circumstances of this case, the location of witnesses and languages do not play a major role in the court’s consideration whether Hong Kong is the forum conveniens. There are no factors pointing to Hong Kong being the more appropriate forum than the courts in Japan, where the Defendant is located and with which the case has far more substantial connections. 28.On the other hand, Mr Whitehead submitted that the duties of Mr Kubota as director is a matter of internal management of the Defendant, which is governed by the Japanese law, being the law of the place of incorporation:Banco de Bilbao v Sancha [1938] 2 KB 176, Carl Zeiss Stiftung v Rayner & Keeler Ltd (No 2) [1967] AC 853 and Presentationes Musicales SA v Secunda [1994] Ch 271. There are thus strong reasons to have this matter resolved by the Japanese courts. 29.Mr Brian Wong, on behalf of the Plaintiffs, contended that this court should exercise its discretion in the Plaintiffs’ favour. Mr Wong mainly relied on the following factors:
30.Mr Wong also contended that in relation to the capacity of Mr Kubota, the “modern approach” is to apply the proper law (or putative proper law) of the contract. Counsel referred to a number of authorities in support of that proposition, including Cheshire and North’s Private International Law, 13th edn (1999) pp 5292-594; Nygh, Autonomy in International Contracts (1999), pp 124-126; Charron v Montreal Trust Co (1958) 15 DLR (2d) 240; Bodley Head Ltd v Flegon [1972] 1 WLR 680. Discussion (1) Witnesses and language 31.The tribunal trying this case is likely to require the testimony of the persons identified by the parties in order to resolve the dispute over the negotiation of the Agreement and Mr Kubota’s authority to sign the Agreement. 32.In my view, the location and availability of the witnesses is a neutral factor in this case. The potential witnesses are easily available in Hong Kong or Japan. 33.On the basis of the evidence before me, it would seem that most, if not all, of the negotiations would have been undertaken in Japanese: the representatives of the 2nd Plaintiff and the Defendant are all Japanese, while one of the investors said to be behind the 1st Plaintiff speaks Japanese. 34.In my view, the Japanese courts are clearly in a more advantageous position to receive the witnesses’ evidence “first hand” in their own language, which could be important to the issue of Mr Kubota’s authority. 35.Another area in which the Japanese courts enjoy advantage over the Hong Kong courts is in relation to the customary practice of executing documents as contended by the Defendant. It is a factor to be taken into account, although not a very weighty one. 36.I do not consider the fact that payments have been or are to be made from Hong Kong to be a weighty factor. The funding could have come from anywhere in the world, and is of little significance one way or the other. 37.At the moment the evidence does not indicate what documents are likely to be involved, and the language in which the relevant documents are written. (2) Questions of law 38.In relation to Mr Kubota’s authority to sign the Agreement, I disagree with Mr Wong that the issue is one of capacity. 39.In my view the question is whether Mr Kubota had authority of the Defendant to execute the Agreement, and whether the Plaintiffs had any reason to believe that he had authority. If any question of law arises on Mr Kubota’s authority, that question would have to be resolved by reference to the law of incorporation and the constitution of the Defendant: see Presentationes Musicales SA v Secunda [1994] Ch 271 (CA) at 282H-283A per Roch LJ; see also Carl Zeiss Stiftung v Rayner & Keeler Ltd (No 2) [1967] AC 853 at 919G (Lord Reid) and 938G-939A (Lord Guest). That would point to Japanese law. 40.On the other hand, if any issue should arise as to whether the Plaintiffs were entitled to rely on Mr Kubota’s apparent or implied authority so as to bind the Defendant to the Agreement, the question may have to be decided by reference to the putative proper law of the contract, ie, Hong Kong law: see Dicey, Morris & Collins, The Conflict of Laws, 14th edn (2006) §§33R-428, 33-429, 33-432 to 33-438. 41.However, the above distinction is mostly of academic interest in this case, because there is no evidence that there is any material difference between the two systems of law relevant to any issue in dispute. Nor is there any suggestion that there may be any difficulty in either the courts of Hong Kong or Japan to apply the other system of law. 42.Mr Wong understandably placed reliance on the express choice of Hong Kong law as the proper law. In my judgment, that fact has little significance in the circumstances of this case. As I have already mentioned above, there is no evidence before me that there is any material difference between any applicable principles under Hong Kong law and Japanese law. (3) Place of performance and evidence on quantum 43.The place of performance of the Agreement is likely to be of considerable importance, particular in relation to the question of quantum should the Defendant be found to be liable for breach of the Agreement. 44.The claim for wasted expenditure is relatively straight forward. The claim for loss of bargain, however, will largely depend on the probability of a successful enterprise and the likely profits of the business. Since the business is to be carried out in Japan, the evidence on that issue is likely to have far more significant connections with Japan. It seems to me that the Japanese court should be much better placed than the Hong Kong court to evaluate that evidence. (4) The non-exclusive jurisdiction clause 45.It is therefore quite clear that but for the non-exclusive jurisdiction clause, Japan would be the more appropriate forum to determine this case. At any rate, it cannot be said that Hong Kong is clearly and distinctly more appropriate than Japan. 46.The major issue for determination is whether the express choice of Hong Kong as a non-exclusive jurisdiction “tips the scale” in favour of the Plaintiffs. 47.The Defendant’s skeleton submissions made the point that the non-exclusive jurisdiction clause “is only a basic indication of availability of a particular forum and the Hong Kong courts have refused to give great weight to such clauses in forum conveniens debates”. Counsel cited the judgments of Stone J in T & K Electronics Ltd v Tai Ping Insurance Co Ltd [1998] 1 HKLRD 172 at 177G-178A and the Court of Appeal in Yu Lap Man v Good First Investment Ltd [1999] 1 HKC 622 at 627D-628D in support of that submission. 48.In his skeleton submissions, Mr Wong argued that the court should respect the autonomy of the contracting parties and should not ignore the parties’ choice easily. No authority was cited in support of that submission. 49.At the hearing, counsel’s attention was drawn to commentaries on the effect of a non-exclusive jurisdiction clause in the current edition of Dicey & Morris(at §12-093)and a number of English authorities, including Marubeni Hong Kong and South China Ltd v Mongolian Government [2002] 2 All ER (Comm) 873 at §63 (Aikens J); S & W Berisford plc v New Hampshire Insurance Co [1990] 2 QB 631 at 645E-646B (Hobhouse J) and British Aerospace plc v Dee Howard Co [1993] 1 Lloyd’s Rep 368 at 375-377 (Waller J). 50.In Marubeni, Aikens J said this:
51.There are other first instance English cases following that approach: see Burrows v Jamaica Private Power Co Ltd [2002] 1 All ER (Comm) 374 at §9 (Moore-Bick J); Import Export Metro Ltd v Compania Sud Americana de Vapores SA [2003] 1 All ER (Comm) 703 at §§ 13-15 (Gross J) and Breams Trustees Ltd v Upstream Downstream Simulation Services Inc [2004] EWHC 211 (Ch) at §§19-28 (Patten J). 52.Moreover, this more “hardened” approach (to use the words of Patten J in Breams at §27) to enforcing jurisdiction clauses has been adopted in decisions of the English Court of Appeal: see Ace Insurance SA-NV v Zurich Insurance Co [2001] 1 All ER (Comm) 802 at §62 (Rix LJ, applying British Aerospace) and Sabah Shipyard (Pakistan) Ltd v Islamic Republic of Pakistan [2003] 2 Lloyd’s Rep 571 at §§32-37 (where Waller LJ in the Court of Appeal adopted his approach in the British Aerospace case). 53.As I see it, the main effects of these cases in the present context are that:
54.In response to those authorities, Mr Whitehead referred me to a commentary in Johnston, The Conflict of Laws in Hong Kong (2005) at §3.083 where, in the context of commenting on the principles to be borne in mind in drafting a jurisdiction clause, the learned author observed a divergence of judicial approaches between the English and Hong Kong courts. The learned author’s view is that:
55.T & K Electronics is a stay of proceedings for forum non conveniens case. The main issue was whether the foreign jurisdiction clause in that case was an exclusive one. Stone J held that the clause was a non-exclusive jurisdiction clause, and held that the existence of such a clause was “simply but one factor to be placed into the discretionary ‘mix’”. In so holding, his Lordship rejected an argument raised (but not pressed) that the presence of a non-exclusive jurisdiction clause created a strong prima facie case in favour of the chosen jurisdiction, such that the burden of proof is reversed: see 177D-178A. 56.Recently, Fung J in China Reit Ltd v Su Ping, HCA 1831/2007, 26.03.07, at §30 followed T & K Electronics without discussion. 57.I do not consider the Yu Lap Man case to be of particular assistance on the issue before me as the main issue in that case was the proper construction of a forum clause which the court held to be an exclusive one. Nevertheless, it should be noted that Majo JA at 627H-628D adopted as the correct approach to construing jurisdiction clauses Travers J’s dicta in Contractors Ltd v MTE Control Gear Ltd [1964] SASR 47:
58.Mr Whitehead submitted that the underlined sentence should be understood to mean that the contracting parties cannot dispute or deny that the chosen forum has jurisdiction. In the present case, the Defendant is not denying the Hong Kong courts’ jurisdiction; it is attempting to persuade this court not to exercise its undoubted jurisdiction. This approach has the support of an authority cited by Mr Wong: Joseph, Jurisdiction and Arbitration Agreements and Their Enforcement (2005) at §4.04, citing Royal Bank of Canada v Rabobank [2004] 1 Lloyd’s Rep 471 (CA) at §4 (see also §§21-23). I agree with Mr Whitehead on this point. 59.In Linda Hwoo, the forum clause in favour of “the court inside the USA” was held to be non-exclusive in nature, and Deputy Judge Reyes SC (as he then was) without any discussion on the relevant principles held that on the facts of that case the clause could not be a weighty indicator towards the US. 60.Ho Siu Poi v Yue Sheng Finance Ltd [2003] 1 HKC 621 does not appear to be of particular relevance on the issue. 61.More recently in Peregrine Fixed Income Ltd v JP Morgan Chase Bank [2005] 3 HKLRD 1, Stone J was again faced with an argument mounted on the basis of the Mercury Communications and JP Morgan cases that a non-exclusive jurisdiction clause was entitled to “considerable weight” in support of a forum non conveniens stay. Stone J said, at §§52 and 54 of the judgment, that:
62.I did not have the benefit of any citation of Australian or other commonwealth authorities on this question. I note that in a recent decision of the Federal Court of Australia, French J considered the existence of a non-exclusive jurisdiction to be a “powerful factor” in determining whether to allow service out of jurisdiction: see Carnegie Corp v Pursuit Dynamic Plc 2007 FCA 1010, 24.07.07, at §61. I am, however, in no position to say whether this reflects the prevailing jurisprudence in Australia. Since neither counsel have made submissions on Australian and commonwealth authorities, I propose to confine myself to the English and local cases drawn to my attention. 63.Having considered all the authorities referred to in the materials identified above, I would simply state my view as follows. 64.In my judgment, the fact that the parties have expressly agreed to submit to a jurisdiction indicates that they intend that jurisdiction to be an appropriate forum for the resolution of their disputes. That contractual expression of intent must be given due weight. What weight should be given must depend on the proper construction of the clause and the circumstances of the case. In my view, there is and must be a distinction between an exclusive jurisdiction clause and a non-exclusive jurisdiction clause. In the former case, the parties have agreed that the chosen forum is the only appropriate one, hence it is right that that choice must be respected unless there are very good reasons not to do so. In the case of a non-exclusive jurisdiction clause, the parties’ choice must still be respected but there may be a number of equally appropriate jurisdictions, or some available jurisdictions may be clearly more appropriate than others, depending on the circumstances of the case. It is therefore a relevant factor to be taken into account, and, depending on the terms of the clause and the relevant circumstances of the case, may even be a very significant factor as in the Peregrine Fixed Income case. But it is in my view wrong to proceed with any preconceived notion that a non-exclusive jurisdiction clause in favour of Hong Kong crowns this court as the “primary forum” which can only be displaced with “strong” or “overwhelming” (or whatever label one may see fit to apply) grounds. As recognised in the English cases referred to above, such an approach effectively reverses the burden which is on the plaintiff to establish that Hong Kong is clearly the more appropriate forum. 65.Take the instant case. Had there been no jurisdiction agreement in favour of Hong Kong, the most appropriate jurisdiction would undoubtedly be Japan, where the Defendant is found and where most of the significant obligations under the Agreement are to be performed. But for the submission to jurisdiction in clause 27.1, it can hardly be said that Hong Kong is clearly and distinctly the more appropriate forum than Japan to resolve this dispute. It may well be the case that it is because the Agreement had little connection with Hong Kong that the parties had to make an express choice of non-exclusive forum in favour of Hong Kong so as to give the Hong Kong courts jurisdiction under O 11 r 1 (1). Moreover, the parties expressly recognise in clause 27.4 that there are other jurisdictions appropriate for the determination of their disputes as well. It is therefore difficult to accept that by virtue of the non-jurisdiction clause Hong Kong should somehow be elevated as the prima facie more appropriate forum. 66.In those circumstances, I do not regard it to be right to start from the premise that Hong Kong is prima facie the most appropriate forum which cannot be displaced without strong grounds. All that one can say is that Hong Kong is an appropriate forum, but not necessarily the most appropriate forum. 67.In my judgment, while giving due weight to the parties’ recognition of Hong Kong as an appropriate forum, that factor does not outweigh the overwhelming factors in favour of the courts of Japan. 68.In case I am wrong on my view as to the force to be given to the non-exclusive jurisdiction clause, so that it is a strong prima facie factor in favour of the Plaintiffs, I am still of the view that the factors in favour of Japan are so much stronger that the Plaintiffs have failed to demonstrate that Hong Kong is clearly and distinctly the more appropriate forum for the resolution of this dispute. 69.For these reasons, I would, in the exercise of my discretion, set aside the leave for service out and the subsequent service of the writ on the Defendant out of jurisdiction. 70.I should add that I have come to the above conclusions notwithstanding the Defendant’s non-admission of the Agreement. In my view, given that all that the court has to be satisfied at this stage is that there is a good arguable case that the jurisdictional grounds under O 11 r 1(1) have been made out, one must proceed on the basis that the Plaintiffs have shown a good arguable case on the existence of a binding Agreement. Conclusion 71.I accede to the Defendant’s application and set aside the order of Master Kwan granting leave to serve the writ of summons on the Defendant out of jurisdiction and the service of the writ on the Defendant. 72.I also make a costs order nisi that the Defendant shall have its costs, to be taxed if not agreed, with certificate for two counsel.
Mr Brian C W Wong, instructed by Messrs Robert Lee Law Offices, for the Plaintiffs Mr Robert Whitehead, SC leading Mr Steven Kwan, instructed by Messrs Leland Chu & Co, for the Defendant Appeal allowed: see CACV398/2007 dated 27 June 2008 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cases cited in this judgment