Samuel Hutchison Canavan v. Brenton George Battenfeld and Another

HCA 2139/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2139 OF 2009

BETWEEN

Coram : Master de Souza in Chambers

Dates of Hearing : 5 March 2010 and 17 June 2010

Date of Handing Down Judgment : 12 August 2010

_______________

JUDGMENT

_______________

I. INTRODUCTION

1.By summons dated 24 November 2009, the Defendants, mother and son, sought an order under O.12 r. 8 for an order staying the Plaintiff’s suit in favour of current proceedings between the same litigants before the Phuket Provincial Court, Thailand on the grounds that:

(1)        this court is forum non conveniens;

(2)        the parties were bound by contract to litigate their disputes in the Phuket Provincial Court; and/or

(3)        lis pendens alibi, namely action number Red Case No. 732/2009 involving the same parties in the Phuket Provincial Court.

II. Background

2.The Plaintiff is a British national and formerly a long time resident of Thailand.  He does not live within the jurisdiction, has poor health requiring long term care in the United Kingdom where he resides.  For reasons best known to him, he decided to litigate his claims in Hong Kong.  He travels to Hong Kong as and when required by the proceedings.

3.The 1^st and 2^nd Defendants are respectively son and mother.  The 1^st Plaintiff is a British national resident in Hong Kong and works in finance for an international corporation.  His mother is retired and resides in Australia.

4.The contractual dispute between the parties arose in these circumstances.

5.Following discussions with the view to developing four houses and a common swimming pool on a plot of land in Phuket for investment purpose, the parties entered into 2 agreements, namely a Land Agreement  and a Land Lease Agreement, both dated 3 July 2005.  These paired agreements were inextricably linked to the same transaction.

6.The Defendants’ financial commitment under the arrangement amounted to THB 6,720,000.  They paid to the Plaintiff by bank transfers a total of THB 4,920,000 in July 2005. The balance went into escrow with a Thai law firm in October 2005 when the parties became bogged down in dispute.

7.A Thai corporate vehicle, Bayshore Estates Management Co. Ltd (“Bayshore”) owned the freehold designated for the proposed development.  This was essential as Thai law forbade foreign ownership of land.

8.As for Thai corporations, there is no dispute that non-Thai nationals are prohibited by law from owning more than 49% of a Thai company.  Using Thai nominees, the Plaintiff effectively controlled 100% of Bayshore that would otherwise have been impossible.

9.To circumvent the law and regulations of Thailand, it was stipulated under the contract that the Plaintiff would procure that 13% of the shares in Bayshore be transferred to each Defendant and a further 20% of the shares be transferred to a Thai national nominated by each Defendant, so that in reality, 66% of the shares in Bayshore would have been transferred by or on behalf of the Plaintiff to the Defendants and their nominees following implementation.

10.The contract further contemplated the nomination of a 4^th party to participate in taking up shares in Bayshore which upon redistribution would result in the Plaintiff, each of the Defendants and the 4^th party each acquiring a 25% shareholding in Bayshore.  When that was achieved, the parties would procure Bayshore to grant a lease of the land to the investors for a term of 30 years with provisions for renewal for two further periods of 30 years.

11.The Land Agreement required a further contract to be entered into.  This Development agreement never came to pass consequent upon disputes arising over the implementation of the Land Agreement and the Land Lease Agreement.

12.As happened, there was a failure to complete.  It is the Defendants’ case that this was entirely caused by the Plaintiff when he suddenly and unilaterally, orally announced that the Defendants would not be getting their shares in Bayshore until the development was fully built.  That tantamounted to repudiation of contract.  The Plaintiff refused to budge from that position and the Defendants being denied their lease from Bayshore after having substantially invested in the project brought a civil suit against the Plaintiff in the Phuket Provincial Court under action number Red Case No. 732 of 2009.  Service upon the Plaintiff was eventually effected by substituted service by newspaper advertisement as there was difficulty locating him for personal service.

13.The Defendants subsequently obtained default judgment on 7 September 2009 for the amount of THB 6,211,500.  The award comprised the sums paid by the Defendants to date and interest.  Upon legal advice, the Defendants had earlier lodged a complaint against the Plaintiff with the Thai police in December 2009.  The Plaintiff was briefly detained but was allowed to leave Thailand for (health and family) reasons concerning his own health and that of his mother upon his undertaking to return.  He failed to return to Thailand as required resulting in a warrant of arrest being issued against him by the Thai authorities.  The Plaintiff has since then not set foot in Thailand.  He said he continued to manage his business interest there with considerable difficulty and inconvenience from Malaysia.

14.The Plaintiff complained that the charges brought against him of fraud and dissemination of malicious information calculated to damage the Defendants’ reputation were entirely without basis and trumped up.  He attributed the failure of the development project to the Defendants’ refusal to return copies of the Thai language lease and the English translations thereof for registration and to make full payment.  But for the wrongful acts of the Defendants, the development would have proceeded to fruition.

15.Against this background, the Plaintiff issued proceedings in Hong Kong on 20 October 2009 claiming, inter alia, damages against the Defendants for misrepresentation, breach of contract, abuse of process and conspiracy to injure by unlawful means and deception.

iii. The Defendants’ application

The Exclusive Jurisdiction Clause

16.The Defendants’ principal stance for a stay is premised on the exclusive jurisdiction clause in the Land Lease Agreement, which they submit should have equal application to the Land Agreement although the Land Agreement is silent on the point.

17.The Court’s power to stay proceedings on jurisdiction clause is readily demonstrated by reference to the principles enunciated in The El Amria [1981] 2 Lloyd’s Rep 119 and The Thor Scan [1999] 2 HKLRD 136.  They are well known and may briefly be summarized thus:  if a plaintiff sues in Hong Kong in breach of an exclusive jurisdiction clause, the Hong Kong Court has a discretion whether to grant the defendant a stay but such should be granted unless there is a ‘strong case’ for not doing so.  In the exercise of this discretion, all the circumstances of the case must be taken into account.  The plaintiff seeking indulgence from the court against a stay faces a heavy evidential burden.  He has to demonstrate on cogent evidence, for mere assertions will not suffice, that the justice of the case requires the refusal of a stay.

18.Lord Justice Brandon in giving the first judgment of the court in The El Amria, supra, restated the applicable considerations from authorities as follows: (at p.9)

(4)        In exercising its discretion the Court should take into account all the circumstances of the particular case.

(5)        In particular, but without prejudice to (4), the following matters, where they arise, may properly be regarded:

(a) In what country the evidence on the issues of fact is situated, or more readily available, and the effect of that on the relative convenience and expense of trial as between the English and foreign Courts.

(b) Whether the law of the foreign Court applies and, if so, whether it differs from English law in any material respects.

(c) With what country either party is connected, and how closely.

(d) Whether the defendants genuinely desire trial in the foreign country, or are only seeking procedural advantages.

(e) Whether the plaintiffs would be prejudiced by having to sue in the foreign Court because they would: (i) be deprived of security for their claim; (ii) be unable to enforce any judgment obtained; (iii) be faced with a time-bar not applicable in England; or (iv) for political, racial, religious or other reasons be unlikely to get a fair trial.

19.It is important to note that considerations falling to be considered may be many and varied and must necessarily be case sensitive.  With that in mind, I turn to consider the jurisdiction clause.

20.The relevant clause appears in the Land Lease Agreement.  Clause 8(5) stipulates ‘If any dispute arises regarding this agreement, it shall be litigated at the Phuket Provincial Court for hearing and settlement (emphasis mine).  On a plain reading of the clause, there seems little doubt that the parties have deliberately chosen to confer exclusive jurisdiction upon the Thai Court to resolve any dispute that may arise from performance of the agreement.  There is ample sense in the choice of forum given the parties’ contractual arrangement to build investment homes in Phuket and the long residence of the Plaintiff in Thailand.

21.The Land Agreement is silent on jurisdiction but it was made on the same day.  It is inextricably linked to the Land Lease Agreement with both cumulatively setting out the contractual intention and obligations of the parties and dealing with the same subject matter.  It will be artificial indeed to conclude that the parties ever intended the two agreements to be free-standing and independent of the other.  That being so and drawing support for this conclusion from Cinnamon European Structured Credit Master Fund v Banco Commercial Portugues SA, [2009] EWHC 3381 (Ch), I hold that the parties must necessarily have contemplated a similar exclusive jurisdiction clause to be read into the Land Agreement.

22.The Plaintiff raised a litany of complaints against the Defendants, alleging, inter alia, lack of probity, extortion, suppression of evidence, deception practised on the Thai Courts and coming to court with unclean hands, all of which were strenuously addressed and denied by the Defendants.  In the result, the proceedings became lengthy with costs escalating.

23.All these allegations, if at all pertinent, go to the underlying facts of the case.  They cannot be adjudicated by a trial on affidavits.  For present purpose, I agree with Mr. Alder, counsel for the Defendants that they cannot be determined without proper ventilation at another time and venue.

24.The disputes between the parties patently have no connection with Hong Kong save for the gratuitous residence of the 1^st Defendant.  The Plaintiff and the 2^nd Defendant live without the SAR in the UK and Australia respectively and have no connection with Hong Kong.  Hong Kong offers no particular convenience for the parties on the evidence.  It is clearly not the natural or appropriate forum with the most real and substantial connection with the suit.  Rather the evidence and the nature of the disputes demonstrate most convincingly the Thai Court in Phuket has those necessary attributes.

25.The underlying contractual disputes involve issues of fact, the evidence for which in my view is situated, or more readily available in Thailand.  A trial in Hong Kong will inevitably require witnesses to be flown here.  Expert evidence will have to be adduced on the legality or otherwise of the nominee holding structure envisaged in the two agreements.  Were the matter to be tried in Thailand, the Thai Court would be best placed to construe the relevant company law and regulatory provisions prohibiting foreign ownership of land in the country.  All these matters greatly impact on the length and expense of the trial.  Costs are likely to be significantly lower were the disputes to be litigated in the Phuket Provincial Court on the 1^st Defendant’s 2^nd Affidavit.

26.Both Defendants are genuinely desirous of returning to Thailand to prosecute their claims and to defend whatever claims that the Plaintiff may choose to raise against them arising out of their contractual dispute.  In this regard, I have no doubt.

27.There is no evidence of or any suggestion that the Defendants are opting for a Thai trial in order to avail themselves of some procedural advantages.  No such advantages have been identified.  There is also no evidence that the Plaintiff would be prejudiced by having to sue in the Thai Court or that he would somehow be unable to enforce any judgment that may be obtained.  As a businessman with commercial interest in the country where he was resident for some period at the time of contract, he clearly contemplated and agreed to confer exclusive jurisdiction on the Court in Phuket on matters arising from the contract.

28.There is equally no evidence that a fair trial of their disputes would be unlikely in Thailand. The Plaintiff’s allegations regarding deficiencies and human rights abuse in the Thai legal system at paragraph 146 of his Affidavit are duly noted.  As Mr. Alder pointedly submitted, the author of the document exhibited in support of these alleged breached remains unidentified and no credentials have been supplied.  The document contains no findings nor is it the product of a court of eminent repute.  Rather it appears to be a submission to the Human Rights Council on criminal process in Thailand.  It did not touch upon the Thai civil justice.  If the Council has come to a definite view, its conclusion is unknown.

29.In any event, the Defendants have specifically addressed and refuted such allegations of impropriety in the Thai legal system: see the letter advice of Mr. Ratthakarn Boonnua (a Thai qualified lawyer) dated 19 February 2010 exhibited to the 1^st Defendant’s 2^nd Affidavit.

30.Where a plaintiff alleges that justice is unattainable in the natural forum on account of inexperience or deficiencies of the courts, he must assert it candidly and support his indictment of the judicial system with positive and cogent evidence.  In the absence of such proof, the Court starts with the working assumption that courts in other judicial systems will endeavour to do justice according to the law and will be free from improper interference or constraints: see New Link Consultants Ltd v Air China (unrep., HCA 515 of 2001; Pacific International Sports Clubs Ltd v Soccer Marketing International Ltd [2009] EWHC 1839 (Ch).

31.This the Plaintiff has wholly failed to achieve.

32.The Plaintiff has equally failed to demonstrate or identify, much less prove any relevant legitimate personal or juridical advantage in Hong Kong that would be denied him if the trial proceeded in Thailand.  There is no evidence that he would suffer prejudice of any material nature if a stay is granted.

33.There is evidence from the 1^st Defendant and Mr. Boonnua that the criminal complaint can be withdrawn and the default judgment set aside.  The Defendants freely gave undertakings to the Court that they would take all necessary steps required of them to that end.  These are matters that are achievable and should facilitate the Plaintiff’s uneventful return to Thailand.  His fears should be adequately addressed.

34.The Plaintiff suffers from ill health and at present is seen to by his doctors in the UK.  His state of health has not prevented him litigating in Hong Kong. There is no evidence that the health care system in Thailand is any less efficient or competent.  In any event, he can as he now does continue with treatment in the UK and travel to Thailand to prosecute his civil claims as and when necessary.

35.The principles on which the Courts in Hong Kong determine the governing law of a contract involve a three-stage test: (1) express agreement, (2) implied agreement and (3) closest and most real connection: G Johnston, Conflicts of Laws in Hong Kong.  According to Mr. Boonnua’s legal advice previously referred to, Thai Courts adopt a similar approach except that the fall back is the nationality of the parties rather than the system of law with which the contract has the closest and most real connection.

36.The evidence established that the Agreements were to be performed, and were partly performed in Thailand.  The issue of illegality being one of the many issues falling to be determined arising from the infringement of Thai regulatory law on land holding by foreign nationals is clearly matter of Thai law.  It would therefore appear that the Agreements should be governed by Thai law.  I am fortified in coming to this view on the evidence of Mr. Boonnua.

37.On the challenge based on the exclusive jurisdiction clause and for the reason stated above, I conclude that the Plaintiff has failed to raise a strong case for refusing a stay.  A stay of the Plaintiff’s suit must follow.

Forum Non Conveniens

38.The proceedings are also challenged on this alternative ground.

39.The guiding principles are to be found in The Spiliada [1987] AC 460, The Lanka Muditha [1991] 1 HKLR 741, Pei Zheng Middle School v China Pui Ching Education Foundation Ltd (unrep., CACV 262 of 2005) and more recently in PT Bali Hospitality Utama v Mathias Echene & Ors, unreported, HCA 604 of 2009, [2010] HKEC 350.

40.The single question to be determined is whether there is some other available forum of competent jurisdiction, which is the appropriate forum for the trial of an action, i.e. in which the action may be tried more suitably for the interests of all the parties and the ends of justice.  The defendant has to establish that (1), Hong Kong is not the natural or appropriate forum, appropriate meaning the forum has the most real and substantial connection with the action, and (2), there is another available forum which is clearly or distinctly more appropriate than Hong Kong.  Failure to satisfy these two matters will result in the rejection of the challenge without more.

41.If the defendant establishes both limbs, the plaintiff may if he wishes seek to show that he will be deprived of a legitimate personal or other juridical advantage if the action is tried other than in Hong Kong.  If he is able to establish this, the Court will have to balance the advantages of the alternative forum with the disadvantages that the plaintiff may suffer.  Deprivation of one or more personal advantages is not necessarily fatal to the applicant for the stay if he is able to demonstrate to the Court’s satisfaction that substantial justice will be done in the available appropriate forum.

42.On the evidence, I have no difficulty for the reasons given under the discussion on the exclusive jurisdiction clause in finding that the Defendants have amply demonstrated that Hong Kong is not the natural or appropriate forum and that the Provincial Court of Phuket is clearly the more appropriate forum that is available to the parties to this action.  I have also held that the Plaintiff has not established any prejudice or the loss of any personal or juridical advantages if the suit were to be tried in Thailand.

43.The Agreements are governed by Thai Law, were contemplated to be performed and indeed were partly executed in that country.  The Land Agreement concerns the transfer of and ownership of shares in a Thai company and envisages the negotiation of a further agreement (the Development Agreement) that was also to be performed in Thailand.  The Land Lease Agreement concerns land to be leased in Thailand.  The Thai Courts are clearly best placed to resolve the parties’ disputes involving Thai company law and regulations.  Indeed there are parallel proceedings afoot in Thailand based on the same dispute and between the same parties.

44.I hold that the Defendants’ application for stay under this alternative challenge equally competent and should be acceded to.

Lis Pendens Alibi

45.In this connection, the Defendants have stated that they do not intend to rely on the default judgment obtained in Thailand.  The application for stay under this alternative was not canvassed in any detail at all.  It was mentioned in passing and I do not propose to make any definitive finding in this regard.  If the Defendants were minded to sustain an application for stay under this head the matter should have been addressed adequately and fully which was not done. I do however note that the Court has jurisdiction to stay the Hong Kong proceedings where there are proceedings abroad involving the same or similar issues raised in the Hong Kong proceedings.

iV. conclusion

46.The Defendants having succeeded in their submissions for a stay of the Hong Kong action based on the exclusive jurisdiction clause and alternately on forum non conveniens, the stay sought is granted.

V. costs

47.The parties are in agreement that the successful party should have indemnity costs.  As costs falls within the discretion of the Court, I consider that an indemnity costs order against the Plaintiff is indeed appropriate in the circumstances.

48.Not unlike the facts in PT Bali Hospitality Utama v Mathias Echene & Ors, unreported, supra, the Plaintiff ought not to have commenced proceedings in Hong Kong when the chosen jurisdiction and on the facts of the case, another available and more appropriate forum most closely tied to the dispute is in Thailand.  It seemed that the Plaintiff opted to bring suit in Hong Kong purely because of the fortuitous presence of the 1^st Defendant within the jurisdiction.

49.The Plaintiff’s presentation of the case unnecessarily lengthened the proceedings. Whilst some leeway should be afforded to the Plaintiff as a litigant in person, it would be unfair for the Defendants to be saddled with extra costs in meeting the many allegations raised against them.

50.In the circumstances, I consider that an indemnity costs order is appropriate. The Defendants shall have their costs of the application on such basis, such costs to include any costs reserved in respect thereof and are to be taxed if not agreed.  Additionally, there shall be a certificate for counsel.

Plaintiff appearing in person.

Mr. Edward ALDER instructed by Messrs. Laracy & Co. for Defendants.