China Agri-products Exchange Ltd v. Wang Xiu Qun and Another

HCA 1807/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1807 OF 2011

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BETWEEN

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J U D G M E N T

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A.  Background

1.The defendants apply by summons under O 12 r 8 of the Rules of the High Court (“RHC”) and under the inherent jurisdiction of the court to set aside the leave granted by Master K K Pang to issue and serve a Concurrent Amended Writ out of the jurisdiction, or alternatively, to stay this action pending the final outcome of the PRC proceedings between the plaintiff and the defendants.

2.In this action, the plaintiff has filed a rather lengthy Re- Amended Statement of Claim.  Parties have also adduced relatively large amount of evidence in this application.  Counsel for the parties, Mr Lam appearing together with Miss Ip for the defendants and Mr Ho, SC, leading Miss Cheng for the plaintiff, have succinctly summarized the relevant facts and the legal principles pertinent to this application.  Thus, I am able to extract most of the background facts from counsel’s helpful submissions.

3.The plaintiff is a Hong Kong listed company.  The 1^st defendant is a PRC national and the 2^nd defendant is a PRC company.

4.The 1^st and the 2^nd defendants respectively held 70% and 20% of the shares (collectively referred to as “Shares”) in a PRC company in Wuhan (“the Company”), which has the right to operate a market there.

5.This claim is premised upon two sale and purchase agreements (“SPAs”) executed on 2 May 2007 between the plaintiff, and the 1^st and 2^nd defendants, for the purchase by the plaintiff of their respective Shares at a total consideration of HK$1.145m (to be paid partly in cash and partly by two instruments (“Instruments”) “承付票據” (which has been translated as “promissory notes”) executed by the plaintiff in favour of the respective defendants.  The date for the presentation for payment under the Instruments was stated to be 5 December 2012.

6.It is not in dispute that both the SPAs and the Instruments were executed in Hong Kong, and each of the SPAs contains a non-exclusive jurisdiction clause providing Hong Kong to be the governing jurisdiction.

7.The claim is essentially a claim for the alleged breaches of the various terms of and warranties contained in the SPAs, which will be discussed in greater detail in Section D.4 below.

8.The plaintiff also asks for a number of reliefs that include loss of profits, an order for an indemnity, damages for breaches and misrepresentation, and an order to restrain the defendants from enforcing the payments under the Instruments.

9.It is perhaps convenient also to mention, by way of background, that in respect of the Instruments, there are currently in place a number of undertakings given by the defendants in agreeing not to, among others, present the Instruments for payment after an earlier injunction order in relation thereto was discharged by consent.

B.  Matters giving rise to the application

10.The matters that give rise to this application primarily arose from another sale and purchase agreement (which is abbreviated as the “Forged Agreement” by the defendants, and I will also adopt the same abbreviation for easy identification), and two sets of proceedings commenced in the PRC.

B.1 The Forged Agreement

11.The Forged Agreement was executed on the same date as the SPAs, that is, 2 May 2007, and by the same parties of the SPAs, and was also purportedly for the sale of the Shares by the defendants to the plaintiff. 

12.The defendants allege that the Forged Agreement was forged.  They also allege that the Company with the knowledge of the plaintiff submitted the Forged Agreement to the relevant government authority for the approval of the transfer of the Shares to the plaintiff.

13.Mr Lam has further highlighted a number of terms as found in the Forged Agreement that are found to be materially different to the terms under the SPAs though both agreements are concerned with the same subject matter, that is, the sale and purchase of the Shares.  For example, clause 13.4 of the Forged Agreement provides that the law of PRC is to be the governing law with the parties also agreeing to submit to the jurisdiction of the PRC courts (instead of having Hong Kong law as the governing law and the Hong Kong courts being the governing jurisdiction). Further, the amount of the consideration for the Shares was stipulated to be 11 times less than the amount provided in the SPAs. In addition, the mode of payment was provided to be in cash in RMB (which is different to that of the SPAs as set out in para 5 above).

B.2 PRC Action No 1

14.The Forged Agreement led to the defendants commencing an action (“PRC Action No 1”) in December 2010 against the plaintiff (with the Company as the third party) in the Higher People’s Court of Hubei.  In the PRC Action No 1, the defendants seek, among others, an order for declaring that the Forged Agreement is null and void and for setting aside the Forged Agreement.

15.The trial of the PRC Action No 1 already took place in June 2012, and its judgment is currently pending.

B.3 PRC Action No 2

16.In April 2011, the plaintiff and the Company commenced an action (“PRC Action No 2”) against the defendants (with other parties), also in the Hubei Higher People’s Court for the alleged loss and damages having alleged to have been caused by the latter’s various wrongdoings.

17.The pleadings in that case are now closed and a hearing had been held before the PRC Court in September 2012.  I was told that there would be further hearings.

C.  The Arguments

C.1 Alleged Material Non-disclosure

18.One of the grounds of the defendants’ application to set aside the order granting leave to serve out is the allegation of material non-disclosure in the Plaintiff’s ex-parte application for the leave.

19.The non-disclosure that has allegedly been made concerns the plaintiff’s failure to describe to the court the PRC Actions and produce their related documents in the ex-parte application.  It was submitted that the fact the Plaintiff has made such non- disclosure is relevant to the consideration by the court in deciding whether to assume jurisdiction over the defendants, thus they are material.

20.For the plaintiff, Mr Ho contends that the facts concerning the PRC Actions are not material for they would not have affected the Master’s decision on the plaintiff’s application, citing the decision of Kwan J (as she then was) in SFC v A, unrep., HCMP 1407/2007 (29 November 2007).

C.2  Forum Non-conveniens

21.Whilst accepting that the non-exclusive jurisdiction clause provided in the SPAs providing Hong Kong to be the governing jurisdiction will be a strong factor pointing to the Hong Kong courts  being the appropriate forum, Mr Lam however argues that the plaintiff still bears the legal burden in showing that Hong Kong is the appropriate forum for the trial of this action: see Noble Power Investments Ltd v Nissei Stomach Tokyo Co Ltd [2008]5 HKLRD 631 per Ma CJHC (as he then was) at 641, §22(2) citing Spiliada Maritime Corp v Cansulex Ltd [1987] AC 460 at p481E.  Since the defendants are residing outside Hong Kong, the plaintiff cannot sue them as of right, and it requires leave to do so.  It is not enough for the plaintiff to only show that there was no appropriate forum elsewhere: see China North Industries Investment Ltd v Chum [2010] 5 HKLRD 1per Stock JA at 30, §83.

22.Mr Lam next submits that the evidence shows that there exist strong or exceptional circumstances that justify this court in not giving effect to the non-exclusive jurisdiction clause.  The circumstances Mr Lam referred to are the co-existence of the SPAs and the Forged Agreement dealing with the same subject matter, and eventual institution of the PRC Actions in connection with the subject matter, which events were unforeseen at the time when the parties executed the SPAs.  Thus, it would be unjust, Mr Lam submitted, to allow the plaintiff to rely on the non-exclusive clause of the SPAs by proceeding with the present action in Hong Kong, while the same parties are pursuing remedies in PRC over or arising from essentially the same subject matter in relation to the sale and purchase and the eventual transfer of Shares.

23.Hence, the existence of the PRC Actions, Mr Lam submitted, cannot be regarded as irrelevant but should be taken into account when the court is considering if the PRC jurisdiction is the appropriate forum for the resolution of the dispute between the parties.  In this case, Mr Lam argued, the PRC Actions are particularly relevant for it has been demonstrated that the actions are genuine and further that with respect to the PRC Action No 1, it has indeed progressed to an advanced stage of proceedings.  Thus, the likely impact of the PRC Actions upon the disputes between the parties is a factor that may show Hong Kong as not being an appropriate forum(Ho Siu Pui & 2 ors v Yue Sheng Finance Limited & anor., unrep., HCA3060/2001 (27 August 2002), Kwan J (as she then was) per §46).

24.The relevancy, if any, of the PRC Actions, Mr Ho contended, should only be restricted to PRC Action No 1 since Mr Lam has confirmed in his oral submission that the defendants are mainly relying on the former but little on the PRC Action No 2. So far as PRC Action No 1 is concerned, Mr Ho argued that it should have no impact whatsoever on this action despite there being “an identity of parties” in the Hong Kong and PRC proceedings.  Mr Ho contended that the PRC Action 1 is not about a breach of the SPAs as this action is primarily based on. Thus, the Hong Kong action, in the words of Mr Ho, “has a life of its own”.

25.It is therefore argued on behalf of the plaintiff that since there is no overlap of issues between this action and the PRC Actions, the ends of justice should allow the plaintiff to continue to pursue this action as its entitlement to sue in Hong Kong is independently upon the outcome of any of the PRC Actions.

26.Furthermore, the PRC Actions, Mr Ho contended, do not in the real sense fall within the so-called doctrine of lis alibi pendens, the existence of simultaneous proceedings elsewhere. In any event, should the PRC Action No 1 be shown to have some impact, it is only an additional factor relevant to the determination of the appropriate forum as the court can allow both sets of proceedings to continue regardless of the existence of the parallel proceedings: see Johnston, The Conflict of Laws in Hong Kong, 2^nd ed., at §3.095.

27.Apart from the absence of impact of the PRC Actions, the plaintiff further sets out a number of factors that it submitted clearly demonstrate that Hong Kong is the natural and appropriate forum for this action whilst the PRC courts cannot be a “clearly or distinctly more appropriate” forum (See The Adhiguna Meranti [1987] HKLR 904 per Hunter JA at 907 applying the three-stage test in the Spiliada).  The relevant factors are:

(a)  The SPAs and the Instruments were executed in Hong Kong;

(b)      Hong Kong law is the governing law;

(c)  Parties have submitted to the non-exclusive jurisdiction of the Hong Kong court under the SPAs;

(d)      The defendants have provided undertakings in respect of the Instruments.

C.3  Interim Stay

28.If the court declines to grant a permanent stay, Mr Lam submits that it would be just and convenient to grant an interim stay pending the final conclusion of the PRC Actions, in particular PRC Action No 1.

29.Mr Lam submission is that the outcome of the PRC Action No 1 would bear a direct impact on how the parties conduct their case in this Hong Kong action after the issues of forgery and the propriety of the plaintiff’s status as the shareholder of the Company are disposed of by the PRC Court. It is because the parties will be bound by the findings of the PRC Court, which findings would determine how the parties would conduct this action.

30.The lack of identity of subject matter in the two proceedings, Mr Ho contended, takes the matter outside the notion of lis alibi pendens with the result that the outcome of the PRC Action No 1, which the defendants are principally relying on, would have very little impact on this action.  In the event, this action, regardless of the outcome of the PRC Actions, will continue in particular in respect of the claims for damages and loss for the payment of the alleged inflated price, for the breach of the warranty of profit guarantee and for the restraint against the enforcement under the Instruments.

D.  Decision                   

D.1  Preliminary matters

31.To put the discussion in context, I should also mention three matters that in my view are relevant to the issue of stay:

(A) Reliance on PRC Action No 1 only

32.The defendants have in the application referred to the PRC Actions but in the event, Mr Lam has expressly indicated that little reliance will be placed on the PRC Action No 2 since it is still in a very early stage.  Thus, so far as the foreign proceedings are concerned, I would attach little weight to the PRC Action No 2, with the discussion mainly focusing on PRC Action No 1.

(B)  Continuation of the undertakings

33.To counteract, perhaps, the concern Mr Ho raised about the deprivation of the legal address against the defendants in enforcing the undertakings in relation to the Instruments given by the defendants in the event of stay, Mr Lam openly informed the court that the defendants are willing to continue with the continuation of the undertakings in their present form in the event of a stay.

(C)  PRC experts

34.Both parties have filed PRC expert evidence in this application.  The views as expressed by the respective experts touch upon a number of issues such as the probabilities of the transfer of the Shares being declared invalid in the PRC Action No 1;whether the subject matter of this action and the PRC Action No 1 is the same; the chance of the Forged Agreement  being found void; whether there was an overlap of issues between this action and the PRC Actions; the impact of the PRC Action No 1 on the legality of the plaintiff’s shareholding in the Company; the chance of the PRC courts exercising jurisdiction over the dispute, and the prospect of success of the PRC Actions etc.

35.Given the almost complete divergence of views of the PRC experts, I do not consider it appropriate or necessary to rely on the experts’ evidence.  I am of the firm view that the arguments can be satisfactorily dealt with by the application of the relevant legal principles to the materials that are placed before me.  There is no real need to engage the assistance of the PRC experts in this application.  Hence, I’d be disinclined to give consideration to the evidence of the PRC experts.

D.2 whether there is any material non-disclosure?

36.Facts that are relevant to the weighing operation of a court are considered to be material, and are required to be disclosed.  However, if it is established there was material non-disclosure which justified the discharge of the ex-parte order, the court has a discretion to continue the order or make a new order on terms (Secretary for Justice v Choy Bing Wing, CACV 11/2004 (3 December 2004 )  per Yeung, JA, at §48 and  SFC v A , per Kwan J at §§40-42).

37.Further, it is submitted that the question of material non-disclosure is one to be determined in isolation (China North Industries Investments Ltd v Chum [2010] 5  HKLRD 1 per Stock JA at 38, §112), which elucidation should be understood, in my view, in its context by confining it to a situation where a court is tasked to determine a number of contentions including a contention on forum.  It is indeed not in dispute, as shown by the authorities in the preceding paragraph, that a court is very often required to go on to consider the issue of forum conveniens before deciding whether an action is to be stayed (or for that matter, an ex-parte order is to be set aside) when a case of material non-disclosure is established.

38.The subject-matter of non-disclosure that the defendants are complaining about is the failure by the plaintiff to disclose the PRC Actions and the related documents in the ex-parte application for leave to serve out. It was submitted that a mere reference to the PRC Actions for the purpose of confirming the whereabouts of the defendants in the PRC could not be a sufficient disclosure.

39.On behalf of the plaintiff, it was contended that since it had disclosed all the relevant documents in relation to the PRC Actions, it clearly had no intention to conceal them from the court.  In any event, such matters do not have any materiality capable of affecting the court’s decision on the ex-parte application for there is no overlap of issues between this action and the PRC Actions.

40.An application for service out is made ex-parte.  Thus, it imposes upon an applicant or the legal advisers when filing the evidence a duty of making full and frank disclosure of all material facts relevant to the consideration of the court.  Facts which are material to the consideration of an application for service out include all material facts relevant to the consideration as to whether to assume jurisdiction over the defendant and the dispute in question (Pacific Aerosupplies Ltd v Dakota Air Parts International Inc, unreported, HCA 1233/2010 (24 June 2011) per Deputy High Court Judge Coleman SC, at §13).

41.In the ex-parte application for service out, the plaintiff altogether filed three affidavits of Chan Heung Wing (respectively referred to as “Chan’s 1^st, 2^nd and 3^rd Affidavits”), the solicitor for the plaintiff.  In Chan’s 1st affidavit, the solicitor referred to the SPAs, and identified the various wrongdoings and breaches of the terms of the SPAs allegedly committed by the defendants.  The plaintiff also relied on O 11 r 1(d)(i) and (iii) of the RHC, that is the SPAs were made in Hong Kong and that the SPAs provide them to be governed by Hong Kong law.  It is further deposed, as required by O 11 r 4 of the RHC, that the plaintiff has a good cause of action.  The claim document “民事起訴狀” of the PRC Action No 2 was also exhibited. However, the defendants’ PRC addresses as shown in the documents were only referred to in the context of complying with O 11 r 4 in informing the court where the defendants would likely be found.  The solicitor also further submitted in Chan’s 1^st Affidavit that Hong Kong is the appropriate jurisdiction to hear the action.

42.Apart from the claim document民事起訴狀of the PRC Action No 2 having been exhibited to Chan’s 1^st Affidavit, the Plaintiff has further exhibited the claim document民事起訴狀of the PRC Action No 1 to Chan’s 2^nd Affidavit.  In spite of the production of these documents, I tend to agree with Mr Lam that it was clearly for the purpose for confirming the defendants’ addresses in the PRC, rather than disclosing the facts of the Actions material to the court’s consideration.

43.What I find materially lacking in the Chan’s Affidavits is lack of disclosure regarding the material aspects of the PRC Actions in matters such as the fact relating to the identity of parties, to the fact that the claims involve matters consequent on the sale and purchase and the transfer of the Shares. Relevantly, I also believe that the plaintiff ought to have also informed the court of the progress of the Actions especially the fact that the trial of the PRC Action No 1 was concluded and the parties were waiting for the PRC court to deliver judgment.

44.Given the fact that relevant pleadings relating to the PRC Actions had been exhibited, I am inclined to find, as the plaintiff explained, that it had no intention to conceal the PRC Actions from the court.  The mere production of the documents for evidently showing the court where the defendants could likely to be found, however, is not sufficient to discharge the plaintiff’s duty of material disclosure.

45.I am unable to accept the plaintiff’s contention that had these facts been disclosed, the court would in all likelihood still have granted the leave to serve out.  This argument is based on the plaintiff’s taking the view there was no overlap of issues with this action and the PRC Actions.  The view as taken by the plaintiff is a matter of judgment (or more correctly, the view taken by its legal advisers).  If there is serious non-disclosure, poor judgment is not enough to exonerate a plaintiff (see Pacific Aerosupplies Ltd v Dakota Air Parts International Inc, unreported, HCA 1233/2010 (24 June 2011) per Deputy High Court Judge Coleman, SC, at para 72).

46.Hence, the question for determining materiality is not whether the court would have granted the leave to serve out, but whether the plaintiff has fully disclosed facts relevant to the consideration of the court. In this context, the court should have been informed of the identity of the parties, the nature of the claims, the reliefs sought and most important of all, the progress of the PRC Actions and how and to what extent they would likely impact on this action.

47.In the circumstances, having regard to the nature of the claim, I cannot be satisfied that the material facts in relation to the PRC Actions have been disclosed in their proper context, though the disclosure is not deliberate or serious.

48.The finding of material non-disclosure does not however automatically mean that the ex-parte order should be set aside.  I should further consider the issue of forum conveniens before deciding the appropriate order to be made.

D.2  Forum conveniens: whether to set aside

49.In this case, there is little dispute that the plaintiff is required to demonstrate that Hong Kong is clearly an appropriate forum for the plaintiff’s claim to be litigated in Hong Kong.  By virtue of the conferment of the non-exclusive jurisdiction on the Hong Kong Court, the defendants  will need to show strong or overwhelming reasons or exceptional circumstances before  the parties can be allowed to be freed from their contractual bargain (See Nobel Power Investments Ltd per Ma CJHC (as he then was) at 645, §36).

50.It is submitted on behalf of the defendants that the defendants have provided compelling evidence showing that by virtue of the PRC Action No 1 (which is unforeseen) and the approval of the transfer of the Shares by the Plaintiff relying on the Forged Agreement, it is just that the court should stay this action.

51.The main plank of the defendants’ argument on this ground is that the plaintiff has been acting inconsistently in that they have been, using the expression Mr Lam used, “blowing hot and cold”.  It is suggested that on one hand the plaintiff has relied on the terms of the Forged Agreement to obtain the PRC approval of the assignment of the Shares to it while on the other hand, the plaintiff in this action has completely disregarded the Forged Agreement. It is submitted that the SPAs and the Forged Agreement are mutually exclusive.

52.Although references have been made by the experts to the likelihood of whether the PRC courts would likely exercise jurisdiction over this dispute, in view of what I have stated above, and further that there is no concluded evidence pointing to the likelihood of whether or not the PRC courts would exercise the jurisdiction, I think this aspect should only be regarded as a neutral factor.

53.The factor that undoubtedly is to be weighed most favourably for the plaintiff will be the express non-exclusive jurisdiction clause making Hong Kong Court to be the governing jurisdiction and the law of Hong Kong to be the governing law.  The plaintiff undisputedly is contractually entitled to sue on the SPAs in Hong Kong.

54.The PRC Action No 1 is concerned with an alleged improper transfer of shares to the plaintiff after the relevant PRC authority had acted upon the Forged Agreement.  Notwithstanding references having been made to the SPAs in the relevant pleadings of the PRC Action No 1, the cause of action of the latter is not based on the SPAs, but on the alleged forgery.  Neither is there any relief touching upon the SPAs.  Thus, it cannot be said, as Mr Lam has suggested, that the plaintiff has been acting inconsistently by commencing this action in Hong Kong, by relying on the SPAs as the cause of action, while bringing an action on the Forged Agreement in the PRC proceedings.

55.Further, I am also unable to discern evidence that the Forged Agreement and the PRC Actions are unforeseen circumstances for the defendants have not provided any evidence to explain why the PRC Action No 1, impugning the Forged Agreement and the approval of the transfer of Shares was only commenced more than 3 years after the Shares were transferred to the plaintiff in November 2007.

56.All in all, after having taken all the relevant factors discussed above, I come to the view that Hong Kong is the appropriate forum.

D.3   Conclusion on the application for setting aside

57.Apart from finding Hong Kong being the appropriate forum, I further find that there is little prejudice to the defendants in refusing to set aside the ex-parte order as the defendants have acknowledged the service of the writ.  For the reasons given, I am not inclined to set aside the ex-parte order though I have found that there is material non-disclosure as I am satisfied that the plaintiff is entitled to bring proceedings in Hong Kong in respect of the claim based on the SPAs.

D.4  Interim Stay

58.The defendants further apply for interim stay as their fallback position on the ground that the outcome of the PRC Action No 1 would materially change the way the parties conduct this action.

59.Before analyzing the impact, if any, the PRC Action No 1  may have on this action, I should briefly set out the claims as contained in the Plaintiff’s Re-Amended Statement of Claim, which contains the following broad heads of claim :

(a) Breach of the term of the SPAs requiring the defendants to be refraining from engaging in competing business (paras 28-35);

(b) Breach of promises in obtaining land use certificates (paras 36-45);

(c) Breach of warranties concerning the true state of the Company’s management accounts and the inflation of assets (paras 46 to 54);

(d) Fraudulent misrepresentation concerning the construction costs  as set out in the relevant management accounts of the Company (paras 55-63);

(e) Indemnity under the Instruments (paras 64-66);

(f) Breach of the profit guarantee and the set off of the net profit shortfall under the 1^st Instrument (paras 67-82).

60.Would the various heads of claim as set out above, when examined against the context of the claim, likely impact on this action?  If yes, how would it be affected?

61.According to Mr Lam, the PRC Action No 1 would impact on this action in three aspects: First, the bulk of this claim would likely become irrelevant should the defendants succeed in the PRC Action No 1.  Secondly, the parties would need to conduct this action in accordance with the outcome as the parties will be bound by the findings of the PRC Court. Thirdly, costs would be saved if the parties are certain of their respective rights and liabilities once the outcome of the PRC Action No 1 is known.

62.Disputing the relevancy of the PRC Action No 1, Mr Ho contended that the determination of the PRC Action No 1 would not help completely dispose of the Hong Kong action because plaintiff’s claims in respect of those heads in para (c) to (f) that I have summarized will remain to be resolved in the Hong Kong court.

63.As to the other two heads of claim in para 59(a) and (b) above, Mr Ho’s position appears to be a little ambiguous, and he does not seem to be seriously contending that they would have likely been rendered irrelevant in case of a successful outcome for the defendants in the PRC Action No 1.

64.Thus analyzed, I think it is beyond argument that if the defendants were to succeed in the PRC Action No 1, the plaintiff may likely abandon a significant portion of the claim.  Parties have in the submissions invariably used the term “overlap of issues” when discussing the impact of the PRC Proceedings on this action. I somehow think that the use of this expression may be a misnomer.  In weighing up the likely effect the PRC Action No 1 has on this action, I do not think it matters much as to whether there is or not an overlap of issues. It is rather, in my judgment, whether the outcome of the PRC Action No 1 would change the texture and the factual and legal matrix of this action. 

65.A brief examination of the claim tends to show that there is such impact, that is, the texture of this claim in terms of the heads of claim and nature of the defence will likely be affected by the outcome of the PRC Action No 1. Hence, irrespective of the conclusion that I have reached in finding Hong Kong being the appropriate forum for the plaintiff to sue on the SPAs, I respectfully disagree with Mr Ho that the PRC Action No 1 can be disregarded in considering its likely impact on the present action.

66.Having so found, I should next, before deciding how my discretion is to be exercised for the attainment of overall justice, weigh up the advantages and disadvantages of an interim stay.

67.The advantages of a stay are obvious.  The parties will have certainty of their rights and liabilities that would in turn likely result in significant saving of costs and time.  This will resonate with one of the underlying objectives of the Civil Justice Reforms.

68.The disadvantages will be the prejudice that may be caused to the plaintiff as a result of the delay.  In addition, since it is still unknown as to when the judgment of the PRC Action No 1will be delivered though the trial was concluded about one year ago,   a further delay may deny the plaintiff the opportunity of the early resolution of its dispute in Hong Kong.

69.On the other hand, if there is no stay, there is a likelihood that costs will be wasted if the court allows this action to continue without allowing reasonable time for the parties to wait for the judgment of the PRC Action No 1.

70.Having weighed up the pros and cons of an interim stay and taking all the relevant matters into the balance, including the substantial amount (which is in excess of RMB200,000,000) being claimed in this action, the promise by the defendants to continue with the undertakings in respect of the Instruments,  the PRC Action No 1 is shown to be a genuine claim and  already in an advanced stage of proceeding pending for judgment, I am inclined to grant, under the inherent jurisdiction of the court,  an interim stay pending the judgment of the PRC Action No 1.

71.In order to militate the prejudice against the uncertainty as to when the judgment will be delivered and the action concluded, I am not inclined to grant a period of stay at large.  A reasonable duration for the conclusion of the PRC Action No 1 must be imposed.  If no time limit is to be imposed, it may be open to abuse.

72.Given that the PRC Action No 1 was already concluded some months ago, I consider that it is reasonable to give the defendants 6 months to wait for the outcome of the PRC Action No 1.  There should be a liberty to apply should there be any change of circumstances that justify an uplift or extension of the interim stay.

E.  Directions and Orders

73.There is a material non-disclosure but the application for setting aside the ex-parte order of 21 December 2011for leave to issue and serve the Concurrent Amended Writ out of jurisdiction; and the service (including substituted service ordered by Master Ho dated 25 May 2012) of the Concurrent Amended Writ on the defendants is refused.

74.There shall be an interim stay for 6 months or until the final outcome of the PRC Action No 1, whichever is the sooner.

75.There shall be liberty to apply.

76.There will be a costs order nisi that the plaintiff to pay the defendants’ cost of the summons, including costs reserved together with certificate for two counsel. Any application to vary the said costs order nisi should be made within 14 days from the date of the handing down of this judgment.

80.The costs are to be summarily assessed in lieu of taxation if they cannot be agreed within 14 days of the costs order nisi becoming absolute. The defendants are to lodge and serve a statement of costs within 21 days from the date of the costs order absolute and the plaintiff likewise is to lodge and serve its list of objections 3 days thereafter. The costs will be assessed on paper without an oral hearing within 7 days of the lodgment of the list of objections.

81.Lastly, I wish to express my gratitude to counsel for their thorough research and helpful assistance in this application.

Mr Ambrose Ho, SC leading Ms Bonnie Y K Cheng instructed by Messrs DLA Piper Hong Kong for the plaintiff

Mr Paul Lam & Ms Chyvette Ip, instructed by Messrs David Lo & Partners for the defendants