HCK China Investments Ltd v Aachen (Asia Pacific) Consultants Ltd

[2002] NSWSC 863

CITATION:	HCK China Investments Ltd v Aachen (Asia Pacific) Consultants Ltd & Anor [2002] NSWSC 863
CURRENT JURISDICTION:	Equity Division
FILE NUMBER(S):	SC 3351/01
HEARING DATE(S):	13/09/2002
JUDGMENT DATE:	20 September 2002
PARTIES :	HCK China Investments Ltd v Aachen (Asia Pacific) Consultants Ltd & Anor
JUDGMENT OF:	Acting Master Berecry at 1

COUNSEL :	Mr D.B. Studdy (Plaintiff) Mr L.V. Gyles (Defendants)
SOLICITORS:	Deacons (Plaintiff) Makinson & d'Apice (Defendants)
CATCHWORDS:	Foreign service - leave to proceed - stay of proceedings - inappropriate forum - tests - different parties - different cause of action.
LEGISLATION CITED:	Supreme Court Rules
CASES CITED:	West's Process Engineering Pty Ltd (Administrator Appointed) v Westralian Sands Ltd & Anor (unreported, BC9703418 Rolfe J, 6 August 1997) World Firefighters Games Brisbane, 2002 v World Firefighters Games Western Australia Inc (unreported, BC 200102431 Philippides J, 17 May 2001) Henry v Henry (1995-1996) 185 CLR at 571 CSR Limited v Cigna Insurance Australia Limited & Ors (1996/1997) 189 CLR 345 Oceanic Sunline Shipping Co Incorporated v Fay (1988) 165 CLR Voth v Manildra Flour Mills Pty Ltd & Anor (1990) 171 CLR 538 Regie National Des Usines Renault SA & Anor v Zhang (2002) 187 ALR 1 at 197
DECISION:	Refer paragraph 28.

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

ACTING MASTER BERECRY

FRIDAY, 20 SEPTEMBER, 2002

3351/01 HCK CHINA INVESTMENTS LTD v AACHEN (ASIA PACIFIC) CONSULTANTS LIMITED & ANOR

JUDGMENT

1 MASTER: Both the plaintiff and the defendants have filed Notices of Motion pursuant to Part 10 and Part 11 respectively. The plaintiff’s Notice of Motion seeks leave to proceed under Pt 10 r 2 and subsequently the entry of default judgment with damages to be assessed. The defendants’ Notice of motion seeks an extension of time and orders under Pt 11 r 8(1)(g) and (h). In essence the defendants’ seeks a permanent stay of the plaintiff’s proceedings. There are currently proceedings in this Court and in the High Court of Hong Kong.

2 New South Wales Proceedings

The plaintiff commenced the current proceedings by filing a Statement of Claim on 29 June 2001. The plaintiff, HCK is a company incorporated in the British Virgin Islands. The directors of the company are Khoo Ee Ping and Khoo Ee Liam. Mr Khoo Ee Liam is also one of two shareholders of the company. Mr Khoo Ee Liam gives a Sydney address in these proceedings. The first defendant is a company incorporated in Hong Kong. The second defendant currently resides in the Peoples Republic of China. The second defendant is the principal and director of the first defendant which is a corporate finance consultant and business broker operating in Hong Kong. The proceedings are based on allegations that the defendants have breached their fiduciary duty to the plaintiff and have been negligent in the performance of their duties and obligations to the plaintiff.

3 The plaintiff sought to transfer shares in its Badaling interest to a publically listed company. The Badaling enterprise involved the business of a cable car operation on the Great Wall of China. The plaintiff held the majority of shares in that company. The plaintiff through Golden Glory (International) Ltd, sought to transfer those shares into a publically listed company. It is alleged that the defendants suggested that an Australian company be used to achieve this objective. It is further alleged by the plaintiff that the defendants were authorised to act on its behalf to explore the possibility of a transfer and subsequently to advise and act on behalf of the plaintiff.

4 The plaintiff alleges that the defendants acted negligently and breached the fiduciary duty they owed to the plaintiff. The alleged loss suffered by the plaintiff arose because of alleged failure by the defendants to advise the plaintiff of the meaning and effect of the Australian Stock Exchange (ASX) listing rules. The plaintiff seeks damages from the defendants.

5 The plaintiff contends that the damages suffered by it arise partly within the jurisdiction. It is said that the damages sustained by the plaintiff include the payment of fees to lawyers in Australia and its diminution in value by virtue of acquiring approximately 83.57% of the issued share capital in Investment Austasia Limited (Inc). That is the public company which was to be the vehicle to transfer the shares in Badaling. However, there was a non-compliance with the ASX rules resulting in IAL being delisted by the ASX. It is further alleged that the defendants were negligent in that they failed to give correct instructions to Baker & Mackenzie, inter alia, by not requiring that there should be a condition precedent included in the document regarding the ASX confirmation of the continued listing.

6 Hong Kong Proceedings

The first defendant commenced proceedings by Writ of Summons in the Hong Kong High Court on 17 July 2001. Currently those proceedings are between the first defendant and Khoo Ee Liam seeking payment of an amount of $4,322,468.30 pursuant to a mandate agreement entered into between those parties. The agreement is in respect of the first defendant sourcing an Australian listed company for Mr Khoo. The agreement was to be construed and enforced in accordance with the laws of Hong Kong and the parties submitted to the courts of Hong Kong in respect of any matter arising from the agreement. These proceedings are still on foot. Mr Khoo has until 27 September 2002 to file a defence.

7 The Applications

On 6 March 2001 the plaintiff filed a Notice of Motion seeking leave to proceed under Pt 10 r 2 and the entry of default judgment pursuant to Pt 17 r 2(a) of the Supreme Court Rules.

8 On 17 April 2002 the defendants filed a Notice of Motion seeking an extension of time within which to challenge the jurisdiction of the Court and a stay of proceedings.

9 It is necessary to determine the extension of time application before considering the plaintiff’s Notice of Motion.

10 Both parties acknowledged that service of the Statement of Claim was effected pursuant to an order of this Court permitting substituted service. The plaintiff did not raise any strong objections to the extension application. The defendants base the application on the fact that neither of the defendants came into possession of the Statement of Claim until March or April 2002. However, the relevant matter is receipt of the document in conformity with the order not possession.

11 The second defendant’s evidence is that he was not aware that there was any time limitation in relation to a challenge to the Court’s jurisdiction. However, once he was advised, he instructed his solicitors to seek an extension. The time frame for this appears to have been about five weeks.

12 It is contended on behalf of the defendants that the extension required is only a period of two months, whereas the matters asserted in the Statement of Claim arose in 1998. Thus, it took the plaintiff three years to commence the proceedings. The plaintiff was unable to point to any prejudice it might suffer should an extension be granted, whereas the defendants submitted that if the extension was not granted they would be prejudiced because the plaintiff may enter default judgment, thereby not giving the defendants any proper opportunity to defend the claim in circumstances where it was seeking to, quite properly, raised jurisdictional questions.

13 In the absence of any evidence of any prejudice to the plaintiff, I have regard to the fact that personal service was not effected and that the second defendant properly took steps to make application once he became aware of the limitation, I am of the view that the defendant would suffer prejudice were I not to grant leave. Therefore, I extend the time for making application pursuant to Pt 11 r 8 up to and including 17 April 2002.

14 Inappropriate Forum

It is submitted on behalf of the defendants that the New South Wales proceedings should be permanently stayed for the following reasons:-

1. The parties are not residents or incorporated in Australia.
2. There have been proceedings between the parties and there continues to be proceedings between the parties in Hong Kong.
3. Those proceedings arise out of the same issues.
4. The dispute should be determined in accordance with the laws of Hong Kong.

15 The defendants submit that the mandate agreement between the first defendant and the Khoo’s which is the subject of the Hong Kong proceedings, is the central issue of the proceedings in New South Wales. It is said that the monies owed pursuant to that agreement are for the work that the plaintiff alleges was performed negligently by the defendants. It is said therefore, that the disputes involve the same issues and ought to be determined by the same Court. The defendants rely on the following authorities for the proposition that New South Wales is clearly the inappropriate forum, namely, West’s Process Engineering Pty Ltd (Administrator Appointed) v Westralian Sands Ltd & Anor(unreported, BC 9703418 Rolfe J, 6 August 1997); World Firefighters Games Brisbane, 2002 v World Firefighters Games Western Australia Inc (unreported, BC 200102431 Philippides J, 17 May 2001); Henry v Henry (1996) 185 CLR at 571; CSR Limited v Cigna Insurance Australia Limited & Ors (1996/97) 189 CLR 345.

16 It is contended on behalf of the defendants that because of the exclusive jurisdictional clause the New South Wales proceedings should be permanently stayed and any ventilation of the matters arising in those proceedings should be determined in Hong Kong. In part, this is based on the fact that the Khoos entered into an agreement with the first defendant to explore the possibility of acquiring a publically listed company in Australia. However, the mandate agreement makes no reference to HCK, the plaintiff in these proceedings. It is difficult to see how it can be said, therefore, that HCK is a party to that agreement. Therefore, it could not be said that HCK should be made to perform its part of the bargain under that agreement, as it was not a party to that agreement. Therefore, in my view, the authorities that are relied on by the defendants, so far as choice of law clauses and choice of forum clauses do not apply. In my view, the plaintiff is not bound by that agreement as it was not a party to that agreement.

17 Further, in the cases relied on by the defendants, in each case there were either concurrent proceedings between the same parties and the same issues, or there was one set of proceedings with another set of proceedings anticipated in a foreign jurisdiction. In the material before me it is clear that the parties to the Hong Kong proceedings are different to the parties to the New South Wales proceedings in that the first defendant in the New South Wales proceedings has brought proceedings solely against Mr Khoo. There has not been joined to those proceedings the plaintiff in the New South Wales proceedings.

18 It is submitted on behalf of the plaintiff that the defendants’ application should be dismissed. In support, it relies on the following matters:

1. The plaintiff’s solicitor receives most of his instructions from a director of the plaintiff, resident in Sydney.

2. The second defendant has previously travelled to Australia to give evidence in the Federal Court of Australia in Sydney (in the matter of HCK China Investments Ltd v Solar Honest Ltd & Ors (1999) 165 ALR at 680).

3. Experts with specialised knowledge and experience in Australian Corporations Law, the Australian Share Market and ASX Listing Rules will give evidence in the proceedings.

4. It will be far more convenient for those Australian experts to prepare their evidence and give their evidence in Australia than having to do so in Hong Kong.

5. The relevant documents, by way of discovery in subpoena, are located in Sydney.

6. Several of the plaintiff’s lay witnesses reside in Sydney.

19 In Oceanic Sunline Shipping Co. Incorporated v Fay (1988) 165 CLR at 224 Deane J made the following comments about the Court’s jurisdiction to stay proceedings:-

“Not only is the jurisdiction one which should be exercised “with great care” or “extreme caution”. It has, as has been indicated, traditionally been seen as a jurisdiction which is only available to be exercised on inappropriate forum grounds where the court whose jurisdiction has been invoked by the plaintiff is so inappropriate for their determination that a continuance of the proceedings in it would be productive of the injustice of oppression and vexation of the defendant.”

And at 247:-

“If the plaintiff is not acting bona fide or in pursuit of a legitimate advantage in pursuing the proceedings in the legal system of this country, that will, of course, make it much easier for a continuation of the proceedings to be characterized as vexatious or oppressive, since there will be little if anything to put into the balance against the inconvenience which would be sustained by the defendant. On that approach, “oppressive” should, in this context, be understood as meaning seriously and unfairly burdensome, prejudicial or damaging while “vexatious” should be understood as meaning productive of serious and unjustified trouble and harassment.”

20 The plaintiff has prima facie the right to have the forum exercise the jurisdiction regularly invoked by the plaintiff either through service on the defendant within the forum or outside, unless the forum is satisfied that it is clearly inappropriate.

21 The onus of establishing that satisfaction lies upon the party who seeks a stay. In my view the defendant has not discharged that onus.

22 The fact the solicitors, witness and documents are within the Court’s jurisdiction is not determinative of the appropriateness of this forum’s jurisdiction. However, they are matters to which the Court must have regard. The statement of Claim pleads breaches and damages which arise within the jurisdiction. On the face of the Statement of Claim I do not think it can be said that the plaintiff is not bona fide in commencing the proceedings in this jurisdiction.

23 In Voth v Manildra Flour Mills Pty Ltd & Anor (1990) 171 CLR 538 the High Court followed and cited with approval by the majority with the statement by Deane J. In Regie National Des Usines Renault SA & Anor v Zhang (2002) 187 ALR 1 the Court commented that a Court is not an inappropriate forum merely because another Court is more appropriate. In Henry v Henry (1995-1996) 185 CLR 571 at 591 the Court said:

“It is prima facie vexatious and oppressive, in the strict sense of those terms, to commence a second or subsequent action in the courts of this country if an action is already pending with respect to the matter in issue.”

In C.S.R. Limited v Cigna Insurance Australia Limited & Ors (1996-97) 189 CLR 345 at 401 the Court said:

“Proceedings which are brought for the dominant purpose of preventing another party from pursuing remedies available in the courts of another country and not available in this country are “seriously and unfairly…..prejudicial [and] damaging”. They are, thus, oppressive in the Voth sense of that word.”

24 In any event, in the current New South Wales proceedings the parties are different to the parties in the High Court of Hong Kong. Therefore, it could not be said that the proceedings are either vexatious or oppressive. Further, the proceedings in New South Wales were commenced prior to the proceedings in Hong Kong. However, there were earlier proceedings between Aachen and the Khoos in respect of the mandate agreement before the High Court of Hong Kong. However, those proceedings were discontinued. I do not think that that assists the defendant in establishing that the Supreme Court of New South Wales is the inappropriate forum for the determination of current proceedings.

25 Therefore, I decline to grant a permanent stay of the current proceedings. The defendants are to pay the plaintiff’s costs on the defendants’ Notice of Motion.

26 The plaintiff seeks leave to proceed pursuant to Part 10 r 2 of the Rules. There has been nothing put by the defendant that the plaintiff does not have an arguable case. In my view, the plaintiff has established that Part 10 r 1A(1)(e) applies. In my view, the plaintiff’s claim could not be described as manifestly groundless or that prospects of success are poor, therefore the plaintiff is entitled to the order it seeks in paragraph 1 of its Notice of Motion.

27 The plaintiff also seeks leave to enter judgment pursuant to Part 17 r 2A of the Rules. It seems to me that such an application is premature. The defendant has seven days after the dismissal of the Notice of Motion pursuant to Part 11 r 8 within which to file a Notice of Appearance (Pt 7 r 5(1)(c) and a further fourteen days thereafter to file a defence (Pt 15 r 3). It seems to me therefore that the appropriate time to seek orders in accordance with paragraph 2 of the Notice of Motion will not arise until twenty-one days after this decision. Therefore, I decline to make orders in accordance with paragraphs 2 and 3 of the Notice of Motion.

28 The formal orders I make are:-

On the defendant’s Motion:-

1. Extend the time for making application pursuant to Part 11 rule 8 up to and including 17 April 2002.
2. Dismiss the balance of the motion.
3. Defendant pay the plaintiff’s costs.

On the plaintiff’s Motion:-

1. Leave be granted to the plaintiff to proceed under Pt 10 r 2 of the Supreme Court Rules.

2. The defendants to pay the plaintiff’s costs of the Motion.

3. Balance of this motion stood over with liberty to re-list on three days notice.

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Last Modified: 09/23/2002