Lun v Kong
[2023] NZHC 1370
•1 June 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2022-404-795
[2023] NZHC 1370
BETWEEN DAMIN LUN
Plaintiff
AND
YONGCING KONG
Defendant
Hearing: 17 April 2023 Appearances:
L A O’Gorman KC and L C Sizer for the Plaintiff R E Harrison KC and B Norling for the Defendant
Judgment:
1 June 2023
JUDGMENT OF ASSOCIATE JUDGE C B TAYLOR
[Application to set aside the defendant’s protest to jurisdiction]
This judgment was delivered by me on 1 June 2023 at 3:00pm
pursuant to Rule 11.5 of the High Court Rules
…………………………. Registrar/Deputy Registrar
Solicitors:
Buddle Findlay (Luke Sizer/Z T P Sinclair), Auckland, for the Plaintiff
Norling Law (Brent Norling/Anja Cherkashina), Auckland, for the Defendant
Copy for:Laura O’Gorman KC, Auckland, for the Plaintiff Rodney E Harrison KC, Auckland, for the Defendant
LUN v KONG [2023] NZHC 1370 [1 June 2023]
TABLE OF CONTENTS
Paragraph
Introduction [1]
Background [2]
Mr Lun’s application to set aside [5]
Affidavit of Damin Lun dated 20 October 2022 [7]
Affidavit of Yu Zheng dated 25 October 2022 [26]
Mr Kong’s opposition [30]
Affidavit of Yongcing Kong dated 1 March 2023 [31]
Reply affidavit of Damin Lun dated 15 March 2023 [47]
Legal principles [55]
Approach to analysis [57]
Personal jurisdiction and subject matter jurisdiction: [59]
Personal jurisdiction [59]
Subject matter jurisdiction [62]
Conclusions in relation to jurisdiction [74]
Forum non conveniens [78]
Is there a forum other than New Zealand which is clearly or distinctly
more appropriate? [79]
Conclusion in relation to appropriate forum [83]
Are there special circumstances requiring that the trial should
nevertheless take place in New Zealand? [86]Conclusion in relation to special circumstances [88]
Result [90]
Orders [91]
Introduction
[1] Mr Damin (Alan) Lun (Mr Lun) has applied to set aside a notice filed by Mr Yongcing (Sam) Kong (Mr Kong) protesting the jurisdiction of the High Court to hear and determine the substantive proceeding concerning whether Mr Kong committed a breach of trust in relation to Mr Lun in respect of shares in an investment interest in the People’s Republic of China.
Background
[2] On 20 May 2022, Mr Lun first filed proceedings in New Zealand alleging a breach of trust by Mr Kong. An amended statement of claim was subsequently filed on 26 May 2022.
[3] On 15 July 2022, Mr Kong filed a notice of appearance protesting the jurisdiction of the High Court to hear and determine the substantive proceeding. Instead, he asserted that China is the more appropriate forum.
[4] On 27 October 2022, Mr Lun then filed this interlocutory application to set aside the notice of appearance.
Mr Lun’s application to set aside
[5] Mr Lun seeks orders setting aside Mr Kong’s notice of appearance protesting jurisdiction, making directions for further conduct of this proceeding, and for costs and disbursements.1
[6]The grounds on which the orders are sought are:2
1 Interlocutory application by plaintiff to set aside protest to jurisdiction dated 27 October 2022 at [1].
2 At [2].
(a) The courts of the People's Republic of China (PRC) is not clearly or distinctly the more appropriate forum than this Court to determine this proceeding:
(i) the plaintiff and defendant are both New Zealand residents domiciled in New Zealand;
(ii)the plaintiff's claim is governed by New Zealand law;
(iii)the subject matter is most closely connected to New Zealand:
(1)the plaintiff's claim concerns the in personam obligations of the defendant as a New Zealand domiciled-trustee;
(2)the plaintiff's cause of action arose within the jurisdiction;
(3)the plaintiff's losses accrue within the jurisdiction;
(iv)relevant witnesses are domiciled in New Zealand and compellable to give testimony and provide evidence here, while any additional witnesses in the PRC are not compellable to give testimony or provide evidence in either jurisdiction;
(v)any judgment against the defendant will need to be enforced in New Zealand;
(vi)the defendant has indicated that he intends to litigate counterclaims related to the plaintiff's claim, which raise common issues of fact, in New Zealand;
(b) In the alternative to 2(a) above, it is unjust for the plaintiff to be deprived of its right to trial in New Zealand:
(i) the plaintiff initially commenced proceedings against the defendant (and others) in the PRC seeking repayment of the dividends payable on the shares held by the defendant beneficially in favour of the plaintiff in Guangzhou Zhanyang Trading Co Ltd (PRC Claim);
(ii)the defendant took no steps in the PRC Claim and did not adduce any evidence or give any testimony;
(iii)following the defendant's Protest, the plaintiff elected to pursue this proceeding, and discontinued the PRC Claim on 31 August 2022;
(iv)if the plaintiff is required to file this proceeding in the PRC, he may face limitation issues (under both PRC and New Zealand law).
Affidavit of Damin Lun dated 20 October 2022
[7] Mr Lun has made an affidavit in support of his set aside application.3 He annexes to the affidavit several documents written in Mandarin. Translations of these documents into English has been effectuated by Ms Yi (Lori) Liang, a qualified and certified translator and interpreter, as set out in her affidavit.4
[8] Mr Lun deposes that while a Chinese citizen, he has lived in New Zealand since 1998. He and Mr Kong were in business in New Zealand from 1998 to 2014. Mr Lun deposes that Mr Kong lived in New Zealand between 1998 to 2011, then returned to China to live but made routine business trips back to New Zealand, and then returned to live in New Zealand again in 2020.
[9] Mr Lun explains that the substantive proceeding alleges a breach of trust related to 5% of shares (the shares) issued in Guangzhou Zhanyang Trading Co Ltd (the Company) which he alleged Mr Kong holds on trust beneficially for him. The alleged breaches include failing to account for dividends payable on the shares, provide him with information in relation to the shares and arrange for registration of the shares in his name.
[10] Between 2005 and 2006, Mr Lun deposes that he met Mr Gao, a friend of Mr Kong, and the three of them discussed business investments. Mr Gao moved back to China from New Zealand in 2006 and purchased with a business partner, Mr Tan, the Wanxin Mansion in Guangzhou, China for development. Mr Kong and Mr Lun jointly invested in the Wanxin Mansion. In or around early 2007, Messrs Gao and Tan bought out Messrs Lun and Kong who made a profit of 2 million yuan paid into Mr Kong’s Chinese bank account.
[11] In or around 2007, Mr Lun deposes that while they were both in New Zealand, he and Mr Kong agreed to invest in Shilou Commercial and Trade Market business premises in Guangzhou (Shilou Market). The investment was to be made from the joint proceeds of the Wanxin Mansion sale and further joint funds. Mr Lun further
3 Affidavit of Damin Lun in support of interlocutory application to set aside protest to jurisdiction dated 20 October 2022.
4 Affidavit of Yi Liang annexing translation dated 27 October 2022.
states that he and Mr Kong agreed that Mr Gao would establish the Company to purchase and operate the Shilou Market and that their joint investment would be used to purchase 10% shares in the Company, which would be held in Mr Kong’s name, but of which 5% would be held on trust for Mr Lun.
[12] In regard to creation of the Company as the investment vehicle, Mr Lun deposes that in early 2007 Mr Kong, Mr Gao and Mr Xu Jianxin (Mr Xu) signed a Cooperation Agreement (the Cooperation Agreement). The Cooperation Agreement meant Mr Gao would represent the Cooperation Agreement’s parties and would sign a Cooperative Operation contract with Mr Gan Fanglun (Mr Gan) to jointly establish the Company which would purchase and operate the Shilou Market. Mr Gao was to hold 50% of shares in the Company through his nominee, Mr Meng Guancheng (Mr Meng), with the remaining 50% to be held by Mr Gan. Mr Gao’s 50%, held through Mr Meng, would be owned beneficially by the Cooperation Agreement’s parties — 30% for Mr Gao, 10% for Mr Kong, and 10% for Mr Xu.
[13] On or about 28 March 2007, Messrs Gao and Gan signed the requisite Co-operative business operation contract to establish the Company (the Cooperative Operation Contract). The Cooperative Operation Contract established the Company, which would purchase the Shilou Market in its name, and assigned equal shares to Messrs Gao and Gan entitling them to the corresponding Company profits. Such profits were to be distributed quarterly after the fact within ten days of the first month of each quarter. Subsequently, the Company duly bought and obtained the Real Estate Title and Market Operations Rights of the Shilou Market, which it then operated.
[14] Mr Lun then deposes that on or about 18 February 2014, he and Mr Kong entered a Deed of settlement (the Settlement Deed) in New Zealand to separate their various businesses and dealings. The Settlement Deed was also entered into by Hauraki Trust (a Mr Lun family trust), Kong Family Trust (Mr Kong’s family trust), Sam’s Fukuyama Food Services Ltd (their old company), Mega Food Services Ltd (their new company), Best Chicken Ltd (their old chicken processing company) and The Fresh Ltd (their new chicken processing company). At that time, Mr Lun highlights that he and Mr Kong were joint investors in a Chinese construction project (Tan Project) alongside their joint ownership of the two New Zealand companies
(Mega Food Services and The Fresh). The Settlement Deed provided for Mr Kong to acquire complete ownership of the Tan Project in exchange for Mr Lun acquiring complete ownership of Mega Food Services and The Fresh.
[15] Mr Lun deposes that cl 6(a) of the Settlement Deed provided for the remaining interest in the Shilou Market as follows:
Shareholding in Guangzhou Panyu Shiliu Market — Alan and Sam invested in the Guangzhou Panyu Shiliu Market. Sam is registered as a shareholder for 10% shareholding in this investment. Sam acknowledges that of the shares Sam holds in this investment 5% belongs to Alan so that Sam only holds the 5% shares belonging to Alan as a bare trustee and Sam shall have no equitable or beneficial interest in Alan's 5% shareholding. Sam warrants that Sam shall arrange for Alans' ownership of the 5% shares to be legally recorded with the appropriate authorities to ensure Alan's rights are recognised protected and will be enforceable by Alan.
[16] Mr Lun is of the view that Mr Kong correctly paid him all dividends on his shares between May 2007 and 23 May 2019. The last dividend payment he received was on 23 May 2019 for dividends up until and including February 2019. In or around late 2019, Mr Kong phoned Mr Lun to say that the Company had not declared any dividends for the second half of 2019 as it was closed for renovations, but Mr Lun says he was never provided with any evidence of this. Mr Lun believes that the Company continued to declare and pay dividends on the shares to Mr Kong from March 2019 to date.
[17] When Mr Kong returned to live in New Zealand in 2020, Mr Lun asked about the dividends, but Mr Kong said he had no idea as he was in New Zealand now. Mr Lun says that on 3 August 2020 his lawyers in China made a demand on Mr Kong to register Mr Lun’s ownership of his 5% shares with the Industrial and Commercial Registration Department (ICRD) within three months of the demand. Then in or around April 2021, Mr Lun again asked about the dividends and Mr Kong refused to pay them. Mr Lun explains this refusal occurred at about the same time as Mr Kong raised other allegations against him and one of his family trusts which had dealings with Mr Kong and his interests in New Zealand.
[18] On 20 May 2021, Mr Lun’s Chinese lawyers made a demand on Mr Kong, the Company, Mr Gao and Guangzhou Huayue Investment Partnership (Mr Gan’s
investment entity) for payment of all outstanding dividends payable on Mr Lun’s shares and for provision of the Company’s financial statements since 2019.
[19] On 27 August 2021, Mr Lun’s New Zealand lawyers made a further demand on Mr Kong in relation to the shares. Mr Kong responded by letter through his New Zealand lawyers on 22 October 2021 in which he admitted holding the shares on trust for Mr Lun, said the Company did not declare dividends for the second half of 2019 as the Shilou Market was closed for renovations, alleged he had been unable to check if the Company has paid him since 2020 as his Chinese internet banking had been locked and required his physical presence in China to be reactivated, denied that the Settlement Deed was legally binding on him, and counter demanded. Mr Kong claimed the Settlement Deed was not binding as he did not read its terms, would never have agreed to cl 6(a), claimed it had not been properly witnessed, and challenged its authenticity seeking to have the original provided to his expert document examiner. His counter demand was for undistributed profits Mr Kong alleges were generated by Mega Food Services and The Fresh between 1998 and 2012, his alleged share of accrued dividends from both companies since 2012 and the transfer of 500 shares in each company to him.
[20] On 28 October 2021, Mr Kong’s New Zealand lawyers sent a further letter challenging the Settlement Deed’s validity by claiming that he and Mr Kong lacked authority to enter it on behalf of Best Chicken and Sam’s Fukuyama Food Service.
[21] On 26 November 2021, Mr Lun’s New Zealand lawyers made further demands on Mr Kong regarding the shares and sought disclosure of the Company’s financial information since 2019 if Mr Kong continued to deny liability. It also rejected the counter demand as unsubstantiated.
[22] Mr Lun deposes that he filed a claim against Mr Kong, Mr Gao and the Company in China on 10 December 2021 seeking dividends for the period between March 2019 and September 2021(the China claim). Mr Kong took no steps to appear in relation to this claim.
[23] Mr Lun’s New Zealand lawyers sought a tolling agreement with Mr Kong so that the New Zealand limitation period would pause while the China claim proceeded. As Mr Kong did not respond, Mr Lun filed the current New Zealand proceedings in which Mr Kong subsequently served the protest to jurisdiction. Following the protest, on 21 August 2022 Mr Lun withdrew the China claim with Mr Kong having taken no action on it and no judgment having been rendered. Mr Lun believes that Mr Kong is aware of the dividends and has refused to pay them or provide him with the relevant financial information in relation to them.
[24]Mr Lun wishes to litigate these proceeding in New Zealand because:
(a)He and Mr Kong are currently domiciled in New Zealand making it more expensive and onerous for them to attend hearings in China.
(b)Mr Kong did not take any steps in the China claim and Mr Lun withdrew that claim after Mr Kong objected to the New Zealand claim. He may have statutory limitation period issues if required to re-file in China.
(c)The Settlement Deed was drafted and signed in New Zealand with witnesses who live in New Zealand. He and Mr Kong were living in New Zealand when they agreed to invest in Shilou Market and Mr Kong agreed to hold shares beneficially for him. A substantial part of the payments for the shares initially originated from New Zealand.
(d)Mr Kong was in New Zealand in April 2021 when he refused to meet his obligations as trustee.
(e)Any judgment for Mr Kong’s breach of trust in New Zealand would need to be enforced in New Zealand.
(f)The New Zealand claim will require discovery of the documents evidencing the dividends payable, but if heard in China Mr Kong
cannot be compelled to provide such evidence as there are no discovery obligations.
[25] Finally, Mr Lun notes that for this claim he will need to call New Zealand-based witnesses. He acknowledges that the key issue is the validity of the Settlement Deed and Mr Kong’s understanding of cl 6(a) at the time of signing. Mr Lun would be likely to call New Zealand-based witnesses to the signing of the Settlement Deed to argue for its validity, which he could not achieve through compulsion in China. Likewise, Chinese witnesses could not be completed to participate in either New Zealand or Chinese proceedings. Ultimately, Mr Lun deposes that his claim would be materially and adversely affected without the New Zealand witness’ testimony.
Affidavit of Yu Zheng dated 25 October 2022
[26] Ms Zheng, a Beijing-based Law Partner at JunHe LLP, has provided an expert affidavit on Chinese law in support of Mr Lun’s application.5 She addresses applicable principles of Chinese law in relation to discovery of evidence, attendance of witnesses in civil proceedings, and statutory limitation periods.
[27] On discovery, Ms Zheng deposes that it or any similar process is not available under Chinese law, but there are some provisions which require opposing parties to submit documentary evidence. Article 112 of the Interpretation of Civil Procedure Law allows for the party who bears the burden of proof to seek the court to order the opposite party to submit documentary evidence clear and necessary to provide facts on which evidence is to be given.
[28] On witnesses, Ms Zheng deposes that witnesses in a civil proceeding cannot be compelled to testify or appear in a Chinese court. Under arts 75 and 76 of the Civil Procedure Law, the general principle is that (i) any individual who knows any circumstances of a case shall have the obligation to testify in court; (ii) upon notice by a people's court, a witness shall testify in court. Article 68 of the Evidence Provisions
5 Affidavit of Yu Zheng in support of interlocutory application by plaintiff to set aside protest to jurisdiction, affirmed 25 October 2022.
also has similar provisions about witnesses to give testimony. However, there are no means to compel attendance or testimony in a Chinese court and the obligation under arts 75 and 76 is not compulsory or enforceable. In addition, under art 68 of the Evidence Provisions, testimony provided in writing or otherwise by a witness who fails to appear in court without justifiable reasons (including health reasons, remote residence and travel difficulty, force majeure or other justifiable reasons) shall not be taken by the Court as the basis for ascertaining the facts in a case. The Court may also refuse to admit the written testimony of a witness who fails to appear in court to testify.
[29] On statutory limitations, Ms Zheng deposes that if a civil claim is governed by Chinese law then under art 188 of the Civil Code the limitation period is three years from the date that an obligee knows or should have known that their right has been infringed and who the obligor is. This is subject to interruption by the obligee requesting performance or filing lawsuit which resets the three years. The maximum long stop period is 20 years absent judicial intervention. Ms Zheng also notes that in cases such as this concerning foreign-related civil relations then the limitation period is governed by the substantive applicable law.
Mr Kong’s opposition
[30]Mr Kong opposes the application on the following grounds:6
a. The courts of New Zealand are forum non-conveniens for the hearing and determination of the plaintiff’s claim against the defendant.
The plaintiff is a citizen of the People's Republic of China (PRC).
ii. The plaintiff and the defendant both have PRC residences and multiple business ventures in the PRC.
iii.The plaintiff and the defendant both have PRC bank accounts including the bank account used for receipt and payment of the Shilou Market dividends (the investment that is the subject of this proceeding).
iv. The plaintiffs alleged cause of action is governed by PRC law and subject to the jurisdiction of the Courts of the PRC:
A.The agreement regarding the investment in the Shilou Market was made in 2007 between investors in the
6 Notice of opposition to interlocutory application by plaintiff to set aside defendant's protest to jurisdiction dated 24 February 2023 at [1]–[3].
PRC, including the plaintiff, the defendant, and another investor, Mr Gao.
B.The investment in Shilou Market was made in accordance with Chinese law and local and regional practices.
v. The plaintiffs alleged losses accrue within the PRC.
vi. The defendant has paid in full all outstanding dividends owing to the plaintiff and has provided an explanation for previous delays in payment.
vii.New Zealand courts are not familiar with Chinese trade practice, customs and law, to adjudicate on what is essentially a Chinese business dispute.
viii.If and to the extent that the nature and terms of the agreement between the plaintiff and the defendant referred to in above at paragraph 3(iv)(A) are in dispute, material witnesses for the defendant (referred to in the defendant's Affidavit) reside in the PRC. If New Zealand courts were to hear the dispute, it would be impracticable for Chinese witnesses to attend or participate in such proceedings.
ix. It would also be costly for a New Zealand court to hear and determine what is a Chinese legal dispute.
x. By issuing proceedings in the PRC in relation to the subject matter of this proceeding, the plaintiff has already accepted that the PRC was (and is) the more appropriate forum for the resolution of the dispute.
b. And upon further grounds appearing in the affidavit of the defendant, Yongcing Kong to be sworn and filed in opposition to the Application.
Affidavit of Yongcing Kong dated 1 March 2023
[31] Mr Kong has made an affidavit in support of his opposition to the set aside application.7 His affidavit is written in and annexes several documents written in Mandarin. Translation into English has been effectuated by Mr George Chang, a qualified and certified translator and interpreter, as set out in his affidavit.8
[32] Mr Kong deposes that he was born and raised in China and previously held Chinese citizenship, despite now holding only New Zealand citizenship since 1991 as
7 Affidavit of defendant in opposition to application by plaintiff to set aside protest to jurisdiction dated 1 March 2023.
8 Affidavit George Ming Chang as to translation of affidavit of Yong Cing Kong and exhibits to affidavit dated 1 March 2023.
China does not recognise dual citizenship. He accepts that he is currently resident in New Zealand and has been since February 2020, but deposes that he has a long-term residence in Guangzhou and business interests in both New Zealand and China. He accepts that he has been involved since 1998 in business and joint investments with Mr Lun in both New Zealand and China, including in the Wanxin Mansion, Guangzhou Panshan Changye Centre, Qianhui Seafood, and Tan Project.
[33] Mr Kong initially sets out his disputed views around the source of joint funds used for some past investments, such as Wanxin Mansion. He reiterates that in 2006 Wanxin Mansion was proposed and invested in and then sold in 2007. He then sets out prior investment in the Guangzhou Panshan Changye Centre which was then sold to fund the Tan Project.
[34] Regarding being trustee, Mr Kong disagrees that he is Mr Lun’s trustee for his share of the investment in Shilou Market. Mr Kong deposes that, as alleged in the Amended Statement of Claim, he was the one who initially invested and it was only later that Mr Lun decided to become involved and jointly invest in the Shilou Market. Mr Kong recalls discussing Mr Lun’s investment in a restaurant in Guangzhou and that there was no trust documentation signed, nor agreement or discussion about trusteeship, particularly given China does not have an equivalent to the trust regime.
[35] Overall, Mr Kong deposes that the Shilou Market investment arose in the context of his and Mr Lun’s ongoing informal business relationship conducted in accordance with Chinese custom and practice. Consistent with their practice, Mr Kong invested his and Mr Lun’s joint funds in Shilou Market through the Company in August 2007 once he had returned to live in China.
[36] Mr Kong signed the Cooperation Agreement with Mr Gao and Mr Xu on 7 August 2007 after Mr Gao and Mr Gan had signed the Cooperative Operation Contract on 28 March 2007. Both the Agreement and Contract set up the Company share structure — 50% to each of Messrs Gao and Gan, and 10% of Mr Gao’s shares held for Mr Kong. That structure could not be subsequently changed to suit the requirements of any other investor, for example Mr Lun seeking registration of his shareholding in the Company.
[37] Mr Kong accepts that he told Mr Lun after the fact about the investment and they met to discuss it at the restaurant in Guangzhou shortly after the Cooperation Agreement was signed. Mr Kong deposes that it was clear to him that Mr Lun wanted to jointly invest and that Mr Lun accepted the investment structure already in place which he accepted by writing “The structure of the shares remains as it is” on the restaurant’s docket. Given this, Mr Kong disputes that the agreement to invest occurred while they were in New Zealand, instead saying it occurred in the Guangzhou restaurant.
[38] Mr Kong disputes Mr Lun’s contention that the 2006 payments were made to invest in the Company. Instead, he says the receipts provided were for the first payment for the short-term investment in Guangzhou Panshan Changye Centre and the second payment for the Wanxin Mansion, noting that the Shilou Market was not for sale in 2006.
[39] Regarding the structure, Mr Kong deposes there is no doubt that Mr Lun and he were aware that Mr Gao would contractually hold and register the Company shares in his name. Messrs Kong and Lun’s shares would not be registered and therefore they cannot assert any rights of shareholders to obtain financial information or require declaration of dividends under Chinese law. Mr Kong concludes that he therefore has no authority under the Cooperation Agreement to compel registration in Mr Lun’s name.
[40] Given Mr Kong has no authority to compel such registration, Mr Kong believes that he is having imposed upon him a non-existent legal duty to register the shares due to a clause in the Settlement Deed, a duty which it is impossible for him to carry out. Mr Kong says that Mr Lun was under no pressure to jointly invest and agree to the terms which were already binding on Mr Kong. Mr Kong could have invested alone if Mr Lun had not agreed.
[41] Mr Kong confirms he has paid in full any dividends owing to Mr Lun and paid by the Company. If Mr Lun wishes to withdraw from the arrangement, Mr Kong is open to buying him out, but claims Mr Lun cannot now insist on registration of the shares which is a matter for Chinese, not New Zealand, jurisdiction.
[42] Regarding the payment of dividends, Mr Kong asserts that there have been no dividends paid since July 2019 because the July to December 2019 dividends were only paid in January 2020, when he was back in New Zealand. His Chinese internet banking was subsequently locked and due to COVID-19 he could not return to China to unlock it in person. He did try to get his wife who resides in Guangzhou to get it unlocked before this time, but those attempts were unsuccessful. He also notes that there were no dividends paid for a period in 2020 as the Shilou Market was closed for renovations after the lease expired in December 2019.
[43] After Mr Kong’s banking access was restored, he distributed all Shilou Market dividend payments received in the interim that were owning to Mr Lun. This was completed on 17 February 2023.
[44] Mr Kong was aware of the China claim and that a trial would take place on 1 June 2022, but then heard from his Chinese lawyer that Mr Lun had withdrawn the lawsuit on 30 August 2022. Mr Kong understood Mr Lun was only able to file suit in China because of his Chinese citizenship.
[45] Mr Kong believes that China is the correct jurisdiction to hear this dispute because:
(a)Mr Lun is a Chinese citizen and both he and Mr Kong have Chinese residences, business ventures and bank accounts there, including those used for Shilou Market transactions.
(b)The agreement to invest was made in 2007 in a restaurant in China.
(c)The investment was made in accordance with Chinese law and local and regional practice.
(d)The overall Shilou Market investment operates under a mixture of partnership and company structures under Chinese law and business practice.
(e)New Zealand courts are not familiar with Chinese trade practice, customs and law to adjudicate on a Chinese business dispute.
(f)It would be inconvenient and impracticable for Chinese witnesses, including Messrs Gao and Xu and a Company representative to attend New Zealand court proceedings.
(g)It would be costly for a New Zealand Court to hear and determine a Chinese legal dispute.
(h)By initially filing in China, Mr Lun accepted that China was and is the more appropriate forum and he provides no valid reason for withdrawing suit.
[46] In conclusion, Mr Kong says that he has not refused to meet his obligations, has explained any reasons for earlier non-payment and has paid any outstanding amounts.
Reply affidavit of Damin Lun dated 15 March 2023
[47]Mr Lun has made an affidavit in reply to Mr Kong’s in opposition.9
[48] On the source of joint funds, Mr Lun sees little relevance given Mr Kong ultimately acknowledges that he invested their joint funds in the Shilou Market.
[49] On the initial investment discussions, Mr Lun denies that the restaurant investment meeting in Guangzhou, in which the restaurant receipt was annotated, ever took place. Mr Lun denies that it is his handwriting on the receipt and asserts that he has never seen that receipt before. He is also surprised by Mr Kong’s allegation that Mr Kong invested their joint funds prior to consulting him. He denies any such understanding or practice and affirms that it would have been his expectation and understanding that agreement was to be obtained before the fact. Finally, Mr Lun says
9 Reply affidavit of Damin Lun re application to set aside the respondent's protest to jurisdiction dated 15 March 2023.
that regardless Mr Kong has accepted that he holds the investment on trust which can only properly arise as a matter of New Zealand law.
[50] On Mr Kong’s views on trusteeship, Mr Lun deposes that Mr Kong has on several occasions admitted that he owes a trust obligation to him in respect of the 5% shares, including in the Settlement Deed and lawyer’s letters dated 22 October 2021 and 18 November 2022. However, Mr Lun is confused by Mr Kong’s affidavit denial of any trust obligation and that the Settlement Deed is not binding on him, especially given he acknowledges an ongoing obligation to pay the dividends.
[51] Mr Lun further notes that Mr Kong has given no explanation as to why despite access to his account being restored from 29 September 2022 the payment of dividends was not effectuated until 17 February 2023. Mr Kong has similarly left unaddressed the expected dividend at the end of January 2023.
[52] On the nature of relief sought, Mr Lun denies that he is seeking as relief the registration of him as shareholder with the ICRD.
[53] On jurisdiction, Mr Lun questions why Mr Kong never took any steps in the China claim if that was the correct proceeding. Mr Kong also received service in New Zealand. Both that claim and this one in New Zealand were proceeding until Mr Lun considered New Zealand was the appropriate forum.
[54] On access to records, Mr Lun claims he has never denied Mr Kong access to records and that records should be discovered through the ordinary discovery processes as this proceeding continues.
Legal principles
[55]Rule 5.49 of the High Court Rules 2016 relevantly provides:
5.49Appearance and objection to jurisdiction
(1)A defendant who objects to the jurisdiction of the court to hear and determine the proceeding may, within the time allowed for filing a statement of defence and instead of so doing, file and serve an appearance stating the defendant’s objection and the grounds for it.
(2)The filing and serving of an appearance does not operate as a submission to the jurisdiction of the court.
(3)A defendant who has filed an appearance may apply to the court to dismiss the proceeding on the ground that the court has no jurisdiction to hear and determine it.
…
(5)At any time after an appearance has been filed, the plaintiff may apply to the court by interlocutory application to set aside the appearance.
(6)The court hearing an application under subclause (3) or (5) must,—
(a) if it is satisfied that it has no jurisdiction to hear and determine the proceeding, dismiss the proceeding; and
(b) if it does not dismiss the proceeding under paragraph (a), set aside the appearance.
…
(8) The court, in exercising its powers under this rule, may do so on any terms and conditions the court thinks just and, in particular, on setting aside the appearance it may extend the time within which the defendant may file and serve a statement of defence and may give any directions that appear necessary regarding any further steps in the proceeding.
[56]Rules 6.29 and 15.1 further provides:
6.29 Court’s discretion whether to assume jurisdiction
…
(3) When service of process has been validly effected within New Zealand, but New Zealand is not the appropriate forum for trial of the action, the defendant may apply for a stay, or for a dismissal of the proceeding under rule 15.1.
15.1Dismissing or staying all or part of proceeding
(1)The court may strike out all or part of a pleading if it—
(a) discloses no reasonably arguable cause of action, defence, or case appropriate to the nature of the pleading; or
(b) is likely to cause prejudice or delay; or
(c) is frivolous or vexatious; or
(d) is otherwise an abuse of the process of the court.
…
Approach to analysis
[57]The issues to be determined in this judgment are:
(a)Are the two prerequisites to the High Court exercising jurisdiction met being:
(i)personal jurisdiction; and
(ii)subject matter jurisdiction?
(b)If those two prerequisites are met and the Court has jurisdiction, does a plea of forum non conveniens indicate the Court should exercise jurisdiction, as a matter of discretion, when there is another available forum? This question requires a two-step analysis where the party alleging forum non conveniens must show:
(i)New Zealand is not the natural or appropriate forum for the trial and there is another available forum which is clearly or distinctly more appropriate; and
(ii)if the Court is satisfied that there is another forum which is prima facie the appropriate forum for the trial, then are there special circumstances by reason of which justice requires that the trial of the matter should nevertheless take place in New Zealand?
[58]I deal with each of these issues in turn.
Personal and subject matter jurisdiction
Personal jurisdiction
[59] Ms O’Gorman, for Mr Lun, submits that Mr Kong was validly served within the jurisdiction by agreement of his solicitor, which establishes personal jurisdiction of the Court under r 6.7. She submits that even if service had not been undertaken by
agreement, Mr Lun was entitled to serve Mr Kong in New Zealand as of right — for example, under r 6.7(g) which provides for service when any relief is sought against a person domiciled or ordinarily resident in New Zealand.
[60] Ms O’Gorman submits that this means the Court has personal jurisdiction over Mr Kong.
[61] Mr Harrison, for Mr Kong, acknowledges that Mr Kong has been validly served with the proceeding in New Zealand and accordingly the Court has personal jurisdiction over him.10
Subject matter jurisdiction
[62] Ms O’Gorman submits that the Court has subject matter jurisdiction over the dispute. She submits the subject matter of the proceeding concerns Mr Kong’s in personam/fiduciary obligations and that the Court has subject matter jurisdiction over both domestic and foreign actions in personam (being those which derived their existence from some foreign system of law), including any action by a beneficiary under a foreign trust seeking some form of in personam relief against the foreign trustees.11 She submits that the governing law and the location of the trust assets are immaterial to that jurisdiction and the common law can recognise a trust over shares even if the lex situs does not recognise equitable proprietary interests at all or would not give effect to a common law trust.
[63]In support of this, Ms O’Gorman refers to:
(a)A decision in Huang v Chen, when the Court held that New Zealand was the correct forum to determine the claim seeking a decree of specific performance (for the transfer of shares in China) and an account of profits because the remedies were in personam;12 and
10 Submissions of defendant in opposition to application to set aside defendant's protest to jurisdiction dated 6 April 2023 at [34].
11 Chellaram v Chellaram [1985] Ch 409 (Ch).
12 Huang v Chen [2021] NZHC 3232, [2021] ERNZ 1259 at [12]–[18] and [28].
(b)The decision of Chellaram v Chellaram, where the United Kingdom’s Court of Chancery held that it had subject matter jurisdiction over a claim seeking removal and reappointment of foreign trustees where the trust was governed by Indian law, its trustees were resident in India and the shares were held in Bermudan companies.13
[64] In relation to subject matter jurisdiction, Ms O’Gorman relies on the following to establish that the subject matter is concerned with whether Mr Kong owes trust/fiduciary obligations to Mr Lun. She submits that the corporate arrangements in China are not in dispute in this proceeding, and this proceeding does not seek to change the registration of the shares, and she relies on the following to establish that the subject matter is properly within New Zealand law:
(a)An oral agreement made in New Zealand in early 2007.14
(b)New Zealand-based documentary evidence being:
(i)The Settlement Deed dated 18 February 2014, executed and witnessed in New Zealand, which contains express references to trusts and trust obligations including “Sam only holds the five per cent shares belonging to Alan as bare trustee” (cl 6(a)).
(ii)A letter from Mr Kong’s former New Zealand lawyers, Heritage Law, dated 22 October 2021, about this proceeding which states at [29] that: “he has never denied that he holds half of his interest in the shares on trust for Mr Lun”.
(iii)A letter from Mr Kong’s subsequent New Zealand lawyers, Norling Law, dated 18 November 2022, concerning the New Zealand proceeding which states: “Mr Kong has never denied that he holds half of his 10 per cent investment in the Company on behalf of and for the benefit of Mr Lun. Nor has he ever
13 Chellaram v Chellaram, above n 11.
14 Although this is disputed, as noted in Reply affidavit of Damin Lun, above n 9, at [7] and [8].
refused to account for and pay across to Mr Lun his half share of the Shilou Market dividends received by him.”
(together the Trust Admission Documents).
[65] Ms O’Gorman submits that as China does not have the equivalent of a trust regime, it follows that the obligations of the above type could only have been assumed/recognised by the parties as a matter of New Zealand law and not Chinese law. She submits that, in any event, even if Mr Kong were to establish that the Trust Admission Documents were in fact referring to some unspecified Chinese law, New Zealand law would still be the appropriate forum to seek in personam relief in respect of such obligations.
[66] Ms O’Gorman further submits that the cause of action arose within New Zealand which provides compelling subject matter connection, Mr Kong was in New Zealand when Mr Lun alleges that Mr Kong denied Mr Lun’s interest in the shares, and the Trust Admission Documents were all made within New Zealand. Accordingly, the underlying acts on which Mr Lun relies for his declaration and alternatively damages, are therefore directly connected to New Zealand.
[67] Ms O’Gorman submits that accordingly the Court has both personal jurisdiction and subject matter jurisdiction.
[68] As a final point, she submits that Mr Kong’s protest to jurisdiction under r 5.49 was the wrong process to follow because he was served within the jurisdiction. The appropriate course was an application under rr 6.29(3) and 15.1 under which the onus is on Mr Kong to show that New Zealand is forum non conveniens.15
[69] Mr Harrison, on the other hand, argues that whether the Court has subject matter jurisdiction is a question that must be determined on whether the applicable substantive law is Chinese law or New Zealand law. He submits that identification of the applicable substantive law for the proceeding (lex causae) is highly relevant for
15 Schumacher v Summergrove Estates Ltd [2014] NZCA 412, [2014] 3 NZLR 599 at [25], n 4 and
[28] and [29].
both the question of subject matter jurisdiction and to the forum non conveniens
arguments.
[70] Mr Harrison submits in the present case the legal nature of the relationship entered into between Mr Lun and Mr Kong is in dispute. Mr Lun characterises the relationship as one of trust, while Mr Kong characterises it as one of contractual agreement (comprising inter-related agreements). He submits that on an analysis of the transactions between the parties, the substantive law or lex causae, should be Chinese law and accordingly the Court does not have the subject matter jurisdiction to hear the dispute. In support of this he refers to the following:
(a)Schumacher v Summergrove Estate Ltd, which was a constructive trust case where the ultimate subject of dispute was real property located in the Republic of Ireland, and Irish law was held to govern the claim, because it fundamentally concerned immovable property located outside New Zealand.16 Mr Harrison submits that the matter of the present dispute is practically “immovable” and located in China.
(b)In Brown v New Zealand Basing Ltd, which concerned employment of international airline pilots under employment agreements, the proper law was expressly that of Hong Kong.17 The issue was whether the contractual choice of law prevented the application of the age discrimination provisions of the Employment Relations Act 2000. The Court of Appeal judgment summarised the choice of law principle it proposed to apply as follows:18
(a)When a court confronts a private problem with a foreign element, it must look for what has been called the “seat” of the legal relationship — that is, the legal system to which in its proper nature the relationship belongs or is subject. …
(b)The issue must first be characterised. If an issue is characterised as contractual in nature, the relevant connecting factor is the proper law of the contract. This is presumptively the parties’ bona fide and legal choice of law or, if the written
16 Schumacher v Summergrove Estates Ltd, above n 15, at [39].
17 Brown v New Zealand Basing Ltd [2017] NZSC 139, [2018] 1 NZLR 245.
18 At [30](a) and (b).
agreement is silent on this point, the system with the “closest and most real connection” to the contractual relationship.
[71] Mr Harrison, applying the tests referred to in the Brown decision, submits that the fact that Mr Lun has pleaded his claim as a breach of trust, or breaches of New Zealand trust law, cannot determine the lex causae which should be applied.
[72] Mr Harrison further referred to Huang v Huang.19 Mr Harrison submits that in this decision Campbell J was faced with determining whether New Zealand law was applicable law in a case where parties resident in China had agreed to invest in a New Zealand property venture, the sale proceeds of which were held by the defendant in a New Zealand bank account. The defendant was alleged to owe duties in trust (among others) to the China resident plaintiff, and the asset subject of the proceedings was located in New Zealand with the defendant living in China but also being a permanent resident in New Zealand. Mr Harrison points to Campbell J’s acceptance that Chinese law applied and governed the originating agreements and relationships conducted and concluded in China.20
[73] Mr Harrison submits that, given the authorities he has referred to and given the factual circumstances and genesis of the asserted transactions or relationship in the present dispute, Chinese law has the “closest and most real connection” to the transaction or the relationship and is the “most appropriate law to govern the substantive issues”. Consequently, Mr Harrison submits that the New Zealand Court does not have subject matter jurisdiction in respect of the dispute.
Conclusions in relation to jurisdiction
[74] There is no real issue between the parties as to the Court having personal jurisdiction as submitted by Ms O’Gorman and noted at [60] and [61].
[75] In my view, Ms O’Gorman is correct in that the dispute between the parties is most closely connected to New Zealand, being the allegations of breach by Mr Kong of trust/fiduciary duties relating to holding the shares and corresponding in personam
19 Huang v Huang [2021] NZHC 2902.
20 At [82] and [88].
remedies sought against him. I accept Ms O’Gorman’s submissions that while the shares are in a company located in China, and the contractual agreements (being the Cooperation Agreement and the Cooperative Operation Contract) are related to arrangements in China, these matters are not disputed in the proceeding.
[76] The alleged oral agreement between the parties and the documents relied on by Mr Lun, being principally the Trust Admission Documents, as being most relevant in establishing the trust/fiduciary obligations of Mr Kong, are most closely connected with New Zealand. The Trust Admission Documents listed at [64](b)(i) to (iii) were all brought into existence in New Zealand. Both the parties live in New Zealand and Mr Kong is a New Zealand citizen.
[77] I am of the view that the Court has subject matter jurisdiction in respect of the dispute.
Forum non conveniens
[78] As noted at [57](b), where the Court has jurisdiction, does a plea of forum non conveniens indicate that the Court should exercise jurisdiction, as a matter of discretion, when there is another available forum? This question requires a two-step analysis.
Is there a forum other than New Zealand which is clearly or distinctly more appropriate?
[79] Ms O’Gorman submits that New Zealand is the forum with the most real and substantial connection to the dispute for the following reasons:
(a)Residence — both parties live in New Zealand with wide-ranging business interests here, and Mr Kong is a New Zealand citizen. She refers to the decision of Van Dyck v Van Dyck where the Court said:21
[it] is difficult to find a case where an action has been stayed where both parties are resident in the same jurisdiction.
21 Van Dyck v Van Dyck [1990] 3 NZLR 624 (HC) at 627.
The Court went on to hold that the parties’ presence in New Zealand could be a determining factor despite other litigation between the parties and family members in Holland, dismissing the application for a stay. Ms O’Gorman submits that the parties’ residence in New Zealand should similarly be dispositive of this application.
(b)Subject matter — Ms O’Gorman submits that the corporate arrangements in China are not in dispute and this proceeding does not seek registration of the shares, but rather the subject matter of the proceeding concerns whether Mr Kong owes trust/fiduciary obligations to Mr Lun. Ms O’Gorman points to the Trust Admission Documents as support for the fact that the most appropriate forum for the dispute is New Zealand.
(c)Location of witnesses — Ms O’Gorman submits that, as Mr Lun deposes, the witnesses relevant to the trust issue (including the execution of the Settlement Deed) live in New Zealand. As to the original discussion and the alleged oral agreement, Mr Lun and Mr Kong are both resident in New Zealand. She further submits that the Settlement Deed was drafted by a New Zealand solicitor, was signed by Mr Lun and Mr Kong in New Zealand, and the other signatories and witnesses, Mr Chin and Mr Gao both live in New Zealand. The subsequent letters dated 22 October 2021 and 18 November 2022, forming part of the Trust Admission Documents, were written by Mr Kong’s New Zealand lawyers on his instructions. She also submits that further information relating to the drafting and execution of the Settlement Deed, as may be relevant, exists in New Zealand.
(d)New Zealand law is the applicable law — Ms O’Gorman submits that once the dispute is characterised as a trust issue, the proper law expressly or impliedly chosen by the parties or, failing that, the system of law with which the trust has its closest and most real connection, is New Zealand. She submits that in this case the trust obligations arose
through express agreement and/or resulting trusts, with an implied choice of New Zealand law and accordingly New Zealand courts are better placed to hear and determine questions regarding the validity and legal implications of the Trust Admission Documents. Ms O’Gorman also submits that Mr Kong’s New Zealand solicitors have themselves raised issues of validity with the Settlement Deed which implicitly recognised the substantive applicability of New Zealand law, or at least calls for the application of New Zealand law, being misrepresentation and/or breach of fiduciary duty, a plea of non est factum, non-compliance with the Property Law Act 2007, and lack of authority by New Zealand companies which were parties to the Settlement Deed.
Finally on this point, Ms O’Gorman submits Mr Kong contends that Chinese custom and practice may also be relevant in assessing the legal nature of the relationship between Mr Kong and Mr Lun, but evidence of this type (including the expert evidence, if relevant) can be readily considered by the New Zealand courts.
(e)Enforcement — Ms O’Gorman submits that Mr Kong is resident in New Zealand and has assets here, making New Zealand a suitable jurisdiction for enforcement steps against him. She submits a proceeding in China would be of no particular use for enforcement purposes and there are no reciprocal enforcement arrangements between New Zealand and China, so cross-border recognition and enforcement would be addressed as a matter of common law:
(i)One prerequisite is jurisdiction, as a matter of private international law (cf domestic jurisdiction), generally requires submissions and steps to be taken by the defendant in the proceeding. By the time the China claim was withdrawn, Mr Kong had not submitted to that jurisdiction or taken any steps in the proceeding, presumably to create a barrier to enforcement in New Zealand;
(ii)At common law it is often suggested that only monetary judgments may be recognised and enforced in New Zealand, not declarations or orders for performance. That is one reason why in personam relief should always be available in the jurisdiction where a trustee is resident and it will often be more efficient to bring the action directly in that jurisdiction.
[80] Mr Harrison, on the other hand, submits that the natural or appropriate forum for determination of the dispute is the one to which the action has the most relevance and substantial connection, including factors affecting convenience or expense (such as availability of witnesses), the law governing the relevant transaction and the places where the parties respectively reside or carry on business. He submits that inquiry includes looking to the law governing the claim, the personal and subject matter connections of the competing jurisdictions (such as the party’s residence, the location of the subject matter, and the place where the events giving rise to the claim occurred), where any judgment would need to be enforced, the relative costs and convenience of proceedings in each jurisdiction, and the strength of the plaintiff’s case.22
[81] Mr Harrison points to the following factors as indicating that China is the natural and appropriate forum for the dispute to be determined:
(a)As Mr Harrison has argued, as summarised at [69] to [73], the overall applicable substantive law for resolution of the parties’ dispute is Chinese law. He submits that as Mr Lun’s pleaded cause of action alleging breach of trust is not available as a matter of Chinese law, then arguments put forward by Mr Lun about the ready availability of remedies and law enforcement fall away. Secondly, he submits proof of Chinese law and relevant customary practices would be necessary were the dispute to be tried in New Zealand.
(b)The dispute has the “most real and substantial connection” with China involving, as they do, investments by ethnic Chinese businessmen
22 Schumacher v Summergrove Estates Ltd, above n 15, at [28]–[30].
carrying on business in China and a Chinese enterprise, and asserted interests (directly or by proxy) in shares in a Chinese company.
(c)The subject matter of the claim, namely Mr Lun’s five per cent interest in the Shilou Market and/or the company, is located in China and (itself) indisputably governed by Chinese law. He submits that while share are not “immovable property” as in the case of real property, the interests in dispute can only be evaluated and enforced to the extent permitted and recognised by Chinese law, including the founding documents governing overall relationships between the various investors and shareholders.
(d)Despite Mr Lun pleading as a breach of trust, Mr Kong’s alleged failure or refusal to register Mr Lun’s ownership of the shares “or otherwise to convey the Trust property to Mr Lun”, the actual relief claimed does not include the seeking of that remedy. The equitable compensation
/damages claim is directly and necessarily founded on an implicit claim that Mr Kong has failed to achieve that outcome.
(e)If, as Mr Lun asserts, Mr Kong holds Mr Lun’s five per cent interest only as “a bare trustee”, that cannot possibly support a complaint that Mr Lun’s own self-imposed inability to deal with his interests as of right (an inability shared by Mr Kong) should somehow render Mr Kong liable to damages, whether in trust or otherwise. He submits that it is noteworthy that Mr Lun has made no attempt to enforce a conversion of his interests into a shareholding in his name, by means of proceedings against the Company or its shareholders in China.
(f)The equitable damages/compensation claim which Mr Lun seeks to advance would require proof of both causation and quantum. In order to establish causation, Mr Lun would have to prove:
(i)permanent detrimental interference with his alleged “rights in the Trust Property” as alleged at [25] of his statement of claim; and
(ii)that it was Mr Kong’s acts which caused this result. Both factually and legally, that inquiry into causation necessarily turns on the factual and legal position in China.
To establish the quantum of loss, the value of Mr Lun’s present interest held under the indirect or proxy unregistered shareholding arrangement, to which he agreed, would necessarily be a Chinese market (or other) value of that interest. That assessment will need to take into account whatever Chinese law may dictate about the interest and the potential (if any) for it to be separately realised in favour of Mr Lun.
(g)Mr Kong’s position is that the witnesses necessary for resolution of the dispute between the parties, other than Mr Lun and Mr Kong themselves, would be China-based, giving evidence in Chinese (Mandarin). He submits Mr Kong would need to call at least Messrs Gao and Xu, the former as (on Mr Lun’s own pleaded version) a party to and participant in the original oral agreements leading to the Shilou Market investment. Mr Harrison submits that expert evidence from a Chinese lawyer as to the nature of, any Chinese law constraints on dealing with and realising Mr Lun’s claimed interest would need to be called, presumably by both parties. Valuation evidence from the Chinese expert would likewise have to be called to establish the quantum of Mr Lun’s claim, again presumably by both sides.
[82] Mr Harrison then seeks to rebut the grounds relied on by Mr Lun to establish that New Zealand is not a forum non conveniens as follows:
(a)Residence of the parties — while it is conceded that both Mr Lun and Mr Kong are currently resident in New Zealand, this is to be weighed
against the fact that each retains a strong and current business and family connection in China. He points to the fact that Mr Lun in particular remains a citizen of China, his current business interests include the Shilou Market and his first steps in relation to this dispute were to instruct Chinese lawyers and to issue the China claim.
(b)Subject matter — the argument by Mr Lun that the corporate arrangements in China are not in dispute is not an accurate characterisation of the subject matter of the dispute nor the central issues, and in particular the corporate arrangements in China are in dispute insofar as both the factual and legal effects of what was agreed between Mr Lun and Mr Kong are concerned. He submits that these arrangements are plainly in dispute insofar as Mr Lun claims that his interest in those arrangements has been excluded or deprived by Mr Kong.
Mr Harrison submits that the fact that Mr Lun’s grievances against Mr Kong would likely have to be advanced as a claim or claims for breach of contract, rather than in trust, does not mean that Mr Lun is without effective redress in China. He submits that Mr Lun’s pleaded case is founded on the series of oral and written agreements in relation to a particular Chinese investment, the main area of dispute being whether the effect of those agreements was that Mr Kong undertook towards Mr Lun the duties and responsibilities of a trustee under New Zealand law. He submits that Mr Kong does not dispute that Mr Lun has a five per cent interest in the Shilou Market investment, and Mr Lun was not deterred from suing in contract and related causes of action in China when he issued his China claim.
Finally on this aspect, Mr Harrison disputes that the cause of action arose within New Zealand. Mr Harrison also points to the fact that the bank account of Mr Kong into which the dividends were received, and the bank account of Mr Lun into which his share of the dividends was
paid, are in China. Mr Kong’s omission for a period to arrange for payment of Mr Lun’s share did not occur in New Zealand.
(c)Availability of witnesses — Mr Harrison submits that the claim by Mr Lun of the need to call New Zealand-based witnesses (other than Mr Lun himself) is not made out.
(d)New Zealand law applicable — as has been previously put forward, Mr Harrison asserts that the correct substantive law in the dispute is Chinese law, not New Zealand law.
(e)Enforcement — Mr Harrison submits that lack of available enforcement did not prevent Mr Lun bringing his China claim and that while there are no statutory reciprocal enforcement arrangements between New Zealand and China, Chinese monetary judgments, if regularly obtained can and will be enforced at common law.
Conclusion in relation to appropriate forum
[83] I am of the view that Mr Kong has not discharged the onus of establishing that New Zealand is a forum non conveniens to hear the dispute. I accept Ms O’Gorman’s submissions that on the pleading the central issue is whether there is a breach of trust/fiduciary obligations by Mr Kong, and accordingly, whether there are in personam remedies available against him. The alleged trust was created in New Zealand, the Trust Admission Documents were all created in New Zealand, the parties are both resident in New Zealand and the alleged breach of trust, although disputed, may have occurred in New Zealand.
[84] On the other hand, I do not accept Mr Harrison’s argument that the dispute is really about the effect of the contractual agreements established in China. In my view, Ms O’Gorman’s submission that location of the trust assets, and even the law governing the trust assets, is irrelevant in terms of the breach of trust and in personam remedies claimed against Mr Kong as trustee.
[85] As I have found that Mr Kong has failed to establish that there is another forum which is prima facie the appropriate forum for the trial, I am not required to address the second step of the analysis. However, for the sake of completeness I briefly do.
Are there special circumstances requiring that the trial should nevertheless take place in New Zealand?
[86] Ms O’Gorman submits in relation to the second step of the analysis relating to forum non conveniens, that there are special circumstances requiring the trial of the dispute to take place in New Zealand, which are:
(a)Mr Kong’s argument that the trust obligations do not exist under Chinese law is a reason that China is a more appropriate forum to resolve the dispute. If this is so, it is a fact favouring New Zealand rather than China — that is, Mr Lun’s inability to obtain justice on those issues in China;
(b)witnesses are not compellable in China;23
(c)discovery is not generally available in Chinese proceedings;24
(d)time limitations may now prevent the disputed issues being determined in China.25
[87] Mr Harrison submits, on the other hand, that the factors relied on by Mr Lun as constituting special circumstances are not made out as follows:
(a)as to the absence of trust law in China, he goes back to his argument that Chinese law is the lex causae which should govern the substantive issues in any event;
23 Affidavit of Yu Zheng, above n 5, at [13]–[15].
24 At [9]–[12].
25 At [16]–[18].
(b)as to lack of compellability of witnesses, and lack of discovery under Chinese law, he submits that while Chinese civil procedures are different, the process apparently being more inquisitorial and Judge-led in terms of ordering production of documents and attendance of witnesses, it has not been shown to likely produce an unjust outcome for Mr Lun should he be required to issue proceedings there;
(c)he describes the evidence of Ms Zheng on time limitation issues as so general as to be unhelpful and the submissions for Mr Lun fail to identify the particular potential cause of action in China which would be out of time if now pursued.
Conclusion in relation to special circumstances
[88] From Ms Zheng’s evidence, there does appear to be a process to obtain production of documents under Chinese law. From Ms Zheng’s evidence it is not entirely clear the extent to which witnesses are compellable in Chinese proceedings. Also, I agree with Mr Harrison’s point that the evidence of Ms Zheng does not clearly identify the particular potential cause of action which would be out of time if now pursued by Mr Lun.
[89] In my view, the special circumstances as advanced by Ms O’Gorman are not a strong argument against New Zealand being forum non conveniens. However, that is of little moment given my finding that Mr Kong has not otherwise established that New Zealand is not the natural or appropriate forum for trial and there was another available forum (ie China) which is clearly or distinctly more appropriate under the first stage of the analysis.
Result
[90] As a result of the conclusions I have reached at [74]–[77], [83]-[84], [88] and [89], I am of the view that Mr Lun’s application to set aside Mr Kong’s protest to jurisdiction should be granted.
Orders
[91]I make the following orders:
(a)Mr Lun’s application to set aside Mr Kong’s protest to jurisdiction is granted.
(b)Counsel are directed to endeavour to agree costs. If no agreement is reached within 20 working days of the date of this judgment:
(i)Counsel for Mr Lun will submit a memorandum as to costs (not to exceed 5 pages) within 10 working days of expiry of the 20 working day period; and
(ii)Counsel for Mr Kong will submit a memorandum in reply (not to exceed 5 pages) within 5 working days of receipt of counsel for Mr Lun’s memorandum.
A decision as to costs will then be made on the papers.
…………………………….. Associate Judge Taylor
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