KTH Capital Management Ltd v China One Fin Ltd

JurisdictionCayman Islands
Judge(Smellie, C.J.)
Judgment Date04 November 2004
CourtGrand Court (Cayman Islands)
Date04 November 2004
Grand Court

(Smellie, C.J.)

KTH CAPITAL MANAGEMENT LIMITED
and
CHINA ONE FINANCIAL LIMITED, MSP CHINA HOLDINGS LIMITED, MS/KTH ADVISORY CORPORATION LIMITED and ZHONGJON FENGDE HOLDINGS LIMITED

J.S. Tarboton for the plaintiff;

N.R.F.C. Timms for the first, second and third defendants.

Cases cited:

(1) Church of Scientology of California v. Miller, The Times, October 15th, 1987, referred to.

(2) Lubbe v. Cape Plc, [2000] 4 All E.R. 268; [2000] 2 Lloyd”s Rep. 383, referred to.

(3) Spiliada Maritime Corp. v. Cansulex Ltd., The Spiliada, [1987] 1 A.C. 460; [1986] 3 All E.R. 843, applied.

(4) Telesystem Intl. Wireless Inc. v. CVC/Opportunity Equity Partners L.P., 2002 CILR N[21], referred to.

Conflict of Laws-jurisdiction-forum conveniens-claim brought as of right in Cayman Islands if both parties incorporated here-burden on defendant to establish another jurisdiction clearly more appropriate forum

Conflict of Laws-jurisdiction-forum conveniens-incorporation in Cayman Islands creates implicit expectation that Cayman courts competent to resolve complex international dispute in just and efficient manner-ability to enforce directly judgment in jurisdiction where obtained important advantage

Conflict of Laws-jurisdiction-forum conveniens-factors considered include convenience and expense, law applicable, domicile-witness-related expenses not decisive-evidence in documentary or electronic form equally available in any jurisdiction

The plaintiffs brought proceedings against the defendants for specific performance of an agreement and damages in lieu of or in addition to specific performance.

The plaintiff and the first three defendants were all Cayman companies. They entered into an agreement for the provision of services for the purposes of a joint venture arranged for the acquisition and recovery of four pools of non-performing loans (‘NPLs’) within the People”s Republic of China (‘PRC’). The agreement did not stipulate a governing law, but the parties accepted that it would be that of the PRC as it was negotiated and executed, and would be substantially performed, there. No party, however, contended that the PRC would be the appropriate forum. The plaintiff and some of the defendants were already engaged in separate proceedings in Hong Kong. The witnesses were domiciled in various jurisdictions. The first three defendants applied to stay proceedings on the ground that Hong Kong, and not the Cayman Islands, was the appropriate forum for the trial of the action.

The defendants submitted that (a) the courts of Hong Kong had to be as highly regarded as those of the Cayman Islands; (b) Hong Kong judges would be better placed to appreciate principles of Chinese law applicable to the contract and its performance, having presumed familiarity with the Chinese system; (c) there were likely to be some Hong Kong judges who spoke Mandarin, the official Chinese language, which some witnesses, including the legal experts, would probably speak, especially as Chinese law would have to be proved as a matter of fact in the Hong Kong courts; (d) a Hong Kong judge would more readily be able to assess the demeanour and understand the nuances of meaning of Chinese witnesses; and (e) Hong Kong would be more practically convenient as most of the witnesses would come from the PRC.

The plaintiff submitted in reply that the Cayman Islands were the appropriate forum because (a) four of the parties were incorporated in the Cayman Islands, and would have a reasonable expectation that the Cayman courts would be well able to resolve a complex international dispute; (b) as the defendants were amenable to the jurisdiction, they could be compelled to obey orders of the court; (c) the order of a foreign court for specific performance of an agreement would not be directly enforceable at common law, with the effect that if the plaintiff were successful in Hong Kong and the defendants had to be compelled to perform, the plaintiff would have to sue again in the Cayman Islands; and (d) it had already expended significant costs and effort in bringing the action in this jurisdiction and there would be significant further expense if similar proceedings had to be instituted in Hong Kong.

Held, refusing to stay the action:

(1) There were no considerations sufficient to justify overriding the plaintiff”s bringing of its claim as of right in the Cayman Islands, given that the plaintiff and the first three defendants were all local entities. The onus was on the defendants to satisfy the court, which they had failed to do, that Hong Kong was clearly and distinctly the more appropriate forum for the trial of the action, even though there was no suggestion that substantial justice would not be done if the case were tried there (paras. 3–4; para. 30; para. 48).

(2) The parties, in choosing to be incorporated in an established international financial centre such as the Cayman Islands, implicitly recognized the practical benefits and advantages in doing so, including the reasonable expectation that the courts of the jurisdiction were competent and able to resolve any complex dispute in an efficient and just manner. The ability to enforce a judgment directly against a party in the jurisdiction in which the judgment was obtained was an important advantage to a plaintiff who brought an action as of right in that jurisdiction, particularly since orders for specific performance against the defendants made in a Hong Kong court would not be enforceable in the Cayman Islands and the plaintiff would need to sue again if it needed to

make the defendants comply with an order against them (paras. 23–25; para. 27).

(3) Other factors which were to be considered included convenience and expense, the law governing the relevant transactions, and the places where the parties resided or carried on business. Witness-related expenses were not a decisive factor. The judicial system in Hong Kong adhered to the common law tradition, which meant that expert factual testimony would have to be adduced regarding matters of Chinese law which governed the transactions, since the judge there would not be permitted to take judicial notice of Chinese law. Evidence in documentary or electronic form, which would form a significant part of the trial, would be just as amenable to being adduced or assessed in either jurisdiction. Therefore the defendants failed to establish that Hong Kong would be the more appropriate forum (para. 32; para. 39; paras. 46–47).

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