HCMP 1305/2021
HCA 1521/2021
[2024] HKCFI 2737
HCMP 1305/2021
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
MISCELLANEOUS PROCEEDINGS NO 1305 OF 2021
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| | In the matter of CW Family Trust (“the Trust”) created under Settlement dated 11 June 2009 |
| | And |
| | In the matter of Order 85, Rules of High Court (Cap 4A) and the Court’s inherent jurisdiction |
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BETWEEN |
| | HENRY SHING HIM CHOW | 1st Plaintiff |
| | WONG PO YING | 2nd Plaintiff |
| | and | |
| | VICTOR LING KAM TONG | 1st Defendant |
| | LING KAM ON | 2nd Defendant |
_________________
AND
HCA 1521/2021
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
CIVIL ACTION NO 1521 OF 2021
_________________
BETWEEN |
| | HENRY SHING HIM CHOW | 1st Plaintiff |
| | WONG PO YING | 2nd Plaintiff |
| | and | |
| | LING KAM TONG, VICTOR | 1st Defendant |
| | LING KAM ON | 2nd Defendant |
| | CHOW CHI SANG ANTONY | 3rd Defendant |
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| Before: | Hon Winnie Tsui J in Chambers (Open to the Public) |
| Date of Hearing: | 5 October 2023 |
| Dates of Further Written Submissions: | 12 and 13 September 2024 |
| Date of Decision: | 14 October 2024 |
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D E C I S I O N
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INTRODUCTION
1. These two actions concern a family trust known as the “CW Family Trust” (“the Trust”). It was created pursuant to a settlement deed dated 11 June 2009 (“the Settlement Deed”). Clause 17, as stated in its heading, makes provisions for “[p]roper law, forum and place of administration”. It is this clause which has given rise to the applications presently before the court. There is no dispute that the Trust is governed by the laws of the British Virgin Islands. The primary dispute is whether the clause confers exclusive jurisdiction on the courts of the BVI over matters relating to the Trust.
2. According to the Settlement Deed, at the time of its creation, the Trust comprised one property only, namely 100% shares in a Samoan company called Lip Hing Holding Ltd (“the Company”).
3. The 1st and 2nd plaintiffs and the 1st and 2nd defendants are identical in both actions. The 1st plaintiff is one of the named beneficiaries of the Trust. The 2nd plaintiff is one of the two settlors and also one of the named beneficiaries of the Trust. There is however a dispute over her beneficial entitlement. The 1st and 2nd defendants are the trustees. I shall refer to them as “the Trustees” below.
4. The plaintiffs say that in July 2021, it was discovered that in October 2018 or earlier, 99.95% of the shares of the Company were transferred to a Mr Antony Chow (“Chow”) at no or grossly undervalued consideration. Chow is the 3rd defendant in the action in HCA 1521/2021. He is not a party in HCMP 1305/2021. It would appear that Chow does not otherwise have any relationship with the Trust.
5. In light of the discovery, the plaintiffs commenced these two present sets of proceedings.
(1) First, by originating summons dated 7 September 2021 issued in HCMP 1305/2021, they seek from the Trustees information on the alleged transfer and a true and perfect inventory and account of the Trust with supporting documents. The application is made under Order 85 of the Rules of the High Court.
(2) Second, about one month later, by writ dated 5 October 2021 issued in HCA 1521/2021, the plaintiffs started an action against the Trustees and Chow. As against the Trustees, they allege, among other things, breach of trust and fiduciary duty by reason of the alleged transfer. As against Chow, they claim that he received the shares of the Company whilst paying no or insufficient consideration and he therefore holds the shares on trust for the beneficiaries.
6. I shall refer to these two proceedings as “the HCMP proceedings” and “the HCA proceedings”, respectively, and “the present proceedings” collectively. The Trustees and Chow were served in Hong Kong.
7. There are now before me six summonses:
(1) the Trustees’ summons dated 22 October 2021 filed in the HCMP proceedings disputing the jurisdiction of the Hong Kong court and seeking a stay of the proceedings here in favour of the BVI courts under Order 12, rule 8;
(2) the Trustees’ summons dated 17 January 2022 filed in the HCA proceedings seeking the same reliefs;
(3) Chow’s summons dated 24 January 2022 filed in the HCA proceedings taking the same stance and seeking identical reliefs as the Trustees’ summonses;
(4) the plaintiffs’ summons dated 6 September 2022 filed in the HCMP proceedings asking for judgment to be entered against the Trustees pursuant to Order 28, rule 4;
(5) the Trustees’ summons dated 24 August 2023 filed in the HCMP proceedings seeking leave to adduce further evidence which comprise court documents relating to the proceedings which they commenced in the BVI court in May 2023 (“the latest BVI proceedings”); and
(6) the Trustees’ summons also dated 24 August 2023 filed in the HCA proceedings seeking leave to file the same evidence.
8. In this decision, I shall refer to the first three summonses as “the stay applications”, the fourth summons as “the summary judgment application”, and the fifth and sixth summonses as “the new evidence applications”. I shall consider the new evidence on a de bene esse basis.
9. In respect of the stay applications, the Trustees and Chow contend that clause 17 of the Settlement Deed confers exclusive jurisdiction on the BVI courts over the subject-matter of the present proceedings, which should therefore be stayed. If clause 17 confers only non-exclusive jurisdiction on the BVI courts, their fallback position is that the BVI is the more appropriate forum and the present proceedings should be stayed under the forum non conveniens principles.
10. The plaintiffs are represented by Mr Richard Khaw, SC and Mr Leo Wong. The Trustees and Chow have separate legal representation. Mr Richard Todd and Mr Chan Hei Ching represent the Trustees and Ms Audrey Eu, SC and Ms Christy Chak represent Chow.
THE PLAINTIFFS’ CASE
11. I first set out the plaintiffs’ case.
The setting up of the Trust
12. The background to the Trust is that the 2nd plaintiff and a Mr Ronald Chow were married until 2009 when they divorced. They have four children, including the 1st plaintiff. All of them were minors at that time. For the benefit of the children and in order not to affect the operation of the family business, Ronald Chow and the 2nd plaintiff decided to transfer the family business to a trust.
13. The Company was the holding company of the family business. It was established by the 2nd plaintiff and a Mr Chow Ying Bor, Ronald Chow’s uncle, in equal shares since its incorporation in 2003. It is the plaintiffs’ case that the 2nd plaintiff contributed to its development and Ronald Chow took an active role in managing the family business despite not being a shareholder.
14. The Settlement Deed was signed. Upon its execution, the 2nd plaintiff and Chow Ying Bor assigned their shares to the Trustees to be held under the Trust.
15. According to the statement of claim, solicitors were instructed to draft and prepare the Settlement Deed.
The Settlement Deed
16. The 2nd plaintiff and Chow Ying Bor were the only parties and signatories to the Settlement Deed. The execution page shows that they both signed in the presence of a Hong Kong solicitor.
17. Unlike many other legal documents prepared by solicitors, the Settlement Deed has no front page or back sheet showing the name of the law firm who prepared the document. It is therefore not known whether the witnessing solicitor (or someone else in his firm) was in fact the drafter of the document. Given that the Trust is governed by BVI law, one possibility is that BVI solicitors might have been engaged to give advice and draft the document. But the evidence does not show any involvement of any BVI lawyer. Hence, based on the materials before me, it is simply not known whether it was a Hong Kong solicitor or a BVI lawyer who prepared the Settlement Deed, or whether it was prepared by a trust specialist or not.
18. The stay applications turn on the construction of clauses 17.1 and 17.2 of the Settlement Deed. It is however necessary to look at the entire clause 17, as the other parts of the clause form part of the context against which the two sub-clauses are to be interpreted.
19. I reproduce the clause below. (There is no sub-clause (d) in the original text.)
“17.1 The proper law of this Trust shall be that of the British Virgin Islands. All rights under this Deed and its construction and effect shall be subject to the jurisdiction of the courts, and construed according to the laws, of the British Virgin Islands.
17.2 The courts of British Virgin Islands shall be the forum for the administration of these trusts.
17.3 Notwithstanding the provisions of sub-clause 16.1 and 16.2,
(a) The Trustee shall have power, subject to the application (if any) of the rule against perpetuities, to carry on the general administration of these trusts in any jurisdiction in the world. This power shall be exercisable whether or not such jurisdiction is for the time being the proper law of this Trust or the courts of such jurisdiction are for the time being the forum for the administration of these trusts, and whether or not the Trustees or any of them are for the time being resident of domiciled in, or otherwise connected with, such jurisdiction.
(b) The Trustees may at any time declare in writing that, from the date of such declaration, the proper law of this Trust shall be that of any specified jurisdiction. No exercise of this power shall be effective unless the law of the jurisdiction specified is one under which his Trust remains irrevocable and all, or substantially all, of the trusts, powers and provisions contained in this Deed remain enforceable and capable of being exercised and so taking effect.
(c) Following any exercise of the power contained in sub-clause 17.3(b), the Trustees shall by deed make such consequential alterations or additions to this Deed as they consider necessary or desirable to ensure that, so far as may be possible, the trusts, powers and provision of the Deed shall be as valid and effective as they were immediately prior to such change.
(e) The Trustees may, at any time, declare in writing that, from the date of such declaration, the forum for the administration of these trusts shall be the courts of any specified jurisdiction.”
The Company
20. According to the plaintiffs, while the Company was incorporated in Samoa, its head office is located in Hong Kong. The major part of the family business is trading under Lip Hing Metal Manufacturing (Hong Kong) Ltd (“Lip Hing Metal”), a subsidiary of the Company and a company incorporated in Hong Kong. Lip Hing Metal owns an office in an industrial building in Kowloon Bay.
21. The Company also has other subsidiary companies incorporated, and carrying on business, in Hong Kong. In addition, there are other subsidiaries or branches of the Company located in the US, the UK, and the mainland.
22. It is the plaintiffs’ belief that a substantial amount of assets held under the Company is located within Hong Kong.
The discovery
23. In about July 2021, two of the children were offered internship to work at the Company. It was during such time that the discovery was made that Chow, who is in fact Chow Ying Bor’s son and a purchase manager of Lip Hing Metal, had acquired in October 2018 or earlier 99.95% shares of the Company. The value of the Company was estimated conservatively to exceed $100,000,000. Chow would have no financial resources to purchase the shares.
24. The plaintiffs say that the beneficiaries had never been informed by the Trustees about the change in the shareholding.
25. By their solicitors’ letter dated 17 August 2021, the plaintiffs demanded the Trustees to disclose information about the change, including whether the Trustees had in fact parted with the shareholding and if so, the details. By letter dated 25 August 2021, the solicitors for the Trustees replied that the Trustees had “no duty to entertain any of the requests made by [the plaintiffs]” (original emphasis) and that the Trustees “shall act strictly in accordance with the terms of the [Settlement Deed]”. The letter went on to recite clauses 17.1 and 17.2 without any elaboration.
26. The plaintiffs’ solicitors also wrote to Chow seeking information about the transfer. He did not reply.
The plaintiffs’ claims
27. Not satisfied with the reply, the plaintiffs commenced the present proceedings.
28. In the HCMP proceedings, they seek from the Trustees disclosure of documents relating to the transfer and an account of the Trust with supporting documents.
29. In the HCA proceedings, as against the Trustees, the plaintiffs plead that they had fraudulently, or alternatively, recklessly or negligently, misappropriated 99.95% of the shares of the Company at no consideration or at a gross undervalue and that was done without any authorisation of the beneficiaries. That amounted to a breach of trust or their fiduciary duties. The plaintiffs also say that the Trustees’ refusal to disclose information about the Company was unreasonable and amounted to a breach of their accounting duty. As against Chow, the plaintiffs plead that he received the shares when paying no or insufficient consideration. The plaintiffs seek a number of reliefs, including inquiry of the whereabouts of the shares, a declaration that Chow holds the shares on trust for the beneficiaries, and the removal of the Trustees.
30. In their submissions, both the Trustees and Chow make a number of criticisms about the plaintiffs’ case.
31. Mr Todd (for the Trustees) says that the plaintiffs’ allegations of misappropriation are all empty allegations and further the allegation of fraud and recklessness is lacking in details. He also refers to the plaintiffs’ contention that Chow now holds the shares on trust for the beneficiaries and says that no basis is being put forward for this “new trust”.
32. Ms Eu (for Chow) stresses that the claim against Chow is premature and that the plaintiffs have yet to establish a claim against him. She says that the pleaded claim is vague, uncertain and speculative. As Chow is not a trustee, he has no duty to account and should not anticipate the claim against him. The plaintiffs cannot even say when or how the transfer took place or if Chow provided no or grossly inadequate consideration. For all these reasons, Ms Eu argues that the claim against Chow is premature and should be stayed until such time after discovery is obtained against the Trustees and after the plaintiffs are able to properly formulate a claim against Chow, if any.
33. To these criticisms, I would say immediately that this is not the proper occasion to go into the merits of these arguments. What I need to decide in these stay applications is the forum in which these arguments should be heard, but not whether these arguments are valid or not. At this stage, suffice it to say that I find the plaintiffs’ allegation about the transfer factually easy to understand.
34. More specifically, I do not accept Ms Eu’s submission that the claim against Chow is premature. If what the plaintiffs now allege is true, the shares of the Company have already gone into the hands of Chow. The purpose of the HCA proceedings is precisely to get those share back to the Trust. There is no reason why the plaintiffs would have to wait. It is true that they are not able to provide any specific information about Chow’s involvement. However, according to their case, they are themselves in the dark as to what has actually happened because the shares of the Company are held by the Trustees and they do not have any information.
35. In any event, the suggestion that the HCA proceedings should be stayed as against Chow pending discovery from the Trustees is a different application altogether from the stay applications and is irrelevant in the present context.
36. Lastly, as regards the plaintiffs’ case, I should add that apart from the above causes of action, they also plead that according to clause 9.1 of the Settlement Deed, the Trustees should distribute income to the beneficiaries, including the plaintiffs, as the income had exceeded the threshold stated in the deed. However, the beneficiaries had never been informed about the income status of the Trust and no income had ever been declared, contrary to clause 9.1. The plaintiffs therefore say that the Trustees were in breach of their duty for that reason. I shall refer to this claim below as “the income claim”.
PROCEDURAL HISTORY
37. The proceedings were served on the Trustees and Chow within the jurisdiction. As such, they were commenced by the plaintiffs as of right. That sets the scene for the stay applications. The burden is on the Trustees and Chow to persuade the court that a stay should be granted in favour of the BVI courts.
The evidence in the Trustees’ stay applications
38. In support of the stay applications, the Trustees have engaged Ms Nicola Roberts of Messrs Harney Westwood & Riegels, a BVI solicitor, to give her expert opinion on BVI law. Her opinion is that clause 17 was intended to convey exclusive jurisdiction on the BVI courts over matters relating to the Trust. As regards the income claim, she points to an apparent inconsistency between clauses 9.1 and 18 of the Settlement Deed, which may affect the 2nd plaintiff’s entitlement to benefit under the Trust.
39. Apart from that, the Trustees have filed only very short affirmations. It is worth pointing out that in these affirmations, they have not made any factual allegations at all in response to the plaintiffs’ claim. They have not said anything about the alleged transfer, eg whether it indeed took place or not. Nor have they said anything about the Trust, eg what assets it currently holds.
40. No defence has been filed yet. All these mean that up to now, the Trustees have not put forward any positive or substantive defence to the claims in both the HCMP and HCA proceedings. Mr Todd remarks that the Trustees in fact “have a great deal to say” about the plaintiffs’ case and but they would not say it here because it should be said before the BVI court instead. He also says this:
“… we have deliberately not descended to the merits – our whole point is that the descent to the merits should be dealt with elsewhere.”
41. I highlight this now because the absence of a positive defence (when there is in fact one, as suggested by Mr Todd) will have a bearing on how the forum non conveniens analysis should be conducted, if at all.
42. The plaintiffs have engaged Mr Justin Davis of Messrs Ogier, also a BVI solicitor, as their expert. His opinion is that it is equivocal whether clause 17 is a jurisdiction clause and if so, it will likely not be considered an exclusive jurisdiction clause.
The evidence in Chow’s stay application
43. In his stay application, Chow has not engaged his own BVI expert. Instead he relies on Ms Roberts’ legal opinions.
44. Same as the Trustees, in the very short affirmations filed on his behalf, Chow has not made any factual response at all to the plaintiffs’ claim. He has so far not confirmed or denied whether he had received the shares or not.
The evidence in the summary judgment application
45. In opposing the summary judgment application, the Trustees have again filed a very short affirmation. They have put forward no substantive defence at all. They have only referred to their jurisdiction challenge.
The new evidence applications
46. The new evidence applications, which are described by Mr Todd as “the BVI Beddoe application”, were made by the Trustees in May 2023, that is more than one and a half years after the commencement of the present proceedings and five months before the present hearing. The Trustees seek leave to rely on documents which they have filed in the latest BVI proceedings.
47. As revealed from those documents, the Trustees in those BVI proceedings seek the following directions:
(1) a declaration that the proper law of the Trust is BVI and the BVI courts have exclusive jurisdiction to hear disputes arising from the Trust, including the present dispute;
(2) a direction that they do not submit to the jurisdiction to the Hong Kong court; and
(3) a declaration that the 2nd plaintiff is excluded from taking benefit under the Trust except reimbursement under clause 18.2 of the Settlement Deed.
48. The plaintiffs oppose the new evidence applications.
ISSUES TO BE RESOLVED IN THE STAY APPLICATIONS
49. As regards the stay applications, the following issues need to be resolved.
(1) Is clause 17 of the Settlement Deed a jurisdiction clause?
(2) If so, is it an exclusive jurisdiction clause?
(3) If so, should the HCMP and HCA proceedings be stayed as between the plaintiffs and the Trustees for that reason?
(4) If the answer to (2) is no, should those proceedings be stayed in favour of the BVI courts on the ground of forum non conveniens? Within this issue, a preliminary issue arises – is the failure of the Trustees to put forward any defence a ground in itself for dismissing their stay applications? If not, how should the court evaluate the applications?
(5) If the answer to (2) is yes, can Chow rely on the clause to seek a stay of the HCA proceedings as between him and the plaintiffs?
(6) If so, should the HCA proceedings be stayed as between him and the plaintiffs for that reason?
(7) If the answer to (5) is no, should the HCA proceedings be stayed as between Chow and the plaintiffs in favour of the BVI courts on the ground of forum non conveniens?
(8) In the event that I arrive at different conclusions on the Trustees’ and Chow’s stay applications, when each is viewed on its own, namely the proceedings against one of them should be stayed in favour of the BVI courts and the other should not, what should the court do? Should those proceedings be conducted in two different jurisdictions? If not, should they continue in Hong Kong or the BVI?
50. As regards Issues (1), (2), (3) and (6), the leading authority is the decision of the Privy Council in Crociani v Crociani [2014] UKPC 40, 17 ITELR 624. Issues (4) and (7) are to be determined under the principles in Spiliada Maritime Corp v Cansulex Ltd [1987] AC 460. Issue (5) is a general trust law issue. Issue (8) raises the issue whether an exclusive jurisdiction clause in a trust instrument should be enforced where enforcement would lead to multiplicity of proceedings in different jurisdictions. There does not appear to be any direct authority in the trust context. But the Hong Kong court has dealt with similar situations involving contractual exclusive jurisdiction clauses.
CROCIANI
51. Crociani is an appeal from Jersey to the Privy Council. The decision dealt with two issues – whether a provision in a trust document had the effect of conferring exclusive jurisdiction on the courts of Mauritius; and, if so, whether it was appropriate to permit the proceedings to continue in Jersey. It was held that the clause in question was not a jurisdiction clause at all, despite the use of the phrase “subject to the exclusive jurisdiction”.
52. The discussion on the second issue is therefore obiter but nonetheless provides authoritative guidance for stay applications relying on exclusive jurisdiction clauses in trust instruments.
The facts
53. The trust was set up in 1987. Clause 12 of the trust deed contained provisions giving a power to the existing trustee to resign as trustee and appoint a new trustee outside the jurisdiction at the time applicable to the trust.
54. Between 2007 and 2012, the trust had three trustees in Jersey and the proper law of the trust was Jersey law. In 2012, the Jersey trustees purported to retire and appoint a company in Mauritius as the new trustee. Some beneficiaries (the respondents in the appeal) subsequently brought proceedings in Jersey alleging various breaches of trust by the Jersey trustees during their time as trustees and challenging the validity of the appointment of the Mauritian trustee. The appellants (some other beneficiaries) applied to stay the Jersey proceedings on the ground that clause 12 conferred exclusive jurisdiction on the Mauritian courts. See paras 8 to 12.
55. I reproduce below the relevant parts of clause 12, which was numbered as sub-clauses 12(5) and (6) in the judgment. The earlier sub-clauses empowered the trustee to retire and appoint a new trustee outside of the jurisdiction of the trust at the time:
“(5) so that the Trust Fund shall continue to be held upon the trusts hereof but subject to and governed by the law of the country of residence or incorporation of such new Trustee or Trustees and
(6) thereafter the rights of all persons and the construction and effect of each and every provision hereof shall be subject to the exclusive jurisdiction of and construed only according to the law of the said country which shall become the forum for the administration of the trusts hereunder” (underline added)
56. The first group of underlined words, namely “subject to the exclusive jurisdiction” was referred to in the judgment as “the exclusive stipulation”. The second group of underlined words, namely “the said country … shall become the forum for the administration of the trusts hereunder” was referred to as “the forum stipulation”. See paras 16 and 23.
Construction
57. It was the appellants’ contention that upon the appointment of the Mauritian trustee, clause 12(6) conferred exclusive jurisdiction on the Mauritian courts to hear the disputes arising out of the trust, relying on both the exclusive stipulation and the forum stipulation.
58. Lord Neuberger, giving the judgment of the Board, rejected that contention.
59. As regards the reliance on the forum stipulation, the appellants argued that “the forum for the administration of the trusts” was a reference to the courts which have jurisdiction to decide and order how the trust’s affairs are to be conducted and to resolve disputes and give directions in relation to the trust. See para 14.
60. The Board rejected the argument. It held that the phrase as used in the trust deed did not bear this meaning and the forum stipulation was not a jurisdiction clause at all. Some of the reasoning was as follows (see paras 17 to 21):
(1) The expression “forum of administration” could refer to the court which is to enforce the trust. But it had no well-established technical significance. It might also mean the place where the trust is administered in the sense of its affairs being organised.
(2) The word “forum” could be a reference to a court, but it could equally well be used to refer to a place for any purpose.
(3) The draftsman of the deed could have intended it to be understood in the latter sense as it was perfectly feasible to think that he would consider it appropriate to stipulate where the trust affairs were to be organised or run, as it could affect the way in which the trustees were taxed.
(4) If the forum stipulation was intended to indicate the country of the courts who were to determine disputes, rather than the country in which the trust was to be managed, one would have expected the draftsman to refer to the courts of the country in the text, as opposed to the country simpliciter, as being the forum.
61. The Board further said that even if it was a jurisdiction clause, it doubted whether it was sufficiently clearly expressed to establish that it conferred exclusive jurisdiction. Lord Neuberger explained at para 22:
“While the courts of Mauritius would have jurisdiction, it must be questionable whether the use of the definite article in the forum stipulation [ie “ … the forum …”] is strong enough on its own to confer exclusive jurisdiction. Particularly given that the word ‘exclusive’ was used in the previous line of clause 12(6), it is very difficult to argue that the stipulation was intended to confer exclusive jurisdiction.”
62. As regards the appellants’ reliance on the exclusive stipulation, they argued that it was a jurisdiction clause as it provided that the trust’s affairs were to be “subject to the exclusive jurisdiction of … the said country”.
63. The Board similarly rejected the argument. Lord Neuberger first commented that when the exclusive stipulation was read on its own, there was obvious force in the argument, the point being that a direction that certain issues should be “subject to the exclusive jurisdiction … of the said country” had the effect of conferring exclusive jurisdiction on the courts of that country. However, his lordship concluded that when construed in its context, it was a proper law provision, not a jurisdiction provision. It served the purpose of ensuring that all issues concerning the trust were to be governed by the same law. See para 23. His lordship gave a number of reasons. I would highlight two here.
64. First, once again, if the draftsman had intended that the exclusive stipulation dealt with jurisdiction instead of proper law, one would have expected him to refer to the courts of “the said country”, rather than simply to “the said country”. See para 26.
65. Second, the words “shall be subject to the exclusive jurisdiction of” were located between two provisions which were ultimately solely concerned with the law applicable to the trust, namely “subject to and governed by the law of the country” in question, and “construed only according to the law” of the country in question. His lordship was of the view that it was unlikely that the draftsman intended to insert a phrase dealing with exclusive jurisdiction between two phrases dealing with the applicable law. See para 27.
66. In conclusion, as a matter of construction, the exclusive stipulation identified the proper law whereas the forum stipulation identified the country of administration of the trust. Neither stipulation was intended to confer jurisdiction, exclusive or not, on the courts of the country of the new trustee.
The correct approach on discretion
67. Notwithstanding the ruling on the construction, the Board proceeded to consider the second issue – if the Mauritian courts had exclusive jurisdiction, should the Jersey proceedings continue?
68. The Board’s answer was yes.
69. Lord Neuberger started his analysis by referring to the approach of the court when dealing with a contractual exclusive jurisdiction clause. He considered that Donohue v Armco Inc [2001] UKHL 64, [2002] 1 All ER 749 stated the position correctly in that context. Where parties to a contract agree to a particular court having exclusive jurisdiction to rule on claims arising out of the contract, the court would ordinarily exercise its discretion to secure compliance with the contractual bargain unless the party suing in the non-contractual forum can show strong reasons for suing in that forum. There is a prima facie entitlement to enforce the contractual bargain, which can only be displaced by strong reasons. What amounts to strong reasons will depend on all the facts and circumstances of the particular case: para 33 of Crociani, citing para 24 of Donohue.
70. His lordship then asked the question whether the same test should apply to an exclusive jurisdiction clause in a deed of trust. And the answer was as follows, at para 35:
“… the Board is of the opinion that it should be less difficult for a beneficiary to resist the enforcement of any exclusive jurisdiction clause in a trust deed than for a contracting party to resist the enforcement of such a clause in a contract. The Board is of the opinion that in the case of a trust deed, the weight to be given to an exclusive jurisdiction clause is less than the weight to be given to such a clause in a contract. Given that a balancing exercise is involved, this could also be expressed by saying that the strength of the case that needs to be made out to avoid the enforcement of such a clause is less great where the clause is in a trust deed.”
71. The reason for the court not applying an identical test is twofold. First, in the trust context, the court is not faced with the argument that it should hold a party to his contractual bargain. While it is true that a beneficiary who wishes to take advantage of a trust can be expected to accept that he is bound by its terms, it is not a commitment of the same order as a contracting party bound by the contractual terms. Second, unlike a contract, the court has an inherent jurisdiction to supervise the administration of the trust and, if necessary, to intervene in order to protect the interests of beneficiaries. His lordship considered that to be a clear and significant distinction between trusts and contracts: para 36.
72. Hence, when exercising the discretion whether to stay or not, the proper approach is to start with the exclusive jurisdiction clause and acknowledge that a party has a prima facie entitlement to insist on and enforce the clause, and then ask whether that entitlement is outweighed by the arguments put forward by the party avoiding the clause. In the process, when exercising the discretion, the court should take into account any circumstance which properly falls for the court’s supervision over the administration of the trust. His lordship added that very often it would be a beneficiary who wishes to avoid the clause and the trustee who wishes to enforce it. In this situation, one would normally expect the trustee to come up with a good reason for adhering to the clause. However, any failure to do so would not prevent the trustee from invoking the presumption in the first place: paras 36, 37 and 39.
73. In the case of contract, a “strong reason” is required to avoid the contractual bargain. Following Crociani, in the trust context, it may not be appropriate to adopt the “strong reason” threshold. This is because the Board specifically said that the strength of the arguments needed to outweigh the effect of the clause in a trust deed would be less than where a contracting party is seeking to avoid it.
74. In Hong Kong, in A v B[2022] HKCFI 1031, a case concerning an exclusive jurisdiction clause in a trust deed, Mimmie Chan J applied Crociani and held that while the burden is a lighter one than in a contractual case, there must still be “sufficiently good reasons” not to adhere to the clause before the court would exercise its discretion not to enforce it: see para 33.
75. I would follow A v B and adopt the “sufficiently good reasons” threshold.
76. I should make a remark here that in the authorities cited by counsel, apart from Crociani, there are only two authorities which deal with exclusive jurisdiction clauses in trust instruments, and address the question whether Hong Kong proceedings which have been brought in violation of that clause should be stayed, ie Issue (3). One of them is A v B. The other one is Hiromi Okada v Tomohiro Okada[2018] HKCFI 2310, an authority relied on by Mr Todd and Ms Eu.
77. I should say at the outset that while Okada is a trust case, the rulings in that decision must be seen against the facts in that case. There, both the plaintiff and the 1st defendant were parties to the trust agreements in question under which the former, as settlor and beneficiary, transferred some shares to the 1st defendant, as trustee on trust. The plaintiff commenced an action in Hong Kong seeking to set aside the trust agreements on ground of misrepresentation, undue influence and mistake. The 1st defendant applied to stay the action in favour of the Tokyo District Court, relying on the exclusive jurisdiction clause in the trust agreements. With the plaintiff being a contractual party and the cause of action not being breach of trust, the case therefore, in my view, resembles more a contract case than a trust case. Crociani was not cited in the decision. It follows that it may not be a directly relevant authority on Issue (3).
Application of the correct approach to the facts
78. In Crociani, the Board proceeded to consider whether it would have stayed the Jersey proceedings in favour of the Mauritian courts. It concluded it would not for a number of reasons.
79. What is worth highlighting here is that some of the reasons were in fact those connecting factors which commonly feature in a forum non conveniens analysis, eg, the governing law of the issues being Jersey law and the fact that Jersey courts being plainly more familiar with Jersey law (para 41), and documentation and many witnesses being likely to be in Jersey (para 42).
80. This brings out a question as to whether post-Crociani, in the trust context, it is appropriate for the court to carry out a Spiliada enquiry when exercising its discretion whether to give effect to the clause, and if the conclusion is that the non-stipulated forum is a more appropriate forum than the one stipulated in the trust, whether that would be a sufficiently good reason to allow a departure from the clause. This issue will be discussed in Issue (3) below.
ISSUES (1) AND (2)
81. It is common ground that Issues (1) and (2) are a matter of construction and fall to be decided under the laws of the BVI. It is also common ground between the experts that common law principles apply.
Is clause 17 a jurisdiction clause?
82. Is clause 17 of the Settlement Deed a jurisdiction clause?
83. The material parts of clause 17 comprise the last sentence in clause 17.1 and the entire clause 17.2. I reproduce them below with the words relied on by the Trustees and Chow underlined.
“17.1 All rights under this Deed and its construction and effect shall be subject to the jurisdiction of the courts … of the British Virgin Islands.
17.2 The courts of British Virgin Islands shall be the forum for the administration of these trusts.” (underline added)
84. I am of the view that clauses 17.1 and 17.2 are jurisdiction clauses because they make express references to the word “courts”. It is plain to me that the intention behind the use of the word must have been to confer jurisdiction on the courts of the BVI over the subject-matter stated in those two clauses.
85. As far as clause 17.2 is concerned, we have seen above that the word “forum” can be a reference to a court but it can equally well be used to refer to a place where the trust should be managed. Here, the draftsman referred to “courts” explicitly in the text. Because of the use of the word, the intention cannot be clearer – the word “forum” must be a reference to a court, rather than a place. This is to be contrasted with the forum stipulation in clause 12(6) in Crociani. See para 60(4) above.
86. Mr Khaw points out that the words “the jurisdiction of the courts” are located between two provisions which are expressly concerned with the proper law of the Trust, namely “The proper law of this Trust shall be that of the British Virgin Islands” and “… and construed according to the laws, of the British Virgin Islands”. Based on that and echoing the observation in Crociani, he submits that it is unlikely that the draftsman intended to insert a phrase conferring jurisdiction between two phrases providing for the proper law. In Crociani, that was in fact one of the reasons why the Board ruled that the exclusive stipulation in clause 12(6) was a proper law provision.
87. However, in my view, in this construction exercise, the use of the word “courts” should carry significantly more weight than the fact that the relevant provision is being sandwiched between two provisions on proper law.
88. Mr Davis, the plaintiffs’ expert, comments that clause 17 has not stipulated that disputes in relation to the Settlement Deed shall be subject to the jurisdiction of the BVI courts and that makes it equivocal whether it is a jurisdiction clause. Along the same line, Mr Khaw argues that the clause does not provide that the parties agree to “submit” or “refer” their disputes to the BVI courts.
89. I do not find these arguments persuasive. The use of the word “courts” has made the intention of the draftsman clear.
90. Hence, my answer to Issue (1) is yes.
Is clause 17 an exclusive jurisdiction clause?
91. Do clauses 17.1 and 17.2 confer exclusive jurisdiction on the BVI courts?
92. There are two parts to this question. First, is the jurisdiction conferred an exclusive one or a non-exclusive one? Second, what does the jurisdiction cover? The second question arises because the parties are disputing what the word “administration” in clause 17.2 means. The plaintiffs say that it covers only non-contentious administration action and does not cover contentious or hostile litigation, such as claims for breach of trust. Accordingly, even if clauses 17.1 and 17.2 do confer exclusive jurisdiction, such jurisdiction does not cover their claims in the present proceedings, which are based on breaches of trust. On the other hand, both the Trustees and Chow say that clause 17.2 covers all types of litigation, regardless of whether it is friendly or hostile.
First question – exclusivity
93. On the issue of exclusivity, it is well-established that the material question to ask in any given case is whether the clause obliges the parties intended to be subject to it to resort to the relevant jurisdiction, irrespective of whether the word “exclusive” is used: Lewin on Trusts (20th ed) at para 11-061. The failure to specifically use the word “exclusive” is not fatal. The court is to have regard to the construction of the document and the background and surrounding circumstances at the time the document was entered into: Yu Lap Man v Good First Investment Ltd [1999] 1 HKC 622 at 624E-F.
94. In the present case, I would arrive at the proper construction of clauses 17.1 and 17.2 by primarily considering the actual words used in the text and the rest of clause 17. This is because there is not much information before me shedding light on the circumstances surrounding the execution of the Settlement Deed, save that it was prepared by a solicitor. Whether he or she was BVI qualified or not is not known.
95. In my view, clauses 17.1 and 17.2 are exclusive jurisdiction clauses.
96. In the construction exercise, there may be pointers in the text which suggest exclusivity. Lewin sets outs three pointers, at para 11-062:
(1) The use of imperative (eg “shall”) rather than permissive language;
(2) The use of the definite (eg “the”) rather than the indefinite article; and
(3) When the chosen proper law is the law of the designated country. This is a pointer in favour of exclusivity because the courts of the designated jurisdiction would have had jurisdiction anyway, so that the clause would do nothing unless it conferred exclusive jurisdiction.
97. In Yu Lap Man, Rogers JA commented on the words “shall be” as appearing in “all disputes … shall be subject to the jurisdiction of the Courts in the People’s Republic of China”. He said, at 628G, that the words “shall be”, as opposed to the word “are”, would be assertive and connote an obligation.
98. Here, as a starting point, I place weight on the use of the words “All”, “shall” and “the” in clause 17.1 and the words “shall” and “the” in clause 17.2, as underlined in the extract in para 83 above. In my view, they are all pointers in favour of interpreting the provisions to confer exclusive jurisdiction.
99. Mr Khaw submits that clause 17 makes no express reference to the word “exclusive”, nor does it provide that the BVI courts are to be the “only” forum for the administration of the trust. It would have been a simple matter to so provide but this simply has not been done. Hence, the clause should not be construed to mean exclusive jurisdiction. Mr Khaw refers me to the following remark in Yu Lap Man, at 627F-G:
“It would have been a simple matter for the parties to state that legal proceedings could only be commenced in the PRC. This has not been done and it was not possible to imply any such agreement either from the clause itself or from the matrix background or the surrounding circumstances.”
100. It is of course true that the word “exclusive” or “only” was not used by the draftsman of the Settlement Deed. However, that omission in itself is not fatal. Even if those words are not used, if one can collect from the text and the factual matrix an intention that the jurisdiction is to be exclusive, the court would give effect to such intention. Here, I have already referred to the pointers which can be found in the text as pointing to such an intention.
101. Mr Khaw further argues that the use of the imperative “shall” and the definite article “the” does not point to exclusivity. He said that in Crociani the Privy Council attached much greater significance to the absence of the word “exclusive” than the presence of the word “the”. Mr Khaw points out that in Lewin, in the passage which discusses the three pointers (para 11-062), it is acknowledged that:
“But in Crociani, the Privy Council was sceptical whether such indications [ie the pointers] were sufficient to confer exclusivity; and it seems that they will not now always be sufficient.”
102. The remark, to which Mr Khaw’s submission relates, was made in para 22 of the judgment (reproduced in para 61 above). The discussion was in relation to the forum stipulation in clause 12(6). But the remark should be looked at in closer detail. Lord Neuberger found it questionable that the use of the definite article would be strong enough “on its own” to confer exclusive jurisdiction. Furthermore, his lordship attached great weight to the absence of the word “exclusive” in the forum stipulation because the very same word was used in the provision immediately preceding that stipulation (“Particularly given that the word ‘exclusive’ was used in the previous line of clause 12(6)”). It is plain to me that the reasoning was that if the draftsman was conscious to use the word “exclusive” elsewhere in the same document to express exclusivity (for proper law), he would have likely used the same word to express exclusivity for jurisdiction if that had indeed been the intention.
103. Here, in addition to the definite article, we also have other pointers – the word “All”, the assertive “shall”. Furthermore, unlike Crociani, the word “exclusive” does not appear anywhere in clause 17. Hence the reasoning in that case does not directly apply.
104. Mr Khaw’s further contention is that when clauses 17.1 and 17.2 are read together with clauses 17.3(b) and (e), it becomes clear that the draftsman could not have intended the former to confer exclusive jurisdiction. This is because clause 17.3(b) gives the Trustees the power to change the proper law of the trust at any time and clause 17.3(e) gives them the power to change the forum for administration to any court at any time. On the face of the clause, these two powers can be exercised independently. That is to say, the Trustees may change the proper law but not the forum at the same time. It is Mr Davis’ opinion that it indicates that “it was not the draughtsman’s intention to confer exclusive jurisdiction on the BVI court”.
105. While neither Mr Khaw nor Mr Davis has elaborated further, as I understand it, the argument is that where the Trustees elect to exercise one power only, eg to change the proper law to another country, without a corresponding change of the forum to that same country, and if the construction is that the forum clause is an exclusive one, then one would have the situation where the parties would be bound to litigate in a court which will decide the dispute under a foreign law. Would the parties have really intended that consequence? If not, then does it not militate against the exclusivity construction of the clause?
106. In fact, this argument also arose (in a different context) in Crociani at para 21. In my view, this submission, when considered on its own, is a plausible one, which should be taken into account in the construction exercise. However, I do not think that the point ought to be taken so high as precluding a conclusion of exclusivity. The reasons why at some point in the future the Trustees may choose to change the proper law and/or the forum to another country can be varied. We do not know how likely the situation of different law and forum will happen. For these reasons, it is unclear to me whether the draftsman had addressed his mind to the issue or whether he ought reasonably to have addressed his mind to it. As I have mentioned above, we do not have much information on the circumstances surrounding the making of the Settlement Deed. That is why I do not think this argument can be pressed too far.
107. Overall speaking, I would place more weight on the pointers identified in para 98 above and from that I conclude that the intention to be gathered from the Settlement Deed, primarily the actual wording used in clause 17, is that the parties are obliged to resort to the courts of the BVI in relation to the subject-matter set out in the clause.
108. I should add that I have not discussed in this decision the many authorities cited by the BVI experts and counsel in which clauses using similar wording were discussed. As remarked in Crociani, these decisions are not mutually consistent and they depend on the arguments advanced in the individual cases. They all inevitably turn on the precise wording of the clause in question, which is to be looked at against the factual matrix, if any: see para 31. Without any disrespect, I do not consider it necessary to make references to the detailed reasoning in those cases in this decision.
Second question – what does the jurisdiction in clauses 17.1 and 17.2 cover?
109. Having established that clauses 17.1 and 17.2 do confer exclusive jurisdiction on the BVI courts, the next question is – jurisdiction over what?
110. When a trust instrument contains a clause providing that the courts of a designated country shall be the forum for the administration of the trust, there arises a question as to what the word “administration” encompasses. There are two schools of thought on this. In the discussion below, I shall refer to the clause as “the forum clause”.
111. The plaintiffs contend that the forum clause refers to the locus of internal administration which can, if necessary, engage the supervisory jurisdiction of the court, rather than the resolution of hostile litigation between beneficiaries and trustees. In the present context, a distinction should be drawn between friendly and hostile litigation. The former includes, eg, the true construction of the trust instrument and other questions arising in the course of the administration of the trust. The latter involves, eg, breaches of trust claims against the trustee. The forum clause, the plaintiffs contend, covers only friendly litigation.
112. Mr Khaw relies on the decision of the Jersey Court of Appeal in Crociani [2014] JCA 089 and the decision of the Singapore Court of Appeal in Ivanishvili v Credit Suisse Trust Ltd [2020] SGCA 62, 23 ITELR 707. Both decisions cited an article written by Prof Paul Matthews, “What is a trust jurisdiction clause?” (2003) Jersey Law Review 232.
113. Prof Matthews wrote:
“The “forum for administration” of a trust is a quite different concept from an exclusive jurisdiction for the resolution of disputes (whether arising from trusts or otherwise.) The administration referred to here is not intended to include contentious breach of trust litigation. On the contrary, it is concerned with aspects of the administration of the trust which, for one reason or another, require the assistance of the court. … This is the “domestic jurisdiction” of the Chancery Court, which under the old Rules of the Supreme Court 1965 in England was represented by the provisions of Order 85. … This jurisdiction – usually, but not invariably, invoked by the trustees – continues today in England. …
Hence the phrase “forum for administration” referred directly back to the nineteenth century (and earlier) idea of the court which would take on the administration of the trust if need be. … But such an administration action was in effect procedural rather than substantive. It was a means of dealing with matters of administration and construction. It was not – could not be – used to deal with breach of trust issues, characteristic of the kind of hostile trust litigation for which an exclusive jurisdiction might be needed. … ”
114. On the other hand, the Trustees and Chow say that the forum clause covers not only friendly litigation but also hostile one. They rely on the following passage in Lewin, at para 11-064:
“… But [the contrary view] is based on a misunderstanding of the scope of an administration action, which has always extended to remedying a breach of trust; and more generally it presupposes that the draftsman would have chosen to limit the jurisdiction of the chosen court by reference to an obsolescent procedure while making no provision for other cases. Accordingly, we favour the wider construction which has been adopted in other decisions, under which the country designated as the forum of administration has jurisdiction to resolve any disputes relating to the trust, whether commenced by trustees or beneficiaries.”
115. Where the forum clause falls to be interpreted on its own, meaning that there is no other context available for construction purposes, I would prefer the construction advocated for in Lewin for the following reasons.
116. First, in Crociani, the Privy Council held that the expression “forum of administration” has no well-established technical significance attached to it. When read on its own, it can mean a court, but it can also mean a place. Similarly, I consider that the word “administration” as appearing in the forum clause, when read on its own, should also bear its plain and natural meaning, which is that it covers all aspects of the administration of a trust, whether it be seeking directions from the court on non-contentious matters or seeking an adjudication from the court on a breach of trust claim.
117. Secondly, according to Lewin, the scope of an administration action has always included contentious litigation. See para 39-025:
“Proceedings for breach of trust are matters of administration and it has always been possible to pursue a claim for breach of trust in an administration action.”
118. On that basis, there is no reason to limit the expression “administration” to friendly litigation only.
119. In Hong Kong, Order 85, rule 4 provides:
“In an administration action or such an action as is referred to in rule 2, the Court may make any certificate or order and grant any relief to which the plaintiff may be entitled by reason of any breach of trust, wilful default or other misconduct of the defendant notwithstanding that the action was begun by originating summons …”
120. Hence, if the trust deed in question is governed by Hong Kong law, it is difficult to arrive at the construction that the forum clause should only cover friendly litigation because that construction would be inconsistent with how the word “administration” is being used in our court rules. If the trust deed in question was prepared by a Hong Kong solicitor, the rules of the court would likely form part of the factual matrix against which the forum clause should be construed. In that case, it would seem unlikely that the draftsman intended that the clause would cover friendly litigation only.
121. Thirdly, as noted in Lewin, the “friendly litigation only” construction presupposes that the draftsman intended to limit the designated court to friendly litigation only while making no provision for other cases. One must ask rhetorically – if the draftsman specifically included a clause providing for a court forum in relation to the trust, why would he have provided for friendly litigation only but not other type of litigation? Solely looking at the forum clause, it is, in my view, difficult to deduce an intention that the draftsman had intended it to cover only one type of litigation but not other types of litigation.
122. Accordingly, in the present case, I consider that if clause 17.2 is to be read alone, it should bear the construction advocated for in Lewin and the jurisdiction which it confers on the BVI courts covers all types of litigation, including both friendly and hostile litigation.
123. In any event, however, clause 17.2 should not be read alone. It must be read against its proper context and that context is clause 17.1, which is the other jurisdiction clause in the Settlement Deed. Clause 17.1 provides that all rights under the deed should be subject to the jurisdiction of the BVI courts. There appears to be no reason why the word “all” should not bear its plain meaning, namely all. If that is accepted, it is reasonable to conclude that the draftsman must have intended that the jurisdiction to be conferred on the BVI courts by virtue of clause 17 would cover all kinds of litigation, whether friendly or hostile. Clauses 17.1 and 17.2 should be read in a consistent way.
124. To conclude, clauses 17.1 and 17.2 confer exclusive jurisdiction on the BVI courts over matters relating to the Trust and that jurisdiction includes both friendly and hostile litigation. Accordingly, the answer to Issue (2) is yes.
ISSUE (3)
125. Given that clause 17 is an exclusive jurisdiction clause, should the present proceedings be stayed in favour of the BVI courts as between the plaintiffs and the Trustees for that reason?
Discretion
126. The court is not bound by the clause but has a discretion to decide whether to stay or not.
127. In Noble Power Investments Ltd v Nissei Stomach Tokyo Co Ltd [2008] 5 HKLRD 631, Ma CJHC explained (in the contractual context), at para 27:
“… when dealing with questions of jurisdiction and forum, as a matter of public policy, it is for the courts ultimately to determine where the interests of justice lie, and the courts may, in exceptional circumstances, ignore the contractual bargain between the parties.”
128. Crociani and A v B explain how the discretion should be exercised in the trust context. Here, the Trustees have a prima facie entitlement to insist on clause 17. In their stay applications, one would expect them to explain why they want to adhere to the clause. However, in their very short affirmations, they did not say anything in this regard. Notwithstanding that, such omission would not prevent them from invoking their prima facie entitlement: see para 72 above; A v B at para 28. It is for the plaintiffs to show sufficiently good reasons why clause 17 should not be observed.
129. On this, Mr Khaw points to a number of connecting factors and concludes that the dispute has overwhelming connections with Hong Kong such that it should be tried in the court here.
130. Mr Khaw is in effect conducting a forum non conveniens analysis. On the assumption that he is right and the Hong Kong court is clearly a more appropriate forum than the BVI courts to hear the present proceedings, does that amount to a sufficiently good reason which would justify a departure from clause 17?
131. I shall first look at the position in contract cases and then consider whether the same should apply to the trust context.
In contract cases, forum non conveniens considerations are generally irrelevant in the exercise of the discretion
132. The position in the contractual context is clear. The authorities on this include Noble Power and the remarks made by the Court of Appeal and the Court of Final Appeal in Re Lam Kwok Hung Guy: see [2022] 4 HKLRD 793, [2022] HKCA 1297; and (2023) 26 HKCFAR 119, [2023] HKCFA 9.
133. For a party who wishes to bring proceedings in a non-stipulated forum, he must show strong reasons to convince the court why he should be freed from his contractual bargain. Such reasons would include the existence of factors which were not contemplated by the parties at the time the contract was made. They would not include factors of convenience that were foreseeable, save in exceptional circumstances involving the interests of justice: see Noble Power at paras 36 and 37; Re Lam Kwok Hung Guy (CA) at para 28; Re Lam Kwok Hung Guy (CFA) at para 92.
134. It is generally not appropriate to embark upon a Spiliada balancing exercise. There are two reasons for that, as explained in Noble Power.
135. First, where a stay application is made based on an exclusive jurisdiction clause, the question before the court is whether the contractual bargain should be enforced. Where a stay application is made on the ground of forum non conveniens, the question before the court is which forum is clearly or distinctly the appropriate forum to try the dispute. One can immediately see that they are two different questions. And the two questions warrant two different approaches. When answering the former question, it is not a matter simply of weighing up the connecting factors, which is what the court does in answering the latter question: see paras 38 to 40, 41(3) and 71(iii).
136. Second, as regards the former question, the fact that the non-stipulated forum is a more convenient one is generally not considered as a strong reason. In Ace Insurance SA-NV v Zurich Insurance Co [2001] 1 All ER (Comm) 802, Rix LJ explained (cited in Noble Power at para 40):
“If a party agrees to submit to the jurisdiction of the courts of a state, it does not easily lie in its mouth to complain that it is inconvenient to conduct its litigation there (ie to assert that the agreed forum is a forum non conveniens).” (at 820a)
137. There is however a caveat. Sometimes, a connecting factor may in itself amount to a strong reason for not adhering to the contractual bargain. When that happens, that connecting factor is relevant and will be taken into account. That relevance was noted by Ma CJHC in Noble Power at para 40:
“Generally, the existence or non-existence of connecting factors will be quite irrelevant, certainly much less powerful, unless it can somehow be shown that these may constitute strong reasons as to why the non-exclusive jurisdiction should not be enforced.” (underline added)
138. Lastly, in Re Lam Kwok Hung Guy, the Court of Final Appeal confirmed that the strong reasons requirement would not be met by reasons which suffice only to establish that the non-contractual forum is the forum conveniens: see para 93.
Should the contractual approach apply to trust cases?
139. The presently material question is whether the contractual approach should apply to trust cases. In my view, it should. I consider that the two reasons underpinning the contractual approach, as explained in Noble Power, apply to the trust context with similar force.
140. In the trust context, where the plaintiff is not a party to the trust instrument (eg a beneficiary), there is no room for saying that he should be held to the contractual bargain. However, as explicitly acknowledged in Crociani, a beneficiary who wishes to take advantage of a trust can be expected to accept that he is bound by the terms of the trust.
141. In fact, there is a lot to be said for upholding an exclusive jurisdiction clause in a trust instrument. First, the autonomy of the settlor should be respected. Second, it promotes certainty in the administration of the trust, which should be beneficial to the beneficiaries. As explained in Lewin, at para 11-068:
“Enforcement also respects the autonomy of the settlor, that is, the ability of the settlor to specify the terms on which he provides his bounty. There seems to be no reason of public policy why the jurisdiction clause should be regarded as ineffective or irrelevant in trust cases and such a clause has the advantage that it reduces the uncertainty, and hence the costs and scope for interlocutory litigation, of identifying the appropriate forum for trust litigation in cases with an international element.”
142. In other words, whereas in a stay application based on a contractual exclusive jurisdiction clause, the question before the court is whether the contractual bargain should be enforced, in a stay application based on a trust exclusive jurisdiction clause, the question before the court may be said to be whether the settlor’s autonomy should be respected and his intention upheld.
143. Analysed that way, I am of the view that the two reasons set out in Noble Power apply similarly to the trust context. First, the question of whether the settlor’s autonomy should be respected and the question of which forum is more convenient to try the dispute are different questions, and they warrant different treatments. Secondly, the fact that the non-stipulated forum is more convenient is generally not a sufficiently good reason for not respecting the settlor’s wishes, as the beneficiary is expected to defer to the settlor if he wishes to take under the trust.
144. I have attempted to analyse the issue as a matter of principle. I now turn to the trust authorities, namely Crociani, A v B and Okada.
145. It is true, as Mr Khaw submits, that in Crociani, the Privy Council took into account factors which commonly feature in a Spiliada analysis. They included the governing law of the trust being Jersey law, the extensive experiences of the Jersey courts in trust litigation, and the location of documentation and witnesses. It concluded that the exclusive jurisdiction clause should not be adhered to in that case.
146. However, in arriving at that conclusion, there were other reasons cited: see paras 44 and 45. Furthermore, Lord Neuberger did not expressly address the question of whether, as a matter of principle, it would be appropriate to carry out a Spiliada analysis when exercising its discretion in the context of trust exclusive jurisdiction clauses. Hence, I do not consider that Crociani is against the view which I have reached above.
147. Okada appears to be in support of my view. It was held in para 47 that the trust exclusive jurisdiction clause “must be given legal effect” and the action should therefore be stayed in favour of the Tokyo District Court. Then, at para 48, Ng J said:
“In view of the above conclusion, no useful purpose will be served by dwelling on the parties’ submissions on forum non conveniens.”
148. However, I refer to my observation in para 77 above. Okada may not be a directly relevant authority on the present issue.
149. Lastly, in A v B, parties put forward opposite submissions. Counsel for B, who sought to rely on the exclusive jurisdiction clause in the trust deed there, submitted that the forum non conveniens approach did not apply at all (para 25) whereas counsel for A submitted that the court should take into account the forum factors (para 34).
150. Mimmie Chan J did not expressly deal with the rival contentions. From para 35 onwards, her ladyship proceeded to analyse the connecting factors. In the end, based on her views of those connecting facts, she held, at para 59, that there was no reason not to enforce the exclusive jurisdiction clause and to the extent necessary, she considered that the stipulated forum was the more appropriate forum for the trial in that case.
151. Based on the above, it may be said that her ladyship in fact embarked on a Spiliada exercise when she exercised her discretion. But, whether that was indeed the case is not clear.
My answer to Issue (3)
152. In the present case, Mr Khaw seeks to convince the court that clause 17 should not be followed by relying on the Spiliada connecting factors. He also relies on the existence of the claims against Chow which he says should be tried in Hong Kong.
153. Applying Noble Power to the trust context, I consider that in deciding whether to exercise my discretion to require the parties to adhere to clause 17, it is not appropriate to conduct a Spiliada exercise in the first place. But if one is to conduct such exercise, as will be seen in Issues (4) and (7) below, I am of the view that it will be more convenient to have the present proceedings heard in the Hong Kong court. Notwithstanding that, applying Noble Power, that convenience in itself does not amount to a sufficiently good reason for departing from clause 17. Furthermore, none of the connecting factors by themselves constitute sufficiently good reasons for not respecting the autonomy of the settlors.
154. As regards the claims against Chow, the proper forum for the trial of that action will be discussed below. Subject to that point, I take the view that the plaintiffs have failed to make out any sufficiently good reason for not observing clause 17. Hence, when the Trustees’ stay applications are viewed on its own without (in the meantime) having regard to the existence of the claims against Chow, the present proceedings as between the plaintiffs and the Trustees should be stayed in favour of the BVI courts. The answer to Issue (3) is therefore tentatively yes, but this answer is subject to the discussion in Issues (5) to (8) below.
ISSUE (4)
155. Issue (4) is about whether the present proceedings against the Trustees should be stayed in favour of the BVI courts on the ground of forum non conveniens. Given my answer to Issue (3), Issue (4) is inapplicable. However, I will proceed to deal with it now as I will in any event have to deal with it under Issue (7).
156. While the respective claims against the Trustees and Chow are based on different legal formulations, they arise out of the same facts. The act complained about is the alleged transfer of the shares in the Company from the Trustees to Chow at no or grossly inadequate consideration. For that reason, the trial of the claims against the Trustees and the trial of the claims against Chow would take the same shape, except that the former would be of a slightly broader scope as it also covers the income claim, which is only made against the Trustees.
157. Hence, the answer to the question of which court is more suitable to try the case should be broadly the same whether we are talking about the claims against the Trustees or those against Chow.
A preliminary issue
158. Neither the Trustees nor Chow has ever identified any defence. Because of that, the plaintiffs raise a preliminary objection to their stay applications.
159. Mr Khaw submits that it is trite that for a defendant to convince the court to grant a stay on forum non conveniens, he must identify his defence with sufficient particularity. This is because without such materials, the court will not be able to know whether there are any real issues to be tried between the parties or to assess the appropriateness of the forum from the point of view of the trial of the action. Here, the burden is on the Trustees and Chow to demonstrate that the BVI courts are more suitable to try the case. As they have failed to identify a defence, let alone one with sufficient particularity, their stay applications must fail. Mr Khaw relies on High Hope Zhongding Corporation v 廈門墩峰進出口有限公司 HCA 2485/2015, 16 January 2017 at paras 30 to 36; China Railway (Hong Kong) Holdings Ltd v Chung Kin Holdings Co Ltd[2023] HKCFI 132 at paras 47 to 52; and Johnston, The Conflict of Laws in Hong Kong (3rd ed) at para 3.096.
160. If the submission is correct, I can straightaway dismiss the stay applications based on the forum non conveniens ground, without even looking at the connecting factors. I therefore need to deal with this point as a preliminary issue.
161. High Hope referred to a line of authorities, including Xu Ziming v Ruifeng Petroleum Chemical Holdings Ltd HCA 450/2013, 27 August 2014, on this point. In the latter case, the stay application by the defendant was refused because, among other reasons, the defendant had failed to identify any defence: see paras 17(1), 18 and 19. It was said, at para 26:
“In my view, the loading up by the defendant of factors which may point to the PRC as the appropriate forum is quite meaningless, when the defendant has simply failed to state ‘the nature of the controversy in dispute’ between the parties … In the circumstances, the court is simply not in a position to focus on appropriateness of the forum ‘from point of view of the trial of the action’.”
162. In High Hope, the court considered that he was facing the same situation. He regarded the defendants’ failure to identify their defence in that case as a “fundamental problem”. Without knowing the nature of the dispute, the court would not know how the connecting factors put forward by them would affect the conduct of the trial and the court would not be able to conduct the Spiliada inquiry without such crucial information. Hence, the failure to put forward a defence was “fatal” to the stay application: see paras 30 and 36.
163. On the other hand, there is another line of cases in which the court takes the view that a defendant’s omission to put forward a defence is not fatal to his forum non conveniens argument: see VTB Capital plc v Nutritek International Corporation [2013] UKSC 5, [2013] 2 AC 337; and 張才奎所託管中國山水投資有限公司股份相關員工 v 張才奎 HCA 1661/2014, HCA 1766/2014 and HCA 2191/2014, 13 May 2015. I should, however, point out at once that these authorities concerned applications taken out by foreign defendants to set aside ex parte orders obtained by plaintiffs to serve the proceedings out of jurisdiction. The significance of this is of course that in this type of application, it is the plaintiff who bears the burden to prove that the Hong Kong court is the more suitable forum to hear the case than the foreign court. By contrast, where a defendant is served within jurisdiction and applies to stay based on forum non conveniens, it is he who bears the burden.
164. According to the two authorities, in an application for leave to serve out, even though the plaintiff bears the burden to show that Hong Kong is clearly the appropriate forum for the trial, it is still incumbent on the defendant to identify the issues concerned. But it should at the same time be recognised that a defendant is in principle “entitled to keep his powder dry”. If he chooses to say nothing, then the court may still proceed to consider the forum non conveniens issue and it may do so on the basis that there is no more, and no less, to the proceedings than will be involved in the plaintiff making out his case. If the defendant is wholly reticent about his case, he can have no complaint if the court does not take into account what points he may make at any future trial: VTB Capital at paras 90 to 91; 張才奎 at paras 48 to 50.
165. I am of the view that the approach adopted in VTB Capital and 張才奎 in the context of applications to serve out of jurisdiction should in principle also apply to applications to stay Hong Kong proceedings, notwithstanding the difference in the burden of proof.
166. As explained by Lord Neuberger in VTB Capital, the general principle is that in civil litigation, it is for a plaintiff to make out his case and a defendant is entitled to keep his powder dry. He said, at para 90:
“The second point … concerns the extent to which a defendant who is challenging the jurisdiction of the English court should identify the nature of his case. In my view, the position is reasonably clear. As a matter of principle, a defendant is entitled to keep his powder dry: he can simply put the claimant to proof of its case. In general at least, that is true at any point of the proceedings. The mere fact that the defendant is challenging jurisdiction does not somehow impose a duty on him to specify his case. The onus is on the claimant to satisfy the court that there is a serious issue to be tried on the merits of the claim, and not on the defendant to satisfy the court that he has a real prospect of successfully defending it.” (underline added)
167. The above principle should apply equally to an application to stay Hong Kong proceedings by a defendant who has been served within the jurisdiction. It is true that in this kind of application, the burden to argue forum conveniens is on the defendant but that burden is one to show that there exists a foreign forum which is more suitable to try the case. There is no burden imposed on him to put forward a defence as such. As explained in VTB Capital and 張才奎, where the defendant does not identify his defence, it is still possible to conduct the forum non conveniens analysis as that can be done solely with reference to the plaintiff’s case.
168. For these reasons, I would decline to follow the approach adopted in Xu Ziming, High Hope and China Railway as I do not consider that the omission of a defendant to identify a defence makes it impossible to consider the forum non conveniens issue. I would follow the approach in VTB Capital and 張才奎 and evaluate the issue by reference to the issues revealed by the plaintiff’s pleaded case.
169. I therefore answer the preliminary issue as follows – the failure of the Trustees and Chow to put forward any defence is not a ground in itself to dismiss their stay applications.
170. By way of footnote, I should add that the cases cited in the passage in Johnston appear to belong to a different category of cases from the High Hope line of cases and therefore are not relevant to the present discussion. They are cases where the defendant has put forward a defence which the court finds to be not arguable or to have no merit or where it is clear that the defendant simply has no defence which it can put forward, then the court considers that that is a strong reason to refuse a stay because “there would then be no real issues between the parties which should be tried either here or elsewhere”: see, eg, Bayer Polymers Co Ltd v The Industrial and Commercial Bank of China, Hong Kong Branch [2000] 1 HKC 805 at 807G-808F.
Forum non conveniens
171. At the trial, the factual matters which the plaintiffs need to prove are broadly:
(1) as background, the circumstances leading to the setting up of the Trust, the appointment of the Trustees and the injection of the shares of the Company into the Trust in 2009;
(2) the plaintiffs’ discovery in 2018 of the alleged transfer of the shares by the Trustees to Chow;
(3) the transfer being for no consideration or at a gross undervalue;
(4) in relation to (3), the value of the shares of the Company at the time of the transfer;
(5) also, in relation to (3), the financial resources of Chow and his lack of ability to acquire the shares;
(6) the transfer being made by the Trustees fraudulently, or recklessly or negligently; and
(7) in relation to the income claim, the amount of income under the Trust.
172. If the facts as alleged are proved, the plaintiffs will have to show that by reason of the alleged transfer and/or the failure to distribute income, the Trustees were in breach of the Trust under BVI law. There is also the construction point concerning clauses 9.1 and 18 of the Settlement Deed, which may have an impact on the 2nd plaintiff’s beneficial interest under the Trust. That will also be governed by BVI law.
173. That would be the broad shape of the trial. It would appear that the majority of the trial time will be spent on dealing with the facts. Neither Mr Todd nor Ms Eu has suggested that there is any novel, complex or obscure issue arising from those facts under BVI law.
174. On the connecting factors, I shall start with the governing law.
175. Both Mr Todd and Ms Eu refer me to Gomez v Gomez-Monche Vives [2008] EWCA Civ 1065, [2009] Ch 245 for the proposition that if a settlor and trustee have chosen a law to govern the trust, then this law is the one with which the trust has its closest and most real connection even if that country has no other connection with the trust (see para 64):
“The connection between a trust and its proper law is in every sense real and close. A trust is not like a commercial contract where it is only necessary to consider the content of the applicable law in exceptional circumstances. Trustees in particular have to be intimately aware of their responsibilities under the general law applicable to the trust. The may have to know whether they can lawfully accumulate income. Resort to the law governing the trust is central to their responsibilities …”
176. There is also a passage in Briggs, Civil Jurisdiction and Judgments (7th ed) which highlights the close connection between a trust and its stipulated governing law (see para 14.48):
“The identification of the system of law with which a trust has its closest and most real connection will be straightforward if the settlor selected and expressed the law to govern the trust. Where this was done, it is practically impossible to imagine that an express choice of a domestic law will not be the system of law with which the trust has its closest and most real connection. … It also follows that factual connections with a country other than that of the chosen law will be unlikely to displace the chosen law as the system of law with which the trust is most closely connected, as the required connection is with a system of law, not a country.”
177. In addition to the above, generally speaking, I accept that where issues under foreign law arise, as a matter of principle, the foreign court should be better placed to determine them than the Hong Kong court. There is a risk that the Hong Kong court may arrive at a wrong conclusion on the foreign law.
178. However, here, as regards the cause of action concerning the transfer of shares, it would appear, and Mr Todd and Ms Eu have not suggested otherwise, that the common law trust principles would apply. Hong Kong courts are of course well placed to decide on and apply these principles. So far, neither counsel has identified any relevant or material difference between BVI law and Hong Kong law which applies to the facts. It has also not been suggested that there is any novel, complex or obscure issue under the laws of the BVI which arise from those facts. It has been said that the Hong Kong court is used to receiving expert evidence on BVI laws: 李明實 v Ace Lead Profits Ltd[2022] HKCFI 3342 at para 85(f).
179. For all these reasons, with proper expert evidence adduced on BVI law, the risk of the Hong Kong court coming to an incorrect conclusion on the BVI law which may feature in the trial is not significant: see 張才奎 at para 102. Hence, viewed from this perspective, the governing law may be said to be a factor of little significance: Navigators Insurance Co v Atlantic Methanol Production Co LLC [2003] EWHC 1706 (Comm) at paras 47 and 48.
180. In my view, the same observations apply to the income claim too.
181. Overall speaking, on the one hand, the Trust is governed by BVI law, and that in itself establishes a close connection between the Trust and the forum of the BVI courts. On the other hand, from the perspective of the trial, as it is not expected that any novel or complex BVI law would arise for determination, the Hong Kong court is in an equally good position to try the case. I would therefore consider that the governing law factor to be a neutral one in determining the issue of appropriate forum.
182. The next factor is the location of witnesses. I first deal with factual witnesses. It would appear that the 1st and 2nd plaintiffs will speak to the matters set out in para 171 above, particularly sub-paras (1), (2) and (5). The 1st plaintiff currently lives in New York. The 2nd plaintiff lives in Hong Kong. They have not identified any other witnesses. As for the Trustees and Chow, as they are taken to have no positive case in our present analysis, they may not testify. But if they do, it is relevant that all of them are residents in Hong Kong. Hence, the location of the witnesses point to Hong Kong being the more convenient forum.
183. The next factor is the location of expert witnesses.
184. It would appear that expert valuation evidence would be required to determine the value of the shares of the Company as of the time of the transfer. According to the plaintiffs’ case, the Company owns Lip Hing Metal, which is the major part of the family business and that company owns an industrial building in Kowloon Bay. Also, it is the plaintiffs’ belief that a substantial amount of assets held under the Company is located within Hong Kong, even though there are other subsidiaries or branches located in the US, the UK and the mainland.
185. It would follow that when it comes to the valuation of the Company, Hong Kong valuers, in respect of real property and other business operations, will be a natural choice. The likelihood that Hong Kong experts will be engaged, and their location being Hong Kong, is a connecting factor in favour of the Hong Kong court.
186. The next factor is the location of documents. According to the plaintiffs’ case, the Trust was set up in Hong Kong. It was Ronald Chow who instructed solicitors to prepare the Settlement Deed. The Trustees have been resident in Hong Kong. It follows from all these that the documentation relating to the setting up of the Trust is likely to be in Hong Kong. It also follows that the administration of the Trust is likely to have been carried out in Hong Kong. The documentation relating to the administration is therefore likely to be in Hong Kong too. The Company’s head office is in Hong Kong and its substantial assets are also located here. It follows that the documentation relating to the assets of the Company will be in Hong Kong. Lastly, given that the Trustees and Chow have both been residing in Hong Kong, it is possible that the physical act of the alleged transfer (in the form of signing the relevant transfer documents) has taken place in Hong Kong. If that is correct, then the documentation in relation to the transfer would likely be in Hong Kong. The Company is incorporated in Samoa. But it has not been suggested by anyone that the actual physical act giving rise to the transfer took place there.
187. It is worth repeating here that in the present stay applications, the Trustees and Chow have chosen to remain completely silent on the serious factual allegations made against them by the plaintiffs (when in theory they should be in a position to rebut them if they do not agree). I therefore have only the plaintiffs’ evidence before me. Both Mr Todd and Ms Eu have attempted to point to what they say are contradictions or discrepancies between the statement of claim and the plaintiffs’ affirmation evidence. In my view, if there are any discrepancies, they are not material. The allegations made in the plaintiffs’ affirmations about the Company, its assets and the location of its assets are straightforward. There is nothing before me which casts serious doubt on them. For present purposes, I therefore have proceeded to make the above observations about the likely location of the documentation on that evidential basis.
188. In summary, the location of documents, as a connecting factor, is in favour of having the trial in the Hong Kong court.
189. Lastly, I turn to the latest BVI proceedings.
190. Mr Todd submits that the existence of ongoing proceedings in the BVI is a weighty factor. He highlights the role of jurisdiction clauses in Beddoe applications and how that may affect the determination of the appropriate forum for the related main actions. He refers me to para 11-079 in Lewin (the same passage is also relied on by Ms Eu):
“… the [jurisdiction] clause may be relevant to the question of the appropriate forum, in that because of the clause any Beddoe application about the claim will ordinarily have to be brought in the designated jurisdiction; and since one of the matters to be considered in a Beddoe application in this context is whether beneficiaries should be added as parties to the main action, and the claimant may also be involved in the Beddoe application, it may be better for the main action also to be brought in the same jurisdiction.” (my emphasis)
191. Ms Eu urges the court to take into account the latest BVI proceedings and treat it as a compelling factor which justifies a stay of the Hong Kong proceedings. To allow parallel proceedings over the same or similar issues in both Hong Kong and the BVI may give rise to the possibility of conflicting decisions.
192. On the other hand, Mr Khaw highlights the timing of the latest BVI proceedings. They were commenced about one and a half years after the stay applications and only five months before the present hearing. So far, the Trustees have not provided any explanation why they were commenced so late. Mr Khaw submits that the chronology and the absence of explanation show that it is merely a tactical move of the Trustees, and that it is doubtful these proceedings would be genuinely pursued by them. In any event, the proceedings have not passed beyond the stage of initiating process. In these circumstances, the existence of the latest BVI proceedings is not a relevant factor when determining the appropriate forum: Emirates Shipping Line DMCEST v Trans Asian Shipping Services PVT Ltd HCCL 2/2013, 30 November 2015 at para 56.
193. In my view, the paragraph from Lewin has been taken out of context. That paragraph deals with the scenario where a person is asserting a claim against the trust, as where he claims to be the beneficial owner of assets held by the trustee by reason of a prior title. This is the context referred to in the passage quoted above. It is an altogether different situation from the present one.
194. On the basis of the materials before me, I agree with the plaintiffs’ submissions, and consider that the existence of the latest BVI proceedings is a neutral factor in the analysis.
My answer to Issue (4)
195. Mr Khaw submits that the dispute has overwhelming connections with Hong Kong – the Trust was set up in Hong Kong, the transfer likely took place in Hong Kong, and the Company is strongly connected to Hong Kong. I agree with that submission.
196. On the whole, apart from the governing law and the latest BVI proceedings which I consider to be neutral factors, every other factor points to the Hong Kong court being the more appropriate forum for the trial of the present claims than the BVI court.
197. Therefore, if Issue (4) is applicable, my answer would be no. These proceedings as between the plaintiffs and the Trustees should not be stayed in favour of the BVI courts on the ground of forum non conveniens.
ISSUE (5)
198. Chow is not a party to the Settlement Deed. He has no role in the Trust. That being the case, can he rely on clause 17 and require the plaintiffs to sue him in the BVI courts such that the HCA proceedings as between him and the plaintiffs should be stayed? That is Issue (5).
199. In my view, the answer is no.
200. Chow can properly be described as a stranger to the Trust. He is not a beneficiary. He has no claim under the Trust. Nor does he have any duty or power under the Trust. He simply has no relationship with the Trust. As explained in Lewin, Chow, being a stranger, is in no position to enforce the exclusive jurisdiction clause as against the plaintiffs.
“Given the basis on which jurisdiction clauses in trusts are enforced, they are binding on and can be enforced by all those who claim rights under the trust or who have assumed duties or powers under it in respect of such matters”. The class so bound includes beneficiaries …, trustees, former trustees, and protectors and other donees of powers …” (para 11-078)
“Claims brought by trustees against strangers to the trust, or vice versa, will not be governed by a jurisdiction clause in a trust instrument. Strangers to the trust, such as those sued for damage to trust property or professionals sued for negligent advice, do not claim rights or assume duties under the trust.” (para 11-080)
201. On this point, Ms Eu submits that Chow is sued as a constructive trustee holding on trust for the beneficiaries and in this context, he “is supposed to have assumed duties under it”, rather than a stranger to the Trust. On that basis, he can enforce clause 17 against the plaintiffs.
202. I reject that submission. It is not clear to me at all what Ms Eu means when she says that Chow “is supposed to have assumed duties under [the Trust]”. In any event, on the facts as pleaded, any constructive trust which the court may impose on Chow would arise by operation of law, which purpose is to ensure that whilst being the legal owner of the shares, he cannot deny the interest of the beneficiaries in relation to them. In this analysis, contrary to Ms Eu’s submissions, he cannot be said to be assuming any duty as expressly provided for under the terms of the Trust.
ISSUE (6)
203. As the answer to Issue (5) is no, Issue (6) is no longer relevant.
ISSUE (7)
204. The forum non conveniens analysis conducted under Issue (4) applies equally to Chow. Therefore, subject to Issue (8), the HCA proceedings as between him and the plaintiffs, when viewed on its own, should not be stayed in favour of the BVI courts on that ground.
ISSUE (8)
205. Under Issue (3), I consider that when one leaves to one side the claims against Chow, the Hong Kong proceedings as between the plaintiffs and the Trustees should be stayed by reason of clause 17. On the other hand, under Issue (7), I consider that when one leaves to one side the concurrent claims against the Trustees, the proceedings as between Chow and the plaintiffs should be allowed to carry on in Hong Kong.
206. These different conclusions lead to two questions. First, should the present proceedings against the Trustees and against Chow be heard in two jurisdictions, namely the BVI courts and the Hong Kong court, respectively? Second, if not, in which forum should they be heard?
First question
207. As regards the first question, the plaintiffs, the Trustees and Chow agree that the present proceedings should all be tried in one single forum. I agree.
208. The material consideration is the fact that the claims against the Trustees and those against Chow are inextricably linked as they arise from one single incident, namely the alleged transfer of the shares of the Company. (The income claim is of course made against the Trustees only).
209. Plainly, these claims should be tried together in one jurisdiction to avoid all the risks and pitfalls associated with multiple proceedings in different jurisdictions, namely duplication of costs arising from two separate trials and inconsistent findings by the two courts. It has been said that to allow two actions in which many of the same issues fall to be determined to be tried in two jurisdictions is “a potential disaster from a legal point of view”. See The El Amria [1981] 2 Lloyd’s Rep 119 at 128; Donohue at para 27; and, Quaestus Capital Pte Ltd v Everton Associates Ltd [2021] 4 HKC 605, [2021] HKCFI 136 at paras 54 to 58.
210. The above authorities all concern contractual exclusive jurisdiction clauses.
211. When considering whether to enforce an exclusive jurisdiction clause against a contractual party where someone else who is not subject to the clause is also being sued on the same or similar facts, the issue of multiplicity of proceedings should lie at the forefront of the court’s mind, and great weight should generally be given to it. In most cases, the interests of justice are best served by the submission of the whole dispute to a single tribunal which is best fitted to make a reliable, comprehensive judgment on all the matters in issue: Donohue at para 34, quoted in Quaestus at para 56.
212. As an illustration, in Quaestus, the plaintiff commenced an action alleging a fraud scheme against Everton (the 1st defendant) and Axis (the 2nd defendant), who were both out of jurisdiction. The plaintiff obtained leave to serve out. Everton did not dispute jurisdiction and filed a defence. Hence, the action between the plaintiff and Everton would proceed in Hong Kong. Axis disputed jurisdiction and applied to set aside the leave to serve out based on an exclusive jurisdiction clause contained in its contract with the plaintiff stipulating the London courts to hear disputes. In that application, Axis’s position was that if the plaintiff sued both Everton and Axis, there should be two sets of proceedings, one in Hong Kong and one in London. The court rejected that position and held that there should not be multiple proceedings and that was a strong cause for not giving effect to the exclusive jurisdiction clause in the Axis contract.
213. In my view, the approach adopted by the courts in the contractual context should equally apply to the trust context.
214. Accordingly, applying The El Amria, Donohue and Quaestus, I hold that the present proceedings should all be tried in one single forum.
Second question
215. Under the second question, the task is to decide, as between Hong Kong and the BVI, which court is better placed to hear the present proceedings. The question should be answered ultimately by considering which option would better serve the interests of justice in this case.
216. There are, in my view, a number of factors which are presently material. Both the Trustees and Chow are Hong Kong residents. They were served within the jurisdiction. The plaintiffs have therefore commenced the present proceedings against them as of right. To stay them in favour of the BVI courts would be depriving the plaintiffs’ entitlement to sue in Hong Kong. That is a serious matter. Separately, I have held that the Hong Kong court is clearly the more appropriate forum for the trial of the present proceedings.
217. Given the above, as far as Chow is concerned, if the present proceedings are to be tried in Hong Kong, he cannot really complain. He is not a party to the Trust or in any way privy to it. He cannot legitimately think that he can take advantage of clause 17 so as to compel the plaintiffs to sue him in the BVI.
218. As far as the Trustees are concerned, the question remains to be whether there is any sufficiently good reason why the court should not give effect to the exclusive jurisdiction clause in the Settlement Deed.
219. In my view, when the claims against Chow are also taken into account, there are sufficiently good reasons. There is a genuine need to avoid parallel proceedings in Hong Kong and the BVI, and the court has to make a choice between the two jurisdictions. On this, there is much to be said that the Hong Kong court is the better option because, first, the plaintiffs should be allowed to sue Chow in Hong Kong; secondly, the Trustees are sued here as of right; and, thirdly, Hong Kong is clearly the more appropriate jurisdiction from a forum non conveniens perspective. It follows that it would be in the interests of justice to have the case tried in Hong Kong.
220. In Crociani, Lord Neuberger reminded us that the court has an inherent jurisdiction to supervise the administration of trusts in general and, if necessary, to intervene in order to protect the interests of beneficiaries. Here, the plaintiffs are making serious allegations against the Trustees. These allegations are yet to be proved. But the circumstances of the case, in my view, warrant the Hong Kong court exercising its inherent trust jurisdiction over the dispute, and justify a departure from the express clause nominating the BVI courts to be the exclusive jurisdiction.
221. On this issue, the position of both the Trustees and Chow is that the plaintiffs should not be released from clause 17 since the claim against Chow was something that was foreseeable when the Trust was created. They both rely on the decision in Lammas Global Corporation v Barclays Bank (Suisse) SA HCA 2411/2009, 13 April 2011.
222. More specifically, Mr Todd submits:
“In the present case, similar to Lammas Global, it was foreseeable at the time when the Trust Deed was entered into that any claim made against the Trustees in respect of any wrongful disposition of trust property would be accompanied by a claim against the recipient thereof (even though the recipient might be outside of the exclusive jurisdiction clause).”
223. Ms Eu similarly submits:
“… when the Deed was formed, it was foreseeable that claims of misappropriation concerning the trust property against the trustees could involve third parties.”
224. I am unable to accept the submissions of Mr Todd and Ms Eu. It seems unreal to say that when the Trust was created, it would be within the contemplation of the settlors or the draftsman that a beneficiary might in the future sue a complete stranger to the Trust. I find it difficult to accept that that was something which the settlors or the draftsman would have in mind when clause 17 was drafted. The objective intention must have been that the clause should only apply to or affect parties to the Trust or those privy to it, but not complete strangers.
225. I also consider that the reliance on Lammas Global is misplaced.
226. In that case, the plaintiff was a client of the Barclays banking group. It dealt with representatives of Barclays Suisse (the 1st defendant) and Barclays plc (the 2nd defendant) in Hong Kong while its account was opened with Barclays Suisse in Switzerland. The group marketed their service of investment advice under the collective title “Barclays Wealth”. The 3rd to 6th defendants were other entities within the Barclays group. In a meeting in Hong Kong, Barclays Suisse and Barclays plc recommended an investment in a hedge fund. The plaintiff made a substantial investment in it. But that later turned out to be a total loss.
227. The plaintiff commenced an action in Hong Kong, claiming against all six defendants in respect of the failed investment. Save for Barclays plc which was served in Hong Kong, all the defendants were served out of jurisdiction pursuant to leave granted by master. The defendants took out applications to dispute jurisdiction. It was held that as between the plaintiff and Barclays Suisse, the account documentation contained an exclusive jurisdiction clause obliging the former to sue the latter in Switzerland. As for Barclays plc and the other defendants, no such contractual clause existed. Like the present case, this was thus a situation where multiple defendants were sued but only one of them was entitled to rely on an exclusive jurisdiction clause in favour of a foreign forum.
228. The court therefore had to decide whether the plaintiff should be allowed to be released from the clause vis-à-vis Barclays Suisse such that the Hong Kong proceedings should continue. It was held that it should not.
229. On the issue of foreseeability, Saunders J said:
“32. Although it is relevant to take into account whether or not the effect of the enforcement of the exclusive jurisdiction clause will lead potentially to a multiplicity of proceedings, for example where the proceedings involve parties not covered by the exclusive jurisdiction clause, in this case the 2nd and 6th defendants, that is a matter which may be anticipated and appreciated by the plaintiff at the time he agreed to the exclusive jurisdiction clause.
33. The burden is on Lammas to show strong cause, unforeseeable at the time of entering into the banking contract containing the exclusive jurisdiction clause, in November 2002, why full effect should not given to Article 26. I accept Mr Bleach’s submission that at the time the account was opened it was foreseeable that dealings in respect of the account would be in Hong Kong and that any claims made against Barclays Suisse in respect of the account may well be accompanied by claims against Barclays plc which could be brought in Hong Kong.” (underline added)
230. It is apparent that Mr Todd’s and Ms Eu’s submissions draw support from the above underlined words. However, in my view, the facts in that case are distinguishable. All the defendants in Lammas Global were related companies within the same group, and the plaintiff could properly be regarded as a customer of the group. It is clear to me that it was against this context that the judge took the view that it was foreseeable at the time the account was opened that any claim against Barclays Suisse might well be accompanied by claims against the other members of the group. That view is justified on its facts. But the same cannot be said to be true in our case where Chow is a complete stranger to the Trust.
231. In conclusion, there are sufficiently good reasons not to enforce clause 17 against the plaintiffs. The claims against the Trustees and those against Chow should all be tried in Hong Kong.
232. Accordingly, the stay applications should be dismissed.
THE NEW EVIDENCE APPLICATION
233. Although I have found the existence of the latest BVI proceedings to be a neutral connecting factor in the forum non conveniens analysis, I consider that it is appropriate for me to take note of the latest development in the BVI when conducting that analysis. I would therefore allow the new evidence applications.
THE SUMMARY JUDGMENT APPLICATION
234. In light of my conclusion that the HCMP proceedings should not be stayed, I now proceed to deal with the summary judgment application.
235. In their originating summons, the plaintiffs seek disclosure of information on the alleged transfer, an inventory and account of the Trust with supporting documents. They now seek summary judgment pursuant to Order 28, rule 4.
236. Under the rule, it is for the plaintiffs to first justify their entitlement to summary judgment. Once this is demonstrated prima facie on the evidence, the burden falls on the Trustees to show that they have a defence: Bank of China (Hong Kong) Ltd v Twin Profit Ltd [2010] 2 HKLRD 1065 at para 8.
237. The issue of whether to order disclosure is governed by BVI law. The unopposed evidence of Mr Davis, the plaintiffs’ expert, is that there is no specific statutory provision in the BVI on disclosure under trust law. The decision of the Privy Council in Schmidt v Rosewood Trust Ltd [2003] UKPC 26, [2003] 2 AC 70 applies. A beneficiary has a right to seek disclosure of trust documents. As part of is inherent jurisdiction to supervise, and where appropriate to intervene in, the administration of trusts, the court has the power to order disclosure. The beneficiary must demonstrate why it is appropriate for the court to exercise the discretion in his favour. The power is to be exercised for enabling the beneficiary to hold the trustee to account for its stewardship of the trust: see Tchenguiz v Rawlinson & Hunter Trustee SA BVIHCM 2017/0026 at para 4.
238. The plaintiffs depose to the alleged transfer on affidavit. On that evidence, I am satisfied that they have demonstrated a prima facie case for disclosure. They should be allowed access to the documents so as to find out whether there was a breach and to seek remedies accordingly.
239. In these proceedings, no substantive defence has ever been put forward by the Trustees to rebut the allegation. In their opposing affirmation, the Trustees only referred to their jurisdiction challenge. They did not say anything about why disclosure should not be ordered.
240. The Trustees have not discharged their burden to show an arguable defence under Order 28, rule 4. That being the case, summary judgment should be entered.
CONCLUSION
241. In conclusion, the stay applications are unsuccessful. I dismiss the summonses referred to in paras 7(1), (2) and (3). The summary judgment application is allowed. I enter final judgment in terms of paras (a) to (c) of the originating summons referred to in para 5(1) above. Lastly, the new evidence applications are allowed. I make an order in terms of paras 1 and 2 of the summonses referred to in paras 7(5) and (6).
242. I also direct that in the HCA proceedings, the Trustees and Chow do file and serve their respective defences within 28 days from the handing down of this decision.
243. On costs, I make the following nisi orders. The plaintiffs do have costs of the stay applications. They do also have costs of the HCMP proceedings, including the summary judgment application. Costs of the new evidence applications be in the cause of the respective stay applications. The above costs include all reserved costs and are to be taxed if not agreed, with a certificate for two counsel.
244. The plaintiffs have submitted their statement of costs. However, given that multiple defendants are involved and the costs which the plaintiffs now claim are substantial, I am inclined to think that taxation would be more appropriate than summary assessment. Hence the nisi order at the end of the last paragraph.
| | ( Winnie Tsui )
Judge of the Court of First Instance
High Court |
Mr Richard Khaw, SC and Mr Leo Wong, instructed by Kwong & Lee, for the 1st and 2nd plaintiffs
Mr Richard Todd and Mr Chan Hei Ching, instructed by Patrick Mak & Tse, for the 1st and 2nd defendants
Ms Audrey Eu, SC and Ms Christy Chak, instructed by YT Szeto & Co, for the 3rd defendant