In what might be one of the last decisions on the Mainland Judgments (Reciprocal Enforcement) Ordinance (Cap. 597), DHCJ Jonathan Wong set aside the registration of a Judgment of the Shantou People’s Court in Hong Kong, holding that there was “no relevant choice of Mainland court agreement” between the Plaintiff and the 1st Defendant.
In 信达澳亚基金管理有限公司v. 宜华生活科技股份有限公司 (30/07/2024, HCMP 442/2023) [2024] HKCFI 1957, the learned Deputy Judge examined whether a bondholder is a party to the dispute resolution clause between (i) the issuer and (ii) the bond trustee for the purpose of registering a Mainland judgment in Hong Kong pursuant to the Mainland Judgments (Reciprocal Enforcement) Ordinance, with a very detailed discussion of Mainland legal provisions and regulations and the tripartite contractual framework.
Background
The 1st Defendant was a company listed on the Shanghai Stock Exchange and the Plaintiff was one of the purchasers of corporate bonds issued by the 1st Defendant.
Before the bond issuance, the 1st Defendant entered into a Bond Trustee Agreement with the bond trustee and lead underwriter of the Bonds (the “Bond Trustee Agreement”). The Bond Trustee Agreement contained a dispute resolution clause which stipulated that the bond trustee may commence legal proceedings against the 1st Defendant at the Shantou People’s Court in case of any dispute (the “Dispute Resolution Clause”). This clause was later referred to in the bond documents issued to purchasers of the 1st Defendant’s bonds, forming (on its face) part of the contract between the Plaintiff and the 1st Defendant.
Subsequently, the Plaintiff obtained a Mainland judgment against the Defendants in respect of the bonds and sought to have it registered in Hong Kong under section 5(1) of the Mainland Judgments (Reciprocal Enforcement) Ordinance. This led to the question of whether the Plaintiff and the 1st Defendant were parties to a relevant choice of Mainland court agreement in section 5(2)(b) of the Mainland Judgments (Reciprocal Enforcement) Ordinance.
The Court’s Decision
The Court held that the Plaintiff is not a party to the Dispute Resolution Clause and therefore could not register the Mainland judgment against the 1st Defendant.
First, the Dispute Resolution Clause provided for a dispute resolution mechanism between the 1st Defendant and the bond trustee only. The Plaintiff could not step into the shoes of the bond trustee in the Dispute Resolution Clause just because it had commenced legal proceedings against the 1st Defendant in respect of the bond documents.
Secondly, the Dispute Resolution Clause was not specifically negotiated between the Plaintiff and the 1st Defendant. Instead, it was incorporated from the Bond Trustee Agreement, which was executed by the 1st Defendant and the bond trustee. When read with other sections of the Bond Trustee Agreement, the Dispute Resolution Clause should be interpreted as only applying to legal proceedings commenced by the bond trustee.
On 29 January 2024, the Mainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement) Ordinance (Cap. 645) came into effect, expanding the applicability of the reciprocal enforcement arrangements. We are yet to expect how the Hong Kong Court develops the jurisprudence in respect of the new Ordinance.
The full judgment is available at: https://legalref.judiciary.hk/lrs/common/search/search_result_detail_frame.jsp?DIS=161677&QS=%2B%7C%28HCMP%2C442%2F2023%29&TP=JU
Mr Charlie Liu acted for the 1st Defendant.
Mr Ambrose Ho S.C., leading Mr Bryan Lee acted for the Plaintiff.
