Levers J
IN CHAMBERS IN THE GRAND COURT OF THE CAYMAN ISLANDS CAUSE NO: 68 OF 2004 BETWEEN: KTH INVESTMENTS LIMITED AND: (1) CHINA ONE FINANCIAL LIMITED (2) KTH CAPITAL MANAGEMENT LIMITED BEFORE: THE HON. MADAM JUSTICE LEVERS APPEARANCES: Counsel for the Plaintiff: N. Sanders of Walkers Counsel for the 1st Defendant: M. Imrie of Maples & Calder Counsel for the 2nd Defendant: J. Tarboton of Appleby Spurling Hunter Heard: March 3, 2005 RULING Levers J, There are two applications before this Court. One, the Plaintiff's application for a stay of these proceedings in the Cayman Islands until the final determination of the proceedings commenced in Hong Kong with action number HCA 76 of 2005 called the ("Hong Kong Action") and the other, the Second Defendant's application for the proceedings to be struck out on the basis that they disclose no reasonable cause of action. The Second Defendant's action can be conveniently dealt with first. The Second Defendant argues that the Plaintiff's claim is hopeless and has no prospects for success and should be struck out and discontinued with costs, on the basis that no reasonable cause of action is disclosed. The Plaintiff's claim is set out in its Originating Summons for rectification of the share register of China One. The claim is brought by KTH Investments Limited ("KTHI") to substitute the name of KTHI for that of KTH Capital Management ("KTHCM") on the share register of China One, Financial Ltd. Rectification is an equitable remedy argues the Second Defendant and that is usually granted where it is clear that there is a mistake between the parties that has led to the incorrect recording of a document. Background This is a claim brought under section 46 of the Companies Law (2004 Revision). The background to these proceedings is set out in the various affidavits of the parties. The affidavits filed to date record a complex transaction involving a number of parties. These proceedings are limited in that KTHI seeks the rectification of the register of members of China One. China One is a vehicle whereby a consortium of financial institutions invested in non-performing loans in China which were auctioned by a Chinese entity called Huarong. Proceedings were commenced for the rectification in the Cayman Islands and subsequently proceedings by this and other Plaintiffs were commenced in Hong Kong. The Hong Kong claim is based on misrepresentation as to funding. The Plaintiff claims that it is only its money that was put into the fund through which China One shares were purchased. The Defendants claim that other investors were involved. A Writ of Summons and a Statement of Claim is to be issued. The Writ of Summons has already been filed. In its application for striking out these proceedings, for disclosing no reasonable cause of action, the Second Defendant relies to some extent on evidence in the affidavits that is has filed. The Plaintiff submits that to strike out on the basis that it discloses no reasonable cause of action, the Court must not look at the evidence and that the Court is required to assume that each and every one of the facts pleaded is true and will be capable of proof at trial. Pleadings will only be stuck out if a cause of action is not one known to the law or if the facts pleaded do not constitute the cause of action alleged or if the relief pleaded is not such as could be ordered by this Court. In this case the action was started by Originating Summons and does not require a pleading. It is supported by the affidavit evidence of a Mr. Luo and I agree with learned counsel for the Plaintiff that a cause of action arises under the Companies Law, as does a question that warrants determination by the judge. My function is to decide whether this case is so plainly unarguable that there is no point in having a trial. I agree with Counsel for the Plaintiff that this is not a plain and obvious case where the Court should exercise its jurisdiction to strike out. The Application for a Stay The Plaintiff seeks to urge this Court to exercise its discretion in granting a stay of these proceedings for the following reasons:
The affidavits filed in this proceeding to date indicate that there are alternative claims arising out of the same facts in favour of KTHI and a number of associated parties;
Those and other claims are being litigated in the Hong Kong action;
The conversion of these proceedings to an action for the purposes, inter alia, of allowing additional relief to be sought was raised at the hearing of the Summons for Directions and objected to by KTHCM but not ruled on by the Court, as directions were ultimately agreed;
Hong Kong is the most convenient forum for determination of the claims that arise for relief additional to that sought in these proceedings. There are a number of lawsuits in Hong Kong, the witnesses are in Hong Kong and the documents are based in Hong Kong and there will be a need for Chinese language evidence which is much better catered for in Hong Kong;
The nature of the claims that arise in favour of the Plaintiff in this action against the Second Defendant and others are set out in the Statement of Claim in the Hong Kong Action. They include, the Plaintiff alleges, claims concerning the beneficial ownership of the shares in China One that are the subject of these proceedings. The Plaintiff urges this Court to hold that they are not strictly parallel proceedings and that different relief is sought arising out of the same facts and different parties are involved. That the Cayman Islands proceedings determine only one element namely, the legal ownership of the shares in China One. That a stay will not cause any increase in costs and will not prejudice the Second Defendant. That Cayman is the only realistic jurisdiction in which the rectification application can be made. The Second Defendant's attorney Mr. Tarboton argues that there are two alternatives. If the Hong action is for substantially similar relief as that claimed in the Cayman proceedings, then this is a form of abuse of process for the Plaintiff to bring duplicate proceedings and the Court should require the Plaintiff to elect in which forum it seeks to litigate and discontinue the other proceedings. However, if, as the Plaintiff's evidence shows, the Hong Kong action seeks different relief by and against different parties, then a stay of the Cayman proceedings is clearly inappropriate. He relies on Australian Commercial Research and Development Ltd. v ANZ McCaughan Merchant Bank Ltd. [1989] 3 All ER 65. In that case Brown-Wilkinson V-C held: "In my judgment, where a plaintiff seeks to pursue the same defendant in two different jurisdictions in relation to the same subject matter, the proceedings verge of the vexatious." The Court further held that: "In those circumstances, in my judgment, the Plaintiff is required to elect which set of proceedings it wishes to pursue. This is not simply a question of the stay of its action here: the action here must be dismissed if it wishes to pursue the matter in the Australian courts and not here. Accordingly, unless the action here is dismissed (with the consequent payment of costs incurred in the action here), in my judgment one does not get on to the kind of considerations of forum conveniens with which the Spiliada was concerned." Here the question is did the Plaintiff commence two sets of proceedings relating to the same subject matter and would the dispute being resolved in Hong Kong resolve all the necessary disputes. In this present proceeding, the Hong Kong action comprises of broader claims than the rectification claim. However, the Plaintiff alone has not commenced that Hong Kong action. The Plaintiff alone commenced the action in the Cayman Islands for the rectification of the share register. It is conceded by all parties that the Plaintiff can only ask for rectification in the Cayman Islands. In the Hong Courts subsequently, the Plaintiff has been joined by other Plaintiffs and asks for wider relief inclusive of the rectification relief. The foreign proceedings in Hong Kong do not involve the identical parties and does not seek substantially the same relief as the Cayman action. What it does do, however, is provide a more convenient forum for the facts to be adjudicated on and wider relief given excluding, the application for rectification. If the Cayman action was to proceed concurrently with the Hong Kong action, the court might find itself with conflicting judgments. If, however, this action is stayed and as a result of the stay, no prejudice is caused to the Second Defendant then if on the merits a rectification is ordered in Hong Kong it can simply be ordered under this cause of action when it is resurrected. The Plaintiff in this case was forced to bring this action to prevent a distribution by China One in respect of the shareholdings, that is the subject of this dispute and therefore in all the circumstances I hold that a stay of these proceedings should be granted. Costs of the applications to the Plaintiff to be agreed or taxed. Dated this 8th day of March 2005. Judge of the Grand Court