CHINA CONSTRUCTION BANK (ASIA) CORPORATION LTD V SHANGHAI PUDONG DEVELOPMENT BANK CO LTD

[2017] HKCA 51; [2017] Civil Appeal no 14 of 2016, High Court of the Hong Kong SAR, Court of Appeal, Hon Cheung JA, Yuen JA, 3 February 2017

Jurisdiction - Stay - Forum non conveniens - Letters of credit - Natural and appropriate forum - Allegation of fraud in other proceedings

This was the appeal of the plaintiff in an action between banks under letters of credit related to a sale transaction between commercial parties. The judge at first instance had stayed the plaintiff's action on the ground of forum non conveniens. An action in mainland China between the parties to the sale transaction involved issues of whether the transaction was a fraud. The plaintiff negotiating bank had paid on presentation under the letter of credit, but the defendant issuing bank declined to honour the commitment on the basis of stop orders by the Intermediate People's Court (IPC) in Wuxi in the Jiangsu province in proceedings issued by the purchasers under the sale transaction against the beneficiaries of the letters of credit. The defendant bank was joined as a third party and ordered not to make payment. It was alleged in those proceedings that the transitions under the letters of credit were fictitious, that there was fraud, and that the plaintiff had knowledge of the fraud and did not conduct the transaction in good faith. The plaintiff had also been joined to the Jiangsu proceedings and had objected to the joinder: both parties were therefore additional parties to the Jiangsu proceedings. The IPC had held that there was fraud, but that the plaintiff had acted in good faith. The IPC decision was appealed and a decision was pending. In the present proceedings, the defendant sought a stay on the grounds that there were proceedings pending in Jiangsu, and that HK was not the appropriate forum. The application had been declined, then granted in previous instances. This was the appeal to the Court of Appeal.