DONG SHIN F&T CO LTD v. HANMEC CO LTD

HCMP107/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 107 OF 2010

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J U D G M E N T

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Introduction

1.  This is an application by the defendant to set aside an order granting the plaintiff leave to serve the Originating Summons in this matter out of the jurisdiction on the defendant in the Republic of Korea (“Korea”). 

Background & procedural history

2.  The plaintiff, Dong Shin F&T Co. Ltd, was incorporated in Korea in August 2000.  Mr Kim Yong Ki is its CEO and one of its directors.  The defendant, Hanmec Co. Ltd, is also a company incorporated in Korea.

3.  The dispute in this action concerns shares in Soyea Hong Kong Limited (“SHK”), a company incorporated in Hong Kong.  SHK was incorporated in around 2001 by its then parent company, Soyea Corporation (“Soyea”), a company incorporated in Korea and formerly listed on the Seoul Stock Exchange.  Until around 2007, Soyea was the sole registered owner of all the shares in SHK.  Soyea is a toy manufacturing and trading company in Korea.  SHK was established as its subsidiary in Hong Kong to oversee and coordinate its production facilities in Guangdong and to act as Soyea’s exporting arm in respect of the products manufactured in the Mainland.

4.  The plaintiff’s case is that in about June 2009 it discovered that third parties, including the defendant, had executed Bought and Sold Notes and an Instrument of Transfer in respect of 3,990,000 shares of SHK (representing a 70% shareholding in SHK) (“the Shares”) which the plaintiff claims are owned by it.  These transfer documents purport to show the sale and transfer of the shares by the plaintiff to the defendant.  It is the plaintiff’s case that the signature of Mr Kim Yong Ki on these transfer documents is forged and also that the company chop on the documents is not that of the plaintiff company.  In short, the plaintiff claims that the alleged transfer documents were never signed by Mr Kim Yong Ki nor executed by the plaintiff and that they are null and void and of no legal effect.

5.  As regards the management of SHK, on or about 20 November 2008, Soyea appointed two members of its staff, namely Mr Kim Jae Chun and Mr Moon Jong Koan, as directors of SHK.  On 22 December 2009, a written Special Resolution of SHK was passed by the plaintiff and Soyea to remove the two directors of SHK and Ordinary Resolutions were passed to appoint new directors with immediate effect.  The documents for the removal of the two directors were not, however, able to be registered with the Companies Registry because of the dispute as to the validity of the transfer documents in respect of the Shares.

6.  The plaintiff maintains that the fraudulent transfer of the Shares to the defendant was part of a scheme by the defendant and its co-conspirators to misappropriate SHK’s assets and properties in China.  In this regard, it is alleged by the plaintiff that the two directors of SHK, Mr Kim Jae Chun and Mr Moon Jong Koan, have set up a branch of SHK in Korea, namely Soyea Hong Kong Limited Korean Branch, and that through this branch office they have arranged for overseas buyers to settle sales proceeds in Korea rather than through the Hong Kong office of SHK.

7.  The plaintiff issued the Originating Summons in this action on 20 January 2010 claiming :

(i) a declaration that “the purported transfer of the 3,990,000 shares in SHK from DS in favour to [sic] Hanmec are null and void and of no legal effect whatsoever”; and

(ii) an order that the Companies Registry “be directed to proceed forthwith the registration or filing of the Written Resolution of the shareholders of SHK passed on 22^nd December 2009”.

8.  On 1 February 2010, the plaintiff obtained leave to serve the Originating Summons out of the jurisdiction on the defendant at its registered office, namely #220 Dearim Acrotel A, 168-1, Jeongja-dong, Bundang-gu, Seongnam-si, Gyeonggi-do, Korea.  The application for leave was supported by an affirmation of Mr Pang Siu Yin, a partner of the plaintiff’s solicitors, dated 21 January 2010.  The order for service out of the jurisdiction was made by Master Hui.

9.  On 4 February 2010, Mr Pang purported to serve the Originating Summons personally on the defendant by leaving a sealed copy of it at the defendant’s registered office in Korea.  This service was, however, defective and, by summons dated 3 March 2010, the defendant applied for it to be set aside.  By an order made by consent dated 10 March 2010, the purported service of the Originating Summons on the defendant on 4 February 2010 was set aside.  The Originating Summons was then duly served on the defendant out of the jurisdiction on 28 May 2010.

10.  On 6 August 2010, the defendant issued its summons to set aside the order of Master Hui granting the plaintiff leave to serve the Originating Summons out of the jurisdiction.

The plaintiff’s claims as presented in the ex parte application

11.  As noted above, the application for leave to serve out was supported by the affirmation of the plaintiff’s solicitor, Mr Pang Siu Yin, dated 21 January 2010 (“Pang 1^st”).  Mr Pang contended that, by reference to the affirmation of Mr Kim Yong Ki dated 15 January 2010 and filed in support of the Originating Summons, the plaintiff had made out a good arguable case that its present claims fell within Order 11, rule 1(1)(f) of the Rules of the High Court, namely “the Plaintiff’s case is founded on a tort committed by the Defendant resulting in damage being sustained by the Plaintiff within the jurisdiction”.[1] He stated that :

“… it is the Plaintiff’s case that unlawful interference, by way of fraud/deceit and forged transfer documents, had been committed by the Defendant against the economic interest of the Plaintiff, i.e. its 70% shareholding in SHK. Further or alternatively, the Plaintiff will be relying on the tort of conspiracy to injure as its cause of action. Kim Yong Ki of the Plaintiff affirmed that the signatures on the transfer documents from the Plaintiff to the Defendant were forged and there was never any agreement of sale and purchase of the said 3,990,000 shares of SHK between the parties.”[2]

12.  Mr Pang referred to three facts as supporting the existence of a serious issue to be tried, namely :

“i. The Plaintiff is a Korean company which owns 3,990,000 shares of SHK representing 70% shareholding in SHK. The consideration it paid in 2008 was substantial, in the sum of US$3,990,000. The Plaintiff is the majority shareholder in SHK since 2008.

ii. In June 2009, it discovered that signatures had been forged by the Defendant resulting in the unlawful transfer of the 3,990,000 shares of SHK owned by the Plaintiff to the Defendant.

iii. Although it is not entirely clear where documents were executed, the unlawful transfer was intended to and had interfered and damaged the Plaintiff’s economic interest in Hong Kong in relation to SHK, as the transfer documents were stamped with Stamp Duty in Hong Kong by the Defendant on 29th April 2009.”[3]

Further materials said by the defendant to be relevant

13.  A series of documents has been produced on behalf of the defendant to evidence sales and purchases of shares in SHK in the period from December 2008 to June 2009.  These appear also to show how the plaintiff acquired and subsequently disposed of its 70% shareholding in SHK, the subject-matter of this action.  The following is a summary of the various transactions evidenced by those documents.

14.  By a Stock Sales Contract dated 28 December 2007, the plaintiff acquired 3,990,000 shares in SHK from Soyea.  The Shares were valued at US$3,990,000 but the transfer price was 100,000,000 Korean Won (equivalent to US$100,000).  Article 17 of that agreement stipulated that it should be governed by Korean law and that any dispute arising, failing amicable settlement, should be submitted to the Seoul Central District Court for resolution.

15.  By an Additional Agreement dated December 2007, the plaintiff and Soyea agreed that the plaintiff would transfer the Shares to a party designated by Soyea within 45 days from the date of the agreement.

16.  By a Stock Sale Contract dated February 2008, the plaintiff agreed that it would transfer the Shares back to Soyea at the price of US$110,000. This agreement was also governed by Korean law and disputes arising were to be submitted to the Seoul Central District Court.

17.  Thus, by the three agreements referred to above, it would appear that the plaintiff and Soyea entered into an arrangement whereby the plaintiff would hold the Shares to the order of Soyea for a period of 45 days in return for an agreed profit of US$10,000, being the difference between the prices under the Stock Sales Contract dated 28 December 2007 and that dated February 2008.

18.  It would appear that, subsequent to the signing of the Stock Sales Contract dated February 2008, Soyea was not in a position to acquire the Shares back from the plaintiff.  The plaintiff filed a Warning Notice for Contract Fulfillment dated 2 December 2008 demanding the acquisition by and transfer to Soyea of the Shares pursuant to that agreement.

19.  By a Stock Sales Contract dated December 2008 (“the December 2008 SSC”), the plaintiff and UNI Communication & Technology Corporation (“UNI”) agreed to the transfer of the Shares to UNI at a price of US$140,000.  Article 15 of that agreement stipulated that it should be governed by Korean law and that any dispute arising, failing amicable settlement, should be submitted to the Seoul Central District Court.  The defendant contends that, at the time of its execution by the plaintiff, this agreement was executed in blank but, after its execution, the plaintiff provided three documents acknowledging its execution of the Stock Sales Contract dated December 2008.  These documents were :

(i) the plaintiff’s seal impression certificate proving due execution of the Stock Sales Contract;

(ii) a receipt given by Mr Kim Yong Ki acknowledging receipt of 140,000,000 Won (equivalent to US$140,000) from UNI under the Stock Sale Contract (“the Receipt”); and

(iii) a confirmation letter signed by Mr Kim Yong Ki dated December 2008 stating that the plaintiff would not raise any objection to the transferee/purchaser under the December 2008 SSC (“the Confirmation Letter”).

20.  Save that the plaintiff disputes that the December 2008 SSC was executed in blank, none of the further materials referred to above was disputed by the plaintiff in its evidence.  It is also clear from the evidence that, prior to its application for leave to serve out, the plaintiff was aware of the existence of the December 2008 SSC and of the acknowledgment of receipt of 140,000,000 Won under that agreement because it apparently filed a document referring to the December 2008 SSC and a copy of the Receipt with the Korean court in June 2009.  The plaintiff’s solicitors were advised of this by way of a letter dated 30 December 2009 from Messrs Orrick, solicitors acting for the two directors of SHK, Mr Kim Jae Chun and Mr Moon Jong Koan.

21.  By a Stock Sales Contract dated 27 March 2009, UNI and the defendant agreed to the further transfer of the Shares to the defendant also at the price of US$140,000.

22.  Subsequent to the Stock Sales Contract dated 27 March 2009, the Shares were further agreed to be transferred by the defendant to Soyea Emergency Committee represented by a Mr Kim Sung Duk by a Stock Sales Contract dated 2 June 2009.  The sale price under this agreement was 150,000,000 Won (equivalent to US$150,000).

23.  These latter two Stock Sales Contracts are disputed by the plaintiff and reports were made to the police in Hong Kong and Korea in respect of the disputed transfer documents concerning the Shares.  In his affirmation, Mr Kim Yong Ki states that he was told by Mr Yun Juhwan, the CEO of UNI, that the Korean police had questioned Mr Lee Tae Kweon, the CEO of the defendant, about the disputed transfer documents.  Mr Lee is alleged to have denied that the signature as transferee on those documents purporting to be his was not in fact his signature and that he and the defendant did not know anything about the transfer of the Shares.  There is evidence to the effect that a complaint has been made to the Korean police and that the Commercial Crime Bureau in Hong Kong is investigating into a complaint of using a false instrument involving SHK.[4] Mr Pang has also exhibited copies of police statements made by Mr Kim Yong Ki and by Mr Lee Jeong Hoon, General Manager of Soyea, concerning complaints about the transfer documents.

24.  As against the plaintiff’s complaints to the police concerning the defendant, there is also evidence that the defendant has filed a complaint against Mr Kim Yong Ki with the authorities in Korea and that the Sungnam Branch Office of the Suwon District Prosecutors Office are investigating Mr Kim for an alleged crime of false accusation.

The grounds of the defendant’s application to set aside

25.  The defendant contends that the order for leave to serve out of the jurisdiction should be set aside on three grounds, namely that :

(i) there was material non-disclosure by the plaintiff in making the application;

(ii) there is no serious issue to be tried; and

(iii) the plaintiff has failed to show that Hong Kong is clearly and distinctly the appropriate forum for the trial of the action.

Was there material non-disclosure in the ex parte application?

26.  Where a plaintiff is applying for leave to serve an originating process out of the jurisdiction, he must demonstrate, at the ex parte stage, that :

(i) there is a good arguable case that the claims fall within one or more of the heads of Order 11, rule 1(1) of the Rules of the High Court;

(ii) there is a serious issue to be tried as to the merits of the claims; and

(iii) under Order 11, rule 4(2) of the Rules of the High Court, the case is a proper one for service out of the jurisdiction.

As to these principles on the grant of leave, see : Noble Power Investment Ltd v Nissei Stomach Tokyo Co. [2008] 5 HKLRD 631 per Ma CJHC (as he then was) at §§16 to 20; and see also GDH Ltd v Creditor Co. Ltd [2008] 5 HKLRD 895 per Deputy Judge To (as he then was) at §§16 and 17.

27.  Since the application is made ex parte, it is incumbent on the plaintiff to comply with the duty to make full and frank disclosure of all material facts which may have a bearing on the court’s decision whether to grant leave.  This principle is well-established and supported by various authorities referred to in Hong Kong Civil Procedure 2010, Vol. 1 at Note 11/4/3A (pp.155-156).  The facts which the plaintiff must disclose are those facts which the court should have in the weighing scales, meaning those facts “relevant to the weighing operation which the court has to make in deciding whether or not to grant the order”, see : Citibank N.A. v Express Ship Management Services & Anor [1987] HKLR 1184 per Fuad JA at p.1190C-E.  Materiality is for the court, not the deponent.

28.  As regards the contention that there was material non-disclosure, Mr Benny Lo, counsel for the defendant, submitted that the plaintiff’s dealings with Soyea and its execution of the December 2008 SSC, the Receipt and the Confirmation Letter were all material facts that should have been disclosed on the ex parte application for leave.  In addition, Mr Lo submitted that the proper law and exclusive jurisdiction clause in the December 2008 SSC should have been disclosed as being particularly relevant to the “long arm” jurisdiction Master Hui was being asked to exercise.

29.  Mr K.M. Chong, leading Ms Emma Wong, counsel for the plaintiff, submitted that there was no material non-disclosure since the December 2008 SSC had been referred to in the ex parte application and the other non-disclosed facts were not relevant to the Master’s weighing exercise on the application for leave to serve out.

30.  As regards the disclosure of the December 2008 SSC, the only reference to it at the ex parte stage is in Mr Kim Yong Ki’s affirmation (at §15) where he stated :

“However, in December 2008, [the plaintiff] had entered into a Stock Purchase Agreement with a Korean company, namely [UNI] pursuant to which [the plaintiff] agreed to sell its entire shareholding of SHK to [UNI]. Up to this time, the said Agreement remains executory as the prescribed Bought & Sold Notes and Instrument of Transfer had not been executed by the parties, and stamp duty had not yet been paid. Therefore [the plaintiff] remains the legal and registered owner of the 70% shareholding in SHK.”[5]

31.  Mr Chong submitted that this disclosure of the December 2008 SSC was sufficient, and that disclosure of the Confirmation Letter and Receipt were unnecessary, since these matters did not relate to the plaintiff’s claim against the defendant.  That claim, submitted Mr Chong, was advanced on the basis that the submission of the transfer documents in respect of the Shares to the Companies Registry was the commission of a tortious act within the jurisdiction and led to the plaintiff suffering damage in that either (a) it could not execute all necessary documents to transfer the Shares to UNI under the December 2008 SSC and so would be liable to be sued by UNI for such failure, or (b) it would have to refund the 140,000,000 Won received by it from UNI under that agreement.

32.  As an initial observation, I note that the way the plaintiff’s claim was advanced by Mr Chong in his oral submissions differs from the way the claim is pleaded in the Originating Summons.  I have set out above the relief claimed in the Originating Summons (see §7).  It will be immediately apparent that there is no claim for damages for any tort and so there is no express relief claimed that would bring the plaintiff’s claim within Order 11, rule 1(1)(f).[6]

33.  Moreover, it will also be apparent that the way Mr Chong advanced and characterised the plaintiff’s claim in his oral submissions (as summarised in the preceding paragraph) is very different to the way in which the case was presented to the Master (see §§11 and 12 above).  First, on Mr Chong’s submission, the plaintiff is relying on both limbs of Order 11, rule 1(1)(f), namely the commission of a tortious act within the jurisdiction and also the suffering of damage in the jurisdiction, whereas the case presented to the Master was confined to an allegation that tortious damage had been sustained within the jurisdiction.  Secondly, the case as presented to the Master clearly gave the impression that the plaintiff’s loss was constituted by it having paid US$3,990,000 for the Shares and having been deprived of them.  Thirdly, the reference to the December 2008 SSC in Mr Kim Yong Ki’s affirmation, in suggesting that agreement remained executory, clearly gave the impression that it was an agreement remaining to be performed by both sides, namely the plaintiff and UNI.

34.  I consider that the terms and circumstances of the December 2008 SSC and the fact of receipt of the payment of 140,000,000 Won for the Shares by UNI under that agreement should have been disclosed by the plaintiff since those matters were plainly relevant to the allegation that tortious damage was sustained by the plaintiff in Hong Kong.  It is material to note that by Article 5 of the December 2008 SSC, it was agreed between the plaintiff and UNI that :

“Upon receipt of the sale amount, [the plaintiff] shall deliver to [UNI] the certificates of non-issued stock certificates for registered stocks as set forth in Article 2-1 and all other documents necessary for title transfer of stocks.”

35.  As noted above (see §19), the December 2008 SSC provided that it was to be governed by Korean law.  Evidence of Korean law has been filed by the defendant in the form of two affirmations of Mr Kim Jeong Yeun, an attorney-at-law employed by DLS Law Firm, a Korean law firm.  His evidence, which is not contradicted by any evidence filed on behalf of the plaintiff, is that under Korean law, the effect of the execution of the December 2008 SSC by the plaintiff and the receipt of payment for the Shares was to dispose fully of the plaintiff’s interest in the Shares under Korean law.[7] Mr Kim Jeong Yeun’s evidence was given on the footing that the December 2008 SSC was executed by the plaintiff in blank, together with the Confirmation Letter, but it seems to me the same conclusion must follow a fortiori on the basis of the plaintiff’s contention that it did not execute the December 2008 SSC in blank and that UNI’s name was inserted in that agreement from the outset as purchaser of the Shares.

36.  Given the uncontested state of the evidence of Korean law, the terms of the December 2008 SSC and the plaintiff’s receipt of payment from UNI under that agreement were plainly material to the plaintiff’s claim.  If the effect of the December 2008 SSC was to dispose fully of the plaintiff’s interest in the Shares, this would have been directly relevant to the plaintiff’s alleged claims in tort.  The fact the plaintiff had received full payment for the Shares was material to the question of whether it had suffered any loss by reason of the transfer documents, it being Mr Pang’s contention that “the unlawful transfer was intended to and had interfered and damaged the Plaintiff’s economic interest in Hong Kong in relation to SHK” (see §12 above).  The reference in Mr Kim Yong Ki’s affirmation to the December 2008 SSC was inadequate, in my view, to discharge the obligation of full and frank disclosure required by the ex parte nature of the application for leave to serve out.  There was no reference to the fact the plaintiff had already received full payment for the Shares under the December 2008 SSC.  Indeed, given the way the case was argued orally by Mr Chong, it would have been a necessary fact to allege the receipt of 140,000,000 Won in order to quantify, on one basis, the plaintiff’s alleged loss.

37.  It follows that I consider there was material non-disclosure in the plaintiff’s application to the Master for leave to serve out of the jurisdiction.  The plaintiff should have disclosed the fact that it had received full payment for the Shares from UNI under the December 2008 SSC.  It should also have disclosed the terms of the December 2008 SSC, which showed that the sale of the Shares was governed by Korean law.  This has the consequence, as apparently demonstrated by the uncontested evidence of the defendant’s Korean law expert, that the effect of that agreement and receipt of full payment under it meant that the plaintiff had fully disposed of its interest in the Shares.  These matters would have been relevant to the weighing operation in respect of both the question of whether there was a good arguable case that the claims fell within Order 11, rule 1(1)(f) and also the question of whether there was a serious issue to be tried.

38.  As noted in Hong Kong Civil Procedure 2010, Vol. 1 at Note 11/4/4 (p.156), serious material non-disclosure at the ex parte stage may lead to the order granting leave being set aside and that cases where the court could exercise the discretion simply to overlook serious or material non-disclosure must be approached with “great caution” and are “very rare”.  In my opinion, the non-disclosure in the present case plainly requires that the leave granted by Master Hui should be set aside.

39.  The question then arises as to whether the court should exercise its discretion to re-grant that leave.  In Pacific Electric Wire & Cable Co Ltd v Texan management Ltd [2007] 1 HKC 301, Mr Recorder A. Chan SC said this (at §56), with which I respectfully agree :

“In my view, it is quite impossible to set out a precise test for the cases as to whether the court, having discharged an ex parte order on the ground of non-disclosure, should or should not decline to entertain a fresh application. The answer is easy for the two extremities on the scale. Where the non-disclosure is innocent (or lacks blameworthiness), the court should normally be willing to entertain a fresh application so that the merits of the application would prevail. At the other end, where the non-disclosure is deliberate, the court normally should not entertain a fresh application so that those who have abused the process of the court would be punished. In between these extremities, the decision must depend on the individual circumstances.”

40.  In the present case, as I have noted above, the plaintiff and its solicitors knew of the terms and circumstances of the December 2008 SSC and the fact of the plaintiff’s receipt from UNI of full payment for the Shares under that agreement.  Whether the plaintiff or its solicitors knew of the effect of the December 2008 SSC as a matter of Korean law (as disclosed on the present state of Korean law evidence before me) is not clear.  However, as I have already observed, the case as presented to the Master was very different to that eventually advanced before me by Mr Chong.  In particular, the asserted fact that the plaintiff paid US$3,990,000 for the Shares was wrong as a matter of fact and prone to mislead the Master into thinking that this was the scale of the plaintiff’s loss.  Mr Chong acknowledged the mistake on the part of Mr Pang but sought to excuse it by reference to the original Bought and Sold Note in respect of the plaintiff’s acquisition of the Shares which noted that this was the sum received by Soyea for the Shares.  I do not, however, accept that this mitigates the seriousness of the false impression created by the plaintiff’s evidence regarding the amount paid by it for the Shares.  Having regard to all the circumstances (including those below on the issues of serious issue to be tried and appropriate forum), I do not think this is one of those “very rare” cases in which the court should exercise its discretion to re-grant leave to serve out.

Is there a serious issue to be tried?

41.  My conclusion on the issue of material non-disclosure is strictly sufficient to dispose of the defendant’s application in its favour.  However, I propose to set out my views on the subsidiary issues since they are relevant to the question of whether it would be appropriate for the court to exercise its discretion afresh to re-grant leave to serve out of the jurisdiction.

42.  Mr Lo accepted that the threshold for a defendant who wished to contend, in an application under Order 12, rule 8 of the Rules of the High Court, that there is no serious issue to be tried is a high one, equating to that applicable on a strike out, see : Ren Yun Liang & Ors v China Merchants Bank Company Limited trading as China Merchants Bank & Ors, HCA1456/2005, unrep., 29 January 2007, per Mr Recorder Yu SC at §32 (followed by Deputy Judge To in GDH Ltd v Creditor Co. Ltd per Deputy Judge To at §19).

43.  It is important, though, to focus on the particular cause of action, and the particular head of Order 11, rule 1(1), relied upon in support of the application for leave to serve out of the jurisdiction when considering the question of whether a plaintiff has shown a serious issue to be tried.

44.  As noted above, the plaintiff’s claim is based on an allegation that the signatures of Mr Kim Yong Ki on the transfer documents relating to the Shares are forgeries.  The cause of action relied upon by the plaintiff for leave to serve out of the jurisdiction is tort and its claim is for damages.  As I have noted above, this is not in fact what is claimed in the Originating Summons.  More importantly, however, the evidence which is not in dispute (including the expert evidence of Korean law) shows that the plaintiff has sold the Shares to UNI and received full payment for them under the December 2008 SSC and that the plaintiff has thereby fully disposed of its interest in the Shares.  In those circumstances, the basis for the plaintiff’s claim in tort as argued on this application is, in my judgment, undermined.

45.  Mr Lo went further in his submissions and contended that, as a matter of Korean law (the defendant’s evidence of which was not contradicted by the plaintiff), the subsequent Stock Sales Contracts dated 27 March 2009 and 2 June 2009 had the effect of authorising the defendant to execute the transfer documents in respect of the Shares and entitled it to a transfer of the Shares.  However, the validity of those contracts is in dispute and, given the high threshold the defendant must meet in showing no serious issue to be tried, I therefore disregard them for present purposes.  But this does not affect the conclusion I have stated in the preceding paragraph.

46.  I accept that the question of whether the plaintiff’s signatures on the transfer documents were forged is a live issue that cannot be resolved at this interlocutory stage.  Mr Chong submitted that the transfer of the Shares could only be lawfully effected according to the law of the place of incorporation of SHK.  I accept that this is the case but, in my view, that does not assist the plaintiff to support a claim for damages for tort. There may be some other basis of action by which the plaintiff can seek to attack the transfer documents and obtain declaratory relief of the nature now pleaded in the Originating Summons but, in my opinion, a claim for tortious damages is not one which is viable as the evidence now stands.

47.  It follows that I do not consider that the plaintiff can show a serious issue to be tried in respect of the cause of action in tort relied on as the basis of its application for leave to serve out of the jurisdiction.  For this additional reason, I would set aside the Master's order granting leave to serve out.

Is Hong Kong the appropriate forum?

48.  A defendant who is served out of the jurisdiction but who wishes to dispute the jurisdiction of the Hong Kong court may apply inter partes under Order 12, rule 8(1) for the discharge of the order granting leave to serve out.  In such an application, the burden of showing that Hong Kong is clearly the appropriate forum for the trial of the action remains on the plaintiff : see Noble Power Investment Ltd v Nissei Stomach Tokyo Co. at §22.  Unless the plaintiff satisfies the court that Hong Kong is clearly the more appropriate forum for the trial of the action than any available alternatives suggested by the defendant, the court’s long arm jurisdiction under Order 11 will not be exercised and any leave granted ex parte will be set aside, see : Graeme Johnston, The Conflict of Laws in Hong Kong at §3.049.

49.  Again, in this context, it is important to remember that one is looking at the particular cause of action that is relied upon in support of the application for leave to serve out of the jurisdiction.  That is because it is on the strength of that cause of action, which engages the jurisdiction of the court under Order 11, rule 1(1), that the court must form a view as to whether the case is a proper one for service out.

50.  Since I have concluded that there is no serious issue to be tried in respect of the alleged tort claim, it follows that Hong Kong cannot be shown to be the appropriate forum for the trial of that claim.  As I have said above, there may or may not be some other cause of action open to the plaintiff on which to base its claim for the declaration sought in respect of the transfer documents relating to the Shares, but that was not put forward as the basis of the application before the Master for leave to serve out.  The asserted basis on which the court's jurisdiction was invoked under RHC Order 11 was that the plaintiff’s claim was within rule 1(1)(f).  I have held that, on the strength of the evidence before the court at this stage, this is not a viable claim and so it follows that this is not a proper case for service out within Order 11, rule 4(2).

51.  This conclusion makes it unnecessary to consider Mr Lo's particular submissions as to why the present case is not a proper case for service out. His submissions were made on the basis that the December 2008 SSC contains an exclusive jurisdiction clause in favour of the Seoul Central District Court.  I accept that this is the effect of Article 15 of the December 2008 SSC.  However, the plaintiff’s claim is not brought on the basis of the December 2008 SSC.

52.  Mr Lo's further contention that the defendant intends to mount a counterclaim based on Article 5 of the December 2008 SSC, on the footing that as a matter of Korean law the December 2008 SSC and the Stock Sale Contract between UNI and the defendant dated 27 March 2009 are back-to-back contracts enabling the defendant to mount such a claim against the plaintiff, is not a factor, in my view, presently weighing against Hong Kong as the appropriate forum for any claim the plaintiff may be able to bring in respect of the validity of the transfer documents.

53.  As for the other additional factors relied upon by Mr Lo, namely (i) the fact the various Stock Sale Contracts are in Korean, governed by Korean law and were executed in Korea, (ii) the relevance of Korean business law, custom and practice, and (iii) the fact the plaintiff, the defendant and Soyea are all Korean companies whose key witnesses are resident in Korea, these are all factors that may or may not be relevant on any future application to seek leave to serve these proceedings on the defendant out of the jurisdiction.

54.  However, I do not propose to address whether Hong Kong might be shown to be the appropriate forum for the trial of any other cause of action that might or might not be viable and within one of the other sub-paragraphs of Order 11, rule 1(1) since that is not a question before me.

Disposition and costs

55.  For the reasons set out above, I set aside the order dated 1 February 2010 granting the plaintiff leave to serve the Originating Summons out of the jurisdiction on the defendant.  For the avoidance of doubt, I do not accede to the defendant’s application in its summons to dismiss the Originating Summons.

56.  Since the defendant has succeeded in its setting aside application, I make an order nisi that the plaintiff pay the defendant the costs of its summons dated 6 August 2010, to be taxed if not agreed.