PETROCRAFT S.A. v. CHAN CHUN FUNG VINCENT AND OTHERS

HCA 69/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 69 OF 2012

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J U D G M E N T

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1. This is an appeal against the decision of Master de Souza dated 15 June 2012, whereby he dismissed the defendants’ application to set aside the Writ and the Statement of Claim on the basis that Hong Kong was forum non conveniens, and he ordered the defence to be served and made an “unless” order, that unless the defence and counterclaim were to be served and filed by 17 July 2012 - which is yesterday - then the plaintiff would be entitled to enter judgment. This hearing is of course today 18 July 2012 and no steps were taken, very sensibly, yesterday.

2. The plaintiff’s action is against three defendants, the first of whom is the commercial director of MLL, a Hong Kong company.  MLL acted as agents for the plaintiff in respect of the sale of petroleum products.  The 2nd defendant is the wife of the 1st defendant.  The 3rd defendant is the mother of the 1st defendant.  The action is not proceeding against her because, as a consequence of the Mareva injunction obtained by the plaintiff, the 3rd defendant handed over her assets subject to that injunction in Hong Kong.  All the defendants reside in Hong Kong. 

3. MLL, through the 1st defendant, contracted with a company called Sharp Cheer.  The plaintiff had no direct dealings with Sharp Cheer.  The plaintiff received the money for the first two lots of the contract but not for the third.  The money for that found its way into the bank account, or accounts, of Sharp Cheer in Hong Kong and they were under the control of the 1st and 2nd defendants.  All three were arrested by the Hong Kong Police for fraud or conspiracy to defraud.  The 1st, 2nd and 3rd defendants are now also on bail. 

4. No clear defence is raised in any affirmation from the defendants.  The only matter advanced in support of the “forum non conveniens” argument which has any materiality is a suggestion that a shadowy figure, allegedly called ‘Mark Lim’, who, according to the defendants, is linked with Shanghai and therefore beyond the jurisdiction of the Hong Kong court, is at the heart of the questioned transaction.  The plaintiff does not know him and the best case the defendants can advance is that the plaintiff may or may not have spoken to him over the telephone.  Not only is Hong Kong the natural and appropriate forum, but Shanghai is decidedly not shown in any way to be an appropriate forum.  The case advanced by the defendants is of the flimsiest nature, in my view, and I would dismiss this appeal on that basis alone.

5. However, the defendants’ actions in the Hong Kong High Court are interesting and the chronology enlightening.  The Writ was issued on 13 January 2012.  The defendants entered appearance and filed notice to defend on 30 January 2012.  In the meantime, on 13 January, the same date as the issue of the writ, the plaintiff obtained a Mareva injunction ‘ex parte’ from Deputy High Court Judge Lok.  (I am not certain about that date because I have the 13th and the 16th but it does not seem to matter because it preceded the appearance on the 19th.  But for present purposes, I put the ex parte Mareva as being dated 13 January).  This was extended by a consent order on 19 January 2012 by Suffiad J until 1 February.  It was further extended to 24 February; then it was further extended to a date to be fixed. 

6. On 5 April, the defendants made an effort to vary the scope of the injunction order.  Then on 17 April, the defendants took out their summons to set aside the Writ.  Before then, there had been a hearing in relation to the costs of the application to vary the scope of the injunction order.  That being heard on 5 April, those costs were summarily assessed on 10 April. 

7. I have no difficulty in concluding the defendants’ actions indicated that they submitted to the jurisdiction of the Hong Kong High Court.  The decision of the English Court of Appeal in Esal (Commodities) Limited v Mahendra Pujara [1989] Lloyd’s Law Reports, volume 2, page 479 is particularly apposite.  There, a defendant, appearing in the ‘inter partes’ hearing of a motion to extend an ‘ex parte’ injunction restraining the defendant from disposing of shares held in a bank which the plaintiff claimed were held on a resulting trust for him, consented to the extension of the injunction and gave no hint of any challenge to the court’s jurisdiction.  A fourth injunction in the nature of a Mareva injunction was issued, preventing the defendant from disposing of two properties in England.  Two months later, the defendant issued a notice of motion, seeking an order to set aside the service of the writ and the grounds included that England was not the forum ‘conveniens’. The court held that by assenting to the inter partes injunction, the defendant:  “Was doing much more than inviting the court to give its blessing to a short-term holding operation”.

8. Turning to page 483 of that decision, Slade LJ said: 

“I do not find it necessary to express a concluded view on this limb of Mr Burton’s argument because I, for my part, accept the other limb. It has throughout to be borne in mind that on 22 May 1986, the plaintiff was asking the court to renew injunctions which would otherwise have expired on that date. Against that background, the defendant did not take any of the alternative courses which, in my view, he might reasonably have been expected to take if he had intended to apply for an order setting aside the service of the writ. His counsel did not ask for the motion to be adjourned until a specified date, or to be heard as a motion by order, or pending the hearing of an application by him under Order 12 rule 8. He did not ask the consent order should contain a provision expressly giving him the right to make such an application. He did not expressly reserve the right to make a challenge of this nature. He did not even tell the judge that such a challenge was under contemplation.

Instead, he consented to an order which not merely granted an injunction until after judgment in this action or until further order in the meantime, but also contained an express reference in paragraph 1 to the opening of a deposit account in certain contingencies in which the moneys were to abide the outcome of these proceedings and, (b) expressly reserved the costs of the motion to the trial.”

9. Mr Chai, on behalf of the defendants, invites me to adopt the approach of Reyes J in Hoo Huang Linda v Fu Being San & Others HCA4888/2001.  The statement at paragraph 26(4) of page 13 by Reyes J needs careful consideration and the circumstances inevitably vary in each case.  He said:

“A party does not submit to the jurisdiction if he merely acts to preserve the status quo pending the mounting and resolution of an application to challenge forum for a party does not submit to the jurisdiction if he merely takes defensive action in interlocutory injunction proceedings brought by the other side.”

10. As an all-embracing statement, I find myself unable to accept it but I do not consider the learned judge meant it to be considered as such.  He included it amongst several guidelines.  There will be cases in which the defendant’s action in interlocutory orders, made by consent, will debar him from belatedly seeking to avoid jurisdiction, as in the Esal (Commodities) Limited v Mahendra Pujara case. 

11. This, the appeal before me, is one such case.  In my view, the defendants’ application has no substance on this ground and no merit and the appeal is therefore dismissed.

(Submissions on filing defence and counterclaim)

12. If a defence and counterclaim is filed by 4 pm on Friday, 20 July, then the plaintiff will not be entitled to enter judgment in default.  That, of course, still leaves it open to the plaintiff to take steps, if so advised, to strike out the defence and counterclaim on other grounds.  It is not for me to identify those grounds.  I think they are self-evident.