YANFULL INVESTMENTS LTD v. DATUK OOI KEE LIANG

HCA 687/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 687 OF 2015

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D E C I S I O N

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1. This action was issued by Yanfull Investments Limited (“Yanfull”) on 30 March 2015. The defendant, Mr Ooi is domiciled in Malaysia. Master Hui granted leave on 15 May 2015 for a concurrent writ to be issued, and for the concurrent writ to be served on Ooi in Malaysia.

2. The concurrent writ was purportedly served on Ooi on 29 May 2015.  Ooi issued a summons on 15 September 2015, which was amended on 13 April 2016.  The amended summons seeks:

(1)   An order under Order 12, Rule 8(1)(b) of the Rules of the High Court, declaring that the concurrent writ of summons (“the writ”) issued by Yanfull on 19 May 2015 has not been duly served on Ooi, in that Yanfull had failed to serve the writ on Ooi in Malaysia in compliance with Malaysian law;

(2)   An order under Order 12, Rule 8(1)(a) that the purported service of the writ on Ooi be set aside in that Yanfull has failed to serve the writ on Ooi in Malaysia in compliance with the Malaysian law;

(3)   An order under Order 12, Rule 8(1)(c) that the ex parte order made by Master Hui of the High Court in chambers on 15 May 2015, granting leave to Yanfull to issue and serve a writ on Ooi out of jurisdiction in Malaysia be set aside, in that:

(a)  Yanfull failed to make full and frank disclosure to the court; and/or

(b)  Yanfull failed to show a serious question to be tried as to the merits of the claims; 

(4)   An order under Order 12, Rule 8(2)(b) and 8(2A) that all further proceedings in this action be stayed on the ground of forum non conveniens, in that the High Court of Malaya at Kuala Lumpur in Malaysia is the more appropriate forum and/or on the ground of this action being an abuse of court process, in that Yanfull has commenced another action in Kuala Lumpur High Court, Suit No 22NCC-100-04/2015 (“The KL suit”) against Ooi on substantially similar or the same subject matter as those of the present action. 

This action

3. Yanfull is a Hong Kong company.  It has a wholly owned subsidiary called Yanfull (Shanghai) Co. Ltd (“Yanfull Shanghai”), which is a company incorporated in Shanghai and owns a construction and development project in Shanghai called “the Royal Garden”.  Yanfull, in turn, is a wholly owned subsidiary of a Malaysian company, Golden Plus Holdings Berhad (“Golden Plus”).  Golden Plus is listed in the Malaysian Stock Exchange, but it will be delisted on 19 April 2016 for failure to issue outstanding financial statements.  

4. Yanfull on 25 July 2007 entered into a management agreement with One China Idea Development Limited (“CIDL”), a Hong Kong company, whereby CIDL was given the full and exclusive rights to manage and operate the business of Yanfull Shanghai in return for an allegedly small return of the proceeds of sale of units in the Royal Garden. The management agreement was announced by the board of Golden Plus to the public on 25 July 2007.  

5. On 17 August 2007, Pembangunan Qualicare Sendirian Berhard (“Qualicare”) acquired 1.67 million shares of Golden Plus, or 1.137% of its issued capital.  On 5 and 12 December 2007, India Corridor Sendirian Berhad (“IC”) acquired 10 million and 17 million respectively of shares of Golden Plus or a total of 18.608% of its issued capital.  Ooi was the CEO and beneficial owner of both IC and Qualicare.  The purchases by IC and Qualicare of the Golden Plus shares were financed by Kuwait Finance House (Malaysia) Berhad (“Kuwait Finance”).  

6. Ooi says that the purchase of the Golden Plus shares by IC was in fact a joint enterprise between Kuwait Finance and IC, and Kuwait Finance had appointed IC as its manager/agent to invest in, manage and control those investments.

7. On 31 December 2007, IC and Qualicare, intending to sue Yanfull and CIDL, applied for and was granted an ex parte Mareva injunction restraining Yanfull and CIDL from dealing with or disposing of HK$647,449,536 on the grounds that Yanfull and CIDL were misappropriating the assets of Golden Plus through their management agreement.  The return date of the injunction was 1 February 2008.  The action in which the injunction was granted was issued as HCA 1/2008 (“The 2008 action”). Yanfull says in this action that the 2008 action and Mareva injunction were for Ooi’s purpose of taking over the control of Golden Plus. 

The undertakings representations

8. Ooi made an affirmation in support of the application of the Mareva injunction.  He said in relation to the undertaking in damages that IC and Qualicare were companies of financial substance with substantial unencumbered assets, which, if required, could be made available to fortify their undertakings in damages, or to pay any damages ordered, pursuant to their undertakings in damages.  Yanfull referred to this as “the Undertaking Representations”.

9. However, Ooi had, on behalf of IC, executed on 17 December 2007, two charges over all the Golden Plus shares held in the name of IC in favour of Kuwait Finance, but he did not disclose this in his affirmation for the application of the Mareva injunction.  He said later that he committed this error innocently as he did not recall having signed the charge documents. 

10. Yanfull, however, described the undertakings in damages given on 31 December 2007 by IC and Qualicare to this court as false, illusory and fraudulent, as IC’s only assets had been charged to Kuwait Finance. 

11. Yanfull, on 18 January 2008, applied to discharge the ex parte Mareva injunction, strike out the statement of claim and dismiss the 2008 action.  On the same day, Reyes J ordered IC and Qualicare to pay into court HK$8 million by 31 January 2008 as fortification of their undertakings in damages. 

12. IC and Qualicare did not provide the fortification on 31 January 2008.  They further served a notice on the return date on 1 February 2008 seeking to discontinue the 2008 action.  On 1 and 4 February, Deputy High Court Judge Carlson discharged the Mareva injunction, granted an anti-suit injunction prohibiting IC and Qualicare from litigating the case in the 2008 action again, ordered indemnity costs against them, ordered an inquiry of the damages suffered by Yanfull and CIDL pursuant to the undertakings in damages of IC and Qualicare, and granted leave for the 2008 action to be discontinued.  Yanfull pleaded in § 27 of this action that:

“27. From 31 December 2007 until 4 February 2008, by reason of and in reliance upon Datuk Ooi’s undertakings, representations by which Datuk had induced the Deputy High Court Judge Toh to grant the ex parte Mareva injunction against Yanfull (and its wholly owned subsidiary Yanfull Shanghai), the only lawful course open to Yanfull was to suspend its business and all work on the Shanghai project, thereby incurring substantial losses (which later became the subject of its claim in the inquiry and damages). From 4 February 2008 until 20 April 2009, in reliance upon Datuk Ooi’s continuing undertakings representations, Yanfull pleaded and progressed its case in the inquiry and damages without seeking offshore interlocutory protective orders against the plaintiffs or against Datuk Ooi.”

The consent judgment representations

13. IC and Qualicare then applied for leave to appeal against parts of the order of Deputy High Court Judge Carlson.  The application was dismissed by the Court of Appeal.  Rogers VP in his reasons of dismissal given on 11 August 2008 said:

“8. The plaintiffs’ conduct in obtaining an ex parte order in the Mareva form, keeping it in force and then filing the notice of discontinuance the day before the scheduled hearing of the return date of the ex parte injunction was not simply discourteous but, in my view, constituted an abuse of the process of the court. At the hearing of this application, grave exception was expressed as to the plaintiffs’ conduct.”

14. The trial of the inquiry and damages was scheduled to commence on 20 April 2009.  Yanfull was claiming damages at more than RMB59 million, or its equivalent of HK$65.68 million.  The parties however settled the amount of damages at HK$35 million and costs at HK$5 million, both payable to Yanfull. 

15. Yanfull pleaded in § 38 of the statement of claim that:

“38. By causing [IC and Qualicare] to enter into the contract with Yanfull which was incorporated in the consent judgment (and through his continuing undertakings representations including the representations, pleaded in paragraphs 24, 31 and 36 above), Datuk Ooi represented, via the plaintiffs’ solicitors, that the plaintiffs could and would perform their joint and several contracts to pay the agreed sum of HK$40 million to Yanfull (collectively ‘the consent judgment representations’), Datuk Ooi made the consent judgment representations in the expectation that Yanfull would rely upon them by compromising Yanfull’s higher claim in the inquiry and damages (for over RMB59 million - about HK$65.68 million), and by foregoing its entitlements to seek, within the action or within the Malaysian proceedings, other relief (for example the appointment of a receiver over the plaintiffs’ assets, and/or direct relief therein against Datuk Ooi).”

16. Yanfull further pleaded that IC as at 20 April 2009, had a negative net worth, and could not perform the consent judgment.  IC and Qualicare did not pay Yanfull anything pursuant to the consent judgment, and were later wound up by the Malaysian courts. 

Reliance on the representations

17. Yanfull pleaded in § 49 of the statement of claim that it had relied upon the undertakings representations and consent judgment representations of Ooi, which were however false, and Yanfull, as a result, suffered loss and damage.  It pleaded in § 50 that its loss and damage are the HK$40 million in the consent judgment and interest thereon from 20 April 2009.  It further pleaded its course of action against Ooi as (1) abuse of the civil procedure by the 2008 action, (2) malicious prosecution in the 2008 action, and (3) deceit of Yanfull through the fraudulent misrepresentations. 

Irregular service

18. Ooi’s first attack is on the service of the concurrent writ on him.  He said in the affirmation in support of this application that the writ and the statement of claim were sent to the front desk of a company in Malaysia connected with him, and also to the company secretary of another Malaysian company also connected with him.  However, that was contrary to the mode of service of writ provided in the Malaysian law which required personal service. 

19. He also produced an affirmation by a Malaysian lawyer setting forth the Malaysian law on service in Malaysia of foreign legal proceedings, which required personal service of the writ on Ooi.  Ooi thus asked for a declaration that the writ has not been served on him according to Malaysian law, and an order to set aside the service on the same ground. 

20. Yanfull does not dispute the irregularity, but says that Ooi has been evading service which would have justified an order for substituted service.  It asked the court not to exercise the discretion in favour of Ooi.  Mr Barlow SC, counsel for Yanfull, relies on Transamerica Occidental Life Insurance Co. (Hong Kong Branch) v King Sound Industry Co Ltd [2005] 1 HKLRD 125, where Stone J held:

“41. … These proceedings have come to the notice of the defendants, and indeed the existence of this action has been the subject of debate by lawyers instructed by both sides in the courts of two competent jurisdictions

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44. In any event, if and insofar as there is some technical failure, that falls to be cured under the provisions of Order 2, Rule 1, and if and insofar as such be necessary in this regard I exercise my discretion in favour of the plaintiff.

45. The object of service of process upon a party is to bring the process to the notice of the party to be served, and such manifestly has occurred.  The manner in which service has been effected has caused no prejudice, and none is alleged.”

21. Mr Lin, counsel for Ooi, on the other hand, relies on Bank of China (Hong Kong) Ltd v Chow Tat Wah and Others HCA 11324/1999, where Kwan J (as she then was), declined to exercise her discretion under Order 2 to cure the irregular service on the 1st defendant therein.  The 1st defendant in that case was an American citizen.  An order under Order 11, Rule 1(1) should have been obtained for service of the writ on him.  The plaintiff, instead, obtained an order for substituted service on him at his last known address in Hong Kong, on the basis that he was then in Hong Kong. However, he was not in Hong Kong when the application for substituted service was made, or when the writ was served pursuant to the order.  Kwan J referred to Leal v Dunlop Bioprocesses International Ltd [1984] 1 WLR 874, which held that it is only in exceptional cases should Order 2 be invoked to validate irregular service in a foreign country. 

22. In the present case, though service of the writ on Ooi was indisputably irregular, Ooi nevertheless was fully aware of the proceedings.  He had dealt with the merits of the statement of claim.  To set aside the service of the writ on him would only necessitate re-service and delay of the proceedings.  Ooi has also not been prejudiced by the irregularity in service.  In the premises, I am not inclined to set aside the service of the writ on Ooi. 

Material non-disclosure

23. The writ in this action was issued on 30 March 2015.  Yanfull applied for leave to serve a concurrent writ on Ooi in Malaysia.  On 19 April 2015, Yanfull issued another writ in Kuala Lumpur against the defendant, namely, the KL suit.  The KL suit is based on the same allegations that Yanfull has made in this action. 

24. On 27 April, Master S Lo made a requisition on Yanfull’s application for leave to serve the concurrent writ in Malaysia.  Mr Danny Leung of Yanfull’s Hong Kong solicitors made his 2nd affirmation to answer the requisition, but he did not mention the KL suit.  The leave for service in Malaysia was given on 15 May 2015, but Yanfull’s solicitors did not advise this court about the existence of the KL suit either before or after the granting of leave. 

25. After Ooi had filed his affirmation in support of this application on 15 September 2015, Yanfull withdrew on 29 October 2015 its claim against Ooi in the KL suit.  The order of the High Court of Malaya at Kuala Lumpur dated 29 October 2015 ordered the withdrawal of the claim against Ooi and also provided that Yanfull has no liberty to file the claim afresh.  I said during the hearing that this part of the order was obviously suggested by Yanfull as the application for withdrawal of the claim was made by Yanfull and not by Ooi.  To the extent that Yanfull is prejudiced by this part of the order in not being able to refile this claim against Ooi in Malaysia, it is self-inflicted and not struck upon by Ooi.  Mr Barlow did not demur to this observation by me at the hearing. 

26. Mr Teh Soon-seng, a director of Yanfull, said in his affirmation for Yanfull to oppose this application that Mr Danny Leung of Yanfull’s Hong Kong solicitors was not aware of the KL suit and the failure to disclose this suit to this court was an innocent mistake. 

27. Mr Barlow argued that the KL suit, as against Ooi was also not parallel to this action, as that suit sued Ooi on the basis of fraudulent trading pursuant to Section 304(1) of the Malaysian Companies Act 1965, which is not available in Hong Kong.  If he should fail in this argument, he would ask for a re-grant of the ex parte leave to serve out of jurisdiction. 

28. I note that both the KL suit and this action rely on the same factual allegations, and hence the same evidence.  Despite the different legal conclusions in law that they may lead to in different jurisdictions, if the evidence to be proffered by the plaintiff is identical or nearly so, the proceedings are parallel.  Mr Barlow’s argument therefore fails. 

29. Mr Lin referred to Burton J’s decision in Network Telecom (Europe) Limited v Telephone Systems International Income [2004] 1 All ER (Comm) 418.  The headnotes summarised the principle for the decision as follows:

“The rule which obliged the court to consider discharge of an order made without notice for non-disclosure of material facts continued to apply after the making of the order. … The identical principle applied to service out of the jurisdiction. It was an extremely serious matter for a foreigner to be put to the inconvenience and costs of litigation in England and Wales and the court ought therefore to be extremely careful before allowing a claim form to be served out of the jurisdiction. Failure to make full and fair disclosure on such an application would, as in all without notice applications, justify the court in discharging the order. Where significant facts occurred after the order had been obtained, those facts should be notified to the court by way of the party returning to the court to obtain clarification as to whether, in the light of the new facts, the without notice order should remain or be relied upon.”

30. I fully agreed with this summary.  However, in the light of the voluntary withdrawal of the KL suit as against Ooi, I am inclined to consider that Yanfull’s error of material non-disclosure was an innocent one.  If this were the only attack by Ooi, I would have discharged the ex parte leave granted by the Master, and re-grant it with costs of the application to be paid by Yanfull.  But there are other attacks made by Ooi and I will move on to deal with them.

Serious questions to be tried

31. Yanfull has made three claims in this action. They are abuse of civil proceedings, malicious prosecution and deceit.  I will deal with them in turn. 

Serious question - abuse of civil proceedings

32. IC and Qualicare claim in the 2008 action that Yanfull and CIDL were trying to misappropriate the assets of Golden Plus through their management agreement.  Yanfull, however, pleaded in this action that Ooi launched the 2008 action through IC and Qualicare, which were his agents and nominees, for the purpose of gaining control of the board of Golden Plus, which was an ulterior purpose of that action.  Mr Barlow submitted that in terms of tortious liability, there are obvious questions to be tried as to whether the tortious actions of IC and Qualicare (which have been described as an abuse of process of the court by Rogers VP), were actions of Ooi. 

33. I also consider that the question of whether Ooi had launched the 2008 action for an ulterior purpose also needs to be tried, hence the claim of abuse of civil proceedings had survived the attack.

Serious question - malicious prosecution

34. It has been held in Eugene Jae-Hoon Oh v Kate Gaskell Richdale [2005] 2 HKLRD 285 by Ma CJHC (as he then was), that an action of malicious prosecution must show that the defendant has set the law in motion to prosecute the plaintiff on a criminal charge.  However, the Privy Council, in a 3 to 2 majority decision in Crawford Adjusters Ltd v Sagicor Insurance Ltd, held that the rationale for excluding a tort of malicious prosecution of civil proceedings was no longer valid.  The decision recognised both abuse of civil process and malicious prosecution in civil proceedings as a general tort.  In the light of this, Mr Lin argued that there are two particular elements in a tort of malicious prosecution that are of significance.  It has to be shown that there was no reasonable or probable cause for the launch of the proceedings in question, and malice must be established. 

35. Mr Lin then further argued at length that there is no court ruling in the 2008 action that says that IC and Qualicare had no reasonable or probable cause for launching that action, and there is no evidence of malice in Ooi in launching that action.  He further submitted that IC and Qualicare had strong grounds and sound cause of action in the 2008 action. 

36. Mr Lin also said that after the 2008 action was discontinued, the securities regulators in Malaysia placed Golden Plus affairs under scrutiny.  As a result of the failure of Golden Plus to convene AGM and to finalise its audited accounts for three years, the trading of its shares had been suspended. 

37. Mr Lin also submitted that the corporate veils of IC and Qualicare should not be lifted to expose Ooi, as when the 2008 action was launched, it was not objectionable for Ooi to have used IC and Qualicare as plaintiffs, because Ooi at that time had no obligation or liability that he would like to evade by using these two companies as his nominees.  However, I am not convinced that there is enough material before me at this stage for me to hold that this cause of malicious prosecution is so devoid of merit that I can strike it out.

38. I also consider that the corporate will may or may not be lifted for the reason that Oii might have wanted to evade from the potential liability that he might be exposed to, in launching the 2008 action in his own name.  I therefore hold that this course of action has also survived this attack. 

Serious question - deceit

39. Yanfull has pleaded in this action that the undertakings representations and consent judgment representations made by Ooi are false and Yanfull had relied on them and suffered loss.  I have difficulty in accepting this as a serious question to be tried in this action.  The undertakings representations were made to the court and not to Yanfull. Yanfull had also disagreed with and disputed them.  Yanfull produced the share charges executed by IC and Qualicare to show that these representations were false.  It also sought and was given an order of fortification of undertaking by Reyes J which required IC and Qualicare to pay HK$8 million into court on 31 January 2008 to fortify their undertakings.

40. I hold that Yanfull cannot rely on the undertaking representations as they were not representations made to Yanfull and Yanfull had not relied on them either.

41. Regarding the consent judgment representations, even if Yanfull should have relied on them in entering into the consent judgment for the inquiry in damages, the fact that it turned out to be an empty judgment was not because of Yanfull’s reliance on the representations, but because of the impecuniosity of IC and Qualicare.  If Yanfull should have chosen not to rely on these representations, it would have gone ahead with the trial of the inquiry in damages.  It might have obtained more or less than the HK$40 million in the consent judgment.  But it would still not be able to obtain any payment as neither IC nor Qualicare had any money to pay it.  Hence Yanfull suffered in not being paid not because of the consent judgment representations or Yanfull’s reliance on them, but because of the impecuniosity of IC and Qualicare. 

42. I therefore hold that there is no serious question to be tried on the cause of action of deceit.  I would strike out this claim, even if I would allow this action to proceed. 

Limitation

43. It is Ooi’s case that the 2008 action was discontinued on 4 February 2008, and the six-year limitation period expired on 4 February 2014.  However, Mr Barlow argued that the limitation period should have commenced from the consent judgment entered on 20 April 2009, so that the limitation period would have expired on 20 April 2015.  Since this action was commenced on 30 March 2015, Yanfull was well within time. 

44. This argument is made on the basis that the torts of abuse of civil proceedings and malicious prosecution are only actionable on proof of damage, and these claims only accrued upon the making of the consent judgment on 20 April 2009. 

45. I disagree with Mr Barlow.  I refer to § 27 of Yanfull’s statement of claim in this action, as quoted above, which pleads clearly that as a result of the grant of the Mareva injunction, Yanfull and Yanfull Shanghai had to suspend all business and work on the Shanghai project, thereby incurring substantial losses.  It is thus clear that the losses accrued or were incurred upon the granting of the injunction, not upon the making of the consent judgment.  The consent judgment merely quantified and liquidated the accrued losses. 

46. Mr Lin also referred me to §§ 157 and 160 of the judgment of McHugh NPJ in Kensland Realty Limited (in liquidation) v Tai, Tang & Chong (a firm) [2008] 3 HKC 90:

“157. In my opinion, however, the concession made by Kensland in the courts below was correct. A plaintiff suffers damage when that person incurs a liability to pay damages, and that is so even though the quantification of the damage is not then ascertainable. Wardley Australia Limited v State of Western Australia (1992) 175 CLR 514 at 536 per Brennan J cited with approval by Lord Nicholls of Birkenhead in Nykredit Credit Mortgage Bank PLC v Edward Erdman Group Limited (2) [1997] 1 WLR 1627 at 1634, and by Lord Hoffmann in Law Society v Sephton [2006] 2 AC 543 at 551. Thus, when a defendant’s negligence breach of a duty of care causes physical harm to the plaintiff or the plaintiff’s property, the defendant incurs a liability to pay damages from that moment. The time for bringing the plaintiff’s action runs from the moment that the plaintiff suffers damages. That the damage cannot be quantified, or is not known, at that moment is not relevant. If the plaintiff acquires a benefit at the same time as acquiring the liability, however, it may not be possible to determine whether the plaintiff has suffered damage until an adverse balance is struck between the benefit and the burden of the liability, Wardley Australia Limited v State of Western Australia (1992) 175 CLR 514, at 536 per Brennan J. Similarly, if the damages are not payable until the happening of a further event, the plaintiff’s liability is contingent only and damage is not sustained until the event occurs, Wardley Australia Limited v State of Western Australia. Personal guarantees are cases that usually fall within this category.

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160. Accordingly, Kensland’s damage was suffered on 2 September 1997.  As from that date, it had a liability to pay damages and interest thereon to Whale View.  It was liable to pay nominal damages for its breach of contract as at that date even if Whale View had not suffered any actual damage.  The damage flowing from that breach increased as time passed and eventually included the three heads of damage to which I have referred. However, for the purpose of Section 4 of the Ordinance, Kensland suffered its damage on 2 September 1997, the date on which Whale View’s cause of action for damages arose.  The present action, having been commenced more than six years after 2 September 1997, is therefore barred by Section 4 of the Ordinance unless the case falls with Section 31 of that Ordinance.”

47. In the premises, the cause of action in this action accrued at the latest on 4 February 2008.

48. Mr Barlow further argued that he could rely on sections 26 and 31 of the Limitation Ordinance.  However, there was nothing material on the accrual of the action that was not known to Yanfull on or before 4 February 2008, and I do not think these two sections can assist Yanfull.  This action was therefore barred on 4 February 2014.  On this ground, I dismiss this action.

Forum non conveniens

49. On this issue, Mr Lin submitted that Golden Plus, IC and Qualicare are all Malaysian companies and governed by Malaysian law.  Ooi is also a Malaysian resident.  

50. I also note that even if evidence of actual loss of Yanfull or Yanfull Shanghai needed to be taken, it should be taken in Shanghai and not in Hong Kong.  Hong Kong is only the place for keeping Yanfull’s books and accounts. 

51. Mr Barlow submitted that the 2008 action was commenced in Hong Kong, and the torts were committed here.  It is also not inconvenient for Ooi to come here to give evidence.  Hence Hong Kong is the appropriate forum. 

52. I agree with Mr Lin.  I think Malaysia is the appropriate forum, as Ooi is a resident there, and the merits of the 2008 action and/or the alleged ulterior motive is best canvassed there.  On this ground, I would stay these proceedings in favour of the Malaysian court, if I had not struck them out.

53. I do not regard the self-inflicted bar prohibiting Yanfull to refile the claim against Ooi in Malaysia as a consideration against my staying of the action, as the bar is self-inflicted with a view to bar this court from staying the proceedings.

Order

54. In the premises, I strike out this action on the ground of limitation.  I also make a costs order nisi, that Yanfull do pay Ooi the costs of this action, with certificate for two counsel.