HUNTLEY INTERNATIONAL LTD v. ASAP LTD IMPORT-EXPORT S.P.A

HCA157/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 157 OF 2009

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BETWEEN

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D E C I S I O N

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1.  By summons dated 31 December 2009, the defendant sought to :

(i) set aside leave granted by the Master to the plaintiff for service out of jurisdiction of the Writ herein; and

(ii) to stay the proceedings on the ground of lis alibi pendi under Order 12, rule 8 of the RHC.

2.  However, at the hearing, the defendant was content not to make any submission independently on the application to stay in respect of the second ground contained in its summons on the basis that that second ground is in fact subsumed into the first ground.

3.  In the process, submissions were made by the parties only on the first ground as to whether the leave granted by the Master for service out of jurisdiction should be set aside.

4.  This Decision is therefore only concerned with the first ground sought by the defendant in its summons.

5.  It should also be noted that after the hearing, but before this Decision was delivered, the court was informed by letter from the plaintiff’s solicitors that the Italian courts have ruled that it has no jurisdiction to entertain the proceedings brought in Italy by the defendant suing the plaintiff and Allied Footwear Co. Ltd for breach of agreement.

BACKGROUND

6.  The defendant, an Italian company, is a fashion goods distributor in Italy.  It’s chairman and director, one Giovanni Cecchini (“Cecchini”), an Italian national, became acquainted with several British nationals by the names of James Sullivan and Daniel Sullivan (father and son) as well as Ezra Shahrabani (“Shahrabani”) and David Tanner (“Tanner”) during various fashion fairs in 2001 and 2002.

7.  Through several meetings in the London office of an English company called Allied Footwear Co. Ltd (“Allied Footwear”) in or about August 2002, the defendant on the one side, and the several British nationals above came to an oral agreement some time between September and November 2002 for the defendant to act as an exclusive distributor of a brand of shoes by the brand name “Irregular Choice” (the “IC brand”) in Italy.  In so far as that oral agreement is concerned, there is some dispute as to who was precisely the principal party engaging the defendant to be the sole distributor of the IC brand, and/or who did those several British nationals represent at the time of the oral agreement.

8.  At the time Cecchini understood that the IC brand was designed by Daniel Sullivan (who worked at his Brighton Office with the name of “Design Asylum”) and that Cecchini believed or thought that the group of British nationals he was dealing with represented Allied Footwear in whose London office the meetings took place and in which the oral distribution agreement was in fact entered into.

9.  However, in their later dealings, it transpired that it was the plaintiff company who issued invoices and received payments from the defendant.

10.  It now appears from the evidence that the plaintiff was the manufacturer of the IC brand of shoes sold to the defendant and that Shahrabani and Tanner were the financial controller and assistant financial controller of the plaintiff.

11.  In 2005, the defendant was also engaged to act as the exclusive distributor in Italy in respect of another brand of shoes with the brand name “Poetic Licence” (“the PL brand”).  It was understood by Cecchini that the PL brand was also designed by Daniel Sullivan but with one Darrin Field being put in charge of sales of the PL brand.  (It should be noted here that there is a major dispute between the parties as to whether there was one distribution agreement, as alleged by the defendant, covering both the IC brand and PL brand of shoes or whether there were two separate and distinct distribution agreements, as alleged by the plaintiff, one for the IC brand and another for the PL brand of shoes).

12.  There was no written agreement between the parties in respect of the distribution agreement for either the IC brand or the PL brand of shoes.  However, there was some evidence (also a matter in dispute between the parties) to show that at some stage there was a draft agreement relating to the PL brand of shoes but which had never been signed between the parties.

THE PLAINTIFF’S CASE

13.  The plaintiff’s claim, which appears by its Statement of Claim, only relates to a breach of contract for the sole distributorship by the defendant in respect of the IC brand entered into with the defendant in 2002.  The plaintiff does not claim for breach of contract relating to the PL brand which the plaintiff says was a different and separate contract entered into with the defendant at a later time.

14.  It is the plaintiff’s case that the plaintiff manufacture shoes under the IC brand.

15.  Shahrabani and Tanner are the financial controller and assistant financial controller of the plaintiff in charge of financial matters.

16.  The defendant holds itself out as having a distribution network both in Italy and internationally.  Cecchini was the director of the defendant and a Ms Ferri its brand manager.

17.  An oral agreement (“the 2002 Agreement”) was entered into between the plaintiff and the defendant between September and November 2002 whereby the defendant would distribute exclusively shoes manufactured by the plaintiff under the IC brand in Italy and the defendant agreed to buy IC brand shoes from the plaintiff for distribution in Italy.

18.  The terms of the 2002 Agreement were that :

(a) the plaintiff appointed the defendant to exclusively distribute IC brand shoes;

(b) the defendant undertook to purchase only from the plaintiff the IC brand shoes and to promote and distribute them in Italy;

(c) the 2002 Agreement would continue until terminated by either party giving 6 months notice;

(d) the defendant was to open a standby letter of credit in favour of the plaintiff in the sum of US$250,000 as security for payment;

(e) goods were to be paid for within 60 days after receipt by the defendant’s shipping agents in China;

(f) orders from the defendant were to be placed in accordance with specified time periods to each season;

(g) orders were required for minimum amounts;

(h) deliveries by the plaintiff would be made in accordance with time periods stipulated by the plaintiff for each season subject to orders being received in accordance with stipulated minimums; and

(i) the defendant shall meet target of 15,000 pair of shoes for each season.

19.  The co-operation between the plaintiff and the defendant was further enhanced in 2005 when the defendant was appointed as a distributor for the plaintiff for the PL brand of shoes, but the plaintiff says that was a separate contract between them.

20.  In the shoe business there are two seasons a year and certain trade practices consistent therewith were adopted.

21.  By letter dated 9 April 2008, the defendant gave notice to the plaintiff to terminate the 2002 Agreement with immediate effect, but as a result of subsequent emails and a further meeting between Daniel Sullivan and Shahrabani with Cecchini to discuss the 2002 Agreement, it was confirmed and agreed between the parties that :

(a) the defendant would continue distributing IC brand shoes in Italy exclusively;

(b) the defendant would continue to purchase IC brand shoes from the plaintiff including for Spring/Summer 2009 and would distribute them in the Italian market;

(c) the parties would enter into a written agreement to record the terms of the 2002 Agreement; and

(d) the defendant would settle all overdue debts outstanding at that date.

22.  On 20 June 2008, the plaintiff notified the defendant that if the outstanding amount was not paid in 7 days, the plaintiff would be entitled to terminate the 2002 Agreement with the defendant.  The defendant undertook to pay within 7 days and by 23 June 2008, all outstanding payments owed by the defendant were settled.

23.  In late June/early July 2008, the plaintiff sent catalogue for Spring/Summer 2009 to the defendant.  By email dated 7 July 2008, the plaintiff invited comments, agreement and sales target from the defendant for the Spring/Summer 2009 but the defendant ignored same.

24.  In accordance with the 2002 Agreement, the plaintiff completed 480 pairs as samples for the Spring/Summer 2009 collection and was prepared to ship them to the defendant.

25.  On 1 August 2008, the defendant notified Daniel Sullivan through Skype that it did not want the samples and hence rejected same, thereby evincing an intention to repudiate the 2002 Agreement.  Such repudiation was accepted by the plaintiff on 5 August 2008.

26.  As a result of the defendant’s breaches, the plaintiff suffered losses comprising inter alia (1) costs of the samples; and (2) loss of business of approximately US$280,000 as there was no one to distribute IC brand shoes for the plaintiff in Italy.

FACTUAL MATTERS IN DISPUTE BETWEEN THE PARTIES

27.  This application has been complicated by the factual matters in dispute between the parties and raised by them in their respective affirmations filed herein.

28.  In summary, the factual matters in dispute include (but are not limited) to the following :

A. Whether the plaintiff was the principal in the distribution agreement, or only a financial provider.

B. Whether there was only one distribution agreement covering both the IC brand and PL brand, or whether there were two distinct distribution agreements.

C. Disputed matters relating to the draft but unsigned agreement for the PL brand.

E. Differences in the terms relating to the 2002 Agreement.

F. Factual disputes relating to what was agreed in May 2008.

29.  I shall go into some detail as to each of the above items A to E to complete the picture as to the arguments and disagreements between the parties since the disputed matters can have a bearing on my determination of this matter.

A. Who is the principal?

30.  It is the plaintiff’s case that the plaintiff was the contracting party with the defendant for the 2002 Agreement.

31.  To this the defendant has responded that it had always been the understanding of Cecchini that he was dealing with Allied Footwear at its London office when the oral agreement was reached between September and November 2002 and that it was only later he came to know that the plaintiff’s role was issuing invoices as a financing party.

32.  Initially it may have appeared that the defendant was saying that the contract was only made with Allied Footwear as the principal.  This undoubtedly was how the plaintiff read the defendant’s case, namely, as saying that Allied Footwear was the only contracting party with the defendant.  However, on a closer reading of paragraph 7(ix) of the 2^nd Affidavit of Wong Yuk Chung Rocky, it seems clear enough that the defendant agreed that the “Distribution Agreement” (which encompassed the distribution for both IC brand and PL brand) was reached between the defendant on the other hand, and Allied Footwear as well as the plaintiff on the other hand, with Allied Footwear being the principal and the plaintiff being the financial tool of Allied Footwear. Therefore the defendant does not dispute the plaintiff being a party to the Distribution Agreement.

33.  The defendant, as stated in paragraphs 30 and 31 of the 2^nd Affidavit of Wong Yuk Chung Rocky, relying on a letter dated 10 April 2008 from Darrin Field (Exhibit “WYCR-21”) to the effect that the plaintiff do not hold any licencing or distribution rights or shareholding of the brands, but is merely the financial provider, says that the contents of that letter confirmed the understanding of the defendant that Allied Footwear was the principal appointing the defendant as distributor and that the plaintiff had no distribution rights but only played a passive role.

34.  This in turn prompted the plaintiff to file affidavit evidence to show that the plaintiff was the contracting party.  That evidence was to the effect that the plaintiff was incorporated in Hong Kong in 1972 and James Sullivan was a shareholder in the plaintiff since 1987and was then appointed as Head of the Footwear Division.  Due to convenience to serve the European market, Allied Footwear was set up as a branch office in London, it being a subsidiary of the plaintiff.

35.  The plaintiff produced a number of documents and emails as well as a letter dated 23 December 2008 from the defendant’s Italian lawyers (Exhibit “WCL-3”) which showed that the defendant must have known of the relationship between the plaintiff and Allied Footwear.

36.  The plaintiff also referred to the Order sheets produced by the defendant (Exhibit “WYCR-8”) to show that such order forms for IC brand of shoes were addressed to the plaintiff’s Hong Kong office.

37.  The plaintiff also adduced evidence (in the 1^st Affirmation of So Yiu Kwong) to the effect that the IC brand is a trademark registered in Hong Kong and other countries with Daniel Sullivan being the registered owner.  The PL brand is also registered as a trademark in Hong Kong and elsewhere with James Sullivan being the registered owner.  In both cases, the plaintiff says that it is the beneficial owner of the IC brand and the PL brand and/or had the implied licence granted by the registered owners to manufacture and distribute shoes of both those brands.

38.  On that basis the plaintiff re-iterates that it is the contracting party for the distribution agreement of the IC brand with the defendant, and not just a ‘financier’ as alleged by the defendant.

39.  Given the above evidence from the plaintiff, the defendant came back to say (in paragraph 11 of the 3^rd Affidavit of Wong Yuk Chung Rocky) it did not understand why the plaintiff had to go to such lengths as the defendant never disputed that the plaintiff was one of the parties to the “Distribution Agreement” with the defendant, but that what the defendant was saying was that until it engaged lawyers in July 2008, the defendant was unclear as to who exactly represented the plaintiff and that the defendant was never told that Allied Footwear was a branch office of the plaintiff.

B. Whether one or two distribution agreements

40.  The plaintiff’s claim herein is based on breach of the 2002 Agreement for the distribution in respect of the IC brand shoes which the plaintiff says was an oral agreement entered into in November 2002 with the defendant.  Although the plaintiff acknowledges that the defendant was also appointed as exclusive distributor in Italy for the PL brand shoes later in 2005, the plaintiff says that the distribution agreement in 2005 was a totally separate and distinct agreement between the parties unconnected with the 2002 Agreement for the IC brand.

41.  The defendant on the other hand says that the distribution agreement for both the IC brand shoes and the PL brand shoes was the same distribution agreement between them, albeit that the PL brand was included therein in 2005, at a later time than the IC brand.

42.  The effect of this disputed factual issue is that it is alleged by the plaintiff that the distribution agreement for the PL brand shoes had been terminated by the plaintiff in March 2008 due to the constant breaches by the defendant of same.

43.  This is denied by the defendant.  The stance taken by the defendant is that on 14 May 2008, as a result of further discussion between the parties, agreement was arrived at between them whereby the defendant would continue to act as the exclusive distributor for both the IC brand as well as the PL brand of shoes.

44.  For the IC brand, Daniel Sullivan had promised to send to the defendant a draft agreement by the end of May 2008 but had failed to do so.

45.  For the PL brand of shoes, Darrin Field had attempted to imposed unilateral conditions on the defendant in ordering samples for Autumn/Winter 2008 and Spring/Summer 2009 which, when the defendant failed to agree to such unilateral terms, Darrin Field refused to further supply any PL brand shoes to the defendant for the Spring/Summer 2009 thereby being in breach of the agreement reached in May 2008.

C. Draft agreement for the PL brand

46.  It is alleged by the plaintiff in the 1^st Affirmation of Wong Chun Lan that “there was a written document regarding the terms of the Poetic Licence Agreement” which was sent to the defendant on 12 September 2005.

47.  However, that document was not exhibited in that 1^st Affirmation of Wong Chun Lan.

48.  At the request of the Master, that document was exhibited as “WCL-6” to the 2^nd Affirmation of Wong Chun Lan and was shown to be an unsigned draft written agreement dated 2005.

49.  The defendant says it has never seen the draft agreement “WCL-6” before but that by an email dated 5 January 2007 from one Roger Brown of Allied Footwear to Cecchini and copied to Darrin Field, a draft agreement containing similar terms to “WCL-6” but dated 2006 (and not 2005) was given to the defendant for the first time.

50.  The defendant further denies that it has ever received an email dated 12 September 2005 under which the draft agreement was alleged by the plaintiff to have been sent to the defendant.

51.  It is the defendant’s case that the draft agreement sent to the defendant on 5 January 2007 was not signed because after discussion the parties could not reach agreement on the terms contained therein.

52.  This factual dispute between the parties over the draft agreement has a further bearing on the defendant’s allegation that the plaintiff has failed to make full and frank disclosure when this matter came before the Master.

D. The oral terms agreed in 2002

53.  In so far as the plaintiff’s case is concerned, the oral terms agreed between the parties have already been set out in paragraph 17 hereinabove.

54.  On the other hand, the defendant says that at the time, Cecchini understood and agreed that in respect of the IC brand of shoes which were manufactured in China :

(a) the defendant was to be appointed by Allied Footwear as the exclusive distributor in Italy;

(b) the IC brand of shoes were to be purchased by the defendant exclusively by orders placed by the defendant with Daniel Sullivan and/or his associates at his Brighton Office (which goes by the name of “Design Asylum”).

(c) the defendant was to promote, re-sell or distribute the same in Italy at its own costs;

(d) no termination date of that distribution agreement was ever agreed;

(e) there was no discussion as to how the good were delivered but the practice later grew up that the samples were mostly delivered from the UK or China, while goods (not samples) were ordinarily delivered from China to the warehouse in Italy of the defendant. Goods (not samples) were to be paid within 60 days from the date of the invoice;

(f) the invoices were to be issued by the plaintiff or other companies that might be appointed by Daniel Sullivan, James Sullivan and/or Shahrabani and to which the payment was to be made;

(g) the defendant would issue a stand-by letter of credit in favour of the plaintiff in the sum of US$250,000 renewable periodically as security for payment; and

(h) there was no discussion about the time limit or on the minimum placement of orders, which were only worked out through the parties subsequently.

E. The agreement in May 2008

55.  It is the defendant’s evidence that at a meeting in Florence on 3 March 2008 James Sullivan and Darrin Field verbally informed Cecchini that they intended to unilaterally terminate the distribution agreement for the PL brand of shoes and later by letter from Darrin Field dated 9 March 2008 which confirmed the cessation of the distributorship of the defendant for the PL brand of shoes in the same letter citing a long list of complaints as the reason for the cessation.

56.  As a result, Cecchini met Daniel Sullivan and Shahrabani on 14 May 2008 at the London office of Allied Footwear in an attempt to resolve their differences in respect of both the IC and PL brand of shoes.

57.  The defendant’s case is that at that meeting on 14 May 2008 it was agreed as follows :

(1) the defendant would continue to act as the exclusive distributor for the IC brand of shoes in Italy for at least 3 years conditional upon the signing of a written distribution agreement, of which Daniel Sullivan promised that a draft would be sent to the defendant by the end of May 2008 with terms to be further discussed;

(2) in respect of the PL brand of shoes, the defendant would continue to act as the exclusive distributor in Italy for the Autumn/Winter 2008 and Spring/Summer 2009 season; and

(3) as for outstanding sums owed to the plaintiff by the defendant, the defendant did promise payment of such outstanding amounts but no date was given.

58.  It is now the defendant’s case that the plaintiff was in breach of the agreement reached between them on 14 May 2008 in that Daniel Sullivan has failed to keep his promise to send any draft written agreement to the defendant by the end of May 2008.

59.  Moreover, Darrin Field has imposed unilateral conditions on the defendant when ordering samples for the Autumn/Winter 2008 and Spring/Summer 2009 seasons and when the defendant refused to agree to such unilateral terms, Darrin Field has refused outright to further supply any PL brand of shoes to the defendant for the Spring/Summer 2009 season, thereby breaching the agreement reached in May 2008.

THE PROPER APPROACH

60.  The correct approach in determining an application for leave to serve out of jurisdiction is stated against marginal note 11/4/8F of the Hong Kong Civil Procedure 2011 and can be summarized as follows.

61.  On an application for leave to serve out of the jurisdiction, the application is decided on the affidavit evidence of the parties and the issue is whether upon the whole of the evidence, the plaintiff shows a good arguable case within one of the sub-paragraphs of Order 11, rule 1(1), or in the court’s discretion the order ought not to have been made or to stand, or the writ or notice was wrongly issued or the service is irregular, so that on these or other grounds the order, writ or service ought to be set aside.

62.  In doing so, the court considers all the affidavit evidence filed up to the date of the hearing, not just that of the plaintiff by the time of the ex parte application.

63.  The onus to establish a good arguable case on the merits and satisfy the court on forum conveniens issues remain on the plaintiff at the inter partes stage.

64.  Where there are disputed issues of fact essential to the resolution of whether the case meets the conditions prescribed for service out of the jurisdiction under Order 11, rule 1, the court should have regard to all the admissible material before it and not just the plaintiff’s case.  The court has to conclude that the plaintiff has a good arguable case and not just a case that could be argued.

65.  The court does not usually try the case upon the affidavits, but must reach a provisional or tentative conclusion that the plaintiff is probably right, before allowing service outside the jurisdiction to stand.

GOOD ARGUABLE CASE

66.  First and foremost, it is for the plaintiff to show a good arguable case coming within Order 11, rule 1(1).

67.  In the present case, the plaintiff’s application for leave is brought within Order 11, rule 1(1)(d)(iii), namely, that the plaintiff’s claim is brought in respect of the breach of a contract, being a contract which is by its terms, or by implication, governed by Hong Kong law.

68.  In this respect, it was submitted by the defendant that the plaintiff needed to show a good arguable case in three respects, namely :

(a) that there exists a contract;

(b) there was a breach of that contract; and

(c) that contract was, by implication, governed by Hong Kong law (since there is no dispute that there was no express terms as to the governing law).

69.  As for the first factor, namely, whether there exists a contract, since it is now accepted by the defendant (in paragraph 11 of the 3^rd Affidavit of Wong Yuk Chung Rocky) that “the defendant never disputed that the plaintiff was one of the parties to the Distribution Agreement with the Defendant”.  By that admission, it must be clear there is no dispute that there exists a contract between the parties.

70.  It was also submitted by the defendant that the distribution agreement between the parties essentially leaves the quantity and the prices for the IC brand of shoes for each season to be determined and agreed between the parties.  Accordingly, there is here only an agreement to agree and therefore no enforceable or binding contract between the parties.

71.  I am not persuaded by this argument of the defendant.  The plaintiff is now suing for breach of the 2002 Agreement, which is the agreement for sole distributorship of the IC brand of shoes by the defendant as a whole and not breach of any individual sales agreement for any particular season. Moreover, the 2002 Agreement between them has existed, has been ongoing and has been performed by them since 2002.

72.  As for the second element, whether there has been a breach, that is a matter for trial.  In this respect, I further note that the defendant has attempted to take out proceedings in the courts in Florence, Italy claiming for breach by the plaintiff and by Allied Footwear of the Distribution Agreement (which the defendant says is for both the IC brand and the PL brand of shoes).  It would therefore seem that even from the standpoint of the defendant there has been a breach of the Distribution Agreement (albeit that the plaintiff says there were two separate agreements for IC brand and for PL brand but the defendant says there was only one distribution agreement for both the IC brand and the PL brand) and that the issue in dispute between them is who is in breach.

73.  Turning now to deal with what is the main issue in dispute between the parties in this application, namely the governing law being Hong Kong law.  In this respect it is not in dispute that there was no express term contained in the 2002 Agreement for exclusive distribution by the defendant of the IC brand of shoes in Italy, as to what was the governing law.  Therefore what needs to be determined in this application is whether the plaintiff has made out a good arguable case for such a term to be implied into the 2002 Agreement.

74.  The question for that would appear to be the system of law with which the transaction has the closest and most real connection.

75.  In considering that question, the test laid down by Litton JA in the case of Century Yachts Ltd v Xiamen Celestial Yacht Ltd [1994] 1 HKLR 385 at 393 is what ordinary reasonable businessmen would have been likely to have agreed if their minds had been directed to the question.

76.  In this respect, and applying the test laid down in the Century Yachts case, one would have to go back to the circumstances prevailing at the time when the 2002 Agreement for the IC brand of shoeswas entered into between the parties some time between September and November 2002.

77.  That oral agreement was discussed in and concluded in the London office of Allied Footwear.  It was discussed between Cecchini, an Italian national, on the one hand and the several British nationals on the other hand.  The IC brand of shoes, the subject matter of the distribution agreement, was designed by Daniel Sullivan working from his office called “Design Asylum” in Brighton and were to be marketed or promoted in Italy by the defendant.  The IC brand of shoes were to be manufactured in China.  These matters are not in dispute or cannot be disputed.

78.  The position adopted by the plaintiff in its submission that Hong Kong law should be implied as being the governing law has its basis upon the fact that this was an international trade between the plaintiff and the defendant and that the plaintiff, a Hong Kong company, having its administrative centre in Hong Kong thus Hong Kong being the place having the closest and most real connection with the contract.

79.  Cecchini on the other hand says that he was always under the impression, or led to believe, that he was dealing with Allied Footwear as the principal and that it was only when the distribution agreement was being performed that the plaintiff also came into the picture as being the party to whom invoices were issued and payment made.

80.  In this respect, there is strong support for what is claimed by Cecchini for in a letter dated 10 April 2008 from Darrin Field to Cecchini, the following is stated :

“For the record [the plaintiff] has no rights or ownership of Poetic Licence as a brand. Huntley International is a financial provider of funds for production of your orders in which we pay them for their services. Huntley provides a credit facility to you on your orders and debit recovery of unpaid amounts.

…

Further clarification on your letter April 9^th in regards to the Brand ‘Irregular choice’ I point out that this brand is solely owned by Dan Sullivan and recorded as such in worldwide trade mark registrations. We [the shareholders] of Poetic Licence the brand have no distribution relationship operating with Irregular Choice. I cannot make any comments in regards to you making reference to that brand in your letter 9^th April. You are aware of this fact and have been from the beginning of the Poetic Licence arrangements. For any purpose of termination arrangements with Poetic Licence you must separate Irregular Choice and your arrangements. Please refer you discussion directly to the owner of Irregualar Choice. I can only assume you are intentionally declaring to threaten the current arrangements you have with Irregular Choice and cause harm to commitments they may have to you and vice versa.

Having the knowledge of the correct owners and relationship of Poetic Licence and its products it provides you with the following understanding

1. Your distribution arrangements are [subject to the official distribution licence] with the brand owners Jim Sullivan and Dan Sullivan holding in trust including additional partners.

2. Huntley is the financial provider to you for credit and sale [invoice for goods]. They do not hold any licencing or distribution rights or shareholding of the brands. I cannot answer for Huntley but I would assume any outstanding money owed by ASAP would be recovered in normal debt recovery methods.”

81.  Given that as late as 2008, Cecchini was still being told that the plaintiff was merely a financial provider and do not hold any licencing or distribution rights or shareholding the brands (noting the plural of that word used), it would not be surprising that at the very outset, when the oral agreement was reached in the London office of Allied Footwear, the defendant may well have been completely in the dark as to the role or even the existence of the plaintiff.

82.  Further support could be found in the evidence, in particular paragraph 13 of the 1^st Affirmation of So Yiu Kwong, as to why the identity or even existence of the plaintiff may not have been fully disclosed to the defendant at the time the 2002 oral agreement was entered into.  In paragraph 13 of So’s 1^st Affirmation, it is stated :

“As the business of the Plaintiff expanded gradually especially in the European market, it became obvious to James Sullivan that the major clients of the Plaintiff would not purchase from Hong Kong unless there was a support office in Europe where they could quickly refer all problems and issues to.”

83.  The fact that Cecchini was dealing with officers of the plaintiff (including James Sullivan, Shahrabani and Tanner) is neither here nor there if the identity or role or even the existence of the plaintiff was not fully disclosed and made known to Cecchini when applying the test laid down in the Century Yachts case.

84.  The only evidence coming from the plaintiff as to the discussion which took place between the parties before the 2002 Agreement was entered into between them in 2002 is contained in paragraph 36 of the 1^st Affirmation of So Yiu Kwong in which it is stated as follows :

“The Defendant was aware that the above individuals acted on behalf of the Plaintiff. I was informed by James Sullivan and Ezra Shahrabani and believe that between 2001 and 2001, [sic] Mr. Cecchini first met James Sullivan and Ezra Shahrabani who introduced the Irregular Choice series to the Defendant on behalf of the Plaintiff. James Sullivan and Ezra Shahrabani negotiated the IC Distribution Agreement on behalf of the Plaintiff in or around 2002.”

85.  Subsequently, the Affidavit of Tanner and that of Shahrabani merely confirmed the facts stated in the 1^st and 2^nd Affirmations of So Yiu Kwong to be true and accurate without adding anything thereto.

86.  Given the state of the evidence, and even accepting on face value what was stated in paragraph 36 of So Yiu Kwong’s 1^st Affirmation, all that can be gleaned from that was that Cecchini would have known in 2002 before the 2002 Agreement was entered into that he was dealing with the plaintiff.

87.  While there is evidence from the plaintiff that the plaintiff is a company incorporated in 1972, there is no evidence from the plaintiff that Cecchini knew or was told in 2002 that the plaintiff was a Hong Kong company.  In the affidavits of the plaintiff, the plaintiff relies on the contents of letters and emails all of which were in 2008 or 2009 to show that the defendant’s knowledge about the plaintiff.  Those letters and emails cannot paint what was the picture back in 2002.

88.  On the other hand, there is also no evidence from the defendant to the effect that Cecchini did not know or was not told that the plaintiff was a Hong Kong company in 2002 at the time when the 2002 Agreement was entered into.

89.  Therefore even accepting that the defendant knew in 2002 that the plaintiff was a Hong Kong company and was one of the contracting parties to the 2002 Agreement, given all the other circumstances as to how the 2002 Agreement came to be entered into, the question that must be asked and answered would be whether the plaintiff has made out a good arguable case to show that Hong Kong law should be implied as being the governing law for the 2002 Agreement.

90.  In arguing this part of the case, the plaintiff has put it on the footing that the plaintiff is a Hong Kong company, and the defendant an Italian company, and that “the real contest is whether the parties would have wanted the [2002] Agreement to be under Hong Kong law or Italian law.” (paragraph 23 of plaintiff’s skeleton submission refers).  A number of cogent reasons were put forward by the plaintiff as to why the parties would not have agreed to Italian law being the governing law of the 2002 Agreement.  Those reasons briefly are that the plaintiff’s officers dealing with the defendant are all English speaking but not Italian speaking so would not have agreed to go to an Italian court using Italian law where they would not have been able to follow the proceedings in the Italian language.  On the other hand, Cecchini is a sophisticated jet-setting English speaking businessman using very good English in his letters.  Once Italian law can be ruled out, what remains is really Hong Kong law and that should be implied as being the governing law for the 2002 Agreement.

91.  However, that argument by the plaintiff does not take into consideration the possibility that English law may have been what the parties would have said to be the governing law if they were asked at the time the 2002 Agreement was entered into by them.

92.  Even accepting the submission of the plaintiff and for the reasons given by it, that it would be highly unlikely that the parties to the 2002 Agreement would have agreed Italian law to be the governing law, given all the circumstances set out hereinabove, it may have been just as unlikely for them to have agreed for the governing law to be Hong Kong law if the defendant had not been told fully to the role of the plaintiff when the 2002 Agreement was entered into, so much so that even in as late as 2008, the plaintiff’s role was said to be only as a financial provider.

93.  Applying the test laid down in the Century Yachts case, and given all the circumstances prevailing at the time the 2002 Agreement was entered into, I would have thought that if asked to address their minds to the question of the governing law, reasonable businessmen in the shoes of the parties herein more likely than not would have agreed on English law to be the governing law, but unlikely they would have said Hong Kong law.

94.  This view is one which has a valid basis when tested against what was stated in the draft agreement (whether the draft dated 2005 or 2006) in respect of the PL brand of shoes in which the governing law was expressly stated to be English law.  Both versions of that draft agreement appear, on their face, to have been drafted by English solicitors.  Even accepting that the agreement for the PL brand of shoes was a separate and distinct agreement from the 2002 Agreement, the nature of that agreement for the PL brand and the parties thereto would appear to be no different from the 2002 Agreement.

95.  It is not necessary for me to actually make a specific finding that the governing law to be implied for the 2002 Agreement would be English law.  It is sufficient for me simply to hold that the plaintiff has failed make out an arguable case that the governing law for the 2002 Agreement to be Hong Kong law.

96.  It follows therefrom that the plaintiff has failed to make out an arguable case that the claim herein is one that falls within Order 11, rule 1(1)(d)(iii). Jurisdiction of this court has therefore not been made out by the plaintiff.

97.  Accordingly, and on that alone the leave granted by the Master must be set aside.

98.  In the circumstances, it would not be necessary for me to go into the further issue of exercise of discretion, namely, whether there is a serious question to be tried or whether for some other reasons, leave should not be granted.

99.  I should further add that in view of the conclusion come to above that the plaintiff has failed to make out an arguable case that the claim herein is one which falls within Order 11, rule 1(1)(d)(iii) and therefore the jurisdiction of this court has not been made out by the plaintiff, the fact that the court in Italy has declined jurisdiction in the Italian proceedings brought by the defendant against the plaintiff and Allied Footwear is not a matter which can have any bearing or relevance upon my decision herein.

COSTS

100.  There will be a costs order nisi that the plaintiff is to bear the costs of the ex parte application before the Master and to pay the defendant’s costs of this application and of the hearing, to be taxed if not agreed.