TRANSAMERICA OCCIDENTAL LIFE INSURANCE CO (Hong Kong Branch) v. KING SOUND INDUSTRY CO LTD AND ANOTHER

HCCL 12/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO.12 OF 2004

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J U D G M E N T

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The application

1. This is the defendants’ application, by summons filed on 24 September 2004 pursuant to Order 12 rule 8 RHC, to set aside the ex parte order of this court, dated 9 June 2004, granting leave to issue and serve a concurrent writ of summons out of the jurisdiction, and further to set aside the purported service of such process upon the defendants.  A declaration is also sought that in the circumstances of the case that this court has no jurisdiction over the defendants in respect of the subject-matter of the claim or the relief or remedy sought in the action.

2. This case has some history — in particular there is within this dispute an element of competing jurisdictions — and before turning to the application in hand it may be worth sketching in a little of the background.

Background facts

3. This is a dispute between the plaintiff life insurance company (‘Transamerica’) and the beneficiaries thereunder, the defendants herein, arising out of three life insurance policies which were issued by the company in April and May 2001 on the life of the assured, a Taiwanese national named Sun Chieh Chen.

4. The assured met his death in China — it is said that he was murdered or committed suicide on 15 June 2002 — and the 1^st defendant (‘King Sound’), the beneficiary under the 1st policy issued in the sum of US$8.35 million, and the 2^nd defendant (‘Madam Huang’), the beneficiary under the 2^nd and 3^rd policies issued in the aggregate of US$6 million, now seek payment under those policies.

5. King Sound was the employer of the assured, Mr Sun, and Madam Huang was his wife.

6. Consequent upon Mr Sun’s demise, Transamerica exercised its contractual right to investigate and to challenge the claim made on the policies within the first two years of issuance.  It is alleged that there is ample material available to demonstrate the insurance company’s entitlement to avoid the policies for material and false non-disclosure on the applications for the insurance, particulars of which are set out in the Points of Claim filed on 29 July 2004.

7. By the proceedings commenced in this jurisdiction, Transamerica seeks declarations that the policies are void, alternatively that it is entitled to avoid liability under the policies, and accordingly that it is not liable to the beneficiaries, the defendants in these proceedings.

8. The writ in this case was issued on 26 March 2004, and leave to serve out of the jurisdiction upon the defendants was granted by this court on 9 June 2004.  It is this grant of leave which is subject to the present attack.

9. However, whilst Transamerica had elected Hong Kong as the forum to decide this case, the defendants herein, in their capacity asbeneficiaries under the three policies, had concluded that the United States District Court for the Central District of California constituted the appropriate venue for the resolution of this dispute.

10. Accordingly, at the time of obtaining from this court the order dated 9 June 2004 permitting leave to serve the writ out of the jurisdiction, Transamerica also applied at the same ex parte hearing for an anti-suit injunction restraining the defendants from proceeding in California.  In the circumstances, this application struck this court as ambitious to say the least, and after hearing argument from counsel on behalf of Transamerica, leave was granted to withdraw this injunction application.

11. The Californian proceedings were commenced by the beneficiaries shortly after the institution of the Hong Kong proceedings by Transamerica, on 27 April 2004 Madam Huang and King Sound filing their own Complaint in the Californian court seeking, inter alia, recovery under the three insurance policies in question.

12. The learned judge in charge of the docket in which this case is listed in the Californian court, Judge Pregerson, has been dealing with a number of interlocutory applications with those Californian proceedings, and I have asked for and have been supplied with an agreed chronology intituled ‘Notable Events’ within the course of these proceedings.

13. For present purposes, suffice it to say that the beneficiaries, that is, the plaintiffs in California, on 31 July 2004 themselves took out an application for an anti-suit injunction seeking an order that Transamerica cease its own litigation in Hong Kong.  For its part, on 16 August 2004 Transamerica, the plaintiff in Hong Kong, took out a cross-motion to stay the Californian proceedings on the grounds of forum non conveniens.

14. By his order dated 17 September 2004 both applications were denied by Judge Pregerson, and the Californian litigation is thus continuing in normal course.  In this context I understand that a Scheduling Order dated 20 August 2004 has been made which lays down cut-off dates for the further interlocutory steps in the Californian action, culminating in a 10 day jury trial which presently is set down to commence on 14 June 2005.

15. As to the current state of play in the Hong Kong action between these parties, the procedural position is that in substantive terms this action has not progressed beyond the filing of the Points of Claim on 29 July 2004.

16. The solicitors for the defendants herein, Messrs Barlow, Lyde & Gilbert, came onto the record on 6 August 2004, and in face of the plaintiff’s Summons for Directions dated 27 August 2004, the defendants took out a time summons requesting an extension of time in which to file and serve the Points of Defence to the claim.  However, the issue of pleading to the claim was overtaken when, on 24 September 2004, the present Order 12, rule 8 application was filed wherein the defendants challenge the jurisdiction of this court to hear and determine the case as brought in Hong Kong by Transamerica.

17. It is to this challenge that I now turn.

Order 12, rule 8 : ambit of the argument

18. The bases invoked by the defendants in this application are two: first, that the case does not fall within the rules relating to service out of the jurisdiction; and second, that there has not been due service effected upon the defendants.

19. The provisions of Order 11 rule 1(1) RHC which were relied upon by the plaintiff at the ex parte stage are that encompassed by the first three heads of subrule (d), which read :

“…service out of the jurisdiction is permissible with the leave of the court if …

(d)   the claim is brought to enforce, rescind, dissolve, annul or otherwise affect a contract, or to recover damages or obtain other relief in respect of a breach of a contract, being (in either case) a contract which –

(i)	was made within the jurisdiction, or
(ii)	was made by or through an agent trading or residing within the jurisdiction on behalf of a principal trading or residing out of the jurisdiction, or
(iii)	is by its terms or implication governed by Hong Kong law …”

20. Mr Hart for the defendants has argued that on the basis of the evidence before the court in this case that none of these requirements are satisfied.  To the contrary, Mr Coleman for the plaintiff asserts that the requirements of each of these subhead clearly are met, and that there is no merit in this challenge to the jurisdiction.

21. Who, then, is right?

Decision

22. There is a good deal of evidence before this court; in fact, there are no less than ten affidavits which have been filed sounding to various aspects of this case, and in the course of argument the court has been taken to various aspects of this evidence.

23. I remind myself, also, of the applicable principles governing the grant of leave to serve out of the jurisdiction, as to which there is no dispute.  In summary, these principles (usefully digested in Hong Kong Civil Procedure, 2004, at pages 96 – 110) are that first, the case must fall within the rule, and that the degree of proof required by the court to show that the case falls within one of the subparagraphs of Order 11, rule 1(1) is that of a good arguable case; second, that between the parties there must be established to be a serious issue to be tried; and third, that the plaintiff must satisfy the court that the case before it is a proper case for the exercise of the discretionary power to grant such leave and to invoke the court’s “long arm” jurisdiction.  This latter requirement, often overlooked, is a consequence of Order 11, rule 4(2), which provides that no such leave to serve out shall be granted “unless it shall be made sufficiently to appear to the court that the case is a proper one for service out of the jurisdiction under this Order”.

24. At the outset of argument Mr Hart canvassed a number of general points.  I should perhaps mention them briefly.

25. He argued that quite apart from the lack of compliance of the plaintiff with regard to any of the subheads of subrule (d), there was a discrepancy between the relief claimed in the Endorsement on the Writ and that in the Points of Claim, and further and in particular that the manner in which the case was framed within the generally-endorsed writ, namely the claim for a declaration that Transamerica was not liable to the 1^st or 2^nd defendants under these insurance policies, was not relief that fell within the rubric of subrule (d).  I reject these contentions.  I note that at the very least the claim for a negative declaration falls within the term “otherwise affect a contract”.  Moreover I reject Mr Hart’s assertion that such a declaration “would not serve any useful purpose”, and if and in so far as the assertion seriously was made that there is not a serious issue to be tried in this case, I reject that also.  Any such contention strikes me as risible in the present circumstances.

26. I revert, therefore, to the three subheads of subrule (d).  As I have indicated, Mr Coleman says that he gets home under all three; Mr Hart maintains that none of them are applicable.

27. The concept of a ‘good arguable case’ is a bit like an elephant: difficult to describe, but you know it when you see it.  This court has been addressed extensively on the evidence, and in particular the process of entering into the insurance contracts in question, given the transnational elements of dealings in Hong Kong (in terms, for example, of application and payment) and in Kansas, wherein the head office of Transamerica is located, and whence these policies formally were issued in 2001.

28. Suffice it to say that, after reviewing the evidence — in particular the details and intricacies of the procedures for entering into these policies — together with the competing arguments, that I am satisfied that the plaintiff in these proceedings has succeeded in bringing itself, in terms of ‘good arguable case’, within subheads (i) and (iii).  I so find.

29. However, I am disinclined to agree with Mr Coleman’s argument that Transamerica also can take advantage of subhead (ii), namely that the contract was made in Hong Kong through an agent of an extraterritorial principal.  Mr Coleman’s point here was that, in terms of the wording of the rule, it matters not whether that agent was agent of the plaintiff or the defendant, and that since it was common ground that the insurance company’s agent was heavily involved in Hong Kong with the negotiation and issuance of these policies that the requirement of the rule was thereby satisfied.

30. Whilst I recognize the force of the argument in terms of the literal wording, and although strictly a decision on the point is not required for the purpose of this case in light of my judgment that the plaintiff is home in any event under subrules (d)(i) and (iii), on balance I tend to the view expressed by Phillips J (as he then was) in Union International Insurance Co Ltd v. Jubilee Insurance Co Ltd [1991] 1 All ER 740 wherein the learned judge decided that the extraterritorial principal must, in terms of this rule, be construed to be a reference to the defendant and not to the plaintiff.

31. Having concluded that the plaintiff herein, that is, Transamerica, has successfully brought itself within the terms of Order 11, rule 1(1)(d)(i) and (iii), at least in terms of a ‘good arguable case’, and that there is a serious issue to be tried, I turn now to the forum conveniens element, which is a matter to be specifically considered by the court in the exercise of its discretion under this Order and in its evaluation of whether this is a “proper” case for service out.

32. Mr Hart has submitted that there are “special considerations” where proceedings are on foot in another jurisdiction, and he further argues that “where a stay of proceedings for a negative declaration is sought, the court will have to consider whether there was any justification for seeking that form of relief as well as forum non conveniens principles”.

33. I confess that I have difficulty in fully understanding this part of the argument.  The obvious initial point is that there is, of course, presently no application before the court apart from the present Order 12, rule 8 application challenging the existence of Hong Kong jurisdiction.  Although an alternative application may well have been anticipated, pointedly there is as yet no application for a stay of these proceedings, which implicitly recognizes the jurisdiction but asks that it not be exercised in the circumstances, and whilst it is appreciated that the forum conveniens element of the current application involves similar concepts, juridically there is no complete overlap.

34. Nor is it clear how the manner in which the present Hong Kong proceedings are framed can be, or should be regarded as, a significant factor.  For my part I fail see why the declaratory relief sought by Transamerica should be regarded as any less valid than the case brought by the beneficiaries against the company in the California court: the like issues will be ventilated, and all that differs is the framing of the relief.

35. I recognize that in considering the issue of forum conveniens within the context of the present debate that I must take into account the existence of the Californian proceedings, in which, of course, there has been a degree of tactical interlocutory sparring on both sides, and upon which Judge Pregerson now has ruled.

36. However, I do not see that the continuation of these proceedings should inhibit this court in its evaluation of the present challenge to its own jurisdiction.  Having found that Transamerica has a good arguable case under Order 11, rule 1(1)(d)(i) and (iii), and bearing in mind, further, that the plaintiff in these Hong Kong proceedings is registered as an overseas company under Part XI of the Companies Ordinance, Cap.32, and is required to conduct its business in Hong Kong under the local regulatory framework enshrined in the Insurance Companies Ordinance, to all intents and purposes the present plaintiff is to be treated as an Hong Kong company operating in and from Hong Kong in accordance with local law.

37. Viewed against this backdrop, therefore, Mr Hart’s bold submission that the issue of the present proceedings by Transamerica — which proceedings antedate the institution of the Californian action by the present defendants — represents an exercise in ‘forum shopping’ strikes me as absurd.  In this context, he may have cause to reflect upon the position of his own clients, who have chosen to proceed in California and who apparently have eschewed bringing suit against Transamerica at its home base in Kansas.

38. At the end of the day, having considered the case in its entirety, in terms of this element of the case I am prepared to exercise my discretion in favour of the plaintiff.  I am not prepared to hold that Hong Kong is other than the forum conveniens, and thus the defendants’ submission that leave to serve out should be set aside on this basis is also rejected.

39. I turn lastly to the second limb of Mr Hart’s complaint, namely that there has not been due service upon the defendants as required by the ex parte order of 9 June 2004.

40. Mr Hart says that the plaintiff has failed to demonstrate that it has personally served either of the defendants in Taiwan or in America, and accordingly that the purported service of the concurrent writ should be set aside.

41. During argument, this point was not pressed, doubtless because it is manifestly devoid of merit.  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.

42. The order granting leave to serve out permitted, inter alia, service upon the 1^st defendant at its business address in Taiwan and upon Madam Huang at her address, and there seems little doubt that such service was thus effected; indeed, it is impossible to have served Hong Kong proceedings in Taiwan through the Taiwanese court process, and thus to have served personally was not contrary to Taiwanese law.

43. Accordingly, I accept the submission of Mr Coleman that there was compliance with Order 11, rules 5 and/or 6, and his further submission that whether there was good service in the USA, via the good offices of Mr Knickerbocker, is nothing to the point.

44. In any event, if and in so far as there is some technical failure, that falls to be cured under the provisions of Order 2, rule 1 : see, for example, The “Goldean Mariner” [1990] 2 Lloyd’s Rep 215, Boocock v. Hilton [1993] 1 WLR 1065, The “Anna L” [1994] 2 Lloyd’s Rep 379, and if and in so far 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.

46. In my judgment, therefore, such service is to stand.

47. The end result, therefore, is that the present application must fail.  I find that the jurisdiction of this court is established, and I decline the relief sought by the defendants by the summons dated 24 September 2004.

Order

48. Consequent upon the foregoing judgment, I make the following Order :

(i)	that the defendant’s application, by summons dated 24 September 2004, be dismissed;
(ii)	there be an order nisi that the costs of and occasioned by the application be to the plaintiff, to be taxed if not agreed;
(iii)	that there be the following directions for the further conduct of these proceedings :
	(1)	that the defendants herein do file and serve their Points of Defence by 4pm on Monday, 10 January 2005;
	(2)	that the plaintiff do file and serve a Reply, if any, by 4pm on Friday 21 January 2005;
	(3)	that there be discovery of documents by mutual exchange of Lists of Documents, such lists to be verified by affidavit, by 4pm on Wednesday 9 February 2005;
	(4)	that there be inspection of documents by 4pm on Friday 18 February 2005;
	(5)	that there be mutual exchange of signed witness statements of fact by 4pm on Wednesday 16 March 2005;
	(6)	that the balance of the plaintiff’s Summons for Directions, dated 27 August 2005, be adjourned sine die, with liberty to restore, and that there be liberty to apply for such further directions as may be necessary.