CHINA INDUSTRIAL SECURITIES INTERNATIONAL BROKERAGE LTD v. LI HAILONG

HCA 508/2021

[2022] HKCFI 2694

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 508 OF 2021

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DECISION

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1.  This is the defendant’s appeal against the Order of Master Anthony Chan dated 19 April 2022 dismissing the defendant’s summons dated 28 October 2021.

2.  By that summons, the defendant sought: (1)  a declaration that the attempted service of the Writ of Summons on the defendant’s solicitors, Messrs Holman Fenwick Willan (“HFW”), on 28 July 2021 was invalid and the attempted service be set aside; (2)  an Order to set aside the Order of Master Phoebe Man dated 4 May 2021 granting leave to issue a concurrent Writ of Summons and to serve the same on the defendant out of jurisdiction in Shanghai or elsewhere in China; and (3)  a declaration that the Court has no jurisdiction over the defendant in respect of the subject matter of the claim or relief sought in this action.  The learned Master made no order on (1)  and dismissed the remainder of the summons with costs summarily assessed against the defendant.

3.  The plaintiff is a licensed securities brokerage in Hong Kong.  Since August 2018, the defendant maintained a securities margin account with the plaintiff.  That account was governed by a client agreement which contains a Hong Kong governing law clause and a non-exclusive Hong Kong jurisdiction clause.  The plaintiff’s case is that between September 2018 and November 2020, the defendant suffered losses from his trading transactions and is liable to the plaintiff in excess of $21 million.

4.  The plaintiff issued the Writ of Summons on 1 April 2021.  It obtained the service out Order on 4 May 2021, and successfully served the concurrent Writ of Summons on the defendant in Shanghai on 7 July 2021 through the Shanghai Court.

5.  On 23 July 2021, the defendant through HFW acknowledged service of the Writ of Summons and indicated an intention to defend the claim.  By letter on the same day, HFW notified the plaintiff’s solicitors, Messrs S T Cheng & Co (“STC”), that HFW had instructions to act for the defendant, enclosed a copy of the filed Acknowledgment of Service of the Writ of Summons (without prejudice to the defendant’s challenge to the irregularity of the concurrent Writ of Summons or its service), and asked for documents relating to: (1)  the plaintiff’s ex parte application for leave to serve out; and (2)  service of the concurrent Writ of Summons in China.  STC replied on 28 July 2021 in the following terms:

“Based on the following:-

1. your confirmation of acting for the Defendant;

2. your request for correspondence be sent to you; and

3. your filing the acknowledgment of service on behalf of the Defendant,

we conclude that you have instruction to accept service on behalf of the Defendant. To remove any doubts, we enclose herewith, by way of service, another set of the Writ and related documents for your handling.

On the other hand, you requested us to provide you with copies of documents relating to the Plaintiff’s ex-parte application for service out of jurisdiction.  With respect, we are under no obligation to provide you with the same.  If you opine otherwise, kindly advise us of the authorities in support of your request.”

6.  The position adopted by STC in the above letter is difficult to understand as a matter of law and on the facts:

(1)  HFW never indicated to STC that they had instructions to accept service on behalf of the defendant.  There is no basis for STC to “serve” another set of the Writ of Summons and related documents on HFW “to remove any doubts” (when there was none)  and treat it as “service” on the defendant.  Mr Richard Yip acting for the plaintiff fairly accepted that STC’s “service” of the Writ of Summons on HFW in such a manner could not, and did not, constitute proper service on the defendant, and he confirmed that the plaintiff did not intend to, and would not, rely on the purported “service” on HFW on 28 July 2021 as service on the defendant. 

(2)  However, STC was far from forthcoming in acknowledging such a position.  In its letter dated 16 November 2021, STC maintained that it was entitled to serve the Writ of Summons on HFW “for the purpose of bringing the proceedings to the defendant’s attention” especially before the plaintiff came to know about the status of the service of the concurrent Writ of Summons in China at that time. In its affirmation filed in opposition to the defendant’s summons, STC stated that the plaintiff “no longer needs to” rely on the service attempt on HFW in light of the successful service on the defendant in Shanghai.  The equivocal stance adopted by STC is most unfortunate and unhelpful, and prompted the defendant to seek the declaration that the attempted service of the Writ of Summons on HFW was invalid.

(3)  STC’s refusal to provide a copy of the ex parte application papers is perplexing.  It is invariably good practice to serve with the Writ of Summons copies of the service out Order, the supporting affirmation and the skeleton or letter placed before the Master granting leave to serve out: Hong Kong Civil Procedure 2022, para 11/5/5 at p 269.  This is because the defendant will need to see these in due course in order to decide whether to challenge jurisdiction.  Mr Yip could not justify STC’s refusal to provide documents to HFW, save to remark that at that time the solicitors were in “acrimonious” terms.  This is a position which STC should never have adopted, in light of the parties’ duties to further the underlying objectives of the Rules of the High Court including: (a)  to ensure that a case is dealt with as expeditiously as is reasonably practicable; (b)  to promote procedural economy; and (c)  to ensure fairness between the parties.

7.  Whilst the unfortunate stance of STC on “service” on HFW understandably prompted the defendant to seek the declaration set out in [2(1)] above, I agree with the learned Master that no Order should be made.  Whether the purported “service” on HFW was valid service on the defendant is an academic and moot point given the successful service on the defendant in Shanghai on 7 July 2021.  There is nothing before me to suggest that the plaintiff is seeking to rely on the “service” on HFW as valid service on the defendant, and Mr Yip’s confirmation as recorded in [6(1)] above left no room for doubt.  It is not for the Court to grant a declaration when there is no live dispute between the parties.

8.  As to the defendant’s application to set aside the service out Order, its argument is two-fold:

(1)  This is not a proper case for service out under Order 11, rule 4 of the Rules of the High Court; and

(2)  There was material non-disclosure by the plaintiff in the ex parte application for leave to serve out.

9.  Mr Eugene Kwok acting for the defendant is not contending that the jurisdictional gateway relied upon by the plaintiff under Order 11, rule 1(1)(d)(i)  and (iii)[1] is not satisfied.  He contended that the defendant is a PRC citizen who lives and works in Shanghai, who will not come to Hong Kong due to the Covid-19 pandemic, and he has no connection with Hong Kong at all.  As such, Mr Kwok argued that the Hong Kong Court is not the appropriate forum for trial of the action.

10.  I reject his submission.  As Mr Yip submitted, where the parties contractually agreed to use Hong Kong as the forum for dispute resolution (as in the present case by virtue of the non-exclusive Hong Kong jurisdiction clause in the margin account agreement), the starting point is that the Court will hold parties to their contractual bargain.  The party seeking to challenge the suitability of the contractually agreed forum bears a “heavy burden” to discharge, and “strong or overwhelming reasons or exceptional circumstances must be shown”: Noble Power Investments Ltd v Nissei Stomach Tokyo Co Ltd [2008] 5 HKLRD 631 at [36].  The defendant falls far short of discharging such a heavy burden by relying on factors set out in [9] above.  In any event, I agree with Mr Yip that the following factors plainly supports Hong Kong being an appropriate forum:

(1)  The plaintiff is a securities brokerage in Hong Kong.

(2)  The securities margin account agreement was made in Hong Kong and governed by Hong Kong law, and the parties have submitted to the non-exclusive Hong Kong jurisdiction.

(3)  The securities trading transactions were made in Hong Kong.

(4)  The witnesses and documents intended to be relied upon by the plaintiff are located in Hong Kong.

11.  As to material non-disclosure, Mr Kwok argued as follows:

(1)  The plaintiff wrongly asserted in its affirmation in support of the ex parte application that the defendant was a director of a Hong Kong company called Regan International Securities Ltd (“Regan HK”)  and claimed that Regan HK’s office address (“Hong Kong Office Address”)  and his residential address in Shanghai recorded in Regan HK’s annual return (“Shanghai Residential Address”)  were two of his last known addresses.  This was untrue when the defendant had on 31 March 2021 resigned from Regan HK.

(2)  The plaintiff failed to inform Master Man that the plaintiff’s emails sent to the defendant would not have been received by him as he had cancelled his email account in 2019.  Any emails sent to that account would have been bounced back.

(3)  In its affirmation in support of the ex parte application, the plaintiff wrongfully and without the defendant’s consent referred to a WeChat telephone call on 25 February 2021 between the defendant and the senior management of the plaintiff in which the parties negotiated for settlement.  The defendant contended that the plaintiff had relied upon this as showing that he had no defence to the plaintiff’s claim.

12.  I agree with Mr Yip that none of the above matters amounted to material non-disclosure by the plaintiff:

(1)  It does not follow from the defendant’s resignation as director of Regan HK that he could not be contacted at the Hong Kong Office Address or the Shanghai Residential Address, and the defendant did not allege that to be the case either.  The plaintiff also identified another Shanghai office address of a Shanghai company of which the defendant was a director.  That was one of the two Shanghai addresses named in the service out Order, and at which the defendant was ultimately successfully served.  The defendant’s resignation from Regan HK had no material bearing on the service out application and it was not a matter that ought to be placed on Master Man’s weighing scale.

(2)  Whether the defendant received emails (which attached the plaintiff’s demand letters)  is plainly irrelevant in considering whether to grant leave to serve out.

(3)  There was no mention to Master Man of the contents of the discussion in the call on 25 February 2021 save that the parties had not reached any settlement.  The discussion could not have been relied upon by the plaintiff, nor could it have a material bearing in Master Man’s decision, on whether the defendant has any defence to the plaintiff’s claim.

13.  For the above reasons, Master Anthony Chan’s decision could not be faulted.  I therefore dismiss the defendant’s appeal with costs to the plaintiff, summarily assessed at $80,000 and to be paid forthwith.