TELECOM (NO 1) SERVICE LTD AND ANOTHER v. RONALD R.C. CHUM AND ANOTHER

cacv 321/2006

in the high court of the

hong kong special administrative region

court of appeal

civil appeal no. 321 OF 2006

(on appeal from hcCl NO. 10 of 2003)

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And

cacv 322/2006

in the high court of the

hong kong special administrative region

court of appeal

civil appeal no. 322 OF 2006

(on appeal from hcCl NO. 54 of 2003)

______________________

______________________

______________________

J U D G M E N T

______________________

Hon Stock JA:

Introduction

1.  Upon applications presented in 2004, leave was granted ex parte in two sets of proceedings to serve the defendants Chum and Wong out of the jurisdiction.  Thereafter those defendants applied for orders setting aside the leave thus granted.  On 24 April 2006 Stone J set aside leave on two grounds:

(1)	that there was in neither case a serious issue to be tried because the Hong Kong proceedings constituted a collateral attack upon a decision of a court in Bermuda on the same issue now raised, albeit between different parties, of a kind that amounted to an abuse of the process of the court; and
(2)	that it was not shown that Hong Kong was the forum conveniens for the trial of the actions.

2.  These are the plaintiffs’ appeals from those decisions.

3.  The defendants Chum and Wong assert that the decision to set aside ought to be affirmed on the further grounds that:

(1)	the plaintiffs were barred by issue estoppel from proceeding in Hong Kong; and
(2)	there has been material non-disclosure.

The companies

4.  China North Industries Investment Limited (‘the Company’) was incorporated in Bermuda in 1994.  Its objective was the creation of a fund to invest in Mainland joint ventures controlled by the China North Industries Group, a state-owned organization.  The investments identified were made through wholly-owned subsidiaries of the Company incorporated in the British Virgin Islands. 

5.  In 1994, 185 million shares in the Company were offered for placement on the Irish Stock Exchange with a secondary placement in Singapore.  The Information Memorandum issued to prospective institutional investors named eighteen proposed joint ventures; although reserving to the Board the right invest up to 15% of the aggregate subscription price in joint ventures not described in the Memorandum.  One such joint venture not referred to in the Memorandum, but subsequently identified and which features centrally in this case, was a telecommunications project operated by Beijing Zhongbei Lianhe Tongxi Company Limited (‘Zhongbei’).

6.  The British Virgin Island company incorporated to enable the Company to invest in the Zhongbei project was Telecom (No. 1) Service Limited (‘TSL’), a wholly-owned subsidiary of the Company.

7.  By an agreement dated 5 September 1994, the Company appointed China North Investment Management Company (‘the Manager’), incorporated in the British Virgin Islands, as its investment manager.  The Manager’s responsibility was to administer the investments in accordance with the directions of the Company’s Investment Committee, to develop overall investment strategy, to monitor the investments, to report to the Investment Committee any development or potential problems with respect to the investments and to provide general administrative services to the Company.[1]  The management agreement stipulated that it was to be construed and governed in accordance with the law of Bermuda and that the parties submitted to the non-exclusive jurisdiction of the courts of Bermuda in respect of any matter arising or in connection with the agreement.[2]

The individuals

8.  The collateral attack with which this appeal is concerned finds its form in the switch from an attack on the Manager in previous proceedings to one, in the current proceedings, upon individuals closely connected to the Manager:

(1)	Mr Ronald Chum, the first defendant in both Hong Kong actions, was a director of the Company, nominated for that role by the Manager.  Amongst the other directors was Mr Simon Murray who until March 1998 was Deputy Chairman, until he was replaced by Mr Jack Mayer – whose testimony featured large in the Bermudan proceedings – and Mr Anthony Lo who had been nominated by the Placing Agent, H G Asia.  In April 1997 a substantial shareholding in the Company was acquired by Gabriel Capital LP of New York and Ariel Fund Limited.  Mr Mayer, a representative of Gabriel, was appointed to the Company’s Board.
(2)	Proposed Company investments were recommended to the Board by its Investment Committee.  At the times with which we are concerned, the Committee comprised Mr Chum, Mr Murray and Mr Lo.
(3)	The Manager was owned as to 85% by China Industrial Management Limited in which latter company Mr Chum held 45% of the shares.  Mr Chum was a director of the Manager.  So was Mr Tony Wong, the second defendant in one of these two actions, who was a senior consultant to the Manager before he became a director.  Mr Duncan Hon held the post of manager.
(4)	Mr Chum and Mr Wong were also directors of TSL.

The Zhongbei issue

9.  At the heart of the proceedings in Hong Kong, as well as those in Bermuda, is a question whether the Manager disclosed to the Company the effect of a memorandum dated 14 June 1997 prepared by solicitors, warning of potential flaws in the investment structure for the Zhongbei project into which it was at that stage proposed to invest a further sum of US$9 million.

10.  Between 1995 and 1997 the Company invested about US$14 million in the Zhongbei project; and in July 1997 the Investment Committee recommended, and the Board approved, a further investment of US$9 million.  These sums fell within the 15% limit on investments not specifically identified in the Information Memorandum.

11.  Concerns were voiced about the investment’s structure because of Mainland prohibition upon direct foreign investment.  In June 1997 a Hong Kong firm of solicitors, D S Cheung & Co, was commissioned by the Manager to advise and report upon investments already made by the Company in the Zhongbei project.  That memorandum, delivered to Mr Hon, was intended for a meeting in Beijing a few days later.  It listed key points for discussion in relation to the Zhongbei investment and raised a number of questions about the method which had been adopted of injecting money into Zhongbei and it also contained proposals for a new structure because, so the solicitors said, the present structure exposed the fund to very high risk.

12.  The Beijing meeting was postponed to 14 July 1997, but a meeting of the Investment Committee was held on 5 July 1997 at Mr Murray’s Hong Kong residence.  It was at that meeting that the Investment Committee recommended further investment of US$9 million.  On 14 July 1997, various agreements were signed called “supplemental loan agreements” which catered for structural changes referred to in the D S Cheung memorandum.  At a Board meeting in London on 21 July 1997, approval was given for the further US$9 million investment.

13.  It was the suggested failure of the Manager to produce the memorandum at the 5 July meeting or to inform the Committee of its contents, and the failure to inform the Board on 21 July 1997 of the changes in the structure of the investments that had by then been incorporated by the supplemental loan agreements, that was one of the breaches alleged in the Bermuda proceedings and that eventually took centre stage in those proceedings.

The Bermuda proceedings

(1) The pleadings

14.  In April 2000, the Manager issued a specially endorsed writ in Bermuda by which it was asserted that in February 1999 the Company had purported to terminate the management agreement and had failed to pay fees due in the sum of US$2,244,109.97.

15.  The Company filed a Defence and Counterclaim in June 2000, by which it contended that the Manager had breached the agreement and its duty of care to the Company by failing to assign sufficient staff or afford sufficient time to its duties or to provide proper administrative services or exercise control over the Company’s subsidiaries.  By amendments made in July 2003, after the trial had commenced, a series of further allegations were made in relation to specific joint venture investments, including one called Chang An, another called Jianling and also the Zhongbei project.  By a re-amendment on 7 July 2003, it was asserted in relation to Zhongbei that the Company had suffered loss, for which it counterclaimed because:

“

The [Manager] failed to report to the Investment Committee meeting which was held on 5 July 1997 for the purpose inter alia of considering and approving an additional investment of US$9 million into the Zhongbei project, the advice which it had received from Messrs D S Cheung & Co dated 14th June 1997 that under the then structure the money provided by the defendant of the US$11 million was exposed to a very high risk and that it would not be desirable for the [Company] to suffer such a risk.”[3]

16.  By the Re-Amended Defence to Counterclaim, the Manager asserted that by or on 5 July 1997 ‘the substance of the memorandum was known to members of the Investment Committee together with the proposed methods whereby the [Company] could be further protected in its investment in Zhongbei.’[4]

(2) The trial

17.  The trial took place in Bermuda before Mr Justice Storr from the 30 June 2003 to 14 July 2003.

18.  On 24 February 2004 judgment was given in favour of the Manager for the unpaid fees and the Company’s counterclaim was dismissed.

19.  In relation to the claims relating to the three named investments, the Manager denied any breach of its duties, said that all the investments it recommended had been authorised and it relied upon indemnities afforded it under the management agreement which did not, however, protect it from liability for gross negligence or wilful misconduct. 

20.  As to the D S Cheung memorandum, the Company’s case, presented mainly through the testimony of Mr Mayer, was that the reservations expressed by D S Cheung & Co had been withheld by the Manager and that had the Company known of them, the US$9 million loan would not have been approved on 21 July 1997. 

21.  The Manager’s assertion, through the testimony of Mr Wong, was that if the Zhongbei investments were contrary to Mainland law then this was known to the Committee, the Board, the Audit Committee and the Company’s financial adviser when investments were made in 1995 and increased in 1997.  It was common ground that the memorandum was not produced at either meeting in 1997 but the Manager’s case was that the substance of the advice was conveyed to the Investment Committee and that that Committee, including Mr Murray, realised that the fund was exposed to a very high risk. 

22.  Mr Murray testified at the Bermuda trial saying that he had no recollection of seeing the memorandum although when asked in cross-examination whether Mr Hon had said words to the effect that the lawyers had identified an issue and had suggested how it should be rectified he replied: “I don’t specifically recall it but I have no problems with it.”

23.  It is clear from the judgment of Storr J that the Counterclaim narrowed at trial to the issue of investments in the three named projects.  He held that the Manager had acted with the Company’s authority save, possibly, in relation to the 1997 investment in Zhongbei, to which issue the judge therefore devoted ‘particular attention’[5].  As to that issue, the judge said that the principal witness for the manager, Mr Wong, ‘did not have the opportunity of giving considered evidence about this matter [the allegation of withholding the D S Cheung memorandum].  While certain documents were put to him in cross-examination the … Memorandum had not previously been produced by the … Company by way of discovery and Mr Wong had not had the opportunity of considering the document.  This is despite the fact that those documents had clearly been in the possession of the … Company and its London lawyers since July 1998.  This is regrettable.’[6] 

24.  The judge noted that:

“

… the uncontroverted evidence of Mr Wong was that he kept the members of the Investment Committee informed as to the progress of negotiations with D S Cheung & Co., … .  It was also his evidence that supplemental loan agreements were executed and registered ….

Whilst [counsel for the company] continued to press the suggestion that the contents of [the memorandum] were withheld from the Investment Committee, nonetheless Mr Lo and Mr Chum signed a cheque for the first instalment on 1st September 1997.  They signed a cheque for $3,000,000, the second instalment, on 16 December 1997 and Mr Lo signed a cheque for the third instalment of $4,000,000 on 2nd February 1998.  In my view, these experienced businessmen would not have signed cheques for a total of $9,000,000 unless they were satisfied that the payment had been properly authorised. … I am therefore satisfied that the Board of Directors of the … Company had all the necessary information when giving unconditional authority for the payment to be made.  Indeed this is consistent with the … Company’s own pleadings which admit that the content of the… memorandum was at some time communicated to the … Company.”[7]

25.  The judge relied further on the contents of the Company’s 1997 annual report which referred to economic and legal risks and specifically to ‘the legal uncertainties associated with such an investment’ and to the fact that the Manager had obtained advice from Hong Kong professional advisers on the structure of the investment.[8] 

(3) The appeal

26.  In the Notice of Appeal dated 5 April 2004, the Zhongbei issue featured prominently and there is included an assertion that not only was the D S Cheung memorandum or its effect not disclosed to the Company but that the Manager actively represented at the meetings of 5 and 21 July that investment in the Zhongbei project was desirable.

27.  The appeal was heard in early November 2004 and the judgment of the Court of Appeal for Bermuda (Nazareth JA; Evans JA; and Ward JA) was delivered on 25 November 2004.

28.  Their Lordships stated that the scope of the appeal was much reduced from that of trial, and the appeal on the Counterclaim was restricted to the memorandum issue and the suggested failure of the court below to deal with an application for the delivery up of books of account.[9]  They noted that specific attention had been given to the issue of the D S Cheung memorandum, the judge’s reliance on the fact that two members of the Investment Committee had signed the three cheques and, in this connection, a contention by counsel for the appellant Company – worthy of note here because it finds its echo in submissions by Mr Strachan for the Company in this, the Hong Kong, appeal – that this line of reasoning by the trial judge showed that he had:

“	… failed to appreciate that the Company was alleging that the Managers withheld information from the Investment Committee and the Board of the Company, so that individual directors of the Company would not know that full disclosure had not been made when the Board’s approval was given.”[10]

29.  It was noted by the Court of Appeal that the Defence and Counterclaim made no mention of the memorandum for it had first been produced in the trial below during cross-examination of Mr Wong.  Counsel for the Company told their Lordships that the Company had had a copy of the original document which was in Chinese and that it was only at a late stage that an English translation was obtained, its significance then becoming apparent.

30.  The Court of Appeal held that the judge’s finding was one that he was entitled to make and, moreover, the Court agreed with the finding.  They said that Mr Wong’s evidence that he kept the Investment Committee informed was corroborated by the minutes of the meeting and gave further reasons which, in the Court’s view, supported the judge’s conclusion[11].  Therefore, the appeal against the judge’s finding on the counterclaim regarding the 1997 Zhongbei investment was dismissed.

(4) The anti-suit injunction

31.  On 20 January 2000, proceedings were commenced in Hong Kong by the Company against the Manager for delivery up of documents (HCCL 7 of 2000).  This followed an assertion by the Manager, against the background of demands for outstanding fees, that it was entitled to exercise a lien over the documents.  When the writ was served, the Manager took issue with the jurisdiction of the Hong Kong court.  In May 2000, the Manager issued proceedings in Bermuda for an anti-suit injunction which in due course was granted.  In a Ruling there dated 6 October 2000, Mr Justice Simmons held that Bermuda was the natural forum for the trial of the action[12] and noted also that the solicitor for the Company had failed to disclose the agreement’s jurisdiction clause to the Hong Kong court or that the agreement was governed by the law of Bermuda.  He called this ‘an egregious oversight.’[13]

The Hong Kong actions

32.  Apart from the 2000 action for delivery up of documents, two sets of proceedings have been commenced in Hong Kong:

(1)

HCCL 10 of 2003 was commenced by generally endorsed writ on 25 February 2003.  The plaintiff to that action is the Company alone.  There are three defendants: Mr Chum, Mr Murray and Mr Lo.  Mr Murray is no longer party to the action which was settled by consent.  The action against Mr Lo has not proceeded.  It is not clear what allegation is made against him or whether he has been served.  It seems common ground now that Mr Chum is the sole target of this action.  The writ’s endorsement is to the effect that he as director of the Company and member of its Investment Committee was in breach of fiduciary duty and negligent, as well as guilty of misrepresentation, in respect of his involvement in the management of the Company’s affairs particularly its investment of US$23 million in the Zhongbei project ‘through [TSL]’; a loan of US$30 million to a company called Chonqing Changan; and a cooperation agreement with a company called Jialing.  The allegation of misrepresentation was added by amendment dated 16 February 2004, eight days before judgment in the Bermudan action; and

(2)

HCCL 54 of 2003.  The writ was issued on 23 October 2003.  At that stage the plaintiff was TSL alone; and Chum and Wong were the defendants.  The endorsement alleged that as directors of TSL they were liable for breach of fiduciary duty and breach of trust and negligence in relation to the Zhongbei investment of US$23 million.  In December 2003 the writ was amended to add the Company as second plaintiff and to add an allegation of fraud.

Given the irrelevance of Mr Murray and Mr Lo as defendants for the purpose of this appeal, references hereafter to ‘the defendants’ are to Mr Chum and Mr Wong alone.

33.  Points of Claim have been filed in HCCL 54 of 2003, but not in HCCL 10 of 2003.  They are dated 15 October 2004; one month before judgment in the Bermudan appeal.  The allegation in the Points of Claim is that on or about 14 June 1997 Chum and Wong became aware of the D S Cheung report but failed to disclose the report to TSL or to the Company and instead provided a positive briefing in relation to the proposed further investment.  Chum and Wong also attended the Board’s meeting on 21 July 1997 in London and, it is said, again failed to disclose the existence of the report or its effect.  The assertion is made that Chum and Wong acted mala fides and for improper purposes, deliberately withholding the effect of the report because they wished the Manager to continue to manage the Company’s investments and to receive management fees.  It is then pleaded that in reliance upon the positive representations made by each defendant, the Company made the further investment in the project whereas had it been aware of the memorandum, it would not have done so; and that the further investment proved to be irrecoverable wherefore both TSL and the Company have suffered loss and damage.  No particulars are provided as to how or what damage has befallen TSL.

The path to this appeal

34.  On 16 February 2004 Stone J on an ex parte application granted leave in HCCL 10 of 2003 to serve the writ upon Mr Chum out of the jurisdiction pursuant to the provisions of Order 11, rule 1(1)(f) of the Rules of the High Court, Cap. 4.

35.  On the same day, 16 February 2004, leave was granted ex parte by Stone J to serve the writ in HCCL 54 of 2003 upon Mr Chum under rule 1(1)(f) and on 13 October 2004 leave was granted to serve the writ upon Mr Wong under rules 1(1)(c) and (f).

36.  By summonses issued in October and November 2004, Mr Chum and Mr Wong applied under Order 12, rule 8 for the orders to be set aside.

37.  The grounds of those applications which remain relevant to this appeal were that:

(1)	the Hong Kong proceedings against the defendants constituted an abuse of process;
(2)	the Hong Kong proceedings against the defendants were barred by reason of issue estoppel;
(3)	Hong Kong was not the appropriate forum for the trial of the actions; and
(4)	the Company had, in obtaining the orders, been guilty of material non-disclosure.

38.  By a judgment on 24 April 2006 Stone J:

(1)	upheld the contention by the defendants that the Hong Kong proceedings constituted a collateral attack upon a final decision of a court of competent jurisdiction, the Bermudan court, an attack that in this case amounted to an abuse;
(2)	determined that the plaintiffs had failed to establish that Hong Kong was the forum conveniens for the trial of the two actions;

and accordingly set aside the orders granting leave to serve out of the jurisdiction and set aside the service that had, pursuant to leave, been effected.  The plaintiffs now appeal against each of those determinations, and the consequential setting aside of leave.

39.  By his judgment Stone J further:

(1)	decided that a sufficiently strong case had not been established by the defendants based on material non-disclosure; and
(2)	rejected the defendants’ further argument that Mr Chum and Mr Wong were privies of the Manager so that the Bermudan judgment in the Manager’s favour gave rise to an issue estoppel that availed the defendants in the Hong Kong actions.

The defendants in this appeal seek by respondents’ notices to contend that those findings were erroneous and to say that leave to serve out of the jurisdiction ought to have been set aside upon these further grounds.

Abuse of process

(1) The argument below

40.  On behalf of the defendants, the argument in the court below (and before us) was that the Hong Kong actions constituted an obvious attempt by the plaintiffs to re-litigate the same principal allegation determined against them in the Bermudan action; that it had been open to the plaintiffs to join these defendants to the Bermudan action but had chosen not to do so (thereby offending the rule in Henderson v Henderson[14]); and that in any event this was a collateral attack, giving rise to the risk of inconsistent judgments, such as to constitute an abuse of the court’s process.

41.  On behalf of the plaintiffs it was submitted that the present defendants were never parties to, or vexed by, the proceedings in Bermuda; that a breach of duty on the part of the Manager did not mean that there could be no breach of duty or misrepresentation by these individual defendants and that, in any event, even if this second action constituted a collateral attack, there was nothing to suggest that it was either manifestly unjust or would bring the administration of justice into disrepute.  It was conceded that the plaintiffs were dissatisfied with the manner in which the Bermudan proceedings had been managed.  As for not joining Mr Chum and Mr Wong as parties to the proceedings in Bermuda, it is said that it would have been cumbersome and unnecessary to do so especially at the very late stage at which the documents now at the heart of this case, pointing to culpability of these defendants, were discovered or their significance realized.

(2) The judgment

42.  Stone J held that the characterisation of the Bermudan litigation as “badly managed” was insufficient reason for the re-opening of the issue “simply by means of changing the identity of the defendants.”[15]  He took the view that there was “a danger that the administration of justice will be brought into disrepute by permitting a party to continue with a claim which has the effect of relitigating a cause which in substance already has been lost in another court of competent jurisdiction; I bear in mind, also, that in the present cases no extraneous matters of fact are asserted in terms of the ‘abuse issue’ which demand further discovery or inquiry.”[16]

43.  He held also that “potential unfairness” arose from the fact that it had been open to the plaintiffs to join these defendants to the Bermudan proceedings[17]. 

(3) The complaint

44.  It is conceded before us that the Hong Kong proceedings are a collateral attack upon a final determination of another court of competent jurisdiction.  That said, the fact of a collateral attack is not, it is argued, sufficient of itself to constitute an abuse of process.  It may or may not do so; but there must, says Mr Strachan for the plaintiffs, be something more, an added factor, and that none has been identified in this case.  It is said in particular that Stone J adopted a test that was overly rigid and that he wrongly read the key part of a speech by Lord Hoffmann in Arthur J S Hall & Co. v Simons[18] – wherein his Lordship in the House of Lords stipulated the need, before an abuse was demonstrated, for the defendant to show that the proposed further litigation would cause manifest unfairness or would bring the administration of justice into disrepute – as being restricted to cases brought by disgruntled litigants against their former legal advisers.

45.  It is contended that in any event the judge failed to address squarely the questions of unfairness or harm to the administration of justice; wrongly held that unfairness had been shown; and in deciding that there was an abuse failed to give weight, or sufficient weight, to the importance of the discovery, since the Bermudan trial, of documentary evidence that cogently supported the case against these defendants.

(4) The law

46.  “Where a final decision has been pronounced on the merits by an English or (with certain exceptions) a foreign judicial tribunal’s jurisdiction over the parties and subject matter any party to such litigation as against any other party … is estopped in any subsequent litigation from disputing such decision on the merits, whether it be used as the foundation of an action, or as a bar to any claim, indictment, affirmative defence or allegation provided the party entitled raises the point at the proper time.”

Spencer Bower, Turner and Handley ‘Res Judicata’[19]

47.  This doctrine, res judicata, is not a rule of evidence but one of substantive law, for which the underlying public policy is the interest of the community in the termination of disputes and the finality of judicial decisions and, further, the need for individuals to be protected from vexatious multiplicity of suits.[20]  It arises where a claim has previously been finally determined between the parties, or their privies[21], by a court of competent jurisdiction and the same issue falls directly in question in subsequent proceedings (cause of action estoppel) or where the issue has been determined by such a court as a necessary step in reaching judgment in case between those parties or their privies (issue estoppel)[22].  It has been held too that the doctrine applies only to fundamental issues determined in earlier proceedings and not to collateral or incidental ones: Angle v Minister of National Revenue[23].

48.  The correctness of the final decision is not relevant.  It binds the parties until such time as it is set aside on appeal.  ‘This rests on the fact that a competent tribunal has jurisdiction to decide wrongly, as well as correctly and if it makes a mistake its decision is binding unless corrected on appeal’.[24]

49.  The defendants assert in this case that there has been a final decision by a court of competent jurisdiction, the Bermudan court, namely, that the effect of the D S Cheung memorandum was drawn to the Company’s attention, for which reason the Company is estopped from asserting otherwise.  It matters not, they say, that in the Hong Kong proceedings the Manager is not a defendant, because the defendants are the Manager’s privies.  To this question I shall later return. 

50.  The assertion that the Hong Kong proceedings constitute an abuse of process is founded on an extension to the res judicata doctrine, an extension that recognizes that where the doctrine does not strictly apply there may nonetheless be circumstances in which a collateral challenge to a previous decision offends the principles underlying the doctrine.  The abuse contention is advanced by the defendants on an assumption that they are not the Manager’s privies and therefore unable to take advantage of the issue estoppel defence.

51.  Whilst the development of the extended doctrine of res judicata is sometimes traced to the decision in Henderson, it has been suggested[25] that, historically, the seminal case in applying the notion of abuse to attempts to re-litigate the same issue determined in earlier proceedings, but which were not strictly cases of res judicata, is Reichel v Magrath[26] in which Lord Halsbury L. C said[27]:

“	My Lords, I think it would be a scandal to the administration of justice if, the same question having been disposed of by one case, the litigant were to be permitted by changing the form of the proceedings to set up the same case again.”

52.  The source of the remedy by which a court will, in an appropriate case, occlude an attempt to re-litigate a decided issue, even though not between the same parties, is its inherent power to prevent an abuse of its process, an inherent power:

“

… which any court of justice must possess to prevent misuse of its procedure in a way which, although not inconsistent with the literal application of its procedural rules, would nevertheless be manifestly unfair to a party to litigation before it, or would otherwise bring the administration of justice into disrepute among right-thinking people.  The circumstances in which abuse of process can arise are very varied; … .  It would … be most unwise if this House were to use this occasion to say anything that might be taken as limiting to fixed categories the kinds of circumstances in which the court has a duty (I disavow the word discretion) to exercise this salutary power.”

per Lord Diplock in Hunter v Chief Constable of the West Midlands Police and Others.[28] 

53.  Given the nature of the conditions precedent to an abuse finding, the resolution of the issue in any case will be highly fact sensitive.  ‘It is’, as Lord Hoffmann commented in Arthur Hall, ‘peculiarly a matter of judicial application to the facts of each case.’[29].  Abuse of process ‘is a concept which defies precise definition in the abstract’: Johnson v Gore Wood & Co[30]; and there is ‘no catch all formula for identifying an abuse since each case will depend on its own facts’: Simms v Conlon and another[31]. 

54.  The burden of establishing abuse rests on the party that relies on the earlier decision: Johnson v Gore Wood & Co[32] and Sweetman v Nathan[33] and it is to be remembered that exercise of the power has the effect of shutting out litigation so that it is a power ‘which no court should exercise but after a scrupulous examination of all the circumstances.’: Yat Tung Co. v Dao Heng Bank[34].  

55.  Hunter was a case of a collateral attack in a civil action upon a decision in an earlier criminal case.  More recent examination of the principle and its application has found its context in actions brought against legal advisers by those who have been disappointed in the result of an earlier civil action.  One such case, that has prominently featured in argument in this appeal, is Arthur Hall.  In each of the three cases there under consideration, the defendant had compromised proceedings upon legal advice but sought in subsequent proceedings to allege negligence on the part of his or her legal advisers.  The risk was of a conflict between the judgment in the new proceedings and the judgment in the old, in that not only was it incumbent on the aggrieved former client to show negligence but also that the negligence would adversely affect the outcome of the earlier proceedings[35].  Whilst the parties to the two actions were not the same, the underlying principle applied:

“

The law discourages relitigation of the same issues except by means of an appeal.  The Latin maxims often quoted are nemo debet bis vexari pro una et eadem causa and interest rei publica ut finis sit litium.  They are usually mentioned in tandem but it is important to notice that the policies they state are not quite the same.  The first is concerned with the interests of the defendant: a person should not be troubled twice for the same reason.  This policy has generated the rules which prevent relitigation when the parties are the same: autrefois acquit, res judicata and issue estoppel.  The second policy is wider: it is concerned with the interests of the state.  There is a general public interest in the same issue not being litigated over again.  The second policy can be used to justify the extension of the rules of issue estoppel to cases in which the parties are not the same but the circumstances are such as to bring the case within the spirit of the rules.”[36]

56.  The judgment of Stone J states[37] that the argument advanced before him included the contention by the plaintiffs that Arthur Hall established a rule of less rigidity than that proposed by Lord Diplock in Hunter.  The comparison was between an approach which says that a collateral challenge is of itself an abuse and, on the other hand, one that finds an abuse in a collateral challenge only if it is shown by the person asserting the abuse that the second action visits manifest unfairness upon the proposed defendant, or that the proceedings would bring the administration of justice into disrepute.  The argument before us was to a slightly different effect, which is that whilst both Hunter and Arthur Hall required demonstration of one of the two conditions precedent – manifest unfairness or bringing the administration of justice into disrepute – Stone J wrongly assumed that Hunter propounded the more restrictive view and that Arthur Hall relaxed the rule in Hunter but only in the context of actions against former legal advisers.

57.  Whether Stone J did so approach the case is a matter to which I will turn, but it suffices at present to say that in my view there is no difference in essence between the approaches dictated by the two decisions.  The point of suggested difference finds its origin in the fact that in Hunter Lord Diplock said[38] that:

“

The abuse of process which the instant case exemplifies is the initiation of proceedings in a court of justice for the purpose of mounting a collateral attack upon a final decision against the intending plaintiff which has been made by another court of competent jurisdiction in previous proceedings in which the intending plaintiff had a full opportunity of contesting the decision in court the by which it was made.”

58.  To view that statement as one that treats all collateral challenges as abusive of the court’s process is to view it in isolation and to disregard the earlier passage to which I have referred in which Lord Diplock expressly referred to the two conditions precedent to the exercise of the power.  As Lord Hoffmann explained in Arthur Hall:

“

I do not think that [Lord Diplock] meant that every case falling within this description was an abuse of process or even that there was a presumption to this effect which required the plaintiff to bring himself within some exception.  That would be to adopt a scheme of categorisation which Lord Diplock deplored.”[39]

The same interpretation of their Lordships intent in Hunter is to be found in Walpole v Partridge & Wilson.[40] For the propositions that a collateral challenge may be but is not necessarily an abuse of process; and that where the parties to the later proceedings were not parties or privies of those who were parties to the earlier proceedings, a collateral attack will only be an abuse if one of the two conditions (manifest unfairness or the bringing of justice into disrepute) is demonstrated, see also Trade and Industry Secretary v Bairstow.[41]

59.  The suggestion is made that there is only shown in this case a collateral attack, that principle requires the establishment of an additional factor before an abuse is constituted, and that that additional factor has not been identified in the present instance.  This, in my judgment, is an approach that is overly nice or precise, for all that has to be established is that the fresh proceedings result in manifest unfairness or that pursuit of the same issue will bring the administration of justice into dispute.  In some cases, the surrounding circumstances will show that the collateral attack is an abuse; in others not.  In Johnson v Gore Wood & Co[42] it was argued[43] that in cases in which an abuse was alleged because an issue could have been but was not raised in earlier proceedings, there was a need to look for an additional element; additional to the fact of that failure.  The argument was rejected and the lead judgment in that case, to which I now turn, is instructive in relation to the similar point taken in this appeal.

60.  Not all re-litigation constitutes a collateral attack: see, for example, the Henderson line of cases, of which Johnson v Gore Wood is one, in which an issue raised in the second proceedings was not but could have been raised in the first.  Such situations ‘need not involve the reopening of a matter already decided’[44] but may nonetheless amount to an abuse.  It is in the context of the ‘could and should have’ cases that Auld LJ in Bradford and Bingley Building Society v Seddon[45] suggested that in such cases the courts should look for an additional element and it is noteworthy that amongst the examples he provided of such an additional element was a collateral attack.  It is in this regard that Lord Bingham in Johnson v Gore Wood said that:

“

… Henderson v Henderson abuse of process, as now understood, although separate and distinct from cause of action estoppel and issue estoppel, has much in common with them.  The underlying public interest is the same: that there should be finality in litigation and that a party should not be twice vexed in the same matter.  This public interest is reinforced by the current emphasis on efficiency and economy in the conduct of litigation, in the interests of the parties and public as a whole.  The bringing of a claim or the raising of a defence in later proceedings may, without more, amount to an abuse if the court is satisfied (the onus being on the party alleging abuse) that the claim or defence should have been raised in the earlier proceedings if was to be raised at all.  I would not accept that it is necessary, before abuse may be found, to identify any additional element such as a collateral attack on a previous decision or some dishonesty, but where those elements are present the later proceedings will be much more obviously abusive, and there will rarely be a finding of abuse unless the later proceeding involves what the court regards as unjust harassment of a party.  It is, however wrong to hold that because a matter could have been raised in earlier proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive.  That is to adopt too dogmatic an approach to what should in my opinion be a broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before.  As one cannot comprehensively list all possible forms of abuse, so one cannot formulate any hard and fast rule to determine whether, on given facts, abuse is to be found or not.  Thus while I would accept that lack of funds would not ordinarily excuse a failure to raise in earlier proceedings an issue which could or should have been raised then, I would not regard it as necessarily irrelevant, particularly if it appears that the lack of funds has been caused by the party against whom it is sought to claim.  While the result may often be the same, it is in my view preferable to ask whether in all the circumstances a party’s conduct is an abuse than to ask whether the conduct is an abuse and then, if it is, to ask whether the abuse is excused or justified by special circumstances.”[46] (Emphasis added).

61.  So, in so far as Mr Strachan suggests that something more than a collateral attack must be established before an abuse is demonstrated, he is correct in the sense that it will only be an abuse if one of the two conditions are met.  But that is all that is needed.  In all the circumstances of a particular case, a collateral attack may be manifestly unfair or an affront to the administration of justice in the minds of right-thinking people.  If so, that suffices to establish an abuse.

(5) This case

62.  I do not agree with the contention that the judge below applied incorrect principle to the question of abuse.

63.  Criticism is levelled at the judge’s comment[47] that in Arthur Hall, Lord Hoffman was making observations ‘as to relaxation of the doctrine within the specific context of claims brought by the losing party in the previous litigation against its own previous legal advisers’; and his remark that he, Stone J, did ‘not to take Lord Hoffmann’s speech to presage a general erosion or pollution of the abuse of collateral attack doctrine.’  The suggestion on the part of the plaintiffs is that the judge thereby demonstrated an adherence on his part to a narrow and strict confine which he thought was dictated by Hunter, and which he thought was not relaxed by Arthur Hall.  

64.  In that the judge below rejected the suggestion that the concept of abuse in the case of collateral attack had been diluted or otherwise relaxed by the speech of Lord Hoffmann in Arthur Hall, he was, for reasons I have provided, correct, for Lord Hoffman in Arthur Hall did not relax anything: he merely put to rest any possible misconception about what Lord Diplock had intended in Hunter.  It is not clear to me what the relevance was of the judge’s allusion to the specific context of Arthur Hall but it is clear to me that Lord Hoffmann’s observations[48] were of general application and not restricted to the context of actions against legal advisers.  Be that as it may, the fear that the judge misled himself is obviated by the judge’s express reference[49] to the fact that there did not exist any concept of a presumptive abuse and, specifically, that “in considering any fact situation the court has two yardsticks, that of unfairness and of bringing the administration of justice into disrepute, and armed with these benchmarks it simply has to make a judgment in the particular circumstances of each case.”

65.  It is then said that the judge spoke merely of “unfairness” rather than “manifest unfairness”.  The point is not a good one.  One can safely assume that the judge, having referred to a number of authorities which articulated the express test of “manifest unfairness,” was well aware of it.  In relation to manifest unfairness, however, I do, with respect, disagree with the judge’s approach and conclusion.  The unfairness that the judge identified was, as he put it, that the defendants could have been, but were not, joined in the Bermudan litigation and that it was, absent the provision of good reason for that failure, unfair to raise now the very matters that could have been raised previously.[50]  It is unwise to attempt any categorisation of the manifest unfairness that might constitute an abuse of process.  It will often, I think, tend to be conduct that constitutes harassment of a litigant; but I do not think that the mere fact in this case of joining these defendants when they might have been joined in Bermuda is, without more, manifestly unfair.  Whether in all the circumstances of the case, to do what the plaintiffs now seek to do is conduct that would, if permitted, bring the administration of justice into disrepute is another matter.  But the defendants were not joined and they incurred no expense and they have suffered no harassment save that a further suit, if it proceeds, would mean that Mr Wong would again have to testify.  That is not manifestly unfair; nor can any cogent argument be advanced that they have suffered by reason of any expectation that the dispute was over.  It is no surprise that in the conduct of this appeal the defendants’ assertion of manifest injustice is not pursued.

66.  In his affirmation in opposition to the defendants’ applications to set aside leave to serve out of the jurisdiction, Mr Mayer asserted that the significance of the D S Cheung report was only apparent shortly before the trial in Bermuda because, by reason of some happenstance, it was only then translated into English.  This is a markedly weak point given that the memorandum had been in the possession of the plaintiffs then legal advisers for about five years before the Bermudan trial[51], legal advisers with professional and support staff well versed in the original language of the report, namely, Chinese.

67.  More significantly to the plaintiff's case is their contention that it was only after the trial in Bermuda that they discovered the Board Book that had been used for the meetings of July 1997.  The suggested significance of the Board Book is that whereas in relation to other investments it incorporated copies of, or reference to, specific legal advice, there was a conspicuous absence from the Book of any reference to the D S Cheung report.  This fact was not before the Bermudan courts and had it been might well, so the argument runs, have made all the difference for that conspicuous absence supported the suggestion that the fact and content of the report had deliberately been withheld by the Manager.  Mr Mayer says in his affirmation that he found a copy of the Board Book in his offices, but only after the trial.  On a point of this suggested importance, it is noteworthy that he does not describe the circumstances in which he came to find a book that had been in the Company’s possession for some considerable time before the trial, or where the Book had been kept, or whether any attempt had been made to find it for the purpose of the trial and, if not, why not and, most specifically, whether it was found before the appeal in Bermuda.

68.  The basis upon which the discovery of new material might, in cases of estoppel, avail a plaintiff, and the circumstances in which it will not, are these:

“

If the party can show that at the time of the former proceedings he was excusably ignorant of some matter, which would have altered the whole aspect of the case, he is entitled to claim that no issue estoppel shall take effect against him.  The estoppel however stands if there was no newly discovered fact, if it was newly discovered only in the sense that the party realised its importance, if the party had actual knowledge of the fact or might with reasonable diligence have acquired such knowledge, or if it was not sufficiently material.”

Spencer Bower, Turner and Handley “Res Judicata”.[52]

69.  The same principles must apply, so it seems to me, to cases of extended res judicata.  It is of no avail to say that the significance of the D S Cheung memorandum was not apparent to the plaintiffs until shortly before trial.  It was for long in their possession.  And in relation to the Board Book, there is no excuse or reason put forward for its late discovery.  It is surely a document that could with reasonable diligence have been discovered by the plaintiffs within their own offices and produced in time for trial.  Whether that would have made any difference is doubtful, because it was never the defendants’ case that the report was actually produced at the July meetings; merely that the effect of it was drawn to the attention of the Company at those meetings.

70.  What we have in this case is an attempt to overturn a final determination in previous proceeding on the very issue, the identical and fundamental question, determined in those proceedings.  The appeal in Bermuda was restricted almost entirely to the counterclaim on the very ground now raised.  It is of no avail to the plaintiffs to complain about the reasoning of the Bermudan courts or to suggest that their case was somehow mismanaged: this is openly to use relitigation as a disguised appeal, where there has already been an appeal that has failed.  The nature and the effect of the Hong Kong claim is no different from the nature and effect of the claims in Bermuda and the justification advanced for the collateral challenge is honest but insufficient in so far as it relies upon dissatisfaction with the determination, and devoid of merit in so far as it relies upon a suggestion of fresh evidence.  The procedure adopted in this case is one that, in my judgment, offends the spirit of the rule of res judicata, and the use of different parties – first in the form of TSL and then in the form of these individual defendants – is but a cover, a matter of form and not substance.  TSL has in truth no interest separate from that of its holding company.  The writ in HCCL 10 of 2003 was issued eight days before the first instance judgment in Bermuda; and the writ in 54 of 2003 very shortly before the hearing of the Bermudan appeal, timing that was not, it can safely be inferred, coincidental.

71.  The action in Bermuda against the Manager was premised upon acts of the Manager’s directors – none other than the present defendants – the very same acts of the very same people in respect of which and against whom the Hong Kong proceedings are directed.  Indeed, it was specifically asserted by Mr Mayer when testifying in Bermuda that the Company always viewed Mr Chum as ‘part of the manager.’[53]

72.  Mr Strachan relies upon the fact that the judge at first instance in Bermuda, in holding that the Company was aware of the risks highlighted by the D S Cheung memorandum, pointed to the fact that Mr Chum (and Mr Lo) signed the cheques for the 1997 further investment and, as experienced businessmen, would not have done so unless satisfied that all was in order.  He argues that the judge failed to appreciate that Mr Chum was alleged by the plaintiffs deliberately to have withheld material information, and that this therefore opens the door to the present challenge.  But the Court of Appeal in Bermuda acknowledged this very contention,[54] held nonetheless that the judge had ample ground to accept Mr Wong’s evidence and themselves agreed with his findings,[55] noting that Mr Murray had himself asked for a review of the existing agreements; that there was evidence that Mr Lo, a member of the Board, was fully conversant with the proposed new arrangements; that it was inherently unlikely that the investment would have been approved by the Board without information as to the legal risk; and that no reason had been given “for supposing that the Managers and Mr Anthony Lo, together or individually, were likely to withhold such obviously material information from the Investment Committee and the Board.  No allegation of bad faith or ‘wilful misconduct’ is made against them.”[56] (Emphasis added).  What the plaintiffs now seek to do is to provide reasons they did not provide, but could have provided, in the former proceedings.

73.  Looking at all these circumstances it seems to me, as it did to Stone J, that the Hong Kong proceedings, if allowed to proceed, would constitute an abuse of process; and in this regard I have in mind as well a factor not expressly raised thus far which is the fact of judicial time and resources engaged by a re-run of this case; a fact that should sit ill with the right-minded observer in the absence of good reason for the proposed exercise.  I here echo a point made in Sea Culture International Pty Ltd v Scoles[57] where French J said[58]:

“	Underlying the power that the courts have assumed to stay or dismiss proceedings for abuse of process is a policy of preventing waste of judicial resources and their use for purposes unrelated to the determination of genuine disputes.”

74.  Upon the ground of abuse of process alone, I would dismiss this appeal.

Issue estoppel

75.  The respondents’ notices ask that the judgment below be affirmed on the further ground, closely allied to the abuse question, that the judge ought to have set aside his ex parte orders on the basis that there was no serious issue to be tried because the plaintiffs were barred from proceeding by issue estoppel.  Issue estoppel is said to arise because the defendants should have been treated as privies of the Manager who had been party to the same issue in the Bermudan trial. 

76.  The judge was not persuaded that either defendant should be characterised as a privy.  In my judgment, he was correct so to conclude. 

77.  The question of privity in this context has been described by Megarry V C as ‘difficult territory,’[59] so one may safely assume that it is. 

78.  In Carl Zeiss Stiftung v Rayner & Keeler Ltd (No.2)[60], Lord Reid said that:

“	It has always been said that there must be privity of blood, title or interest.”[61]

79.  In the present context it is the concept of interest upon which the defendants rely; as to which concept Megarry V C in Gleeson said:

“	One difficulty about this is the protean nature of the word “interest”, a term which at times seems almost capable of meaning all things to all men.”[62]

80.  In the court below, the first defendant, Mr Chum, primarily relied[63] on his 45% shareholding in the company that held 85% of the shares in the Manager.  Before us, what is put forward is the concept of a “sufficient community of interest”; echoed to much the same effect by Mr Wong who relies upon the fact that he was employed by the Manager, first as a consultant and then as a director.  In this regard reliance is placed upon a passage in Gleeson in which the Vice Chancellor said:

“

I do not say that one must be the alter ego of the other: but it does seem to me that, having due regard to the subject matter, there must be a sufficient degree of identification between the two to make had just to hold of the decision to which one party should be binding in proceedings to which the other is party.”[64]

81.  That statement, viewed in isolation, has been “criticised as circuitous and not helpful in identifying when the necessary degree of identification is present.”[65]  The essence or sense of the term seems best gleaned by study of examples; one of which is that provided by the Vice Chancellor immediately following the passage now relied upon the plaintiffs: that of trustee of property in dispute and beneficiary.  The required commonality is a direct interest in the subject matter of the litigation, a parallel or corresponding interest in that subject matter and not simply a financial interest in the result of the action: Genesee Enterprises Ltd v Abou-Rached[66], so that:

“

Privies include any person who succeeds to the rights or liabilities of the party upon death or insolvency, or who is otherwise identified in estate or interest.  It is essential the party to be estopped by privity must have some kind of interest, legal or beneficial, in the previous litigation or its subject matter.  Privity was described by the US Supreme Court as a mutual or successive relationship to the same right of property, although this cannot be exhaustive.”

Spencer Bower, Turner and Handley Res Judicata[67].

82.  Neither defendant enjoys that ilk of identity of interest with the Manager in the subject matter of the action.  That the Manager acted through the defendants is not to the point.  Neither is the interest in the sense of concern or conceivable personal ramifications that the defendants may have had in the outcome of the action in Bermuda; and Mr Chum’s shareholding in the company that held a majority of shares in the Manager does not make him the Manager’s alter ego.  There is a danger, I rather think, underlying the present argument, of confusing privity of interest, on the one hand, with those factors, on the other, which may render the second set of proceedings an abuse of process.

Forum Non Conveniens

83.  In seeking to set aside leave, the defendants further asserted that Hong Kong was not the forum conveniens for the trial.  The judge commenced his analysis with the following propositions of law, with which there can be no quarrel:

(1)	that the burden of proof was on the plaintiffs to show that Hong Kong was the forum conveniens and clearly so : Spiliada Maritime Corporation v Cansulex Ltd[68]; and
(2)	that it was insufficient to show that there was no appropriate forum elsewhere : Daewoo Hong Kong ltd v Mana Maritime Inc.[69]

84.  The judge noted[70] that the Company is a Bermudan company and that the duties of its directors were necessarily governed by Bermuda law; that TSL was a British Virgin Islands company and a mere nominee; and that neither company had any business or any place of business in Hong Kong.  Not a single one of the likely witnesses in the Hong Kong proceedings – save for Mr Lo – resided in Hong Kong and as to Mr Lo it had been acknowledged that the writ against him had been protective only and that there had been no identification of any specific evidence that will cause him liability.  None of the relevant documentary evidence was in Hong Kong and the Manager had neither place of business nor any personnel here.  

85.  The plaintiffs argued, on the other hand, that the Manager had carried on business from premises in Hong Kong and that those who represented the Manager, particularly Mr Chum, had all been based principally in Hong Kong.  The judge thought that this was “a pretty thin evidential picture when weighed against the overall canvas as now painted by the applicants upon inter partes argument.”[71] He rejected the notion that the natural forum of a dispute was irrevocably fixed at the time of the incident that gave rise to the dispute[72] and he noted[73], citing Rambas Marketing Co LLC v Chow Kam Fai David[74] that the court was required ‘to focus on the appropriateness of a forum from the point of view of the trial of the action’[75] rather than upon the connecting factors at the time the cause of action arose. 

86.  At the heart of the plaintiffs’ attack upon the decision of the court below as to the appropriate forum of trial is the suggestion that Stone J failed sufficiently to recognise the fact that the Hong Kong action is based on tort and the proper weight to be accorded to that fact.

87.  The tort is said to have been committed in Hong Kong in that the negligent act and the fraudulent misrepresentation relied upon took place – putting aside the later July meeting in London – at the meeting of the Investment Committee of 5 July 1997 in Hong Kong.  Furthermore, the London resolution of the Board of 21 July 1997 was, it is said, acted upon in Hong Kong in that the letters of instruction to the Company’s bankers were drawn up in Hong Kong and sent to the bank in Hong Kong.

88.  The trigger for the plaintiffs complaint is the principle articulated by Ackner LJ (as he then was) in The Albaforth[76] that:

“	… the jurisdiction in which a tort has been committed is prima facie the natural forum for the determination of the dispute.”

89.  That statement preceded an analysis in the same case by Goff LJ (as he then was) who traced the policy to the decision of the Privy Council in Distillers Co. (Biochemicals) Ltd v Laura Ann Thompson[77].  The Distillers case concerned the liability of a company for grave disfigurement caused by thalidomide to a child whose mother had, whilst pregnant with her, purchased and consumed the drug in New South Wales, after the drug had been manufactured in England and sold to an Australian company.  The question considered by the Privy Council was whether there was a cause of action which arose within the jurisdiction of New South Wales and three possibilities were canvassed: that every ingredient of the cause of action must have occurred within the jurisdiction; that it sufficed if the last ingredient had occurred within the jurisdiction; or that “the act on the part of the defendant which gives the plaintiff his cause of complaint must have occurred within the jurisdiction.”[78]   The third option was preferred by Lord Pearson and it was in that context that he gave as a reason that it was:

“	… manifestly just and reasonable that the defendant should have to answer for his wrongdoing in the country where he did the wrong.”[79]

90.  Endorsing this theme, Lord Goff in The Albaforth said that it followed from the Distillers decision and another he reviewed[80] that:

“

… where it is held that an alleged tort has been committed within the jurisdiction of the Court, the test which has been satisfied in order to reach that conclusion is one found on the basis that the Court, so having jurisdiction, is the most appropriate Court to try the claim, where it is manifestly just and reasonable that the defendant should answer for his wrongdoing.  This being so, it must usually be difficult in any particular case to resist the conclusion that a Court which has jurisdiction on that basis must also be the natural forum for the trial of the action.  If the substance of an alleged tort is committed within a certain jurisdiction, it is not easy to imagine what other facts could displace the conclusion that the Courts of that jurisdiction are the natural forum.  Certainly, in the present case, I can see no factors which could displace that conclusion.”[81]

91.  The effect of Spiliada is that in applications for leave to serve out of the jurisdiction it is for the judge to identify the place at which the case can most suitably be tried for the interests of all the parties and the ends of justice, which include questions of efficiency and economy, the onus being on the applicant to show that the forum put forward for the claim is the appropriate forum for the trial of the action and that that is clearly so.  The assessment is pre-eminently one for the trial judge.

92.  The suggestion made in this appeal as to the factors to be considered in determining appropriate forum is that Spiliada addressed generalities, whereas the Albaforth addressed the situs of the tort, not just as one of the Spiliada factors, but as a factor that has its discrete policy-driven consideration which it will normally be difficult to displace.  The argument is that this was not recognized by the judge who therefore erred in principle.

93.  Mr Shieh SC for the first defendant contends that the place of commission of the tort is a factor that ought not to be treated as one driven by some special policy reason but ought, rather, to be treated as a Spiliada factor, that happens with some regularity to come to the fore simply because the parties to an action founded on tort and the witnesses to a tort tend to be in one place and tend to be in the place of the tort’s commission.  The suggestion that it was ever intended generally to apply some special policy status in forum conveniens cases to the place of the tort ignores, he asserts, the peculiar parentage of the point, namely, the Distillers case which had nothing to do with forum conveniens but with the question whether there was a cause of action which arose within the jurisdiction.  That, historically, is correct but it has to be said that Lord Goff’s dictum about the place of tort in forum cases and the policy reason for it, has been repeated with apparent approval elsewhere, not least by the House of Lords in Berezovsky v Michaels[82].

94.  I do not in the event think it necessary in this case to engage the question raised by Mr Shieh, interesting though it is.  That is because, although the pre-eminent weight which Lord Goff might be thought to have attributed to the place of the tort has since been modified or clarified, it is nonetheless well established that the starting point is to be viewed as the place of the tort’s commission.  Berezovsky made clear that there was no conflict between Spiliada and The Albaforth and, in particular, in relation to the weight to be given to the place of commission of the tort, Lord Hope said[83] that:

“	The principle which Ackner LJ articulated in The Alabaforth provides the starting point, but no more than the starting point, for a correct application of the Spiliada principles to the question whether the case is a proper one for service out of the jurisdiction under Ord 11 r4(2).”

See also Lennox Lewis & Others v Don King[84].

95.  I am satisfied that the judge well understood the starting point.  He specifically referred to Lord Goff’s comments in The Albaforth in relation to the significance of the place of the commission of the tort[85] and to the fact that this was prima facie the natural forum[86].

96.  I am satisfied too that the judge did not misapply relevant principles.  In so far as the plaintiffs emphasise the place of the tort, it seems to me that they elevate that factor to one that is non-contextual.  The tort factor is one that must necessarily be sensitive to nature and context.  In this case there was between the parties a pre-existing relationship which was governed by the law of Bermuda; the alleged tortious acts took place not only in Hong Kong but London also; and the very same assertions have been the subject of litigation elsewhere.  The plaintiffs’ concentration for its suggestion that Hong Kong was the centre of gravity of the case concentrated then, as now, on history rather than on questions of convenience at the date when the question of jurisdiction fell to be addressed by which latter date the factors had changed significantly.

97.  Once one is satisfied, as I am, that the judge well appreciated the principles, one is left with the exercise of a judicial discretion that, as Lord Templeman said in Spiliada:

“	… is pre-eminently a matter for the trial judge …  An appeal should be rare and the appellate court should be slow to interfere.”[87]

98.  Mr Strachan complains that the test applied by the judge introduces fluidity: the forum changes every time witnesses move.  I cannot agree, for the question is determined at a fixed time: the time at which the issue of appropriate forum comes to be determined.  He then asks the question: If not Hong Kong, where?  This, with respect, is not the correct question.  The correct question is whether the plaintiffs have established that Hong Kong was clearly the forum conveniens.  In his assessment of that issue, I see no error of principle made by the judge; nor any matter taken into account that he ought not; nor the failure to take into account any matter that he ought; and there is no merit in the contention that he was plainly wrong.

99.  Accordingly, in my judgment, this limb of the appeal also fails.

Material non-disclosure

100.  The judge was of the opinion that this aspect of the case was “essentially incidental to the main arguments”[88]; and he did not consider that a sufficiently strong case had been made out under this head.  In so saying he commented that:

“

With the benefit of hindsight some criticisms have resonance – for example, that which was taking place in Bermuda indeed could have been subject to greater elaboration – but at the end of the day I decline to regard material non-disclosure as a basis for setting aside the ex parte orders, and I do not do so.”[89]

101.  The assertion of material non-disclosure is founded upon affidavits of one of the partners of the firm of solicitors acting for the plaintiffs, affidavits placed before the court below in support of the applications for leave to serve out and for substituted service.   

102.  The first such affidavit was dated 16 February 2004, well after conclusion of the trial in Bermuda, a matter of days before judgment there and several years after the judgment in the anti-suit proceedings where the same deponent had been criticized for having failed to disclose to the Hong Kong court that the agreement was covered by the law of Bermuda.  In this affidavit, reference is made to the trial in Bermuda under a heading devoted to it.  There is mentioned the nature of the defendants claim; that is to say, that it was a claim for fees.  Then, as to the counterclaim, it is said that that was for breach of fiduciary duty ‘in relation to their management of the [Company’s] affairs’.  Nothing more specific than that.  The fact is related that judgment had not yet been delivered, and then this: ‘The circumstances surrounding the non-disclosure of the D S Cheung report played a prominent role in the counterclaim at the trial.’  This was, I think, a strange phrase to use.  It would have been easier and more direct, surely, to say that the sole issue asserted in the Hong Kong proceedings fell for determination as a discrete issue in Bermuda.

103.  The affidavit asserted that the significance of the non-disclosure of D S Cheung report had not been discovered until a few days before the Bermudan proceedings.  What it did not reveal was that it had been in the Company’s possession for some years.

104.  No reference was made to the anti-suit proceedings, including the judgment which held Bermuda to be the natural forum for trial.

105.  Judgment was given in Bermuda against the Company in February 2004 but no steps were taken by the solicitor to draw to the attention of the Court the fact of that judgment and the express finding against the Company on the very issue that formed the basis of the Hong Kong proceedings.

106.  On 12 October 2004, the same individual solicitor filed an affidavit in support of the Company’s application for leave in HCCL 54 of 2003 to serve Mr Wong out of the jurisdiction.  The affidavit contained the same phrase as did the February affidavit, as to the ‘prominent role’ of the D S Cheung report, and the deponent then said that: “Judgment was delivered in March 2004 in favour of the Investment Manager.  That judgment is currently under appeal to the Court of Appeal in Bermuda.”  In what regard that judgment favoured the Investment Manager is not stated.  What, one is bound to wonder, was so difficult about disclosing to the Hong Kong court that the judge in Bermuda had expressed himself satisfied that the Board of Directors of the Company had all necessary information; that the Bermudan court had rejected the Company’s claim that the Manager had failed to disclose the nature of the advice tendered by D S Cheung; and that the pending appeal, a matter of weeks away, concentrated upon this very issue?

107.  Exhibited to one of these affidavits was part of the examination-in-chief of Mr Murray in the Bermudan trial in which he had said that he had never received the D S Cheung memorandum.  During cross-examination of Mr Murray, he was taken through the history of events in mid-1997 and asked whether he had instructed the Manager to review yet again the existing agreement with Zhongbei to ensure that the Company’s interest was protected.  It was put to him that in that context Duncan Hon, the Manager’s representative, had said at the meeting of 5 July that “the lawyers had identified an issue” and further that “they had also suggested how to deal with it.”  Mr Murray answered, in cross-examination: “I don’t specifically recall it, but I have no problems with it.”  This was, it might be thought, a concession of some potential significance, particularly since it was common ground that the Manager had never tabled the memorandum at that meeting and that the Manager’s case was, rather, that the effect of it was orally revealed.  Yet the affirmation mentioned only the evidence-in-chief.

108.  There are other suggested instances of material non-disclosure but those to which I have referred suffice for present purposes.

109.  The duty upon an ex parte application of the present kind is to make full and frank disclosure of all material facts, which is to say facts material for the judge to know: Brink’s Mat Ltd v Elcombe.[90]  It is self-evident in this case that in determining whether to exercise his power to grant leave to serve out of the jurisdiction – a serious step indeed – the fact that the proposed Hong Kong proceedings ran the same issue as had been run elsewhere and, later in the piece, that the proceedings constituted a collateral attack upon the decision of a court of competent jurisdiction on that self-same issue was highly material for the judge to know.  Moreover, the duty of full and frank disclosure is a continuing one: 

“

… it is the duty of a party who obtains ex parte Mareva relief to bring to the attention of the Court any subsequent material changes in the situation, i.e. any new or altered facts or matters which, had they existed at the time of the application, should have been disclosed to the Court.  It must always be remembered that the granting of ex parte relief provides (albeit so that justice can be done) an exception to the most basic rule of natural justice – that both parties should be heard.  Thus the need for full disclosure by the party seeking relief – and thus to my mind the need to continue to make full disclosure while the proceedings remain on an ex parte basis.”

Commercial Bank of the Near East Plc. v A, B, C and D[91].

110.  In the Bermudan anti-suit proceedings the non-disclosure – by the same individual solicitor, it so happens, albeit not the same non-disclosure – was heavily criticised.  So, in my judgment, it deserves to be in this case.

111.  This was not a case in which non-disclosure was restricted to some point of fine detail at which only a counsel of perfection would baulk.  What was not disclosed was central, important and straightforward information; and I find myself, with respect, in fundamental disagreement with the judge's conclusion on this issue.  The fact that I would have taken a different decision is not, in the exercise of an appellate function, dispositive of this aspect of the respondents’ notice, because the judge below was acting in the exercise of a discretion and the sound point is made by the plaintiffs that the judge was also the tribunal that heard the ex parte application.  All that said, I am of the view, with respect, that in the exercise of that discretion, the judge plainly erred. 

112.  In coming to his conclusion he said that he did not consider this aspect of the case as anything but essentially incidental to the main arguments[92].  This aspect of the case was, I would answer, only incidental in the sense that the defendants did not need to rely on it once they succeeded on other grounds and because the judge had, by the time he came in his judgment to determine the issue of non-disclosure, already decided the issues of abuse of process and forum non conveniens in favour of the defendants.  But that was not to the point, because the question of material non-disclosure was one to be determined in isolation, assuming for that purpose that the issues of abuse and forum had not been decided.

113.  Secondly, the judge took the view that the criticisms had resonance “with the benefit of hindsight”.  If one puts oneself in the shoes of the deponent of these affidavits, a person thoroughly familiar with the history of the case, most particularly with the history and detail of the proceedings in Bermuda, it is difficult to see where hindsight comes into it.  It is not as if he failed by some unfortunate oversight to address a subject matter that, with the benefit of hindsight, he ought to have addressed; or that he overlooked or misjudged matters of detail.  He addressed the fact of proceedings in Bermuda and in addressing it he must have chosen what to say and how to say it.  Yet he conspicuously failed to tell the court that the very factual issue upon which the Hong Kong proceedings depended had already been determined against his clients in another court of competent jurisdiction.

114.  I would therefore hold that the judgments should be affirmed on the further ground of material non-disclosure by the plaintiffs.  

Conclusion

115.  For the reasons I have provided I would dismiss these appeals and make an order nisi that the costs of the appeals and of the respondents’ notices be to the respondents, to be taxed if not agreed.

Hon Barma J:

116.  I agree and there is nothing I wish to add.

Hon Stock JA:

117.  Accordingly, the appeals are dismissed and there will be an order nisi that the costs of the appeals and of the respondents’ notices be to the respondents, to be taxed, if not agreed.

[1] Management Agreement clause 3(A).

[2] clause 20.

[3] Re-Amended Defence and Re-Amended Counterclaim, para 10(b)(xiv).

[4] Re-amended Defence to Counterclaim, para 9(iv)(b)(ix).

[5] Appeal judgment para. 43.

[6] Judgment (Bermuda) pp 50-51.

[7] Judgment (Bermuda) pp 52-53.

[8] Judgment (Bermuda) pp 53-54.

[9] Appeal judgment para 4; see also para 61.

[10] Appeal judgment para 43.

[11] Appeal judgment paras 89-91.

[12] Ruling, page 7.

[13] Ruling, page 8.

[14] (1843) 3 Hare 100.

[15]  Judgment para 85.

[16] para 86.

[17] para 87.

[18] [2002] 1 AC 615.

[19] 3^rd ed., para 9.

[20] Spencer Bower, Turner and Handley para 10.

[21] Spencer Bower, para 231.

[22] Halsbury’s Laws of England 4^th ed.,Vol 16(2) para 953.

[23] [1975] 2 S.C.R. 248.

[24] Spencer Bower para 15.

[25] Spencer Bower paras 444-445.

[26] (1889) 14 App Case 665.

[27] at 668.

[28] [1982] A.C. 529 at 536.

[29] at 705 C.

[30] [2002] 2 AC 1 at 29A.

[31] [2006] EWCA Civ 1749 at [141].

[32] at 31 B.

[33] [2003] EWCA Civ 1115 at [34].

[34] [1975] AC 581 at 590.

[35] per Lord Hoffmann at 687D.

[36] Lord Hoffman at 701.

[37] Judgment para 80.

[38] at 541.

[39] at 703B-C.

[40] [1994] QB 106 at 116B.

[41] [2004] Ch 1 at 16-17.

[42] [2002] 2 AC 1.

[43] at 4G-5B.

[44] at 23 E.  See also Manson v Vooght [1999] BPIR 376 at 387-388.

[45] [1999] 1 WLR 1482 at 1492–1493.

[46] [2002] 2 AC 1 at 31.

[47] Judgment para 81.

[48] at 705 to 707.

[49] para 83.

[50] para 87.

[51] see the judgment of Storr J at 50-51.

[52] para 196.

[53] Evidence transcript page 1430.

[54] Appeal judgment para 3.

[55] Appeal judgment paras 90 –91.

[56] Appeal judgment para 91.

[57] (1991) 32 FCR 275.

[58] at 413.

[59] Gleeson v J Wippell & Co. Ltd [1977] 1 WLR 510 at 515.

[60] [1967] 1 AC 853.

[61] at 910.

[62] at 514.

[63] See judgment para 94.

[64] at 515.

[65] Spencer Bower para 231.

[66] 2001 BCSC 59; 84 BCLR (3^rd) 277; [2001] BCWLD 344.

[67] para 231.

[68] [1987] AC 460 at 480-481.

[69] [1997] HKLRD 1264.

[70] paras 105-107.

[71] para 110.

[72] para 116.

[73] para 103.

[74] [2001] 3 HKC 250.

[75] at 255.

[76] [1984] 2 Lloyds Rep 91 at 94.

[77] [1971] A.C. 458.

[78] at 466.

[79] at 468.

[80] Diamond v Bank of London and Montreal Ltd [1979] 1 Lloyd’s Rep. 335.

[81] at 96.

[82] [2000] 1 WLR 1004 at 1013 and 1014.

[83] at 1032.

[84] [2004] EWCA Civ 1329.

[85] Judgment para 113.

[86] Judgment para 118.

[87] at 465.

[88] para 128.

[89] para 129.

[90] [1988] 1 WLR 1350 at 1356.

[91] [1989] 2 Lloyd’s Rep 319, per Saville J at 323.

[92] para 128 judgment.