ZHANG CAIKUI v. ZHAO YONGKUI AND OTHERS

HCA 1739/2018

[2020] HKCFI 1170

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1739 OF 2018

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DECISION

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A. The Application

1.  This is the adjourned hearing of the application of the 2^nd to 6^th defendants (“D2” to “D6”, collectively the “SHDs”, and together with the 1^st defendant (“D1”), collectively “Ds”) made by way of Summons dated 17 July 2019 (the “Summons”) to, inter alia, set aside the ex parte leave granted to the plaintiff (“P”) to serve these proceedings out of the jurisdiction (the “Service Out Order”) and to challenge the jurisdiction of the Hong Kong courts over the present case.  The application was originally set down to be heard on 18 December 2019 before Deputy Judge To.  On that day, an application was made on behalf of P to file a new affirmation for the averred purpose of correcting 2 errors made in one of his previous affirmations.  The application to amend was allowed, but the hearing of the Summons was adjourned.  It now resumes before me.

2.  The main issues are whether P has established to the requisite standard a case for service out under Order 11 rule 1(1)(f), and whether P breached its duty to make full disclosure when seeking the Service Out Order.

B.     Affirmatory evidence

3.  30 affirmations have been placed before me.  The following affirmations are the most relevant ones:

 (a)For P:

(i) his 1^st affirmation of 21 September 2018 (“P/1^st”) filed in support of P’s ex parte application for the Service Out Order;

(ii) his 2^nd affirmation of 14 October 2019 (“P/2^nd”) in reply to D6/1^st (defined below);

(iii) his 3^rd affirmation of 23 December 2019 (“P/3^rd”) for the averred purpose of correcting 2 errors made in P/2^nd;

(iv) his 4^th affirmation of 31 March 2020 (“P/4^th”) in reply to D6/3^rd (defined below);

 (b) For the SHDs:

(i) the 1^st affirmation of D6 (“D6/1^st”) of 2 August 2019 in support of the Summons;

(ii) the 2^nd affirmation of D6 (“D6/2^nd”) of 24 December 2019 in reply to P/2^nd;

(iii) the 3^rd affirmation of D6 (“D6/3^rd”) of 13 January 2020 in reply to P/3^rd;

(iv) the 4^th affirmation of D6 (“D6/4^th”) of 29 April 2020 in reply to P/4^th.

C.     The Shanshui series of proceedings

4.  This is part of the Shanshui saga.  The parties have been before the courts on multiple occasions.  Quite a number of judgments and decisions have been handed down.  The one that is of particular relevance to the present application is the Judgment of G Lam J in HCA 1661, 1766, 2191/2014 & HCA 623, 939, 1564/2015 (Consolidated) ([2018] HKCFI 195, handed down on 31 January 2018, the “Trust Actions” and the “Trust Judgments”).  I respectfully refer to the Trust Judgments for the background facts without reciting them.

D.     HCMP 1506/2015

5.  HCMP 1506/2015 (“HCMP 1506”) is one of the actions amongst the Shanshui series of proceedings.  Ds are the 6 petitioners in HCMP 1506. 

6.  In gist:

(a) On 22 June 2015, Ds as petitioners took out a Petition (the “Petition”) in HCMP 1506 under ss 724 and 725 of the Companies Ordinance Cap 622. There were 5 respondents.  Relevantly, P was the 1^st respondent, China Shanshui Investment Company Limited (“CSI”) the 3^rd respondent, and China National Building Materials Company Limited (“CNBM”) the 4^th;

(b) By the Petition[1], Ds sought to stop P from going ahead with an intended sale of certain CSI shares to CNBM (the “Share Sale”).  The main basis of the claim was that the Share Sale  was in breach of a common understanding of the shareholders of CSI[2] (the “Alleged Common Understanding”).  The terms of the Alleged Common Understanding was pleaded as follows[3]: 

“ (1) Save that the shares in CSI could be transmitted by a staff member of the Shanshui Group to his/her successor(s) in accordance with the PRC Law of Succession, the shares in CSI could only be transferred amongst the staff members of the Shanshui Group but not to any outsiders.

 (2) The board of CSI should only consist of staff members of the Shanshui Group (or their representatives) but not any outsiders.”

(c) The reason why the Share Sale was said to be in breach of the Alleged Common Understanding was that CNBM was an outsider;

(d) On 25 June 2015, Ds obtained on an ex parte basis an interim injunction (the “Injunction”) from Harris J.  The effect of the Injunction was to restrain P from proceeding with the Share Sale;

(e) When applying for the Injunction, Ds gave the usual cross‑undertaking in damages (“Ds’ HCMP 1506 Undertaking in Damages”);

(f) Subsequently, P revealed that China Building Materials Holding Co Ltd (“CBMH”)[4] had decided not to go ahead with the Share Sale.  The Injunction was on 14 October 2015 discharged;

(g) HCMP 1506 has not been prosecuted further.

E.     The present action

7.  In July 2018, P by Writ commenced the present action.  The Statement of Claim (the “SoC”) is dated 27 July 2018.

8.  As can be seen from the SoC, P’s claim is in gist as follows:

(a) In respect of the Share Sale, P had prior to the grant of the Injunction signed an agreement with CBMH dated 14 June 2015 (“SPA”);

(b) He entered into the SPA as trustee having considered the intentions of the relevant selling employee beneficiaries (“EBs”)[5];

(c) On 15 June 2015, pursuant to the terms of the SPA, CBMH paid P a deposit (the “Deposit”) together with its share of stamp duty in the total sum of HK$164,463,396.  Shortly afterwards, P distributed the Deposit to the relevant selling EBs[6];

(d) As a direct consequence of the Injunction, P was prevented from fulfilling his obligations under the SPA and the Share Sale[7];

(e) As P had already distributed the Deposit to the relevant EBs, he was not able to return the Deposit and the stamp duty to CBMH[8];

(f) On or before 15 June 2015, Ds, wrongfully and with the sole or predominant intention to injure P and/or to cause loss to him, by unlawful means, conspired and combined together to defraud P and the Court[9];

(g) Pursuant to and in furtherance of the conspiracy, Ds instituted HCMP 1506, took out their application for the Injunction, maliciously prosecuted the application for the Injunction and obtained the same, and concealed the falsity in their claim and their roles in promoting, broking and facilitating the sale of EBs’ interests to another entity (namely Tianrui (International) Holding Co Ltd (“Tianrui”)[10];

(h) Alternatively, Ds “blatantly abused the Court’s civil process”[11];

(i) Ds knew or must have known that the Alleged Common Understanding did not exist and was fabricated by them to found their claims and the Injunction in HCMP 1506[12];

(j) Ds have maliciously prosecuted their application for the Injunction[13];

(k) Ds have committed the torts of (1) conspiracy to injure, (2) abuse of civil process, (3) malicious prosecuting and/or obtaining the Injunction by fraud, (4) wrongful interference with the Share Sale, and (5) causing loss by unlawful means[14] (the “5 Alleged Torts”);

(l) He has suffered loss and damage, that[15]:

“ By reasons of [Ds’] tortious acts, [P] has suffered loss and damage.

Particulars of Loss

1) … CBMH had transferred the Deposit … to [P] …

2) … [P] was obliged to return the entire Deposit …

3) By a letter of 9 July 2015, CBMH had demanded the return of the Deposit …

4) By the Notice dated 11 August 2015, CBMH had terminated the [SPA]; and

5)  Despite best efforts, [P] has to date not been able to recover the Deposit from the selling EBs and hence, is not in a position to return the same to CBMH.”  

(m) He pleads further at §§77 and 78 that:

“ 77. In the premises, [P] is entitled to and does claim an indemnity from [Ds] against any losses, damages, interest, payments, costs and expenses as suffered, incurred or occurred by CBMH arising out of and in relation to the aborted Share Sale that CBMH may claim against [P].

78. In addition, [P] is entitled to and does claim damages and/or equitable compensation for [Ds’] tortious acts.”

(n) P as a result claims against Ds, inter alia:

“ (1) Order that [Ds] do indemnify [P] for any claim that [CBMH] may claim against [P] arising out of or in relation to the breach of the [SPA];

(2) Damages and/or equitable compensation to be assessed.”

9.  On 11 October 2018, P obtained from Master Ho leave to issue and serve a Concurrent Writ of Summons on the Ds (ie the Service Out Order).

10.  On 25 April 2019, P obtained from Master Grace Chan leave for substituted service on the SHDs (except D4) (the “Substituted Service Order”).

F.     The Summons

11.  On 17 July 2019, the SHDs took out the present Summons:

(a) according to the indorsement marked on the left side margin of the Summons, the Summons was taken out under “RHC O.12, r.8, O.18, r.19(1)(a), (b) & (d) and Inherent Jurisdiction”;

(b) it contains 6 paragraphs;

(c) §1 thereof seeks an Order that the Service Out Order be discharged;

(d) §2 thereof seeks an Order that the Substituted Service Order be discharged;

(e) §3 thereof seeks an Order that Service of the Writ herein and the Concurrent Writ on the SHDs be set aside;

(f) §4 thereof for:

“ A Declaration that in the circumstances of the case the Court either has no jurisdiction or should not exercise any jurisdiction over the [SHDs] in respect of the subject‑matter of the claim or the relief or remedy sought in the action, and/or an Order that all proceedings herein be stayed, on the ground that Hong Kong is not clearly and distinctly the more appropriate forum for the trial of this Action.”

(g) §5 thereof for an Order, without prejudice to the application therein, that time for the SHDs to file and serve their Defence and/or Counterclaim be extended to 28 days after the final determination of the Summons;

(h) §6 concerns costs.

12.  Though the Summons contains 6 paragraphs, §1 is the main one.  Mr Maurellet, leading counsel for the SHDs, confirms with me that the order sought in §§2 and 3 are intended to be consequential upon any order which the SHDs may obtain under §1.  They are not seeking to support §§2 and 3 on any basis or reason other than or independent of those relied upon in support of §1.  The Declaration sought under §4, while it makes clear what the SHDs’ challenge is, is really not necessary.  The stay also sought under §4 is unlikely to arise. As will be discussed below, P has the onus of showing that Hong Kong is clearly and distinctly the more appropriate forum for the trial.  If he fails in that regard, the likelihood is that the Service Out Order and the Substituted Service Order would be discharged.  If on the other hand P is successful in establishing that, it is unlikely that the SHDs can establish a case for a stay.

G.     Submissions to jurisdiction?

13.  Mr Wou, counsel for P, takes one preliminary point.  He points to the indorsement marked on the left side margin of the Summons.  He submits that in the light of the reference to “O.18, r.19(1)(a), (b) & (d)”, “SHDs have already submitted to jurisdiction and this should be the end of the matter”[16].

14.  Mr Maurellet refers me to §32/6/7 of the Hong Kong Civil Procedure 2020, where it is explained that:

“ It is good practice to endorse a reference to the rules under which the application is made in the margin of the summons. An incorrect indorsement will not, however, preclude the granting of relief (Premier Fashion Wears Ltd v. Li Hing Chung [1994] 1 H.K.C. 213).”

15.  In RKL v WL and Another, unrep, CACV 9/2016, 6 May 2016, Chu JA observed at §31 that:

“ Whether any particular matter amounts to a voluntary submission to jurisdiction must depend on the circumstances of the particular case. In Miruvor Ltd v. Panama‑Globe Steamer Lines SA [2007] 1 HKLRD 804, 809 at §9 and 812 at §6, Rogers VP had observed that the circumstances should be looked at sensibly, realistically and fairly to see whether the step taken by the defendant constituted a submission to jurisdiction.” (Emphasis added)

16.  I have summarized above the Orders which the SHDs are seeking by way of the Summons.  They are not seeking any order for the SoC to be struck out (which Order 18 rule 19 is about).

17.  I have also considered the contents of the Summons.  The jurisdiction of the court is expressly challenged.  The Service Out Order and the Substituted Service Order are specifically sought to be discharged.

18.  Mr Maurellet accepts that the reference to Order 18 rule 19 is not necessary, and its reference was a mistake.

19.  Looking at the matter sensibly, realistically and fairly, I conclude that the SHDs have not submitted to the jurisdiction of the Hong Kong Court.

20.  This preliminary point taken by Mr Wou fails.

H.     Legal requirements for leave to serve out

21.  I have in section K.1 to K.3 of my judgment in Chen Hongqing v The persons whose names are set out in the second column of the Schedule to the Re‑amended Writ of Summons filed on 26 March 2018 and Others [2019] HKCFI 2121 considered the legal requirements for leave to serve out.  I will not repeat them in full.  To recapitulate:

(a) an application for leave to issue a writ for service out of the jurisdiction ought to be made with great care, and be looked at strictly — Kayden Ltd v SFC (2010) 13 HKCFAR 696, per Ribeiro PJ at §35;

(b) to get leave to serve out, the plaintiff has the onus of establishing:

(i) jurisdiction on the criterion of “good arguable case” under one of the gateways set out in Order 11 rule 1(1);

(ii) that the discretion should be exercised in his favour in that:

(1) there is a serious issue to be tried on the merits of the case;

(2) under Order 11 rule 4(2), the case is a proper one for service out of the jurisdiction.  Part and partial of that, if not a vital consideration in this regard, is that Hong Kong is clearly and distinctly the more appropriate forum;

(c)if certain matters go to both jurisdiction and discretion, the threshold of “good arguable case” remains applicable to those which go to jurisdiction, even though they go also to merits.

I.     The gateway under Order 11, rule 1(1)(f) — whether a good arguable case

22.  P relies on the gateway under Order 11, rule 1(1)(f)[17]. That sub‑paragraph provides that:

“ … service of a writ out of the jurisdiction is permissible with the leave of the Court if in the action begun by the writ—

(f) the claim is founded on a tort and the damage was sustained, or resulted from an act committed, within the jurisdiction; …”

23.  Mr Wou accepts[18] that under Order 11, rule 1(1)(f):

“ … P has to show that –

1) His claim is founded on tort (‘Requirement 1’); and

2) either –

a) Damage has been sustained within the jurisdiction (‘Requirement 2a’); OR

b) Damage has resulted from an act committed within the jurisdiction (‘Requirement 2b’) …”

24.  In Dynasty Line Ltd v Sukamto Sia [2009] 4 HKLRD 454, Cheung JA observed at §33 that:

“ In considering whether damage is sustained in Hong Kong it is sufficient if some significant damage had been sustained here: see Slade LJ in Metall Und Rohstoff AG v. Donaldson Lufkin & Jenrette Inc and Another [1990] 1 QB 391 at p.437.”

25.  As discussed above, and also accepted by Mr Wou, that gateway has to be established on the criterion of “good arguable case”, and if certain matters go to both jurisdiction and discretion, the threshold of “good arguable case” remains applicable to those which go to jurisdiction, even though they go also to merits.

26.  Mr Maurellet submits that P cannot show a good arguable case.  He makes 3 submissions[19], that:

(a) the present action is procedurally unsound and liable to be struck out;

(b) P has failed to show any actionable loss; and

(c) in any event, P’s pleaded case is fraught with serious difficulties and falls far below that “good arguable case” standard.

27.  I consider these submissions in turn.

I.1.     The present action procedurally unsound?

28.  Mr Maurellet in turn makes 2 submissions under this limb of his submissions:

 (a) P’s only remedy is to seek to enforce Ds’ HCMP 1506 Undertaking in Damages; and

 (b) The present action constitutes an abuse of process.

I.1.a.     P can only seek to enforce Ds’ HCMP 1506 Undertaking in Damages?

29.  Mr Maurellet, relying on Wingames Investments Ltd v Mascot Land Ltd (No 2) [2013] 1 HKLRD 1186, §§22‑23 and CT Bowring & Co (Insurance) Ltd v Corsi & Partners Ltd [1994] BCC 713, 729A‑B, submits that P’s only remedy is to enforce Ds’ HCMP 1506 Undertaking in Damages.

30.  There is no dispute that an undertaking in damages does not found any cause of action.  As explained by Kwan JA in Yanfull Investments Limited v Datuk Oop Kee Liang, unrep, CACV 114/2016, 15 March 2017, at §64:

“ The reason lies in the special feature of a cross‑undertaking in damages given by a party in applying for an injunction. The undertaking is given to the court, not to any opposite party. In relation to such undertaking, the court acts or declines to act in its own right and exercises a broad equitable jurisdiction, ‘not merely as an umpire in an adversarial process between the parties, though obviously having full regard to the position of the parties and to the interests of justice’ (CT Bowring, at 731C, per Sir Michael Kerr). As stated by Millett LJ (as he then was) at 729A to B:

‘ Although the defendant is claiming monetary compensation for loss which it alleges it has sustained as a result of the injunction, it has no independent cause of action to recover such loss. It cannot bring separate proceedings, whether by writ or counterclaim in the existing proceedings. Its claim arises out of and is wholly dependent upon the plaintiff’s cross‑undertaking. Its only remedy is to enforce the cross‑undertaking by applying under the liberty to apply in the proceedings in which the cross‑undertaking was given.’

And at 729H to 730A:

‘ … the court’s power to order an inquiry as to damages is discretionary. … The source of the court’s discretion to refuse to order an inquiry is its inherent jurisdiction to release or vary an undertaking which has been given it.’ ” (Emphasis added)

31.  However, as submitted by Mr Wou, P is not suing on Ds’ HCMP 1506 Undertaking in Damages, but the 5 Alleged Torts pleaded in §75 of the SoC. The application for the Injunction was pleaded as an act in furtherance of the alleged conspiracy.

32.  I note in this regard further §11‑035 of Commercial Injunctions, Steven Gee QC, 6^th ed, that:

“ The undertaking in damages is given to the court, not directly to the party or parties identified in it. That party is not entitled to sue on the undertaking by way of a claim in contract. Where there has been malice in obtaining the order it might be that there could be an action in tort available to the person injured for loss caused by the making of the order. Depending on the circumstances there might be a claim available in tort, perhaps for damages for conspiracy, but often no such claim is available, or would be speculative.” (Emphasis added)

33.  The 5 Alleged Torts are independent of the Injunction.  Whether any of them is “available” to P, and whether they may be “speculative”, are matters of evidence, which turn on different issues.  But if they are (or any one of them is) available to P, I do not see why P should as a matter of law be barred from pursuing the present action merely because of the existence of Ds’ HCMP 1506 Undertaking in Damages.

34.  I do not accept Mr Maurellet’s submission on this point.

I.1.b.     Abuse of process?

35.  Relying on Chiang Lily v Secretary for Justice [2009] 6 HKC 234, §§55‑68, Mr Maurellet submits that it is an abuse of process for P to bring the present action when his claim for compensation could and ought properly to have been litigated in HCMP 1506.

36.  As explained by Ma CJHC (as the Chief Justice then was) in Chiang Lily at §57, in relation to res judicata in the Henderson v Henderson sense:

“ ... I emphasize here the existence of two elements that have to be demonstrated by the part alleging abuse: that there exist matters that could and should have been litigated in earlier proceedings.”

37.  HCMP 1506 is a petition taken out under ss 724 and 725 of the Companies Ordinance Cap 622.  The substantive relief sought was injunctive in nature, and was aimed at stopping the Share Sale.

38.  Given the nature of HCMP 1506, I do not believe that it is expedient, or even appropriate, for P’s present claim for damages based on the 5 Alleged Torts to be dealt with there by way of a counterclaim.  Mr Maurellet accepts that that is not normally done.

39.  Further, the Share Sale fell through not long after the commencement of HCMP 1506.  Ds’ entitlement to the relief sought ceased to be a live issue, and remained relevant at best only to costs. 

40.  In the circumstances, I am not satisfied that P’s present claim for damages based on the 5 Alleged Torts should have been litigated in that earlier action.

41.  I also reject Mr Maurellet’s submission on this point.

I.2.     Whether any actionable or recoverable loss

I.2.a.     The relevant facts

42.  The following facts are relevant to this limb of Mr Maurellet’s submissions.

43.  According to P, the CBMH formally terminated the SPA by a termination notice dated 11 August 2015[20].

44.  Whilst CBMH has according to P on 3 occasions (by letters of 9 July 2015 and 11 August 2015, and in September 2019 orally by a member of the internal audit department of CNBM, the parent company of CBMH) demanded him to return the Deposit[21], CBMH has not started any formal legal action for return of the same. 

45.  In the SoC, P pleads that shortly after his receipt of the Deposit, he “distributed the Deposit to the relevant selling EBs”[22]. In P/2^nd, he corrects that.  He says that that is a mistake. Instead of the word “distributed ”, he says that he should have used the words “started distributing”[23]. He says that once he became aware of the Injunction, he “instructed my staff to suspend the distribution.  This explains why they had paid only 123 out of the 713 EBs involved ”[24]. The total amount distributed to those 123 EBs was RMB73,599,212 (or HK$92,091,106)[25].

46.  There is no suggestion from P that the balance of the Deposit which has not been distributed to the EBs has been returned to CBMH.

47.  As the SoC shows (material parts reproduced above), it is not P’s pleaded case that he has at this stage suffered any actual loss as a result of the 5 Alleged Torts.  He is suing for an indemnity.  P himself says at §60 of P/2^nd and §7 of P/4^th that:

“ 60. … the primary remedy I am seeking in this action is only an order of indemnity against any claim that CBMH may bring against me in relation to the Aborted Share Sale.”[26]

“ 7. … in this action, I am not claiming against the SHDs for the sum of HKS 163,917,000, but only an order of indemnity for any claim that CBMH may claim against me arising out of and in relation to the Aborted Share Sale which was wrongfully caused by the SHDs’ tortious acts …”[27]

I.2.b.     Parties’ stances

48.  On those facts, Mr Maurellet submits that P’s claim in tort is doomed to fail as he has failed to show that he suffered any actual loss or damage as a result of the Injunction[28]. He makes 2 specific points:

(a) each of the 5 Alleged Torts requires the proof of damage as part of its cause of action, so that they are in the absence of any not constituted[29]; and

(b) even if the torts are sufficiently constituted, the Court would not normally grant a declaration of indemnity on a quia timet basis[30].

49.  In reply, Mr Wou submits that:

“ 26. …On the authorities, for the tort of malicious prosecution, P can recover damages for forseeable economic loss beyond out‑of‑pocket expenses. As for the tort of conspiracy to injure, damages are at large and are not limited to a precise calculation of the amount of the actual pecuniary loss actually proved …

   27. Further … CBMH has demanded return of the Deposit on at least 3 separate occasions … At any rate, it is counter‑intuitive to suggest that CBMH, being a state enterprise, will not be seeking to recover the Deposit in excess of HK$ 164 Million.”

I.2.c.     Discussion

50.  As I have summarized above, Mr Wou accepts that the onus is on P to establish, on a good arguable basis, Requirement 1 and either Requirement 2a or 2b. 

51.  Relying on various passages from Clerk & Lindsell on Torts, 22^nd ed [31], Mr Maurellet submits that each of the 5 Alleged Torts requires the proof of damage as part of its cause of action.

52.  Mr Wou does not appear to be arguing that any of the 5 Alleged Torts are actionable per se:

(a) He points to the evidence that P has paid 123 EBs, that receipts from those 123 EBs have been produced[32], and that demands for repayment of the Deposit have been made.  He submits that it is counter‑intuitive to suggest that CBMH would not seek to recover the Deposit;

(b) He highlights the types of damage that could in law found P’s claims;

(c) In relation to the tort of malicious prosecution of civil proceedings,

(i) Mr Wou refers[33] to Crawford Adjusters Ltd v Sagicor Insurance Ltd [2014] AC 366 where Lord Wilson JSC observed at §78(i) that:

“ A tort of malicious prosecution of civil proceedings should enable a claimant to recover damages for forseeable economic loss beyond out‑of‑pocket expenses.”

(ii) In the course of his oral submissions, he produced Quartz Hill Gold Mining Company v Eyre (1883) 11 Q.B.D. 674, wherein Brett, MR observed at p 683 that:

“ When we look back to the decisions of the judges of earlier times (which decisions are to my mind the best guides for judges of the present day), we find it laid down by Holt, C.J., in Savil v. Roberts, that there are three heads of damage which will support an action for malicious prosecution. There is damage to a man’s person, as when he is taken into custody, whether that be, as in former times, upon mesne process or upon final process, or whether it be upon a criminal charge. To take away a man’s liberty is damage, of which the law will take notice. Secondly, to cause a man to be put to expense is damage, of which the law will take notice. But Holt, C.J., adds a third head of damage, and that is where a man’s fair fame and credit are injured. This is also a head of damage of which the law will take notice.”

Mr Wou submits that the 2^nd and 3^rd heads apply to P’s claim;

(d) In relation to the tort of conspiracy to injure, Mr Wou at    §57   of  his written submissions refers to Bullen & Leake   &   Jacob’s    Precedents of Pleadings 19^th ed, Vol 2, Chapter 59 — Conspiracy, 59‑02 and 59‑07 and submits that:

“ For the tort of conspiracy to injure, damages are at large in the sense that they are not limited to a precise calculation of the amount of the actual pecuniary loss actually proved.”

53.  In considering Mr Wou’s submission, it is important to refer to the entirety of §59‑07 of Bullen & Leake & Jacob’s.  There, the learned authors explain that:

“ Damage is the gist of a civil action for conspiracy. The tort is complete only if the agreement is carried into effect so as to damage the claimant.

In conspiracy damages are at large in the sense that they are not limited to a precise calculation of the amount of the actual pecuniary loss actually proved. In coming to a view as to the level of damages which a defendant ought to pay, the court will consider all the circumstances of the case, including the conduct of a defendant and the nature of his wrongdoing. However, that damages are at large does not mean that it is sufficient simply to plead, without any particulars, that loss and damage has been suffered. Such a pleading has been described as grossly inadequate.” (Emphasis added)

54.  In my view, and on the authorities before me, the main problem which P faces is not so much the constitution of the 5 Alleged Torts, but the satisfaction of Requirement 2a or 2b.

55.  In order to obtain the Service Out Order, the onus is on P to show either Requirement 2a or Requirement 2b.  The threshold is good arguable case.

56.  To satisfy Requirement 2a, as observed by Cheung JA in Dynasty Line, it is sufficient if “some significant damage” has been sustained here. Whilst that may mean that it is not necessary to show that all “the damage” has been sustained within jurisdiction, at least “some significant damage” will have to be shown to have sustained here.

57.  In the context of Requirement 2b:

(a) In my view, it is equally necessary for P to show that “some significant damage” has resulted from an act committed within the jurisdiction.  This is obvious when one notes that the words “the damage” in Order 11, rule 1(1)(f) are shared by the 2 alternative requirements of “was sustained, or resulted from an act committed, within the jurisdiction”;

(b) Mr Wou relies on §11/1/28 of the Hong Kong Civil Procedure 2020 and submits[34] that:

“ Here, there is no (nor can there be any) dispute that all the Wrongful Acts were committed by SHDs in Hong Kong and indeed, before the Hong Kong Courts. It is just that SHDs reside abroad. In the premises, the present case is straightforward and at least Requirement 1 and Requirement 2b will always be satisfied.”

(c) §11/1/28 of the Hong Kong Civil Procedure 2020 is in the following words:

“ Where the tort is entirely a Hong Kong one and it is merely that the defendant is abroad, at least requirements (1) and (2)(b) will always be satisfied and the situation will be straightforward. At the other extreme, where the tort and damage take place entirely abroad, para.(1)(f) will not be engaged (although other gateways of r.1(1) may be). In the middle ground are cases where the relevant acts took place partly abroad and partly in Hong Kong and either requirement (2)(a) or (2)(b) is made out on the facts.”

(d) In context, it is clear that it is the location of the tort which §11/1/28 is discussing.  If the tort is committed entirely in Hong Kong, and if damage results, that damage would have been resulted from an act within the jurisdiction, so that Requirement 2b will always be satisfied.  It does not mean that whenever the tort is alleged to have been committed in Hong Kong, Requirement 2b will always be satisfied irrespective of whether any damage has been resulted.  I do not understand Mr Wou to be advocating that latter proposition.  If he were, I reject it.

58.  The main question boils down to this: whether P has on a good arguable case basis established “some significant damage” which “was sustained, or resulted from” the 5 Alleged Torts.

59.  What are before the Court are:

(a) receipt by P of the Deposit in June 2015 pursuant to the SPA;

(b) distribution by him shortly afterwards of part of the Deposit to 123 of the 713 EBs involved, with no suggestion that the balance having been repaid;

(c) allegation that “despite best efforts”, he has not been able to recover the part of the Deposit that have been paid to the 123 EBs;

(d) despite 3 alleged demands (the latest one made orally by a member of the internal audit department of CNBM), there has been no legal action from CBMH for repayment of the Deposit;

(e) a claim by P for an indemnity against Ds (§78 of SoC);

(f) an bare allegation in the SoC that P has suffered loss and damage, and that he is entitled to claim “damages and/or equitable compensation for [Ds’] tortious acts” (§78 of SoC).

(g) P’s evidence at §§51, 54 and 65 of P/2^nd, that:

“ 51. … I asked [my then colleague] Chen XS to approach the selling EBs and demanded the return of their receipts. I was informed by Chen XS that he contacted some of the selling EBs by phone and met others in person. None of them was willing to return the money.

…

54. At the very least, I would have to incur considerable legal expenses out of my own pocket to commence and prosecute my claims against the selling EBs. It lies ill in [Ds’] mouth to suggest that their tortious acts did not cause any loss or damage to me. But for the tortious acts committed by the [Ds], I would not need to spend any time, efforts and money, including what I have incurred in this action. Plainly, these constitute loss and damage occasioned by their wrongful acts.

…

 65. In all of the circumstances, I have clearly suffered loss or damage in Hong Kong caused by [Ds’] tortious acts.  Had they not obtained the [Injunction] by fraud, the Share Sale would have been completed by around 25 June 2015 or shortly thereafter.”

(h) P’s evidence at §32 of P/4^th, that:

“ 32. The indisputable fact remains that pursuant to the SPA, I had paid a substantial portion of the Deposit to the 123 Selling EBs which I have not been able to recover. But for the tortious conducts of the SHDs, the Aborted Share sale would have been completed. There is now a real and imminent risk that CBMH will sue me for the return of the Deposit. I am advised by Deacons and verily believe that I am entitled to an order of indemnity against the SHDs for any such claim by CBMH. At the very least, there must be serious questions to be tried.”

60.  In respect of any claim that may be brought by CBMH for return of the Deposit, until any has actually been brought, no loss has been crystallised.  As P himself says at §73(2) of P/2^{nd [35]}, it will only be then when “my loss will be crystallised here in Hong Kong” (emphasis added).

61.  If CBMH indeed claims, P has the option of joining Ds as third parties. P realizes that — see §73(5) of P/2^nd.

62.  Mr Wou has placed before me no authority in support of any proposition that a claim for an indemnity in the circumstances is sufficient for Requirements 2a or 2b to be satisfied. 

63.  On the other hand, Mr Maurellet has placed before me Freight Connect (S) Pte Ltd v Paragon Shipping Pte Ltd [2015] SGCA 37 in support of the proposition that the Court would not normally grant a declaration of indemnity on a quia timet basis in favor of someone in P’s position who could commence third party proceedings instead.

64.  In Freight Connect, the Singapore Court of Appeal applied the English Court of Appeal decision of Trans Trust SPRL v Danubian Trading Co Ltd [1952] 2 QB 297.  In Trans Trust, Lord Somervell LJ, in commenting on the appropriateness of a declaration of indemnity made in an earlier case, observed that:

“ … The judge, in making the declaration which he did, followed with modification a declaration made in somewhat similar circumstances by Lewis J. in Household Machines Ld. v Cosmos Exporters Ld. The problem can be shortly stated. B sues C for breach of contract. The court holds that B is entitled as against C to recover damages in respect of B’s liability to A arising out of C's breach of contract. At the time of the hearing B is not in a position to call evidence to quantify this damage. There may be some cases in which the court can state a principle which makes the subsequent quantification of this damage simple. On the other hand, difficult questions may arise, depending, for example, (1) on any variation of the terms of the contract between B and C as between B and A, (2) on the question whether A took the steps which should have been taken to mitigate damage. No declarations ought to prejudice or preclude a proper determination of these issues, on which the defendants should be entitled to be heard. It might, as it seems to me, be more satisfactory if there were liberty to apply for directions as to the determination of these issues, if any, and quantification of damages under this head as between plaintiffs and defendants, should disputes arise. Some order in this form, at any rate, in some cases, might be more satisfactory than a declaration in the form ordered.”

65.  In respect of any “legal expenses out of my own pocket to commence and prosecute my claims against the selling EBs”[36], those are at best future expenses which P might incur.  He himself says that they are expenses which he “would have to incur”.

66.  In any event, beyond the possibility of any claim from CBMH, P has not given any particulars on any loss and damage which he claims “was sustained, or resulted from” the 5 Alleged Torts.  I repeat what has been said at §59‑07 of Bullen & Leake & Jacob’s, that:

“ … that damages are at large does not mean that it is sufficient simply to plead, without any particulars, that loss and damage has been suffered. Such a pleading has been described as grossly inadequate.”

67.  I remind myself that the damage which P has to establish to satisfy Requirements 2a or 2b is “some substantial damage”.

68.  I remind myself further that an application for leave to issue a writ for service out of the jurisdiction ought to be made with great care, and be looked at strictly.

69.  For the reasons set out above, I come to the view that on the question of jurisdiction, P has failed to satisfy either Requirement 2a or Requirement 2b.

I.3.     P’s pleaded case fraught with serious difficulties?

70.  Mr Maurellet submits[37] that:

“ P’s case on the facts are ridden with contradictory and inconsistent statements, and had been inexplicably changing his case. These brings into serious doubt the veracity of his claim.” (Emphasis added)

He attaches to his written submission Appendix I where he sets out those alleged “significant inconsistencies and contradictions”[38]. Mr Wou has in turn spent some 50 paragraphs of his written submissions on the issue.

71.  Strictly speaking, the merits of P’s claim goes to Requirement 1, and P has the onus of showing on the good arguable threshold that his case “is founded on a tort”.  But as Mr Maurellet accepts, save in clear cases, it is not the function of this Court in hearing the Summons to conduct a mini‑trial so as to decide the issue.  I have considered the contents of Appendix I. In my view, on the facts of this case, this is not one of those clear cases where the point can be decided on affirmations.  This Court cannot appropriately go into details to consider the alleged “doubt” over the “veracity of P’s claim”.  I am not prepared to do so.  I am not satisfied that this ground has been made out.

J.     Forum conveniens

72.  I have previously at Section K.3. in Chen Hongqing, op cit, considered the legal principles.  I refer to them.  They are not in dispute between the parties.

73.  At §35 of his written submissions, Mr Maurellet sets out 9 factors in support of his submissions that the PRC Court in Jinan is the more appropriate forum.  On the other hand, Mr Wou at §104 of his written submissions relies on 13 factors in support of his submissions that Hong Kong is clearly the appropriate forum.

74.  For the following reasons, my view is that while Hong Kong can be a forum for the trial of the present action, it is not clearly the appropriate forum to do so.

75.  Some of the factors which Mr Wou relies on are that “the alleged torts were committed in Hong Kong”, “[the] substantive law should be Hong Kong law”, “[most] of the documents relating to the tortious conduct e.g. affirmations in [HCMP 1506] are located in Hong Kong”, “[the] SPA is governed by Hong Kong law”, “[the] Sale Shares were that of … a Hong Kong company”, “CBMH paid the Deposit in HK$ to P’s bank account in Hong Kong”, and “CBMH has demanded return of the Deposit in HK$”.

76.  Those factors, while true, are neither here nor there.  They (eg the initiation of HCMP 1506, the application for the Injunction, the filing of evidence in support by Ds, the grant of the Injunction, etc) are mostly matters of records and are not likely to be in serious dispute. 

77.  I remind myself also of the observation made by Kwan JA in Yanfull at §83, that

“ The place of commission of the tort is not determinative, it is no more than a convenient starting point or prima facie position.”

78.  Mr Wou then relies on the expert opinion which P has obtained that the scope of any asset restraining order which P could obtain, compared with the scope of a Mareva injunction in Hong Kong, is narrower. 

79.  Given the history of the matter, and the fact that the Writ herein has been issued some time ago, I doubt whether a Mareva injunction even in Hong Kong will serve any purpose.  The horse would have bolted by now.

80.  Mr Wou then submits that the relief of an indemnity is not available in the Mainland[39]. But even in Hong Kong, as submitted by Mr Maurellet and supported by Trans Trust, the Court would not normally grant a declaration of indemnity on a quia timet basis in favor of someone in P’s position who could commence third party proceedings instead.

81.  In my view, the following factors highlighted by Mr Maurellet are much more relevant, and that they point to the Mainland Court in Jinan being the more appropriate forum:

(a) P and the SHDs are residents in the Mainland;

(b) The participating employees (including the 123 EBs who allegedly had been paid) are mostly residents in the Mainland;

(c) The alleged distribution of part of the Deposit to the 123 EBs, and P’s unsuccessful efforts to seek recovery from them, which facts are relied heavily upon by P on the question of his alleged loss and damage, all took place in the Mainland;

(d) The crux of the dispute is the existence or otherwise of the Alleged Common Understanding, the resolution of which would involve consideration of underlying facts which took place mostly in the Mainland.

82.  Another point which Mr Maurellet has highlighted is this:

(a) In relation to P’s conduct in certain prior Shanshui related proceedings, he has been found guilty by Au‑Yeung J of contempt (HCMP 1574/2016[40], Judgment handed down on 28 February 2018).  He was ordered to personally attend the sentencing hearing (§147(9) of the Judgment), which took place on 23 May 2018.  P failed to.  He was sentenced to an immediate total term of imprisonment of 4 months (Reasons for Sentence handed down on 31 May 2018[41]);

(b) In P/2^nd, P reveals that those judgments are under appeal[42]. Whilst that is so, the point remains a relevant one as to whether P will come to Hong Kong to give evidence.

83.  In my view, P has failed to discharge the burden on him to show that Hong Kong is clearly and distinctly the more appropriate forum.

K.     Material non‑disclosure

84.  Mr Maurellet has raised a number of complaints.  He submits that P should have disclosed that his only remedy is to seek to have Ds’ HCMP 1506 Undertaking in Damages enforced.  I repeat my views in Section I.1.a above.  Given my rejection of Mr Maurellet’s submissions in that regard, I do not accept there has been any material non‑disclosure in relation to that same point. 

85.  Mr Maurellet points to further factual matters relating to P’s mistake relating to the alleged distribution of the Deposit and certain subsequent sales of the Shares concerned.  Most of them are disputed issues of facts between the parties which go to the need for trial.  I am not satisfied that there has been material non‑disclosure in those regards.

86.  I however agree with Mr Maurellet that the fact that P has been found guilty of contempt of court and sentenced to 4 months of imprisonment is a material fact which Master Ho was entitled to know when considering whether to grant the Service Out Order.  The learned Master was entitled to be informed of the facts leading to the conviction, P’s failure to attend the sentencing hearing, the sentence, the warrant of arrest, why P had not purged the contempt or serve the sentence, and the pending appeal.  The learned Master was entitled to have the full facts to consider whether P might attend Hong Kong as a witness of the trial which initiation process he was seeking leave to serve out.  The learned Master was further entitled to consider the possibility of P’s appeal being dismissed, and how that would impact on P’s claim that Hong Kong is clearly and distinctly the more appropriate forum for the trial of the present action.

87.  The sentence took place less than 5 months prior to P’s application for the Service Out Order.  Appeal was underway.  The failure to disclose the conviction and sentence could not simply have been an oversight.  In my view, the non‑disclosure was a deliberate one.

L.     Disposition

88.  For the reasons set out above, in the light of my views that P has failed to satisfy either Requirement 2a or Requirement 2b, that P has failed to discharge the burden on him to show that Hong Kong is clearly and distinctly the more appropriate forum, and P’s material non‑disclosure of his conviction for contempt, I discharge the Service Out Order and the Substituted Service Order, and make an Order in terms of §§1‑3 of the Summons.

89.  As P’s failure to satisfy either Requirement 2a or Requirement 2b goes to question of jurisdiction, this is not a case for this Court to consider any regrant.

M.     Costs

90.  I make a costs order nisi that the SHDs should have the costs of and occasioned by the Summons, with certificate for 2 counsel, to be taxed if not agreed.