XCHRX FERROMIN LTD. v. NITTETSU SHOJI CO. LTD.

HCCL41/98

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL LIST NO.41 OF 1998

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J U D G M E N T

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The Application

1. This is the Defendant's application by summons dated 5th May 1998 pursuant to RHC Order 12, rule 8 for the discharge of an Order of Barnett J. dated 17th February 1998, whereby the Plaintiff was given leave to issue and serve the Writ of Summons on the Defendant out of the jurisdiction pursuant to RHC Order 6, rule 7(1) and Order 11, rule 1(1).

The Background Facts

2. The Plaintiff's claim relates to a CIF contract dated 19th January 1998 whereunder the Plaintiff agreed to purchase and the Defendant agreed to sell 250 metric tonnes of carpenter solids (an alloy of nickel and iron) at a price of US$3.5 per kg. CIF Hong Kong; this contract was the last of a series of six contracts whereby the Defendant agreed to sell such carpenter solids to the Plaintiff. As is adverted to later in this judgment, there was in fact never any direct negotiation between the Plaintiff and the Defendant; further, for reasons which remain unclear despite the profusion of affidavit evidence the case has thrown up, it appears that the quantities of carpenter solids sold by the Defendant to the Plaintiff under all five previous contracts were in fact shipped back to Japan to the actual source of these solids (albeit not the contracting party), one Kanto Metal Ltd., a Japanese company which on 5th February 1998 filed for bankruptcy in the Tokyo District Court with debts of 24 billion Japanese Yen.

3. In any event, the Plaintiff alleges that the goods supplied by the Defendant pursuant to this sixth contract were not carpenter solids, but a worthless cargo of scrap iron (the essential value in the solids being in the percentage of nickel content), and that the Defendant obtained payment under the letter of credit opened by the Plaintiff by the presentation of an antedated bill of lading at the time of the negotiation, with the Tokai Bank Ltd. in Tokyo, of the documents required to be presented under that credit. In turn, the Tokai Bank thereafter exercised its right of recourse against the Plaintiff's issuing bank, MeesPierson Ltd. in Hong Kong, which upon accepting the conformity of the relevant documents thereupon debited the Plaintiff's account in the contract sum, and reimbursed the Tokai Bank for the payment of US$918,050.00 which had earlier been made to the Defendant.

4. Against this background, the Plaintiff issued its writ on 17th February 1998 (Points of Claim were dated 8th April 1998), the endorsement of which claims, inter alia, damages for breach of contract, misrepresentation, deceit, and repayment of the sum paid, namely US$918,050.00 as money had and received, alternatively (and presumably) restitution of such monies as being subject to a constructive trust. In addition, the writ (at para.1 thereof) sought a Mareva injunction against the Defendant.

5. Accordingly, when Barnett J. was seized with the matter upon an ex parte basis on 17th January 1998 he faced two applications, for the Mareva injunction and for leave to issue and serve proceedings on the Defendant out of the jurisdiction, applications which were granted after hearing the submissions of Mr Whitehead, the Plaintiff's Counsel, who also appears before this Court to resist the Defendant's present application to set aside the order giving leave to serve out. It is agreed by Counsel, I think, should the Defendant be successful, that the Mareva injunction which currently remains in place must also be discharged since the jurisdiction so to grant such relief is derivative from, and dependent upon, the validity of the primary jurisdiction asserted over the Defendant.

The Grounds Underpinning the Assertion of Jurisdiction

6. The Plaintiff contends that this action is brought within the terms of Order 11 in the following ways:-

(a) Pursuant to Order 11, rule 1(1)(d)(i), namely, that the contract between buyer and seller was made within the jurisdiction; and/or

(b) Pursuant to Order 11, rule 1(1)(d)(iii), namely, that the contract is by its terms or by implication governed by Hong Kong law; and/or

(d) Pursuant to Order 11, rule 1(1)(f), namely, that the claim is founded on a tort and that damage was sustained or resulted from an act committed within the jurisdiction.

7. I set out the grounds now relied upon because regrettably in this case the Defendant has had some difficulty in understanding precisely what jurisdictional bases were being asserted. For example, the Affidavit of Miss Frew leading the application had not invoked sub-rule (f), nor had the Order granting leave to serve out been indorsed with the grounds that had been accepted at the ex parte stage. In addition, subsequent affidavit evidence of Mr Fache of the Plaintiff further asserted reliance upon sub-rule (e), when such was not and had not been the case. Indeed, those acting for the Defendant had to go to the unusual lengths of securing a transcript of the ex parte hearing itself in order to find out exactly what had happened. This is unfortunate. Practitioners should note that in this List applications for leave to serve out of the jurisdiction are unlikely to be granted in future save and except upon the basis of the specific ground or grounds clearly deposed to in the affidavit evidence leading the application. This is consistent with established practice and principle and puts an end to argument, such as took place in this case, upon Parker v. Schuller (1901) 17 TLR 299 principles, which preclude the Plaintiff, in resisting an application to set aside leave granted to serve out, from setting up and relying upon a separate and distinct cause of action not initially relied upon (a principle expressly cited and approved in the current commentary in the White Book 1999, at MN 11/4/16).

8. As Slade L.J. observed in Metall & Rohstoff v. Donaldson Inc. [1990] 1 QB 391 (at 436E-F), in the context of a discussion as to the manner of the plaintiff's Order 11 application in that case, the Order 11 procedure

"is designed to ensure both that the court is fully and clearly apprised as to the nature of the legal claim with which it is invited to deal on the ex parte application, and the Defendant is likewise apprised as to the nature of the claim he has to meet, if and when he seeks to discharge an order for service out of the jurisdiction..."

The Relevant Principles

9. There is no dispute between Counsel as to the principles relevant to applications for leave to serve out of the jurisdiction, principles which have been considered by this Court in a number of recent cases. Suffice it to say that as a result of the speech of Lord Goff in Seaconsar v. Bank Markazi [1994] 1 AC 438 at pp.446-458, it is clear that applications for leave to serve out involve a three-stage evaluation under the headings of jurisdiction, merits and forum conveniens. Lord Goff put it thus (op.cit. at 456-457) :-

"...Accordingly, a judge faced with a question of leave to serve proceedings out of the jurisdiction under Order 11 will in practice have to consider both (1) whether jurisdiction has been sufficiently established, on the criterion of the good arguable case laid down in Korner's case, under one of the paragraphs of rule 1(1), and (2) whether there is a serious issue to be tried, so as to enable him to exercise his discretion to grant leave, before he goes on to consider the exercise of that discretion, with particular reference to the issue of forum conveniens ..."

10. I adopt that broad approach in this case. In addition, I bear in mind also the useful commentary upon the various provisions of Order 11 in the Supreme Court Practice 1999.

11. At the end of the day, of course, the requirement that must be satisfied by a Plaintiff seeking leave to serve out of the jurisdiction is that as set out in Order 11, rule 4(2), namely :-

"No such leave shall be granted unless it shall be made sufficiently to appear to the Court that the case is a proper one for service out of the jurisdiction under this Order."

12. I turn now to the argument and to the application of these principles to the instant case. On the merits, Mr Sussex is minded to concede that there are serious issues to be tried, and concentrates his attack under the heads of jurisdiction and forum conveniens, his broad submission being that the claims advanced by the Plaintiff do not fall within any of the heads of Order 11, rule 1(1) and, further and in any event, that the case is and was not a proper one for service out of the jurisdiction.

(1) Jurisdiction

13. The benchmark here, of course, is that of the good arguable case, which is a judicial animal that is perhaps easier to recognise than to describe. However, Mr Whitehead for the Plaintiff has drawn my attention in this context to the recent English Court of Appeal decision of Canada Trust Co. v. Stolzenberg [1998] 1 WLR 547, in which Waller L.J. observed (at 555) :-

"...It is I believe important to recognise, as the language of their Lordships in Korner's case [1951] A.C. 869 demonstrated, that what the court is endeavouring to do is to find a concept not capable of very precise definition which reflects that the plaintiff must properly satisfy the court that it is right for the court to take jurisdiction. That may involve in some cases considering matters which go both to jurisdiction and to the very matter to be argued at the trial, e.g. the existence of a contract, but in other cases a matter which goes purely to jurisdiction, e.g. the domicile of a defendant. The concept also reflects that the question before the court is one which should be decided on affidavits from both sides and without full discovery and/or cross-examination, and in relation to which therefore to apply the language of the civil burden of proof applicable to issues after full trial is inapposite. Although there is power under Ord.12, r.8(5) to order a preliminary issue on jurisdiction, as Staughton L.J. pointed out in the Attock Cement Co. case [1989] 1 W.L.R.1147, 1156D, it is seldom that the power is used because trials on jurisdiction issues are to be strongly discouraged. It is also important to remember that the phrase which reflects the concept 'good arguable case' as the other phrases in Korner's case 'a strong argument' and 'a case for strong argument' were originally employed in relation to points which related to jurisdiction but which might also be argued about at the trial. The court in such cases must be concerned not even to appear to express some concluded view as to the merits, e.g. as to whether the contract existed or not. It is also right to remember that the 'good arguable case' test, although obviously applicable to the ex parte stage, becomes of most significance at the inter partes stage where two arguments are being weighed in the interlocutory context which, as I have stressed, must not become a 'trial'. 'Good arguable case' reflects in that context that one side has a much better argument on the material available. It is the concept which the phrase reflects on which it is important to concentrate, i.e. of the court being satisfied or as satisfied as it can be having regard to the limitations which an interlocutory process imposes that factors exist which allow the court to take jurisdiction.

The civil standard of proof has itself a flexibility depending on the issue being considered and the concept 'good arguable case' has a similar flexibility. It is natural, for example, in a case concerned with a contract where the jurisdiction depends on whether the breach took place within the jurisdiction, but where the issue to be tried will be whether there was a contract at all, not to wish to give even the appearance of pre-trying the central issue, even though the concept of being satisfied must apply both to the existence of the contract and the place of the breach. It is equally natural for the court in the process of being satisfied to scrutinise most jealously that factor which actually provides jurisdiction..." (emphasis added)

14. With respect, I agree with and adopt these observations, which seem to me admirably to describe the type of thought process which is required to take place during an interlocutory debate such as this. In terms of the jurisdictional heads relied upon, therefore, does the Plaintiff have "a much better argument on the material available"? The answer to this question in this case involves scrutiny from the viewpoints of both contract and tort.

The contractual arguments

15. In this regard Mr Whitehead relies upon both Order 11, rule 1(1)(d)(i) and rule 1(1)(d)(iii), albeit potentially consideration of these two rules involves an element of circularity of reasoning, given that the place where the contract was made impacts upon determination of the proper law thereof, and vice versa. In the circumstances, however, it is logical, I think, to take the issue of the proper law first.

16. Rule 1(1)(d)(iii) :

"...the claim is brought [in respect of] a contract which is by its terms, or implication, governed by Hong Kong law"

17. There is no difference between Counsel as to the relevant principles to be applied, Mr Whitehead accepting the submission of Mr Sussex that the Hong Kong Court determines the proper law of a contract by reference to its conflicts rules, so that, when the governing law is not specifically expressed, the determination of the proper law is resolved by either the inferred intention of the parties (Dicey, Rule 180, Sub-Rule 2) or by the system of law with which the contract has its closest and most real connection (Sub-Rule 3).

18. Under these heads I have had the benefit of forceful opposing submissions. For the Plaintiff, Mr Whitehead stressed, inter alia, that the contract in question (the 6th of the sequence) is in English and expressed to be CIF Hong Kong, the parties intended the goods to be delivered to Hong Kong (as with all the earlier contracts), and in fact the purported goods were so delivered. To the contrary, Mr Sussex asserted that the proper law submissions of the Plaintiff were "fanciful", and that in the circumstances all relevant factors pointed to Japan.

19. On the subject of the proper law of a CIF contract, I have also been referred to texts as various as Sassoon, C.I.F. and F.O.B. Contracts, 4th Ed. 1995 (at pp.328-331) and Benjamin's Sale of Goods, 5th Ed. 1997, Cap.19 (at 1247 et. seq.). In this context I note that Sassoon (op. cit. at p.329) observes, inter alia :-

"In determining what is the proper law of a CIF contract, two connecting factors were of particular relevance. The first is the law of the place where the contract was concluded, namely, the lex loci contractus. The second is the law of the place where the contract is to be performed, namely, the lex loci solutionis.

Where a contract is to be performed in the country in which it was concluded these two factors converge...

In cases where the place of performance of the contract is not identical with the lex loci contractus the factors pointing in favour of the law of the place of performance are obviously weaker. Clear authority favouring the lex loci solutionis under such circumstances where f.o.b. contracts are concerned is provided by the Privy Council decision in Benaim v. Debono [1924] A.C.514, but no corresponding decision appears to exist with respect to c.i.f. sales. Most commentators however have concluded that the same principles would apply..."

20. However, as the learned author makes clear, the issue is not free of doubt, further citing Pearson J. in H. Glynn (Covent Garden) Ltd. v. Wittleder, [1959] 2 Lloyds Rep.409, wherein the learned judge stated that there was no prima facie presumption that the lex loci solutionis was the proper law in the case of c.i.f. contracts.

21. Notwithstanding the absence of clear authority, however, in my view the submissions of Mr Sussex on the point are to be preferred. Put shortly, on the facts before the Court the place of making the contract (an aspect which I shall shortly address), the place of shipment, and the place of tender of documents and payment (under the negotiation credit) all point to Japan, so that in my judgment there is no good arguable case for anything other than Japanese law as constituting the proper law of this contract. As Mr Sussex succinctly put it, "everything points one way"; the entire performance of the contract was to take place in Japan, the sole factors providing any connection with Hong Kong being the residence of the buyer and the ultimate designation of the goods (albeit in this latter regard there must be some doubt because of the revolving nature of the five previous transactions and their reshipment back to Japan by the Plaintiff). Accordingly, and with due respect to Mr Whitehead's arguments, I reject the contention that the jurisdictional threshold has been attained by the Plaintiff under Order 11, rule 1(1)(d)(iii).

22. I turn now, therefore, to consider the alternative contractual basis relied upon.

23. Rule 1(1)(d)(i) :

"...the claim is brought [in respect of] a contract which was made within the jurisdiction"

24. The relevant law applicable to determine where the contract was made has been the subject of primary disagreement. Mr Whitehead suggests that this should be the lex fori, that is, Hong Kong law, whilst Mr Sussex turns the point around and argues that it would be very odd if it is the putative proper law which is used to decide if there is a concluded contract, whereas in instances in which there is agreement that a contract is indeed in existence (as here) it should be the lex fori, and not the proper law, which is the determinant for where the contract is made.

25. Surprisingly, there appears to be no settled authority as to which comes first, and I confess that I am attracted to the logic to Mr Sussex's argument. Accordingly, I address this sub-rule on the basis of Japanese law and thereafter, if I be wrong on this approach, I also consider the argument as to where the contract is made as a matter of Hong Kong law.

26. Whatever system of law be applied, however, the objective facts are slightly unusual, and in themselves have given rise to a certain amount of controversy. The affidavit leading the ex parte application, the 1st Affidavit of Mr Fache, observes (at para.11 thereof) that he is

"informed by our agents, Mr Utsumi of Japan Robles of Tokyo, and verily believe, that the Intended Defendant is a company which deals in non-ferrous metals and steel. This contract was negotiated with our agents in Tokyo, Japan..."

27. In fact, the precise sequence of events that appears to have taken place with regard to the contract in question (and for that matter all previous five contracts) was that there was never any direct negotiation between the Plaintiff and the Defendant, and that the signed offer to purchase was sent from the Plaintiff, Ferromin Limited in Hong Kong, to Japan Robles in Tokyo, and thence to Kanto Metal Ltd. (the actual supplier of the carpenter solids whose bankruptcy effectively stimulated these proceedings), and thereafter to the Defendant, Nittetsu Shoji Company Ltd. And that the signed acceptance of such offer proceeded in the reverse direction, that is, from Nittetsu to Kanto to Japan Robles to Ferromin.

28. Why precisely this occurred in this manner represents one of the unexplained curiosities in this case, and it may (or may not) have something to do with why, for example, the container load of "carpenter solids" ostensibly the subject of the 6th contract was apparently the same cargo which had been the subject of the immediately preceding 5th contract, and why this particular load (as was the case with all previous loads) had been dispatched to the Plaintiff in Hong Kong under its contract with the Defendant, only to be (apparently) on-sold by the Plaintiff and shipped back to Kanto Metal in Japan, which by common consent was the original supplier both of the final load together with all previous loads of such carpenter solids.

29. Whatever the explanation, however, given this sequence of events in terms of the offer and acceptance chain of communication, where is it said that the contract was made?

30. Mr Sussex was in no doubt. If Japanese law applied on the point (as he asserted that it did), the evidence before the Court was overwhelmingly in favour of Japan as the loci contractus. In this connection he referred to the evidence of Mr Seo, who concluded that in his opinion, as a matter of Japanese law as contained in Articles 109 and 110 of the Japanese Civil Code,

"...there could be no doubt that in relation to Contract No.P8/28-528 Japan Robles Minerals Company Limited was held out by the Plaintiff as its agent. In arriving at this conclusion, great reliance is placed upon the "Remarks" clause in the contract, which reads thus :-

Remarks: Japan Robles Minerals Company Limited is an exclusive channel for this contract hereto acting as agent and as arranged, if any discrepancy of terms and conditions occurred with the Sellers, Japan Robles Minerals Company Limited retains the right to claim."

31. Mr Seo further notes that, pursuant to Article 110 of the Civil Code :-

"Even if Japan Robles did not have actual authority to accept contractual acceptances on behalf of the Plaintiff, the Plaintiff would nevertheless be bound by a contractual acceptance communicated to Japan Robles, unless the party communicating with Japan Robles had knowledge of its want of authority. This is because an exclusive agent (such as Japan Robles is described in the contract between the Plaintiff and the Defendant) would normally have authority from his principal to contract on his principal's behalf, and that authority would normally include receiving contractual acceptances..."

32. I bear in mind the principle that a Court cannot properly choose between conflicting affidavit evidence in the absence of cross-examination, but the short point in this case, as Mr Sussex pointed out, is that Mr Furuta, the expert invoked by the Plaintiff in reply to Mr Seo, does not respond to the apparent authority argument developed at length by Mr Seo; nor for that matter do I understand, in the circumstances of this case, Mr Furuta's conclusions on the point. Based upon Japanese law as the applicable law, Mr Seo's view that the Defendant communicated its acceptance of the contractual offer (itself made in Japan) to the Plaintiff's agent in Japan, seems to me to be unassailable on the evidence before the Court. As Mr Seo expressed it : "As a matter of Japanese law it could not seriously be argued that the contract was concluded in Hong Kong", a conclusion which, for present purposes, I am minded to accept. Accordingly, on the basis that Japanese law is to be applied to determine where the contract was made, in my judgment no good arguable case has been made out by the Plaintiff under rule 1(1)(d)(i).

33. This perhaps is unsurprising, since the fundamental approach of the Plaintiff, and of Mr Whitehead's submission in this regard, was upon the premise that Hong Kong law was the applicable law under this head, and that on that basis the contract was made in Hong Kong. I now turn therefore to consider this aspect of the argument if and in so far as my earlier conclusion, based upon the application of Japanese law, is incorrect.

34. At the outset I recognise that there is a dispute on the face of the papers as to the status of Japan Robles as the Plaintiff's agent and/or the ambit of Japan Robles' actual authority. Nor do I attempt in this judgment to reconcile or otherwise decide this dispute, although in the circumstances of this case I have some sympathy with Mr Sussex's critique of what he described as the Plaintiff's gradual regression, as the evidence unfolded and as it addressed the case advanced by the Defendant, from the initial position of Japan Robles as its agent to that of Mr Fache's subsequent averment that "Japan Robles was not authorised to accept the Defendant's acceptance of contract but was authorised only to transmit the signed contract back to the Plaintiff", and the classification of Japan Robles as an "introduction agent" only, without authority to conclude contracts on behalf of the Plaintiff. In fact, Mr Utsumi of Japan Robles, whose affidavit is filed on behalf of the Plaintiff, goes so far as to state, in terms of the overall contractual relationship between the Plaintiff and the Defendant regarding the purchase of carpenter solids, that in fact Japan Robles was acting "as agent for Kanto Metal", that it had been engaged by Kanto Metal "to act as co-ordinator and communicator as between the Plaintiff and the Defendant" and that his company had no authority, actual or apparent "to receive, accept or conclude contracts on behalf of the Defendant".

35. Against this background of this dispute as to the ambit of Japan Robles' authority (a dispute characterised by Mr Sussex as amounting on the Plaintiff's side to little more than a summary of legal conclusions within obviously forensic affidavits), Mr Whitehead's submission concentrated upon the principle that where an offer is accepted by means of instantaneous communication, in this case by facsimile transmission (both for the instant contract and all earlier contracts), under Hong Kong law the contract was not concluded until such fax acceptance was received by the Plaintiff in Hong Kong. Mr Whitehead drew my attention in particular to the Hong Kong case of Susanto Wing Sum Co. Ltd. v. Yung Chi Hardware Machinery Co. Ltd. [1989] 2 HKC 504, a decision of Godfrey J. (as he then was) wherein the learned judge observed (op. cit. at 506) :-

"The rule relating to communications by telex is now well settled and the same rule must in my judgment apply to communications by facsimile... In my judgment the like rule must apply where the communication is not to a principal but to an agent with authority to accept the communication. It is accepted for present purposes that the communication was clearly to an agent for the Defendant... but the terms in which its agency is described in the Plaintiff's own evidence admits of no doubt that he must have had full authority, among other things, to receive an acceptance of a contractual offer..."

36. In Susanto Wing Sum, of course, unlike the present situation, there was no issue as to the agent's authority, and after stressing the current dispute as to the position of Japan Robles, Mr Whitehead approached the matter by arguing that notwithstanding the sequence of events wherein the acceptance faxed from the Defendant went the rounds, passing to Kanto Metal and onto Japan Robles before being faxed on to the Plaintiff in Hong Kong, the Court should nevertheless look at the mode of communication chosen by the parties in deciding whether in law the case is or should be considered to be one of instantaneous transmission. He suggested that if the Court accepted that the chosen method of communication was by fax, a mode of communication which in itself is prima facie intended to be instantaneous, that this factor, when considered in context of the serious issue as to the parameters of Japan Robles' authority, was sufficient to attain the "good arguable case" benchmark even if the Court reached the view that it was more probable than not that Japan Robles was entitled to receive such contractual acceptances.

37. This is an ingenious argument, but one which I have difficulty in accepting, because I reject as decisive the argument as to the mode of communication chosen, not least because the practical application of such mode manifestly did not result in instantaneous communication in this case. Further, I agree with the submission of Mr Sussex that the "instantaneous transmission" rule laid down in Entores Ltd. v. Miles Far East Corporation [1955] 2 QB 327 (CA) and Brinkibon Ltd. v. Stahag Stahl [1983] AC 34 (HL) is intended to assimilate the position of contractual acceptances communicated by telex and fax with acceptances communicated inter praesentes. So that, to use the example proffered, if an oral contractual acceptance were to be communicated by A to the authorised agent of B, it could not be argued that the contract was not made until B learned about the acceptance from its agent, and likewise, if A orally communicates a contractual acceptance to a person with apparent or ostensible authority to receive A's communication on behalf of B, a contract would be concluded by that communication at the place where such communication occurred.

38. At the end of the day, as Lord Wilberforce observed in Brinkibon (op. cit at p.42), there is no universal rule to fit all situations :-

" Since 1955 the use of telex communication has been greatly expanded, and there are many variants on it. The senders and recipients may not be the principals to the contemplated contract. They may be servants or agents with limited authority. The message may not reach, or be intended to reach, the designated recipient immediately: messages may be sent out of office hours, or at night, with the intention, or upon the assumption, that they will be read at a later time. There may be some error or default at the recipient's end which prevents receipt at the time contemplated and believed in by the sender. The message may have been sent and/or received through machines operated by third persons. And many other variations may occur. No universal rule can cover all such cases: they must be resolved by reference to the intentions of the parties, by sound business practice and in some cases by a judgment where the risks should lie: see Household Fire and Carriage Accident Insurance Co. Ltd. v. Grant, 4 Ex.D.216, 227 per Baggallay L.J. and Henthorn v. Fraser [1892] 2 Ch.27 per Lord Herschell."

39. In the present case it seems to me, contrary to Mr Whitehead's persuasive submissions, that there is a good arguable case to the effect that, consequent upon the 'Remarks' clause in the contract, Japan Robles indeed had authority to receive the contractual acceptance on behalf of the Plaintiff; for my part, the words "exclusive channel for this contract hereto acting as agent..." appearing in that clause in my view point in one direction only. However, for present purposes I do not have to go this far, given that in all the circumstances it is abundantly clear that, qua the Defendant, as a matter of Hong Kong law Japan Robles clearly had apparent or ostensible authority to receive such acceptance, and could not convincingly be suggested to be analogous to a mere post office or postal box, particularly since there was no evidence of any express limitation communicated to the Defendant (or indeed to anyone) as to any restriction of authority on the part of Japan Robles. Accordingly, in my view this is sufficient in itself to take the case out of the ambit of rule 1(1)(d)(i).

40. In addition, and if such be necessary, I accept a further 'waiver' point relied upon by Mr Sussex, based upon the following observations of Lord Parker in Entores (op. cit. at 336) :-

"Since, however, the requirement as to actual notification of the acceptance is for the benefit of the offeror, he may waive it, and agree to the substitution for that requirement of some other conduct by the acceptor. He may do so expressly, as in the advertisement cases, by intimating that he is content with the performance of a condition. Again, he may do so impliedly, by indicating a contemplated method of acceptance, for example by postal telegram. In such a case he does not expressly dispense with actual notification, but he is held to have done so impliedly on grounds of expediency..."

41. Applying this to the facts of the instant case, Mr Sussex suggested, with some justification, that where, as here, the contractual offer is conveyed by Ferromin to Japan Robles to Kanto to Nittetsu, if Nittetsu adopts the like course in reverse in communicating its acceptance, then irrespective of the state of Japan Robles' authority, it is highly arguable that Ferromin has impliedly waived the requirement of the actual communication of Nittetsu's acceptance to Ferromin itself.

42. On the basis of the foregoing, therefore, and if I be wrong in the primary position of applying Japanese law to decide where the contract was made, in my judgment, the same result enures with the application of Hong Kong law. Accordingly I hold that, upon either basis, the Plaintiff has failed to bring itself within rule 1(1)(d)(i).

43. I turn now to the third leg of the argument relied upon to justify the assertion of jurisdiction.

The Tort Argument

44. Rule 1(1)(f) :

"...the claim is founded on a tort and the damage was sustained, or resulted from an act committed within the jurisdiction."

45. Towards the end of the hearing, Mr Whitehead was moved to remark, in answer to a query from the Bench, that he had "always been of the view" that the claim under (f) was his best point, whilst in his skeleton argument he had also gone so far as to say that although this case had a contractual genesis, "the Plaintiff's claim is clearly substantially one in tort". Possibly these submissions were made with the optimism of an advocate who was warming to what was perceived as the most winnable theme, but the stark fact remains that for a point which latterly assumed such high profile, its beginnings were hardly auspicious.

46. The claim under (f) found no place whatever in Miss Frew's affidavit leading the ex parte application for leave to serve out, and I suspect, from a reading of the transcript of the hearing before Barnett J., that it was only Mr Whitehead's sureness of instinct that caused him to introduce sub-rule (f) into his address at the ex parte stage. I bear in mind, however, that this was an urgent application wherein obtaining the Mareva injunction was perhaps then the predominant consideration from the Plaintiff's point of view, and there is no doubt that sub-rule (f) was placed before the learned judge. However, it is perhaps fair also to note that in itself the treatment accorded to this sub-rule has not been consistent.

47. At the ex parte hearing, the case in tort was advanced as the tort of deceit, reliance in this regard being placed primarily upon the tender to the negotiating bank, the Tokai Bank in Tokyo, of an antedated bill of lading. As to the latter, such was clearly a deception practised upon the negotiating bank, which as a consequence paid the Defendant, pursuant to the terms of the credit, before reverting to the Plaintiff's bank MeesPierson, the issuing bank, for reimbursement pursuant to the inter-bank engagement arising out of the letter of credit.

48. As the argument progressed, however, it became clear that the entire emphasis had changed, and that reliance on the antedated bill of lading had been all but abandoned. Derry v. Peek fraud remained, but solely in the guise of a fraudulent misrepresentation said to be contained in the contractual description clause.

49. In this connection it is worth noting at the outset that I do not accede to Mr Sussex's submission that, as a result of this change of tack, the claim under this head in any event should be dismissed in accordance with Parker v. Schuller principles (nor for that matter do I accept his additional proposition that, so far as the tort head is concerned, there is no serious issue to be tried on the merits). Nevertheless I do consider that there are very real conceptual difficulties with this argument, which Mr Sussex categorises as the inappropriate 'shoehorning' of what is fundamentally a contract case into an unreal and unsustainable tort claim.

50. In principle, I think that Mr Sussex is correct when he says that it is very difficult to see how the contractual description in this case can or could constitute a representation founding the tort of deceit, given that the primary ingredient of this tort is that the Defendant must make a representation knowing it to be untrue, or having no belief in, or being reckless as to, its truth; in addition, of course, it must be shown that the Defendant intended that the Plaintiff should act in reliance upon that representation and that the Plaintiff in fact acted in reliance on the representation to his/its detriment.

51. This was a CIF contract, Mr Sussex submitted. As such, it was a sale by description and all that the Defendant had to do was to tender the documents relevant to the 'carpenter solids' as shipped; indeed, notwithstanding the content of the 6th contract dated 19th January 1998, the goods in question could have been purchased for on-sale well after the end of January 1998. So that on 19th January 1998, which was the date of this contract, the Defendant necessarily need have had no idea where the subject goods were going to be obtained, and from the mere contractual description, there could be no clear inference one way or the other as to what was or was not the Defendant's intention. And, the argument went, whatever may have happened after Kanto Metal Ltd. went into liquidation at the end of January 1998 (thereby triggering the Plaintiff's request for inspection of the goods and the presentation of the antedated bill of lading), these were matters which could not constitute material from which it was possible to infer a dishonest intention on the part of the Defendant as at the contract date, namely 19th January 1998.

52. To the contrary, Mr Whitehead argued forcefully that the contract signed by the Defendant, which contained the misrepresentation in the contractual description, was received by the Plaintiff and acted on to its detriment in Hong Kong in terms of the opening of the relevant letter of credit, significant damage thereafter having been suffered within the jurisdiction, in that as a result of the acts of the Defendant the Plaintiff's bank account had been debited in Hong Kong. And further, even if the Court were to be unsure as to this analysis, the Plaintiff still succeeded because all that it had to show was a good arguable case, which did not require proof to the civil standard.

53. It is fair to say, as Mr Whitehead surmised, that the Court was indeed unsure at the time of hearing the argument. However, on reflection I am against Mr Whitehead on the point. In the circumstances of this case, I cannot see how a contractual description such as this can be moulded into the profile of a misrepresentation sufficient to meet the requirements of the tort of deceit, nor do I think that on this basis the Plaintiff can establish a directly causative link in terms of loss, which arose not as the result of opening the contractually required credit, but as the consequence of the negotiation of that credit by the Defendant with the Tokai Bank in Japan. In fact, in the context of the present argument as to whether the contractual description can amount to the misrepresentation which is asserted, I tend to agree with Mr Sussex that, far from constituting a good arguable case for a tort claim under rule 1(1)(f), when put this way there is a real doubt that it constitutes a tort at all. Accordingly, whether this issue be governed by Japanese or by Hong Kong law (and given that all the Defendant's actions of which the Plaintiff complains took place in Japan, it seems highly likely that Japanese law would be the proper law of the tort), I find further that the Plaintiff has failed to make out a good arguable case falling within rule 1(1)(f).

54. To this I would add that should I be wrong in this, and should I have concluded, as Mr Whitehead confidently asserted, that a tort of the type relied upon had in fact been committed, I should have gone on to find, on the basis of the several authorities placed before me, that by reason of the debiting of the Plaintiff's account by its bank in Hong Kong, a good arguable case had been established that the ingredient of damage was sustained within the jurisdiction.

(2) Forum Conveniens

55. Given my conclusions under the jurisdiction head, detailed consideration of the issue of forum conveniens is unnecessary. In the present case the jurisdictional arguments under both the contractual and the tort heads are suffused with what Mr Sussex has termed, appropriately in my view, an "essential Japaneseness", with the only definitely Hong Kong elements being the Plaintiff's residence and the fact that the bill of lading tendered during the negotiation of the credit by the Defendant in Japan evidenced shipment of the goods to Hong Kong (which, notwithstanding the on-sale arrangement which appeared to have been effected, appeared at that stage to be the ultimate destination of the goods).

56. In other words, on the conclusions I have presently reached under the individual heads of Order 11, it is not difficult further to conclude that the case is in any event not a proper one for service out of the jurisdiction, in that the Plaintiff has not succeeded in demonstrating to the Court that Hong Kong constitutes the forum conveniens for the trial of this action. To the contrary, in the circumstances, the Courts of Japan would appear to be distinctly more appropriate to deal with the matters arising, so that the interests of justice are best served by further proceeding in Japan, to this I would add that when looked at inforum conveniens terms I do not attach any great importance to the so-called juridical disadvantages (regarding limited costs, statutory interest and restricted discovery) which would allegedly beset the Plaintiff should the matter be litigated in Japan. So that in this connection, if such be necessary, I also find in favour of the Defendant on the issue of forum conveniens.

57. There is no need to go further for present purposes, although for completeness I note that if and in so far as Mr Whitehead had got home on the basis of the Plaintiff's tort claim as the jurisdictional basis for leave to serve out, in this instance I should have been nevertheless inclined to refuse leave on the basis of forum conveniens alone. In this connection, I agree with Mr Sussex that this case is essentially a contract case which belongs in Japan, with the Defendant being in Japan, the witnesses for the most part in Japan, and the events having taken place in Japan. This view is to some extent fortified by the further evidence of Mr Seo to the effect that the Plaintiff is currently in litigation in Japan against a large Japanese trading company, Nissho Iwai Corporation, in a case commenced in May 1998 in the Tokyo District Court, which is a court familiar with the background to transactions initiated by Kanto Metal and which other case arises out of similar circular transactions to the present whereby carpenter solids were sold by Nissho Iwai, acting as a commission agent for Kanto Metal, to the Plaintiff, and shipped from Japan to Hong Kong, such goods then being sold by the Plaintiff to Kanto Metal and thereafter shipped back to Japan.

58. In all the circumstances, therefore, it is hard to avoid the conclusion that the tort claim in this case was formulated in the way that it was solely for jurisdictional purposes, and given the established principle that a litigant cannot plead beyond the terms of his leave, to permit a case to be run in this jurisdiction on the basis of tort alone would not, in my judgment, constitute "a proper case" for service out, and in the circumstances would represent an arbitrary application of Spiliada principles.

Submission to the Jurisdiction

59. A separate point which was run in tandem by the Plaintiff is that in any event the Defendant has submitted to the jurisdiction of the Hong Kong Courts by virtue of a request contained in its solicitors' letter dated 28th April 1998, which was sent prior to the issue of the current Order 12, rule 8 summons, wherein the Defendant's solicitors gave notice pursuant to Order 24, rule 10 of a wish to inspect documents referred to in the Plaintiff's Points of Claim filed on 8th April 1998, a request repeated in the solicitors' second letter of 30th April 1998.

60. Mr Whitehead argued that in the latter letter, the Defendant's solicitors effectively contend that the purpose of the Order 24, rule 10 request was to address the question of jurisdiction in an intended Order 12, rule 8 application, an act which he says is "wholly at odds" with an Order 12, rule 8 application. He submits that it is not open to the Defendant to give a formal Order 24, rule 10 notice compelling the Plaintiff to make available to the Defendant all documents in its claim, which notice the Plaintiff duly acted upon, whilst at the same time asserting that the Defendant may or may not make an application under Order 12, rule 8. This, says Mr Whitehead, was clearly a step in the action, and as such constituted a submission to the jurisdiction.

61. Mr Sussex protests that this is nonsense. It was absolutely clear that those instructing him had flagged throughout the intended Order 12, rule 8 application, and that it was both obvious and understandable why they had sought the documents under Order 24, rule 10, in particular copies of the 5th and the 6th contracts. What was relevant was the sequence of transactions for the purpose of determining where contractual acceptance took place. Mr Sussex directed the attention of the Court in particular to the observations of the English Court of Appeal in Chambers v. Starkings (1992) (unreported, Transcript of Judgment) wherein Farquharson L.J., in the context of a waiver argument advanced in an Order 12, rule 8 application, and on facts involving a second acknowledgement of service erroneously served and the lodgment of a defence pending determination of appeal, observed as follows :-

"...The disinterested bystander with knowledge of the facts of the case and in particular of what had passed between the parties' solicitors would have been in no doubt that the defendant had mounted and was vigorously maintaining a challenge to the validity of the service of the writ. The lodgment of a further acknowledgment of service and the service of a defence would rightly have been viewed by him as conditional upon that challenge failing. Accordingly there was no waiver of the defendant's rights...."

62. In this case, says Mr Sussex, the disinterested bystander could have been under no misapprehension as to the true situation.

63. I agree. In my view the point is without merit, and I reject it.

Conclusion

64. During his submissions, Mr Whitehead was moved to remark that it "cannot be right" that against the factual background of the present case, the Defendant could effectively "thumb his nose" at the Hong Kong Commercial Court and dictate that the Plaintiff must litigate in Japan. As Counsel are aware, I had initial sympathy with this view, and said as much in terms. However, whilst I understand Mr Whitehead's indignation, the hard fact remains that the law requires the exercise of a real degree of caution before allowing a writ to be served out of the jurisdiction. The term "exorbitant jurisdiction" has perhaps gone out of fashion in recent years, but in my judgment it still represents the law that the Court should not seek to invoke its jurisdiction over a foreigner as a result of straining any of the subheads of Order 11, rule 1(1). The requirements for the assumption of jurisdiction pursuant to Order 11 are well-established, and must be applied in a manner which resolves doubt in favour of the foreigner sought to be impleaded. Accordingly, if and in so far as the rigorous application of principle produces a result which may not generate any degree of enthusiasm, this perhaps is the price to be paid for the way in which the law has developed in this area.

65. It follows from the foregoing, therefore, that the Order of Barnett J. dated 17th February 1998 giving leave to the Plaintiff to issue the writ of summons herein and to serve the same upon the Defendant out of the jurisdiction is discharged. I make an Order nisi that the costs of and occasioned by this action, including the application herein, be paid by the Plaintiff to the Defendant, to be taxed if not agreed.

66. With regard to the Order of Barnett J. imposing a Mareva injunction upon the Defendant, it is agreed by Counsel that this injunction is parasitic and can only survive in the event of the jurisdiction asserted over the Defendant being upheld. This is not the case. To the contrary, such jurisdiction purportedly so exercised has now been set aside. In the circumstances, in my view the appropriate Order is that the injunction in Mareva form granted by Barnett J. on 17th February 1998 be discharged, with costs to the Defendant, to be taxed if not agreed. I further order that this Order is to take effect at 4.00 p.m. on 2nd February 1999, absent any application to the contrary by the Plaintiff.

67. I thank both Counsel for their considerable assistance.