WO FUNG PAPER MAKING FACTORY LTD v. SAPPI KRAFT (PTY.) LTD

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. The writ of summons was issued on the 10th March 1987. By an order dated the 13th March 1987, a Master of the Supreme Court granted leave to issue a concurrent writ of summons against the defendant and to serve the same out of jurisdiction in South Africa. An Acknowledgement of Service was filed on behalf of the defendant on the 15th July. Under O.12, r.8 of the Rules of the Supreme Court, the defendant was entitled to file a summons to challenge the Court's jurisdiction within 14 days thereafter. Hence, the last day to file an O.12, r.8 summons fell on the 29th July.

2. An O.12, r.8 summons together with a supporting affidavit was prepared and made ready for filing on the 29th July. When the filing clerk of the solicitors for the defendant presented the documents for filing, the Supreme Court Registry "refused to issue the summons" and apparently also refused to accept the supporting affidavit for filing. Refused, they certainly were. As understood by the filing clerk of the solicitors for the defendant, a judicial clerk in the Supreme Court Registry, to whom the documents were presented, spoke to the Chief Judicial Clerk and thereafter he, the filing clerk was  told that the estimated time of three minutes endorsed on the summons was unrealistic. The filing clerk was instructed to obtain clarification from the solicitor in charge. The filing clerk reported to the litigation clerk of the solicitors for the defendant by telephone, and as the solicitor in charge was not then available in the office, matters had to be left in abeyance. When the solicitor in charge finally came to be informed of the incident, he advised to be offered an explanation, in effect, that the three minutes estimated time was designed to cater for a brief hearing for directions, and the litigation clerk was thereupon requested to immediately arrange for the documents to be filed on the same day. Apparently, instructions to the litigation clerk must have been given before the closing of the Supreme Court Registry for the day. By the time further instructions reached the filing clerk, it was too late to have the documents filed, including the summons in question issued before the Supreme Court registry closed. The next day, the same summons and supporting affidavit were presented to and accepted for filing by the Supreme Court Registry.

3. It is conceded that the summons was thus out of time as prescribed by O.12, r.8(2) which reads as follows:

"(2) Order 3, rule 5, shall apply in relation to the period of 14 days mentioned in paragraph (1) with the modification that the said period may be extended by the Court only on an application made before the expiry of the period."

4. The summons filed out of time came before another Master of the Supreme Court. An oral application was also made by counsel for the defendant to extend time. On behalf of the defendant, two main arguments were advanced: first, the court has inherent powers to extend time for challenging jurisdiction under O. 11; secondly, also under inherent jurisdiction, as well as O. 32, r.6, the court may entertain an application for discharging the ex parte order allegedly obtained without a full disclosure.

5. There were a series of Purchase Orders between the plaintiff and the defendant. The learned Master refused to extend time. He came to the conclusion that there was non-disclosure by the plaintiff on its ex parte application under O.11 for leave to issue and serve the concurrent writ out of jurisdiction, but he declined to disturb the order in respect to Purchase Orders 54 and 55. However, he acceded to the defendant's request to discharge that ex parte order in respect to Purchase orders 72-77. From this order of the learned Master, being both partially dissatisfied, the plaintiff and the defendant respectively appeal.

6. It is now agreed on all hands that there is no power to extend time under O.3, r.5 for making an application to challenge the O.11 order. Counsel for the plaintiff submits as he did before the Master that the Court has also no residual inherent Jurisdiction to enlarge time for the filing of the defendant's summons. The plaintiff was successful on this limb of its arguments before the learned Master, and from that determination it is the defendant who now appeals.

7. Counsel for the defendant contended before the Master as he does today that the court has inherent jurisdiction to extend time and should have time extended on the merits. Counsel had not begun to canvass the merits before the learned Master because of the view he took on inherent jurisdiction.

8. Counsel for the defendant further argues as he did before the Master that at all times the court has jurisdiction under O.32, r.6 and inherent jurisdiction to entertain an application for discharging an ex paste order, such as that obtained by the plaintiff hereunder O. 11, on account of material non-disclosure. The learned Master decided that he had jurisdiction to entertain the application but was prepared only to discharge part of the order In the manner I have alluded to. Against these partial refusal of the learned Master, the defendant now appeals and desires to have the order completely discharged with effect to also Purchase Orders 54 and 55. As for the plaintiff, it appeals against the Master's decision that he had inherent jurisdiction as well as jurisdiction under O.32, r.6 to entertain an application to discharge an ex paste order for material non-disclosure. The plaintiff further seeks to set aside the Master's order insofar as it is favourable to the defendant.

9. The parties invited me to determine the question of jurisdiction first. I acceded to their request. I held that the court has inherent jurisdiction to extend time despite the absence of any time summons filed within the 14 days prescribed by O.12, r. 8(2). However, I had some reservation as to how such inherent jurisdiction ought to be exercised. Further submissions were invited. I further held that the court has inherent jurisdiction and jurisdiction under O.32, r.6 to discharge an ex parse order for alleged material non - disclosure. I have since given full reasons for those determinations.

10. Counsel for the plaintiff protests as to the use of Mr. Arnold's affidavit to explain the late filing of the O.12, r.8 summons. Mr. Chan claims to be entitled to hold the defendant to its alleged election before the learned Master. On behalf of the defendant, two issues were then raised, namely that the summons filed was, in effect, in time and that alternatively, the court had jurisdiction to extend time. On both issues, the learned Master reached a conclusion adverse to the defendant. The defendant, so Mr. Chan submits, must stand or fall by its election before the Master not to introduce affidavit evidence as to the circumstances of the filing of the O.12, r.8 summons. There was yet a further complication: Mr. Arnold's viva voce evidence was in fact offered to the learned Master who was nevertheless told that matters relating to steps taken by the filing clerk had to be based on double hearsay as he was no longer in the employ of the defendant's solicitors. The learned Master declined to hear Mr. Arnold but suggested an adjournment to enable the filing clerk to swear an affidavit. On instructions, counsel for the defendant, Mr. Ma, did not take advantage of the offered adjournment as he then understood that the filing clerk could not be readily located. Before me, Mr. Ma states on instructions that in fact both clerks are now still being with the firm of the defendant's solicitors. Counsel has no clear instructions as to whether the filing clerk had once left the defendant's solicitors' firm and returned or whether his instructions before the learned faster as to the unavailability of the filing clerk was erroneous. Mr. Ma is attended to by another solicitor today.

11. Counsel for the defendant now abandons the first argument before the learned Master, that is to say that the summons was in effect within time. Mr. Arnold's affidavit relating to the circumstances in which the O.12, r.8 summons was refused is proposed to be relied on for merits as to whether the inherent jurisdiction of the Court should be exercised. The learned Master held against the defendant on the Court's inherent jurisdiction to entertain an application for extension of time and merits were not examined. In these circumstances, it cannot be said that there was a binding election or that if the defendant had stood on its election, any issue was determined on that basis to the plaintiff's prejudice. I shall therefore regard myself as entirely free to accept Mr. Arnold's affidavit.

12. Mr. Chan, counsel for the plaintiff, interprets parapgraphs 6 and 7 of Mr. Arnold's affidavit as no more than a mere request for further clarification by the Supreme Court Registry, and he submits that in fact t there was no refusal on the 29th July to accept for filing the instant summons. In paragraph 6 of Mr. Arnold's affidavit, it was made reasonably clear that the ligitation clerk informed him "that the court had refused to issue the summons because the Clerk of Court felt that time limit endorsed on the summons (3 minutes) was unrealistic". In paragraph 7, the filing clerk conveyed to Mr. Arnold what he understood to be the reason for the rejection: "the judicial clerk at the Registry who was presented with the summons conferred with the Chief Judicial Clerk and instructed (the filing clerk) to obtain clarification from the solicitor (having) conduct of the matter in relation to the time estimate given." Attempted issuance of the instant O.12, r. 8 summons was indeed refused.

13. I have decided that the court has inherent jurisdiction to extend time despite the expiration of the 14 days without a time summons. How is it to be exercised? It has been said that "the overriding feature of the inherent jurisdiction of the Court is that it is part of procedural law....... and not a part of substantive law." Therefore, it stands to reason that if the Rules are not deficient, the inherent powers of the Court should not lightly be invoked to contravene any express provisions in the Rules. Guidance comes readily from the observation of Coetzee J. in Western Bank Limited v. Packery⁽¹⁾:

"Thus, where a particular matter is provided for by the Rules, and they can, therefore, not be said to be deficient in that respect, the scope for the exercise of inherent powers is limited to prevention of abuse of his process."

14. At the same page between G and H, the same South African Judge noted the narrow compass within which inherent jurisdiction was exercised to interfere with the Rules in the the Transvaal before 1965, i.e. the courts had only "(1) extended provisions as to time for the doing of any act and (2) condoned certain irregularities or non-compliance with the Rules." In both categories of cases, there was no "express provision to the contrary" but in addition, there were "proper circumstances".

15. Indeed, even in a deserving application, the inherent jurisdiction of the Court should be exercised with "great caution and only in a clear case". See another South African case Hudson v. Hudson & Anr.⁽²⁾ per De Villiers, J. A.

16. In a further South African case Moulded Components v. Coucourakis & Anr.⁽³⁾, Mr. Justice Botha of the Witwatersrand Local Division observed, in the absence of any rules extending power of inspection in "action" to "applications" :

"If justice requires an inspection of an object, in application proceedings, I consider that the court will exercise an inherent jurisdiction to order production for such inspection. I should add, however, that I have no doubt that such a situation would be an unusual one and that this is a power that the court would exercise very sparingly."

17. Citation here of South African Authorities is liberal as our Supreme Court Library carries only one reference text on the topic of inherent jurisdiction, "The Inherent Jurisdiction of the Supreme Court" by Jerold Taitz, a Cape Town University Senior Lecturer. There is, however, a short article of Master Jacob in (1970) 23 Current Legal Problems pp. 23-52.

18. Even if the same constraint were self-imposed outside South Africa, when the Rules are wholly adequate, there seems as be little recent judicial reluctance to circumvent them with leave granted under inherent jurisdiction. In The Venus Destiny ⁽⁴⁾ ,O.13, r.6. R. S. C. precluded the plaintiff from entering judgment in default of appearance on a writ containing also a claim for an injunction, and Lord Goff, as he now is, granted leave to enter judgment on the claim and ordered the Mareva injunction to continue in aid of execution. Inherent jurisdiction has thus been invoked in defiance of the strict provision of the Rules.

19. In Montreal Trust Company v. Churchill Forrest Industries (Manitoba) Limited⁽⁵⁾, the Canadian Manitoba Court of Appeal had this to say:

"Inherent jurisdiction cannot, of course, be exercised so as to conflict with a statute or rule. Moreover because it is a special and extraordinary power, it should be exercised ally sparingly and in a clear case."

20. It seems reasonably clear that "statute or rule" in the Montreal Trust Co. case was meant to refer to law and regulations which have legislative force. The entire passage in that case reads as follows:

"Certain other features of inherent jurisdiction pointed out by Master Jacob are relevant for us to note. Inherent jurisdiction is derived not from any statute or rule but from the very nature of the Court as a Superior Court : 'the jurisdiction which is inherent in the Superior Court of law is that which enables it to fulfill itself as a court of law'. Inherent jurisdiction cannot, of course, be exercised so as to conflict with a statute or rule. Moreover, because it is a special and extraordinary power, it should be exercised only sparingly and in a clear case.

21. In paragraph 14, volume 37 Halsbury's Laws of England, 4th ed., the position is succinctly stated:

"In the ordinary way, the Supreme Court, as a superior ourt of record, exercises the full plentitude of judicial power in all matters concerning the general administration of justice within this territorial limits, and enjoys unrestricted and unlimited powers in all maters of substantive law, both civil and criminal, except in so far as has been taken away in unequivocal terms by statutory enactments." (Emphasis is mine).

22. To challenge or dispute an application for leave to issue and serve a concurrent writ out of jurisdiction under O.11, O.12, r.8 now provides the procedure. After Acknowledgement of Service, an application must be made within 14 days and the 14 days may be extended by the Court only on an application made before the expiration of that period See O.12, r. 8(2). This provision has been described by Robert Goff, J., as he then was, in Carmel Exporters (Sales) Ltd. v. Sea Land Services Inc⁽⁶⁾ as "a rigid and draconian provision, which could have very harsh consequences". At p. 991f, the learned judge reiterated O.12, r. 8(2) as a "draconian provision of the Rules of Supreme Court .......to prevent the party in error from curing his mistake"; at p. 993 c-d the same sub-rule was said to be one of "exceptional rigidity" which "contrasts forcibly with the flexibility which is now generally characteristic of the Rules of Supreme Court, and which enables the Court to ensure that justice is done". The learned judge selected the mataphor, "the guillotine" for this determinative provision. I have attempted to illustrate that sufficiency of the Rules of Court is no bar to the operation of inherent jurisdiction, but the more stringent the provision in the civil code is, the more exceptional the circumstances need become for calling in aid the inherent jurisdiction of the Court.

23. What then are the circumstances which would justify the exercise of my inherent jurisdiction in respect to a late summons with a late application to extend time in the light of O.12, r.8(2)?

24. O.12, r. 8(2) setting a limit for the filing of a time summons is a rule from which there seems to be no escape, but nevertheless it is only a procedural rule. Like sentiments were expressed by Roper, J. in Moluele & Ors. v. Deschatelets, N.O. ⁽⁷⁾. In that case, counsel sought to equate a rule of court as to time with a time limit laid down by statute law, and it was argued that just as in the case of any act or thing required to be done within a statutory period, time fixed by a rule of court was a condition precedent to its jurisdiction and compliance could not be dispensed with. At p. 675 Roper J. gave the following ruling :

The Legislature not having seen fit to impose a time limit as in appeals from Witwatersand Local Division, it is in my view unlikely that, in fixing a time limit by the rule, the Judges themselves would have intended to limit their own jurisdiction, or to deprive themselves of the power of relaxing the rule where considered necessary in the interest of justice. The court has not hesitated to relax the provisions of other Rules, even when peremptory in form, when necessary in the interest of justice."

25. At page 677, Roper, J. commended the following matters for the exercise of the court's inherent jurisdiction:

"In considering whether the justice of the case requires relaxation of the strict terms of the rule which has been contravened, the court will of course take into account such factors as the nature of the default or negligence, if any, which led to non-compliance, the degree of hardship which will be caused to the party in default if condonation is refused, and any hardship or substantial injustice which may possibly be caused to the other party if relief is granted."

26. Purely on inherent jurisdiction to extend time, an example may be found in R. v. Bloomsbury and Marylebone County Court, ex parte Villerwest Limited⁽⁸⁾, where time imposed by an order of a judge was extended.

27. There was no question of default or negligence. The documents presented for filing were rejected, and what followed was quite unexpected with the solicitor being out of the office resulting in instructions not duly transmitted to the filing clerk in time for a second attempt to be successfully made on the same day. The degree of hardship is telling: without a summons within time the defendant would not be permitted to call upon the plaintiff to justify, on the usual grounds, the institution of proceedings within jurisdiction against a foreign South African company. Without the summons, the defendant would he herded into the narrower confine of a complaint for material non-disclosure.

28. Botha, J. of South Africa in the Moulded Components v. Coucourakis & Anr.⁽³⁾ had this to say:

"I think that the court will exercise an inherent jurisdiction whenever justice requires that it should do so. I shall not attempt a definition of the concept of justice in this context. I shall simply say that, as I see the position, the court will only come to the assistance of an applicant outside the provisions of the Rules when the court can be satisfied that justice cannot be properly done unless relief is granted to the applicant."

29. The defendant's proposed challenge to the court's jurisdiction under O.11 is not frivolous, unmeritorious or idle. Its grievances are teal and substantial.

30. If the activities of the Supreme Court Registry had been wholly disrupted by some natural calamities without negligence or default on the part of the intended applicant, cases in which our Courts would refuse to exercise inherent jurisdiction to extend time so as to enable the making of a concerned challenge to jurisdiction under O.11 must be rare. In the instant case, the non-compliance with O.12, r.8(2) was unusual. Cirumstances are, in my view, proper for indulgence to be granted to the defendant for ventilating their objection to the court's Jurisdiction under O.11. In the exercise of my inherent jurisdiction, I accede to the defendant's application for extending time for filing the instant summons to the 30th July. That would in effect make the instant summons as one duly filed for the purposes of O.12, r.8.

31. Having allowed an extension of time to the defendant, I should now state the facts : Four Purchase Orders A050/85 to A053/85 were completed. The plaintiff claims against the defendant on eight Purchase Orders. They are : A054/85 andA055/85, allegedly in one set with four Purchase Orders already completed, and A072/86 to A077/86 which are a further six Purchase Orders in another set. I shall call them Purchase Orders 50-55 and 72-77. The plaintiff claims damages for non-delivery under Purchase Orders 54 and 51 and 72-77.

32. Each alleged Purchase Order was for 500 metric tonnes. For Purchase Orders 54 and 55 and 72-77, the total quantity was 4,000 Metric Tons, but for the plaintiff's claim for loss of profit, a quantity much in excess of 4,000 Metric Tons is included in the 2nd Schedule to the statement of claim. No one before me, including counsel for the plaintiff, is able to decipher this enigmatic 2nd Schedule in which grossly inflated tonnage appears in the computation of alleged loss of profit.

33. Letters of Credit had been opened for Purchase Orders 54 and 55 and 72-74. As for Purchase Orders 75-77, no Letter of Credit was opened "by reason of the fact that the defendant had not been able to give any shipment dates to the plaintiff in aspect of these contracts and by reason of" the defendant's alleged breaches under the other Purchase Orders 54 and 55 and 72-74.

34. The defendant denies these Purchase Orders as concluded contracts. The defendant claims that its procedure for entering into a binding Sales Contract had consistently been in two stages : after a Purchase Order was signed by the agent or by itself, first the prospective buyer had to furnish the defendant with specifications, giving details of width requirements; secondly, the defendant would despatch to the prospective buyer an "Acceptance of Order" if the defendant was able to meet the specifications. The standard form of an "Acceptance of order" expressly stipulated that "all orders are accepted subject to our standard terms and conditions of sale (especially our terms in respect of deliveries, ownerships, risks, claims and payment) which standard terms and conditions you acknowledge you are fully conversant with and have in your possession". Goods together with an invoice would thereafter be delivered after the receipt of a Letter of Credit in, an acceptable format.

35. In each of these Purchase Orders, whether or not it be a binding contract, the express stipulation was that the plaintiff must cause "specifications to be advised 30 days before shipment".

36. The defendant also seeks to rely on the standard terms and conditions of sale, but there is no documentary evidence before me that the plaintiff had ever agreed to them, although they were referred to in the Acceptances of Order said to have been despatched to the plaintiff for Purchase Orders 50, 51, 52 and 53. However, the plaintiff denies having received any Acceptance of Order and claims to he unaware of these standard terms.

37. For Purchase Orders 54 and 55, specifications were given by telex to the defendant by the defendant's Hong Kong agent, Irraffe Trading Company Limited, on the 24th December 1985, but there was no confirmation from the plaintiff. As early as the 7th February 1986, the defendant telexed its said Hong Kong agent that Purchase Order 54 and 55 were not accepted. By a further telex of the 12th February 1986, the defendant reminded its said Hong Kong agent that all of the Purchase Orders could not be accepted as there was no "machine capacity". According to the defendant, there was consequently no Acceptance of Order sent for Purchase Order 54 or Purchase Order 55.

38. As for Purchase Orders 72-77, the defendant put its said Hong Kong agent on notice of lack of machine capacity also by the last-mentioned telex of the 12th February 1986. Admittedly no specifications were ever given. The defendant claims that therefore there was no Acceptance of Order for any of these Purchase Orders 72-77. By a further letter dated the 12th March 1986, the defendant emphasized to its said Hong Kong agent that the defendant could not accept the 8 Purchase orders sued upon in this action.

39. The defendant's said Hong Kong agent has absconded, and there is no evidence that these defendant's telexes to Irraffe were then communicated to the plaintiff.

40. By a letter dated the 22nd May 1986, the plaintiff pressed the defendant for delivery under Purchase Orders 54, 55, 72 and 73. The defendant did not respond directly to the plaintiff but telexed its said Hong Kong agent twice expressing surprise at the plaintiff's demand for delivery under Purchase orders which had not been accepted. By a further letter dated the 16th June 1986, the plaintiff complained of lack of response to its previous letter of the 22nd May and held the defendant responsible for non-deliveries under all these Purchase Orders.

41. Apparently, the parties embarked on some negotiation. It was thereafter, on the 24th October 1986 that the defendant telexed the plaintiff direct. The plaintiff was told that its proposal was unacceptable, and if the plaintiff had no prior knowledge of the defendant's stance, this direct telex left it in no doubt that none of the Purchase Orders in question was said to have been ever accepted. In fact, the plaintiff had prior knowledge because in an earlier direct telex from the defendant sent more than 3½ months before on the 7th July 1986, the plaintiff was given references of the defendant's past communications with its said Hone Kong agent ending with a repeated message of the defendant's lack of machine capacity and its non-acceptance of the Purchase Orders in question.

42. Whilst counsel for the defendant relies on that telex for prior notice of there being no accepted contract; counsel for the plaintiff seeks to make capital of a passage in it as an admission that the defendant had in fact no difficulty with capacity but declined to complete except for a higher price. The passage reads :

"We do no longer produce 125 gm/2 liner as our machine cannot produce product profitability unless price 400 USD per MT".

43. That passage could very well be understood as meaning that the defendant had no machine available for production but that with the right price, adjustment could be made or equipments spared for manufacturing a particular type of merchandise.

44. According to the general manager of the defendant, the shortfall in machine capacity was genuine as there were production problems in its newly opened mill and its said Hong Kong agent had been instructed to include in all the Purchase Orders negotiated thereafter, a proviso :

"This order is accepted subject to production space available."

45. This passage in the telex of the 7th July, when tested against these versions, provides no instant answer.

46. It is the plaintiff's case that all the Purchase Orders were binding, having been entered into by a properly constituted agent in Hong Kong. It is stressed that the proviso set out above had itself presupposed an order as having been "accepted subject to production space available".

47. Although Letters of Credit had been established for Purchase Orders 54, 55, 72, 73 and 74, the defendant explains that there is little significance in the opening of these Letters of Credit, which was an unilateral step undertaken by or on the part of the plaintiff and that after all there were no Letters of Credit for Purchase Orders 75, 76 and 77. The plaintiff's case as given in paragraph 13(1) of the statement of claim is that Letters of Credit for Purchase Orders 75, 76 and 77 were withheld by reason of the persistent defaults on the part of the defendant. That is another area of dispute.

48. The plaintiff also relies on the defendant having actually drawn on the plaintiff's Letter of Credit opened for Purchase Order 54. The defendant's explanation is that a shipment was effected under Purchase Order 53 after its Letter of Credit had expired and that "as a matter of administrative convenience" as suggested by its said Hong Kong agent, the Letter of Credit for Purchase Order 54 was taken advantage of. This, though quite extraordinary, is yet a further disagreement.

49. What is not contested is that to the knowledge of the plaintiff, the defendant did claim to have declined to accept any of the Purchase Orders in question. That fact had been conveyed to the plaintiff as early as the direct telex of the 7th July and repeated in the telex of the 24th October 1986. In addition, the plaintiff has throughout been well aware that for Purchase Orders 54 and 55, they had themselves given the defendant no specifications or confirmation. As for the other six Purchase Orders, 72-77, the plaintiff admits that no specifications have at all been given to the defendant. Endeavouring to overcome the question of specifications, Mr. Chan, counsel for the plaintiff, raises an implied term of an initial obligation on the part of the defendant to give to the plaintiff a more than 30 days' notice of their readiness to manufacture, i.e. the production date. Counsel submits that such implied term need not be pleaded until and unless the defendant makes the absence of specifications an issue. If non-compliance of an implied term had been the immediate causation of a breach, one would have expected the plaintiff to rely on such breach rather than alleged non-delivery. Nevertheless this must be part and parcel of the merits.

50. The defendant's claim of no binding contracts forms the basis of its contention on material non-disclosure.

51. The obligation to make the fullest possible disclosure of all material facts on an ex parte application was epitomized in R. v. Kensington Income Tax Commissioners ex parte Princess Edmond de Polignac⁽⁹⁾, per Warrington L.J. at p. 509 and per Scrutton L.J. at p. 514. Scrutton L.J. referred specifically to an ex parte application for service out of jurisdiction. In The Hagen⁽¹⁰⁾ Farwell L.J. observed :

"In as much as the application is made ex parte, full and fair disclosure is necessary, as in all ex parte applications, and a failure to make such full and fair disclosure would justify the court in discharging the order, even although the party might afterwards be on a position to make another application."

52. In Guess ?, Inc. & Ors. V. Lee Seck Mon & Ors. ⁽¹¹⁾, the Hong Kong Court of Appeal favoured an unfettered judicial discretion in entertaining an application for discharging an ex parte order obtained on material non-disclosure.

53. Known defences must be fully and candidly disclosed on an ex parte application. See Re a Debtor⁽¹²⁾, where Warner, J. echoed the importance of the duty to disclose in these terms :

"The rule in Ex p Princess de Polignac exists because, by definition, on an ex parte application the person against whom the order is sought is absent. It is accordingly the duty of the applicant to inform the court of any facts which he knows which might tell in that person's favour.

In The "Panaghia P"⁽¹³⁾, in his consideration of an ex Parte application made under O.11, Hobhouse, J. emphasised the need to disclose matters unfavourable to the applicant :

"O.11 leave is originally given ex parte. On any ex parte application it is the duty of the applicant fairly to draw to the attention of the court matters favourable or unfavourable, relevent to the making of the order asked for and quite specifically not to mislead the court in any way."

And at p. 656, the learned judge called attention to the duty not "to cause the judge not to appreciate the serious weaknesses of the plaintiff's application".

54. I have held that the Court has inherent jurisdiction and powers under O.32, r.6 to discharge an ex parte order obtained on material non-disclosure. I have also referred to the preference of the Hong Kong Court of Appeal in Guess ?, Inc.⁽¹¹⁾ to a residual judicial discretion on the return of an ex parte order obtained without full material disclosure.

55. The plaintiff's case against the defendant on Purchase Orders 72-76 leaves much to be desired. If full disclosure had been made of the defendant's assertions of no binding contract, lack of machinery capacity or production space and, in particular, absence of any specifications together with the plaintiff's alleged implied term, these matters would or at least could have affected the learned Master in his weighing operation on the ex parte application before him for O.11 leave. Moreover, since the plaintiff was enjoined to show "a good arguable case", known defences and weaknesses of its own case are all the more matters vulnerable for disclosure.

56. The other two Purchase Orders 54 and 55 are in better form, in the sense that some specifications, though unconfirmed by the plaintiff, did reach the plaintiff and that the defendant did draw on the Letter of Credit for Purchase Order 54 despite the explanation proffered. The plaintiff has not intimated even before me whether those specifications were acceptable.

57. These are serious matters for consideration of "a good arguable case" on in ex parte O.11 leave application. In ignorance of a defendant's defences it would be almost impossible to judge whether a good arguable case has been successfully presented on an applicant's assertions alone, however cogent. I come to the conclusion that the ex parte order should be discharged for such material non-disclosure, and I discharge it. In reaching my decision, I have also borne in mind, though broadly, matters touching upon the merits to which I shall return in my consideration of "a good arguable case''.

58. The plaintiff applied to the learned Master for leave under O.11, r.1(1) (d) (ii) for contracts allegedly made by a local agent for a principal trading outside Hong Kong.

59. The plaintiff alleges, inter alia, that the defendant's local agent had full authority to enter into contracts in the form of these Purchase orders. The defendant denies this assertion on the grounds that I have enumerated. In essence, the defendant claims that the local agent had merely power of negotiation, that the Purchase Orders negotiated for were not accepted and that in any case there were no or no confirmed specifications. In addition, for Purchase Orders 72-77, there vas an express provision making delivery subject to availability of production space or machine capacity, and the defendant claims that this proviso was adequately borne out by facts. The plaintiff argues conversely. Much would ultimately depend on the evidence led in support of the defendant's allegations and the proper construction of that provision.

60. For Purchase Orders 72-77, it is admitted that the plaintiff never furnished specifications, and the plaintiff's suggested implied term on the part of the defendant to give the plaintiff a more than 30 days' notice of shipment date does not seem to be well founded as a matter of business efficacy and in law. Further, the plaintiff has suggested no specific acts of repudiation but simply seeks to rely on the institution of this action. The claim for damages is in disarray with the inexplicable 2nd Schedule to the Statement of Claim.

61. Although there were no written specifications from the plaintiff direct, the plaintiff's claim on Purchase Orders 54 and 55 would seem to be on stronger grounds. However, the plaintiff has still not openly embraced these Irraffe's specifications as its own. There again, the same criticisms may be levelled at the plaintiff's failure to specify acts of repudiation and its bewildering claim for damages. As for Purchase Orders 54 and 55, the plaintiff certainly has shown a prima facie case, but has it shown a strong arguable case?

62. In addition to full material disclosure, the plaintiff must, on an ex parte application for leave under O.11, bring its case within one of the sub-rules. The plaintiff's assertion, though it is denied, of there being a local agent for entering into these Purchase Orders as contracts is plain enough. The plaintiff must adduce" cogent evidence with 'clear and frank' assertions". See Brinkibon Limited v. Stahag⁽¹⁴⁾, where Stevenson, L.J., having quoted Lord Tucker's phrase of "cogent evidence pointing to a strong probability", summed up succinctly that an applicant for an O.11 leave must satisfy "a requirement somewhere between a prima Facie case resting on the assertion or little more than an assertion in an affidavit and a case which satisfied the court that it would he proved at the trial." See also marginal reference 11/4/3 1988 White Book Vol. 1, p. 89. The plaintiff's case on Purchase Orders 54 and 55 could be claimed to be somewhere bordering a good arguable case if its claim in damages were unambiguous and if there were evidence affirming the specifications given by Irraffe. But as it now stands, I am unable to hold that even on these two Purchase Orders 54 and 55, the plaintiff has discharged that burden.

63. Choice of the appropriate court or "forum conveniens" is a guiding principle for the due exercise of judicial discretion in the granting, of leave under O.11. But the overriding consideration is, of course, whether the plaintiff has made it sufficiently to appear to the court that it is a proper case for service out of jurisdiction. See O.11, r.4(2).

64. One must not overlook that the burden is on the plaintiff to satisfy the court that Hong Kong is the appropriate forum. See Spiliada Maritime Corporation v. Cansulex Limited ⁽¹⁵⁾. At p.474 F/G, Lord Goff warned that "it is most important not to allow" forum non-conveniens "to Mislead us into thinking that the question at issue is one of 'mere practical convenience'" The true consideration is "to identify the forum in which the Case can be suitably tried for the interest of all the parties and for the ends of justice." See p. 480 G. Not only lies the burden on the plaintiff to establish Hong Kong as the appropriate forum but "he has to show that this is clearly so" for this is the exercise of a jurisdiction which is "extraordinary". Per Lord Goff at p. 481 D/E and F/F. In Societe Generale de Paris v. Dreyfus Brothers⁽¹⁶⁾ Pearson, J. highlighted for our benefit the basic objection to O.11 leave:

"It becomes a very serious question.... whether this court ought to put a foreigner, who owns no allegiance here, to the inconveniene and annoyance of being brought to contest his rights in this country, and I for one say, most distinctly, that I think this court ought to be exceedingly careful before it allows a writ to be served out of jurisdiction."

65. In his speech in Spiliada⁽¹⁵⁾, Lord Goff concluded that relevant considerations "include both the residence or place of business of the defendant".

66. The plaintiff had filed little evidence for the assistance of the court on its ex parte application for O.11 leave. Information is equally lacking to- day. In the instant case, the additional evidence brought in for my consideration under the ratio in WEA Limited v. Provisions Channel 4 Limited⁽¹⁷⁾ does, not take the matter further. There is no evidence to suggest what the proper law of the alleged contracts was, though the defendant claims that by its said terms and conditions of sale allegedly known to and agreed by the plaintiff, South African law was expressly selected. However, there is no information as to whether South African law is materially different from our law, and counsel for the plaintiff invokes the presumption that foreign law coincides with local law. However, no or no sufficient facts are presented for determining whether Hong Kong is the appropriate forum to litigate. Mr. Chan, counsel for the defendant, is left with little support in his endeavours to satisfy me that Hong Kong court is the appropriate court and that it is a proper case to be contested in Hong Kong. Mr. Ko of the plaintiff is the Only material witness as opposed to at least two South African residents for the defendant. The market price of the goods in these Purchase Orders does not seem to be exclusively or even primarily referable to the Hong Kong market. The defendant claims that supply is predominantly America and Canada. Through Mr. Cheung, the plaintiff made a bald assertion that it is verily believed that the plaintiff has good cause of action. I do not propose to repeat the "merits" of the case against the defendant. The plaintiff has not laid claim to any loss of advantage for the dispute to be resolved in South Africa. The assertion that enforcement will be less problematic in Hong Kong is unconvincing and ill founded. The defendant is said to he a sizable South African institution. Counsel for the plaintiff seeks to rely on the defendant's local claims against its Hong Kong agent who has absconded. Giving of particulars of these alleged assets has not even been attempted by the plaintiff. In short, the plaintiff has not even begun to show that Hong Kong the appropriate forum or that it is a proper O.11 case. For all these reasons, the ex parte order for leave cannot stand and I discharge it.

67. Subject to what Counsel have to say, I propose that costs of these proceedings including those inter partes before the learned Master be costs for the defendant. I need hardly say that the order of the Master be accordingly set aside to the extent Of my decision in favour of the defendant.

(1)    [1977(3)] T. P. D. 137 at p. 141, letters E - F

(2)    (1927) A. D. 295 at p. 268

(3)    [1979(2)] W.L.D. 457 at p. 462

(4)    [1980] 1 W.L.R. 460

(5)    (1972) (2) D.L.R. (Third) 75 at p.81

(6)    [1981] 1 All E.R. 984 at p. 989c

(7)     (1950) T.P.D. 670 at p. 675

(8)     [1976] 1 All E.R. 397

(3)     [1979(2)] W.L.A. 457 at p. 463 A-B

(9)     [1917] 1 K.B. 486

(10)   [1980] P.189 at p 201

(12)     [1983] 3 All E.R. 545 at p. 551d per Warner, J.

(13)     [1953] 2 L1.L.R. 653 at p. 655

(14)    [1980] 2 L1. L. R. 556 at p. 559 right hand column

(15)    [1987] A. C. 460

(16)     (1335) 29 Ch. D. 239 at pp. 242 and 243.

(15)     Ante. p. 482A.

(l7)     [1983] 1 W.L.R. 721, at p.p. 727H - 727A & p.p. 729 A & B.