VICTOR CHANDLER (INTERNATIONAL) LTD v. ZHOU CHU JIAN HE

HCA 300/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 300 OF 2005

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J U D G M E N T

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Introduction

1.  Mr Zhou Chu Jian He, the Defendant, is a wealthy Peruvian businessman who was born in Mainland China and who is now ordinarily resident at Beijing although he also has a home in Hong Kong and has substantial business interests here including other real property.

2.  He likes to gamble heavily including on the outcome of overseas soccer matches.  The Plaintiff is a, by now, well known bookmaker registered in Gibraltar.  It will accept substantial bets on-line from its worldwide clients who are required to establish an account with it to enable them to place bets.  This is what the Defendant did.  He bet and lost what, for most people, is a fortune.  In order to purportedly pay off his debt to the Plaintiff he presented it with three cheques to the value of HK$14 million drawn on a Hong Kong bank account.  These cheques have all been dishonoured.  The Plaintiff has sued him on the cheques in this court.  He is now indulging in a most unattractive wriggle to try and get out of paying his debt.  Had he won his bet he would, no doubt, have expected to be paid.  Now that he has lost he is trying to get out of paying.

3.  The Plaintiff had obtained judgment in default of appearance but his solicitors have succeeded in setting it aside.  The Master held that the judgment was irregular and that it should go unconditionally.  The Plaintiff has not appealed from that order.

4.  The Defendant has now taken out a summons [pages 1-3 of the Bundle of Documents and Affirmations] in three parts.  The first two parts come under O. 12 r. 8(1)(b) and (g) for a declaration that the writ dated 18 February 2005 has not being duly served on him [sub-rule (b)] and secondly, as a result, for a declaration that this court has no jurisdiction over him [sub-rule (g)].  If he fails on this part of the summons, he then invites me, under the court’s inherent jurisdiction, to permanently stay the action on the basis that Hong Kong is forum non conveniens for the trial.

5.  Should the Defendant get his declarations under O. 12 r. 8 the Plaintiff will have to start again and where the Defendant is resident at Beijing it may well have to apply for leave under O. 11 r. 1 and r. 4 to serve the writ out of the jurisdiction when, no doubt, it can and will be met with the familiar argument that Hong Kong is not the appropriate forum for the trial of the action, which raises many of the considerations that apply on the hearing of a forum non conveniens stay application.

The procedure under O. 12 r. 8

6.  A convenient starting point is the Master’s order dated 29 August 2005 setting aside the default judgment [see pages 45-47 of the Bundle].  The material parts of the order for these purposes are at page 46 where the Master, having set the judgment aside, ordered the Defendant to do two things.  Firstly, to file his notice of intention to defend within five days, secondly, to serve his defence within 14 days and following on from that he also ordered the Plaintiff to serve its reply 14 days after that.

7.  Mr Carolan, who appears for the Plaintiff, says that the terms of the order have the effect of showing that the Defendant is to be taken to have submitted to the court’s jurisdiction which is fatal to the application now being made. The note to O. 18 r. 8/1 shows that the policy underlying r. 7 and 8 is that the defendant should not be taken as having submitted to the jurisdiction of the court by reason only of the fact that he appeared in the proceedings, inter alia, for the purpose of contesting the jurisdiction.  Mr Carolan accepts this but he says that the matter in this case goes much further than that.  He relies on the fact that the Master’s directions as to the filing of the defence by the defendant, which is a standard direction in cases where judgment has been set aside and the matter is then to proceed before the court, is indicative of the Defendant having accepted the court’s jurisdiction.  The fact that the Master directed the filing of a notice of intention to defend is neither here nor there.  A defendant is required to file such a notice if he seeks to avail himself of an application of this sort and so the notice of intention to defend is to be viewed as entirely neutral.  Nevertheless, the directions as to the filing of pleadings are only to be understood, says Mr Carolan, as active participation in the proceedings and therefore a submission to the jurisdiction.

8.  Following the making of the order the Defendant’s solicitors served the notice of the intention to defend and then took out this summons.  They have filed no pleadings.

9.  Mr Carolan has suggested that they should have appealed the direction as to the filing of pleadings.  Their failure to do so amounts to a concession that they have submitted to the court’s jurisdiction.

10.  I do not accept this view of the matter.  The fact that the Master made that order, very much as a matter of routine, does not carry this significance nor the effect contended for by Mr Carolan.  On the contrary, their selective compliance, filing an intention to defend followed by the taking out of this summons, is entirely consistent with a challenge to the jurisdiction.  The Defendant’s solicitors had gone to the Master to set aside the judgment as being irregular.  It is not suggested that the Master had been invited to make the direction as to the filing of pleadings.  He did so as a matter of course, these days, to get the ball rolling, as it were.  It was then up to the Defendant and his solicitors to react to the order as they saw fit.  They have declined to file their defence because they are challenging jurisdiction and so this part of Mr Carolan’s submission must fail.

Is there other behaviour by the Defendant consistent with submission to the jurisdiction?

11.  Mr Carolan has addressed an argument that the way that the Defendant’s solicitors have approached the application to set aside the default judgment, by raising defences to the claim on its merits is only consistent with a submission to the court’s jurisdiction.  Mr Lam, who appears for the Defendant, has invited me to determine whether there has been a submission to the court’s jurisdiction by considering how the argument developed.  He correctly submits that the summons to set the judgment aside was brought on the basis that it was an irregular one.  Thereafter, the Plaintiff filed evidence conceding the fact that the judgment was irregular and therefore liable to be set aside but contended that it should only be set aside on terms having regard to the assertion that the Defendant have been trying to avoid service and that he had “offered no defence to the claim”.  Mr Lam, seeking to put this into context, says that the defences on the merits were in response to the Plaintiff’s affirmations that there was no defence.  In this regard the remarks of Mr Recorder Reyes S.C. (as he then was) in Hwoo Huang, Linda v Fu Being San & Ors, HCA 4888/2001 are apposite.  What he said at para. 26, pages 12-13 of his judgment was this :

“The Court should adopt a common sense approach.  It must not be overly subtle or astute to find that a party has submitted to the jurisdiction.  Otherwise the question of submission could easily become a technicality trap for the unwary.  The real question is whether a party’s conduct is so inconsistent with maintaining an option to challenge forum that the party should be assumed to have waived such option.  In the case of any doubt, the party proposing to challenge forum should probably be given the benefit of that doubt.”

12.  I am entirely satisfied that Mr Lam’s analysis is correct.  The Defendant’s solicitors have always made their position very clear that they challenge the court’s jurisdiction.  Their venture into the merits has been entirely responsive to the Plaintiff’s assertion that there is no defence to the claim on the merits.  In such circumstance, it was entirely reasonable for the Defendant’s solicitors to seek to demonstrate, by expert evidence from the PRC and Gibraltar that bona fide defences would be available should the matter go to trial, nevertheless, this has plainly been “without prejudice” to their contention that the court does not have jurisdiction over the Defendant.

13.  Respectfully adopting Mr Recorder Reyes S.C.’s approach, I am satisfied that the Defendant has not by conduct, as identified by Mr Carolan, submitted to the court’s jurisdiction.  This being so I now turn to the question of whether the Defendant has been duly served.  He of course seeks a contrary declaration, under O. 12 r. 8(1)(b).  If he has not been “duly served” to use the word of the sub-rule then the court can have no jurisdiction over him and the plaintiff would have to, as I have already indicated, start again by applying for leave to serve the writ out of the jurisdiction.

Was he duly served?

14.  Mr Lam’s submission is perfectly simple in this regard.  The relevant evidence is this.  The Plaintiff served the writ by inserting it through the letterbox of the Defendant’s Hong Kong address on 8 February 2005.  This is the address that he provided to the Companies Registry in the annual return of a company called Junefield (Holdings) Ltd in which he is a shareholder.  He owns the property in Kowloon where he was served. 

15.  O. 10 r. 1(2)(b) which govern service provide as follows :

“A writ for service on a defendant within the jurisdiction (emphasis added) may, instead of being served personally on him, be served, if there is a letter box for that address, by inserting through the letter box a copy of the writ enclosed in a sealed envelope addressed to the Defendant.”

The point which arises is this.  The evidence from the Defendant’s travel records, kept by the Director of Immigration, is that the Defendant was not in Hong Kong from the time the writ was served to the time when the default judgment was entered.  He left Hong Kong on 14 October 2004 and returned on 16 April 2005 which was the date when he signed his affirmation in support of his application to set aside the judgment which had been entered a month prior to that on 16 March 2005.

16.  Notwithstanding, Mr Carolan’s sustained submissions to the contrary, that chronology taken together with the requirement that the Defendant must be physically within the jurisdiction if he is to be validly served under O. 10 r. 1(2)(b) must put an end to the matter.  The Defendant was not “duly served” and is not therefore subject to the court’s jurisdiction.  I need go no further than Deputy High Court Judge To’s observations in Shanghai Land Holdings Ltd v Chan Hing Ngai & anr., HCA 2704/2003 who, having reviewed the authorities, concluded that :

“It is clear that the requirement that the proceedings be brought to the notice of the Defendant is not an alternative to the requirement that he must be within the jurisdiction. … It is a well established principle that the Defendant must be within the jurisdiction for service to be effective.”

The result

17.  Accordingly, the Defendant must have the declarations that he seeks under r. 8(1)(b) and (g) with the consequence for the Plaintiff which I have already referred to.

Forum non Conveniens

18.  Whilst my decision on due service is determinative of the matter, in the event of an appeal, I propose to say how I would have ruled on forum.

19.  I am entirely satisfied that Hong Kong is the appropriate forum for the trial of this action.

20.  The nature of the action is based on the cheques which were drawn on a Hong Kong bank account and dishonoured here.  The Defendant has been sued on the cheques.

21.  The Defendant has raised a number of matters which Mr Lam submits make Beijing the more appropriate place for the trial of the action.  He points to the fact that the Defendant is now ordinarily resident there and was so resident when he opened his gaming account with the Plaintiff and that the conversations leading to the opening of the account were held there.  He also says that if the trial is not held at Beijing he will be deprived of an unanswerable defence to the action because gambling debts are unenforceable in the PRC.

22.  It strikes me that the Defendant is somebody with an international flavour about him.  He has Peruvian nationality and gave the Peruvian authorities who issued his passport [their Consulate-General at Hong Kong] a Hong Kong address as his residence.  He has business interests here as he does in the PRC.  He owns property in Hong Kong and of course has a bank account here.

23.  What the Defendant has to do is to demonstrate that it would be correct to deprive the Plaintiff of the right to sue in the courts of Hong Kong.  This he has singularly failed to do.

24.  The cause of action has arisen here.  Under sections 21, 45, 47, 55, 72 and 73 of the Bills of Exchange Ordinance, the contract made between the parties in respect of these cheques was made here or, at the very least, breached by dishonour here.  Accordingly, the Plaintiff must be entitled to have the matter resolved in the courts of Hong Kong.

25.  The Court of Appeal in the recent case of Esquel Enterprises Ltd v Tal Apparel Ltd & Anr., CACV 71/2005 has re-affirmed the three stage approach which a court considering a stay application of this type has to apply.  Firstly, I need to decide whether it has been shown that Hong Kong is not only not the natural and appropriate forum for the trial, but that there is another available forum which is clearly or distinctly more appropriate than Hong Kong.  This is the burden that the Defendant, as the applicant for the stay, needs to carry.  I am completely satisfied that he has failed to do so for the reasons that I have already given.  The overwhelming consideration being that the cause of action has arisen here.  This must conclude the matter and it becomes unnecessary for me to go on to stages two and three which only arise if the applicant has succeeded at this initial stage.

Costs

26.  The Defendant, having succeeded in demonstrating that he is not subject to the court’s jurisdiction, must I would have thought have his costs of the application.  I say that notwithstanding the unattractive way in which he has approached his obligations to the Plaintiff.  The order for costs will be an order nisi in the usual way.

27.  Because of my expressed views as to forum, I would have thought that any application which the Plaintiff decides to bring to serve the writ out of the jurisdiction should be heard by another judge having regard to the fact that the considerations on service of a writ out of the jurisdiction are broadly similar to an application for a stay based on forum non conveniens.