EAST ASIA SATELLITE TELEVISION (HOLDINGS) LTD v. NEW COTAI, LLC AND OTHERS

HCA 2189/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2189 OF 2009

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(Heard Together)

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J U D G M E N T

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I.  INTRODUCTION

1.  The Plaintiff (EAST) sues the Defendants on a variety of causes of action, some personal, others derivative.  The causes of action (as found in the Prayer to EAST’s Statement of Claim) may be summarised as follows:-

(1) By way of personal action against the 1^st Defendant (New Cotai), damages of $689 million for breach of clause 6.2.2 of a Share Purchase Agreement (SPA) and for conspiracy.

(2) By way of personal action against the 5^th to 10^th Defendants (collectively, the New Cotai Directors), damages of $689 million for inducing breaches of the SPA by New Cotai and for conspiracy.

(3) By way of a personal action against the 11^th and 12^th Defendants (respectively, Silver Point and Oaktree), damages of $689 million for inducing breaches of the SPA by New Cotai and for conspiracy.

(4) By way of derivative action on behalf of the 2^nd to 4^th Defendants (collectively, the Joint Venture Companies) against New Cotai, damages or equitable compensation of $18.6 billion (US$2.385 billion) for dishonest assistance and for conspiracy.

(5) By way of derivative action on behalf of the Joint Venture Companies against the New Cotai Directors, damages or equitable compensation of $18.6 billion for breach of fiduciary duty and for conspiracy.

(6) By way of derivative action on behalf of the Joint Venture Companies against Silver Point and Oaktree, damages or equitable compensation of $18.6 billion for dishonest assistance and for conspiracy.

2.  The 1^st, 5^th, 7^th and 9^th Defendants (collectively, the Internal Defendants) were served in Hong Kong.  The 6^th, 8^th, 10^th, 11^th and 12^th Defendants (collectively, the External Defendants) were served outside the jurisdiction.

3.  There are currently 6 Summonses before me in these proceedings.  The Summonses are identified in the conclusion of this Judgment.

4.  As far as EAST’s writ action is concerned, I essentially have to determine the following matters:-

(1) Applications by the External Defendants to set aside service on them or, to the extent that service was valid, to strike out EAST’s claims against them; and,

(2) Applications by the Internal Defendants to strike out substantial parts of EAST’s claims against them,

(3) An application by EAST to amend its Re-Amended Writ.

5.  In parallel with its claimed actions, EAST has brought a s. 168A Petition in relation to Cyber One (one of the Joint Venture Companies).  By the Petition EAST seeks the following cumulative or alternative reliefs:-

(1) An Order that New Cotai’s shares be cancelled and its capital reduced.

(2) An Order that New Cotai transfer its shareholding in EAST for a “nil consideration, alternatively for a price to be determined by the Court”.

(3) An Order that New Cotai and the relevant New Cotai Directors pay EAST damages and interest for the unfair prejudice caused to EAST and its shareholding in Cyber One.

(4) Such “injunctive relief ... as may be necessary or appropriate to restrain the continuation of ... wrongful conduct and to protect the interests of [Cyber One’s] members including EAST”.

(5)    All necessary accounts and inquiries.

(6) Further or other relief.

6.  EAST made New Cotai and 5 of the New Cotai Directors (Mr. Umansky, Mr. Moross, Mr. Friedman, Mr. Baker and Mr. Goldberg) Respondents to the Petition proceedings.  The latter Respondents (collectively, the Relevant Respondents) are now applying to strike out parts of the Petition.  Cyber One is also a Respondent to the Petition, but it has remained neutral throughout these proceedings.

7.  The Defendants (whether External or Internal and whether or not Relevant Respondents) principally rely on 2 contentions in support of their applications to set aside or strike out EAST’s actions and the Petition.

8.  First, the Defendants submit that certain of EAST’s claims for relief are impermissible because such are simply claiming reflective loss (namely, a diminution in the value of shareholdings in the Joint Venture Companies).

9.  Second, the Defendants argue that certain asserted actions on behalf of the Joint Venture Companies are impermissible because such amount to multiple derivative actions.  The Defendants say that multiple derivative actions (or actions analogous to multiple derivative actions) are not possible under the laws of the places (Macao or the BVI) where the Joint Venture Companies were incorporated.

10.  In addition to the foregoing main contentions, there are a number of secondary issues to be resolved, including an allegation by the External Defendants of material non-disclosure by EAST in the course of its application to serve outside the jurisdiction.  These will be dealt with in the course of my discussion of the principal contentions.

II.  BACKGROUND

A.  History of the Joint Venture

11.  EAST (a BVI company) and New Cotai (a Delaware company) are shareholders of Cyber One (a BVI company).  EAST and New Cotai respectively hold 60% and 40% of Cyber One.

12.  EAST and New Cotai are also parties to a Joint Venture Agreement (JVA) dated 6 December 2006 relating to Cyber One and its subsidiaries (Cyber Neighbour and Macao Co).  Cyber One holds 100% of Cyber Neighbour and 4% of Macao Co.  Cyber Neighbour holds the remaining 96% of Macao Co.  Cyber One, Cyber Neighbour and Macao Co are the Joint Venture Companies referred to in the Introduction to this Judgment.

13.  EAST is a subsidiary (via an intermediary) of eSun Holdings Limited (eSun) (a Bermuda company).

14.  New Cotai is wholly-owned by New Cotai Holdings LLC (a Delaware company).  New Cotai Holdings LLC is in turn held as to 50.1% by 2 US hedge funds (Silver Point and Oaktree) and as to 49.9% by Mr. Friedman.

15.  eSun, EAST, New Cotai and New Cotai Entertainment LLC (NCE) (a Delaware company wholly-owned by New Cotai Holdings LLC) are parties to other agreements relating to the Joint Venture Companies.

16.  New Cotai, eSun and EAST entered into a Share Purchase Agreement (SPA) on 8 April 2006.

17.  The SPA envisaged a number of agreements being executed upon its completion.  Those agreements included the JVA and an Entertainment Use of Commercial Space Option Deed (the Casino Deed).  SPA cl. 6.2.2 required the parties to cooperate and work together in good faith in obtaining land grant modifications for the MSC site.  By agreement of the parties, completion of the SPA was deemed to have occurred in December 2006.

18.  EAST and New Cotai executed the JVA for the purposes of developing a 32 acre site in Macao into a resort to be known as “Macao Studio City” (MSC).

19.  After formation of the joint venture, eSun sold a one-third interest in EAST to CapitaLand Integrated Resorts Pte Ltd. (CapitaLand) (a Singapore company) for over $658.7 million.

20.  Under the SPA, New Cotai paid a first tranche of a little over $1.3 billion to EAST to acquire its 40% interest in Cyber One and to secure NCE’s right to own and operate a casino in the MSC pursuant to the Casino Deed and various lease agreements.  The SPA further provided for a payment of a second tranche of about $689 million (the Additional Sum) by New Cotai in relation to its joint venture interest upon the gazetting of a modification of the land grant for the MSC site.

21.  Macao Co leases the MSC site from the Macao Government under a land grant.  That grant was gazetted in 2001.  The grant is for 25 years commencing from 9 October 2001.  The grant is renewable up to 19 December 2049.  The grant permits Macao Co to construct facilities with an aggregate Gross Floor Area (GFA) of 119,335 sq m or about 1,284,522 sq ft.  The grant is subject to restrictions, including a prohibition against alienation.

22.  When the joint venture was first formed, EAST and New Cotai were planning to develop the MSC site in 2 Phases.  Phase I would comprise commercial and other facilities and have a GFA of 3,659,760 sq ft.  Phase II would increase the number of facilities, with a corresponding increase in GFA to over 6 million sq ft.

23.  Given those plans, it was necessary to modify the original land grant for the MSC site.  Among other things, according to the SPA, the grant had to be modified to relax the restriction against alienation and to allow for a development having a GFA of at least 3,659,760 sq ft for Phase I of the MSC Project.

24.  The joint venture accordingly applied for a modification to the Macao Government.

25.  However, problems arose between EAST and New Cotai from mid-2007 onwards.  The parties (according to EAST) have been at odds as to whether the joint venture should be restructured so that the MSC is merged with New Cotai’s casino operation or whether New Cotai’s casino should be run independently from the MSC as envisaged under the original joint venture structure.

26.  EAST accuses New Cotai of sabotaging efforts to obtain a land grant modification from the Macao Government.  EAST alleges that New Cotai is seeking to avoid the payment obligations which would be triggered by the gazetting of a modification.  EAST says that this is because New Cotai does not now believe that the originally proposed casino operation will be financially viable.

27.  On 9 November 2007 eSun, EAST, New Cotai and NCE executed a Memorandum of Understanding (MOU) in an attempt to resolve some of their disputes.  Among other things, the MOU dealt with NCE’s rights in relation to the operation of a casino at the MSC.  The MOU also varied the SPA in relation to when New Cotai was obliged to pay the Additional Sum.

28.  But substantial differences remain among the parties.

29.  By letter dated 13 January 2009, apparently to enable it better to consider the joint venture’s application for a modification of the land grant, the Macao Government requested a “technical, economic and financial study” specifying the amount of capital investment to be injected into the MSC project as well as the financing plan for the phases of project.

30.  The parties disagree on how the Macau Government’s letter is to be addressed.  The parties have accordingly not responded.  As a result the MSC project has come to a standstill.

31.  The standstill is due to the structure of the joint venture.  Cyber Neighbour and Macao Co can only act in accordance with an approved resolution of Cyber One.  However, a Cyber One resolution can only be approved if it has been approved by a majority of the directors of Cyber One’s board and the resolution has been approved by both EAST and New Cotai as shareholders.  Cyber One’s board consists of equal numbers (5 each) of New Cotai and EAST nominated directors.  The result is, EAST and New Cotai each adhering to their opposing positions, that none of the joint venture companies (whether Cyber One, Cyber Neighbour or Macao Co) can function.  There is deadlock.

32.  The Macao Government has indicated that, if the MSC project does not proceed in the near future, it will simply reclaim the MSC site.  This would put the whole MSC project in jeopardy.

33.  Of the New Cotai Directors, Mr. Moross and Mr. Vora are no longer directors of the Joint Venture Companies.

B.  History of the proceedings

34.  On 29 October 2009 EAST issued a generally endorsed Writ.  The Writ alleged personal actions against Cyber One for breaching the SPA and against the New Cotai Directors, Silver Point and Oaktree for inducing Cyber One to breach the SPA and for unlawful interference with EAST’s business.  The Writ further alleged derivative actions on behalf of the Joint Venture Companies (including Cyber One) against Cyber One, the New Cotai Directors, Silver Point and Oaktree for (in the case of the New Cotai Directors) breaching fiduciary duties to the Joint Venture Companies or (in the case of Cyber One, Silver Point and Oaktree) inducing the New Cotai Directors to breach their duties to the Joint Venture Companies.

35.  On 2 November 2009 EAST amended its Writ.  The amendment involved raising the damages claimed in relation to EAST’s derivative actions from $16.6 to $18.6 billion.

36.  On 5 November 2009 EAST served the Amended Writ on the Internal Defendants.  The latter acknowledged service on 17 November.

37.  On 19 November 2009 EAST applied ex parte for leave to serve the Amended Writ on the Joint Venture Companies and the External Defendants outside Hong Kong.  The Affidavit in support of the application relied on 2 limbs of Order 11.  One was r. 1(1)(c) which permits service out on a “necessary or proper party” to proceedings properly commenced in Hong Kong.  The other was r. 1(1)(d), which permits service out where a “claim is brought ... to recover damages or obtain other relief in respect of the breach of a contract” made in Hong Kong or governed by Hong Kong law or containing a term giving the Hong Kong Court jurisdiction.  The Affidavit identified the SPA, the JVA and the MOU as the contracts which brought r. 1(1)(d) into play.

38.  On 23 November 2009 Master de Souza raised queries in connection with EAST’s application for service out.

39.  On 27 November 2009 EAST applied to amend the Amended Writ.  The proposed re-amendments sought to correct 2 sets of errors in the Amended Writ.

40.  First, EAST sought to re-amend so as to claim against relevant Defendants for inducing New Cotai (not Cyber One as pleaded in the Amended Writ) to breach the SPA.  The original reference to Cyber One as the party induced to breach the SPA was an obvious typographical error, as Cyber One was never a party to the SPA.

41.  Second, insofar as the Amended Writ accused various Defendants of “inducing and/or procuring” breaches of the SPA or breaches of fiduciary duties owed to one or other of the Joint Venture Companies, EAST wished to amplify its complaint to “causing and/or inducing and/or procuring” the pleaded breaches.  As far as I can see, this re-amendment did not materially add to what was already to be found in the Amended Writ.

42.  On 30 November 2009, by letter from their solicitors, the Internal Defendants stated that they had no objection to the Re-Amended Writ.  Master Lung accordingly gave leave, pursuant to a Consent Summons filed by EAST and the Internal Defendants, for the Re-Amended Writ.  The Re-Amended Writ was filed on 4 December 2009 and served on the Internal Defendants on the same day.

43.  On 9 December 2009 EAST responded by a 2^nd Affidavit in support of its leave application to Master de Souza’s queries.  The 2^nd Affidavit requested an order “granting leave ... to issue and serve a concurrent writ of summons” on the Joint Venture Companies and the External Defendants.  It referred to the Re-Amended Writ having been duly served “within the jurisdiction for the purposes of this action”.  It also mentioned that the Re-Amended Writ had been filed as a result of the Consent Summons agreed with the Internal Defendants.  It of course did not exhibit the Re-Amended Writ in accordance with the standard practice whereby official Court documents are not exhibited to affidavits.  The Re-Amended Writ having been filed 5 days previously, it would have been among the documents contained in the Court file before the Master.

44.  On 11 December 2009 Master Ng considered the leave application, including the 2^nd Affidavit.  She emended para. 12 of the 2^nd Affidavit by hand so as to read as follows (Master Ng’s emendation being underscored):-

“I respectfully request this Honourable Court to make an order granting leave to [EAST] to issue and serve a re-amended concurrent writ of summons out of the jurisdiction on the [Joint Venture Companies and the External Defendants]....”

45.  On the same day Master Ng made an Order giving EAST the requisite leave.

46.  On 14 December 2009 Master Ng’s clerk informed EAST’s solicitors in writing that leave had been granted “to issue and serve a amended concurrent writ of summons out of the jurisdiction” on the Joint Venture Companies and the External Defendants.

47.  EAST’s solicitors submitted a draft Order to Master Ng on 21 December 2009.  That draft referred to leave for service out of a “concurrent Re-Amended Writ”.  But the Master (or her clerk) amended this to read “concurrent Amended Writ”.

48.  The draft Order as amended was sealed on 23 December 2009.  A Re-Amended Writ for service outside of the jurisdiction was issued on the next day.  It is that Re-Amended Writ that was served on the External Defendants.

49.  On 3 February 2010, pursuant to extensions granted, EAST filed a Statement of Claim.

50.  On 29 March 2010 EAST applied to amend the Re-Amended Writ.  The Re-Re-Amended Writ proposes to introduce claims for conspiracy and dishonest assistance against various defendants.  It will have been noticed that, although the Statement of Claim alleges conspiracy and dishonest assistance against various defendants, the Writ, Amended Writ and Re-Amended Writ do not.  The amendments to the Re-Amended Writ are intended to rectify this situation.

III. DISCUSSION

51.  As I mentioned at the hearing, for convenience of exposition, in this section, I shall follow the order of topics in the Defendants’ written Response Submissions dated 5 July 2010.

52.  An outline of those topics is as follows:-

A. External Defendants’ Order 12 Rule 8 Application to set aside service on them outside of Hong Kong

A.1    Alleged procedural errors in issuing and serving proceedings on the External Defendants

A.2    Whether actions within Order 11 Rule 1(1)

A.3    Whether serious issues to be tried

A.3.1   Personal claims against the 6^th, 8^th and 10^th Defendants (that is, the 3 New Cotai Directors (Mr. Moross, Mr. Baker and Mr. Vora) who are also External Defendants) for inducing breach of the SPA

A.3.2   Derivative claims on behalf of Macao Co against the 6^th, 8^th and 10^th Defendants for breaches of fiduciary duty owed to Macao Co

A.3.3   Derivative claims on behalf of Cyber Neighbour against the 6^th, 8^th and 10^th Defendants for breaches of fiduciary duty owed to Cyber Neighbour

A.3.4   Derivative claims on behalf of Cyber One against the 6^th, 8^th and 10^th Defendants for breaches of fiduciary duty owed to Cyber One

A.3.5   Personal claims against Silver Point and Oaktree for inducing breach of the SPA

A.4    Summary

A.5    Whether material non-disclosure by EAST

B. Internal and External Defendants’ Strike Out Applications

C. EAST’s Application to amend the Re-Amended Writ

D. Application to strike out parts of the Petition

A.  External Defendants’ Order 12 Rule 8 Application to set aside service on them outside of Hong Kong

53.  To qualify for service outside the jurisdiction, EAST must show that there is a good arguable case that its claims fall within one of the sub-paragraphs of Order 11, Rule 1(1), that there is a serious issue to be tried in respect of its claims, and that the Court should exercise its discretion to grant leave.

A.1    Alleged procedural errors in issuing and serving proceedings on the External Defendants

54.  On the basis of the Chronology in Section II.B of this Judgment, Mr. Mark Strachan QC (appearing for the Defendants) submits that EAST obtained leave to serve the Amended Writ on the External Defendants.  Since EAST instead served the Re-Amended Writ on the External Defendants outside Hong Kong, Mr. Strachan argues that service on the External Defendants was irregular.

55.  I disagree.

56.  Plainly, when Master Ng considered EAST’s application for service out on 11 December 2009 she was fully aware of the Re-Amended Writ.  That is why she emended para. 12 of the 2^nd Affidavit.  The emendation evidences her appreciation of what would have been self-evident, namely that:-

(1) the Re-Amended Writ had superseded the Amended Writ; and,

(2) EAST was applying by the 2^nd Affidavit for service outside the jurisdiction of the Re-Amended Writ which had come into existence since the time when EAST had originally filed its leave application.

57.  Why else, one asks rhetorically, would Master Ng have emended para. 12 of the 2^nd Affidavit?  Why would any Master having given leave to serve a superseded document (here, the Amended Writ) as the External Defendants argue?

58.  It is true that, un-emended, the 2^nd Affidavit literally sought leave by para. 12 to serve a “concurrent writ of summons” outside the jurisdiction.  But para. 12 had to be read (as the Master correctly read it) in context.  Even the 1^st Affidavit sought (by its para. 28) leave to serve a “concurrent writ of summons” outside of the jurisdiction.  But no one (not even the External Defendants) is contending that para. 28 should be read literally as referring to the Writ, despite the existence of the Amended Writ at the time when the 1^st Affidavit was filed.  Para. 12 has to be read in an analogous commonsense manner as referring to the re-amended version of the Writ which was extant at the time of the 2^nd Affidavit.

59.  It is also true that Master Ng (or more likely her clerk) amended the specific reference to Re-Amended Writ from the draft Order submitted on 21 December 2009.  But this was presumably done to bring the draft Order in line with the wording in the clerk’s 14 December 2009 note to EAST’s solicitors.  It appears to me to have been a purely “bureaucratic” amendment.  I am unable to infer from such amendment anything which alters what (from the Master’s undoubted own emendation to the 2^nd Affidavit) the Master obviously understood.  In particular, I note that the Re-Amended Writ itself literally fits within the description “amended concurrent Writ” in the clerk’s note.  A Re-Amended Writ is a form of amended Writ.  So the clerk’s note is entirely consistent with the Master’s emendation.

60.  In my view, leave was given to serve the Re-Amended Writ outside the jurisdiction.  Accordingly, in what follows, I shall consider the External Defendants other criticisms of EAST’s Order 11 Application in the context of the actions asserted in the Re-Amended Writ.

A.2    Whether good arguable case that actions fall within Order 11 Rule 1(1)

61.  Recall that, in support of its application for service out, EAST relied on 2 limbs of Order 11, namely, r. 1(1)(c) and r. 1(1)(d).  Mr. Strachan says that neither limb is apposite.

62.  Mr. Strachan first submits that EAST’s various personal claims against the External Defendants for inducing New Cotai to breach the SPA cannot fall within the terms of r. 1(1)(d).  That is because such claims are not in relation to the breach of the SPA by one or more of the External Defendants.  The External Defendants are not parties to the SPA, only New Cotai is.  It follows (Mr. Strachan reasons) that the claims are not “to recover damages ... in respect of the breach of a contract” as required by r. 1(1)(d).  EAST’s claims are at one remove from this requirement.  The claims are only in respect of persons not parties to a contract causing a party to the contract to breach the same.

63.  In support of his argument, Mr. Strachan refers me to Hong Kong Civil Procedure 2010 Note 11/1/21 (at pp. 144-5) which states:-

“Requirement of a contract -- The relevant rule in the CPR [English Civil Procedure Rules] is now intentionally wider in that the claim need merely ‘relate to’ a contract, Albon (trading as NA Carriage Co.) v. Naza Motor Trading Sdn Bhd & Anor [2007] EWHC 9 (Ch).  Further English cases may be useful but must be treated with caution in Hong Kong.

Previous Hong Kong and English White Books stated that the contract must be between the plaintiff and a defendant, but it has been held under the CPR that this reads something into the rules that [is] not there, Greene Wood & McLean v. Templeton Insurance Ltd. [2009] EWCA Civ 65.  In Hong Kong it is only in limited circumstances that a non-party would have any claim to enforce, etc a contract, for example, if the contract were made in Hong Kong but governed by a law under which third parties may enforce benefits in their favour, for example English law.  It may be doubted that claim for damages for procuring a breach of contract is a claim for relief [in] respect of the breach of a contract....”

64.  I do not think that the passage cited assists Mr. Strachan.

65.  The first sentence of the passage suggests the contrary of his case.  Thus, I do not see much difference between the words “relate to” and “in respect of”.  There is no reason why the latter expression should be read narrowly to require that a putative defendant be a party to some relevant contract.  The claim must simply be “in respect of” a contract meeting the requirements in r. 1(1)(d)(i), (ii), (iii) or (iv).

66.  The passage expresses a view that in Hong Kong a claim for damages for procuring a breach of contract is outside the scope of r. 1(1)(d).  But no authority or reasoning is given in support of the opinion expressed.  The passage simply asserts, without elaboration, that “it may be doubted”.  But why should it be doubted?  On the contrary, the jurisdiction which the passage so casually dismisses as doubtful would seem to accord with commonsense.

67.  Assume that a contract is connected with Hong Kong for one or other of the reasons in r. 1(1)(d)(i)-(iv).  Then, the Hong Kong Court can certainly determine if a person X (whether within or outside Hong Kong) is in breach of the contract.  If so, in the absence of clear words, it makes little sense to read the extra-territorial jurisdiction conferred by r. 1(1)(d) as not applying where the allegation is that some person outside the jurisdiction has caused X to breach that same contract.  The Hong Kong Court presumably has jurisdiction under r. 1(1)(d) precisely because of the factors connecting the contract in question with Hong Kong.  In the situation of inducing breach, it must similarly be appropriate for the Hong Kong Court to adjudicate whether someone has actually caused a breach of the Hong Kong-related contract.

68.  Mr. Strachan further submits that r. 1(1)(c) does not apply because there would be no real advantage to EAST in suing the External Defendants in Hong Kong.

69.  But, given New Cotai has been validly served as an Internal Defendant and given EAST’s claim that New Cotai has breached the SPA, it must be that the External Directors are proper or necessary parties to the action.

70.  If the claim against New Cotai for breach of the SPA proceeds in Hong Kong, but EAST’s claims against the External Defendants for inducing breach of the SPA are litigated elsewhere, there is a danger of contradictory judgments.  The Hong Kong Court may, for instance, find that there has been a breach of the SPA by New Cotai.  But the foreign court might find that there has been no breach of the SPA by New Cotai.  In that circumstance, despite the Hong Kong Court’s finding, the foreign court would have to conclude that SPA could not have been induced by the External Defendants to breach the SPA.

71.  The claims for breach of the SPA and inducing breach of the SPA should be heard in the same court, if only so that the External Defendants and New Cotai may all be bound by one set of findings.  Avoiding the possibility of contradictory findings by different courts would be a real advantage for EAST.

72.  Consider further the derivative claims alleged in the Re-Amended Writ against the 6^th, 8^th and 10^th Defendants for breach of fiduciary duties owed to the Joint Venture Companies.  The Joint Venture Companies do not dispute service on them outside the jurisdiction.  Assume that the derivative claims asserted by EAST on behalf of the Joint Venture Companies are well-founded (in other words, that there is a serious issue to be tried in respect of those claims).  Then on that assumption it would follow that the External Defendants as the alleged wrongdoers towards the Joint Venture Companies are proper or necessary parties.  The applicability of r. 1(1)(c) ultimately depends on the validity of the assumption (as to which see below).

73.  Accordingly, subject to EAST establishing a serious issue to be tried in respect of the personal and derivative actions asserted in the Re-Amended Writ, EAST’s claims would fall within rr. 1(1)(c) or (d).

A.3    Whether serious issues to be tried in respect of EAST’s alleged actions

A.3.1 Personal claims against 3 New Cotai Directors for inducing breach of the SPA

74.  EAST’s allegation is in effect that the 3 New Cotai Directors induced their own company (New Cotai) to breach the SPA between New Cotai and EAST.

75.  However, the general rule is that, where a director is acting bona fide and within the ambit of the director’s authority, the director has no personal liability for procuring the director’s company to commit a breach of contract.  More particularly, a director or other agent of a company who causes the company to act in breach of contract incurs no personal liability and is under no duty of care to counterparties to the contract, to ensure that the company fulfils its contractual obligations.  See Crystalens Ltd. v. Dr. John White [2006] EWHC 3357 (Gloster J at paras. 11 and 12) summarising what is sometimes referred to as the rule in Said v. Butt [1920] 3 KB 497.

76.  As Mr. Strachan (borrowing from D. C. Thomson & Co. v. Deakin [1952] 1 Ch 646 (CA), at 681) explained the rule, a director being the human agent or alter ego through whom a company acts, a director cannot be sued for inducing the director’s own self to breach a contract.  On the other hand, where the director acts outside the scope of the director’s authority and in bad faith, the director ceases to be the company’s alter ego and may then incur personal liability towards third parties.

77.  In oral submission, Mr. Manzoni QC (appearing for EAST) sought to argue that EAST’s claim against the 3 New Cotai directors fell within the exception to the rule in Said v. Butt.

78.  Mr. Manzoni submitted that New Cotai was in substance the landholding arm of the New Cotai Group.  Therefore, as directors of New Cotai, the New Cotai Directors (including the 3 directors in question here) could only be acting within the scope of their authority to the extent that they furthered the joint venture’s attempts to develop the MSC site.  Instead (Mr. Manzoni contended) the New Cotai Directors attempted to promote the interests of NCE by stalling the development of the MSC site until better terms could be extracted from EAST to make NCE’s intended casino operations at the MSC more profitable.  For this reason, there is (Mr. Manzoni suggested) a serious issue to be tried as to whether, in furthering NCE’s interests over those of New Cotai, the New Cotai Directors were acting in bad faith outside the scope of their authority contrary to the interests of New Cotai.

79.  I am not persuaded by Mr. Manzoni’s submission that EAST’s claim against the New Cotai directors (including the 3 in question here) for inducing breach of the SPA falls within the exception to Said v. Butt.

80.  First, as Mr. Strachan points out, if Mr. Manzoni’s case is truly as he stated in Court, then one would expect such case to have been pleaded in the Statement of Claim.  But there is nothing in the Statement of Claim which suggests that any of New Cotai Directors (including the 3 in question here) were acting otherwise than bona fide in the interests of New Cotai and within the scope of the authority conferred upon them as directors of New Cotai.  There is no mention or hint at all in the Statement of Claim of the directors wrongly favouring the interests of NCE over those of New Cotai.

81.  The Court expects allegations of bad faith against individuals to be pleaded explicitly with full particularity.  Since this has not been done, I do not see how the Court can accept what Mr. Manzoni has alleged out of the blue from the bar table.

82.  Second, in practical terms, Mr. Manzoni’s allegations do not make sense.

83.  The thrust of EAST’s case is that New Cotai has systematically and deliberately frustrated progress on the development of the MSC site in order to force EAST to renegotiate the terms of the joint venture.  If that is the case, I do not understand how it can be said that the New Cotai Directors were acting outside the scope of the authority conferred upon them.  The New Cotai Directors would simply have been carrying out the wishes of New Cotai as their principal.

84.  Further, New Cotai and NCE are both wholly-owned subsidiaries of New Cotai Holdings LLC.  It seems to me highly artificial for Mr. Manzoni to be drawing nice distinctions between the interests of New Cotai (as landholding entity) and NCE (as casino operator).  The reality must be that the interests of New Cotai Holdings LLC, New Cotai and NCE on the matter are identical.  In furthering the interests of NCE (if that was what they were doing), the New Cotai Directors would have been equally furthering the interests of New Cotai Holdings LLC and New Cotai.

85.  Accordingly, in my view, the claim against the 3 New Cotai Directors for inducing their own company to breach the SPA is fanciful.  There is no serious issue to be tried here.

A.3.2 Derivative claims on behalf of Macao Co against the3 New Cotai Directors for breaches of fiduciary duty owed to Macao Co

86.  EAST is a shareholder of Cyber One, which in turn is a 100% shareholder of Cyber Neighbour and a 4% shareholder of Macao Co.  Consequently, to the extent that EAST seeks to sue the New Cotai Directors (including the 3 in question here) for wrongs done by the latter to Macao Co, EAST is seeking to bring a multiple derivative action.

87.  Where a shareholder seeks to bring a derivative action (whether single or multiple) on behalf of a foreign company (such as Macao Co), the Hong Kong Court will only entertain such derivative action if and only if an analogous action can be brought by the shareholder under the law of the place of the foreign company’s incorporation.  See Konamaneni v. Rolls Royce (India) Ltd. [2002] 1 WLR 1269 (Lawrence Collins J at para. 50).

88.  Thus, for the purposes of its Order 11 application for service out, EAST had to show a good arguable case that Macao law recognises the possibility of a multiple derivative action or something analogous to a multiple derivative action.  By “something analogous to a multiple derivative action,” I mean that EAST must establish a good arguable case that under Macao law it is possible for a shareholder of a company X to bring an action against persons who have done wrong to a company Y of which X is a shareholder.

89.  On a shareholder suing third parties for wrongs done to a company, Macao Commercial Code Art. 248 provides (in translation from the original Portuguese):-

“The liability action in favour of the company can be brought by an unlimited liability shareholder or by shareholders holding a capital participation of no less than 10%, if the company has not yet initiated the respective action.”

90.  Mr. Strachan submits that it is plain from Art. 248(1) that Macao law recognises only single derivative actions (that is, where the shareholder of X brings an action against persons who have done wrong to X).

91.  Mr. Strachan supports his contention by reference to the evidence of Mr. Riquito, a Macanese lawyer who has filed affidavits on Macanese law on behalf of the Defendants.  Mr. Riquito explicitly states in his evidence that the remedy afforded by Art. 248 “is available only to a direct shareholder of the company that has suffered damage and not to an indirect shareholder (as in the case of [EAST] with regards to Macao Co)”.

92.  Mr. Manzoni’s written submission relied on the evidence of Prof. Godinho, EAST’s Macanese law expert.  Prof. Godinho argues that the Macao Court “would permit [EAST] to bring a multiple derivative action on behalf of Macao Co under Art. 248 in the circumstances set out in the Statement of Claim”.

93.  However, I pointed out to Mr. Manzoni in the course of his oral submission that I could not follow Prof. Godinho’s argument.  That argument appears to hinge on the possibility under Macao law of disregarding the corporate veil in certain situations.  Even if that were so, it does not follow that, as a matter of general principle Macao law accepts that a shareholder of a parent company can directly sue persons who have wronged the parent’s subsidiary.

94.  It seems to me that all Prof. Godinho is saying is that Macao law (in common with the law of Hong Kong and that of many other states) has a principle whereby the corporate veil may be ignored.  The application of that principle in conjunction with Art. 248(1) (Prof. Godinho suggests) can have the result in certain situations of mimicking what happens under a common law multiple derivative action.  Thus, where the corporate veil can be pierced under Macao law, a parent X may be treated as the same legal person as its subsidiary Y.  In that instance, a shareholder of X would be able to sue wrongdoers of Y directly under Art. 248(1) since X and Y are together deemed to be “the company” within the terms of that provision.

95.  But, in reality, the shareholder does not sue wrongdoers of Y because Macao law recognises a direct right of suit in the shareholder under a doctrine analogous to a common law multiple derivative action.  The shareholder is only able to sue directly in the example given because Macao law recognises the different doctrine of piercing the corporate veil.

96.  Further, implicit in Prof. Godinho’s argument is an acceptance that, but for recourse to some other doctrine (such as piercing the corporate veil) whereby a parent and a subsidiary are treated as the same entity, Art. 248(1) does not authorise a direct action by a shareholder of X against the wrongdoers of Y.  There would be no need for Prof. Godinho’s elaborate reasoning in relation to piercing the corporate veil, if on its own Art. 248(1) is capable of being construed as enabling multiple derivative actions.  Inherent in Prof. Godinho’s approach is a tacit acknowledgment of Mr. Riquito’s position, namely, that on its face, Art. 248(1) plainly only permits shareholder suits analogous to single (not multiple) derivative actions.

97.  In response to my concerns over Prof. Godinho’s reasoning, Mr. Manzoni did not attempt to defend Prof. Godinho.  Instead, Mr. Manzoni adopted and urged on me a reading of Art. 248 which I had broached in the course of Mr. Strachan’s submissions.

98.  I had invited Mr. Strachan to comment on the possibility of obtaining a result analogous to a common law multiple derivative action through successive iterations of Art. 248(1).  By the expression “successive iterations,” I was asking whether the employment of Art. 248(1) in a series of actions might achieve the same result as a common law multiple derivative action.

99.  What I had in mind was that, in a 1^st iteration, EAST might sue the directors of Cyber One under Art. 248(1) for breach of their obligations to Cyber One in not bringing suit against the directors of Macao Co and in jeopardising Cyber One’s interest in Macao Co by their inaction.  In EAST’s 1^st iteration proceedings, EAST would be seeking (among other things) to compel the directors of Cyber One to cause Cyber One to sue the directors of Macao Co under Art. 248(1) for wrongdoing to Macao Co.

100.  In the event that EAST was successful in its 1^st iteration action, the directors of Cyber One would (among other things) be compelled to cause Cyber One to bring an Art. 248(1) action (the 2^nd iteration) against the directors of Macao Co for alleged wrongdoing to Macao Co.  The net result would be that, through EAST’s 1^st iteration action, a 2^nd iteration action is initiated against the directors of Macao Co.

101.  Mr. Strachan thought that there were at least 3 difficulties with what I had suggested to him.

102.  The 1^st difficulty was the number of foreign elements involved.  There was no evidence (Mr. Strachan submitted) that, on the facts of this case, the Macao Court would regard itself as having jurisdiction to compel the directors of a BVI company (Cyber One) to cause that BVI company to initiate action against the directors of a Macao company (Macao Co).  In the absence of evidence on the applicable Macao conflict of law rule, I could not assume that Art. 248(1) could be used as I suggested.

103.  Like Mr. Manzoni, I doubt the validity of this 1^st objection.

104.  Under Hong Kong conflict of law rules, one refers to Macao law as the governing law where a multiple derivative action is sought to be brought here on behalf of a Macao company.  But normally, where as a result of a conflict rule the Hong Kong Court refers to law of a foreign state, the Hong Kong Court only considers that foreign state’s domestic law minus its conflict of law rules.  The Hong Kong Court simply asks the general question whether it is possible in Macao to bring something like a multiple derivative action against a Macao corporation.  The Hong Kong Court does not also examine whether on the specific facts of the present case a Macao Court would allow a process analogous to a multiple derivative action.

105.  The 2^nd difficulty is that neither Mr. Riquito nor Prof. Godinho say anything at all about the possibility of using Art. 248(1) iteratively.  There is consequently no evidence one way or the other that Art. 248(1) can be so used.  For instance, neither Macao law expert discusses whether it is possible to obtain an order under Art. 248(1) compelling the directors of a company to cause the company to bring an action under Art. 248(1) against persons who have wronged the company’s subsidiary.  One would have thought that, if Art. 248(1) could have been so used to improvise a crude form of multiple derivative action, Prof. Godinho at least would have dealt with the matter.  But, as he does not, it would be “dangerous” (Mr. Strachan cautions) for this Court to go “off-piste” and accept as a possible application of Art. 248(1) what neither expert has addressed or advocated.

106.  In my view, there is substance in Mr. Strachan’s 2^nd objection.  Given the complete silence among the experts, I do not think that I can treat my suggestion as even potentially arguable.  In all likelihood, the experts did not bother to raise the iterative use of Art. 248(1) for the simple reason that as a matter of Macao law one cannot so use the provision.

107.  Mr. Strachan’s 3^rd difficulty was that he did not think that the iterative use of Art. 248(1) (even if that were possible) gave rise to something analogous to a multiple derivative action.

108.  I think that there is also substance in Mr. Strachan’s 3^rd objection.

109.  In Waddington Ltd. v. Chan Chun Ho & others [2009] 4 HKC 381 (CFA) Lord Millett (at para. 70) stated that it was “deceptive” to regard a multiple derivative action as no more than “two or more derivative actions which have been consolidated into one”.  The multiple derivative action was instead more accurately described as:-

“a single action on behalf of the company in which the cause of action is vested.  The only question is whether the action, which may be brought by a member of the company, may be brought by a member of its parent or ultimate holding company.  This is simply a question of locus standi.”

110.  The iterative use of Art. 248(1) is roughly equivalent to treating a multiple derivative action as no more than “two or more derivative actions which have been consolidated into one”.  But, given what Lord Millett has said, that iterative use would not result into something truly analogous to a common law multiple derivative action.

111.  The iterative use of Art. 248(1) does not give a shareholder locus to bring a single action on behalf of a parent directly against the wrongdoers of a subsidiary.  All that the iterative use of Art. 248(1) achieves is to cause the directors of a parent company to cause the parent to sue the wrongdoers of the subsidiary.

112.  The locus or right directly to sue the wrongdoers of the subsidiary remains vested in the parent and does not vest in the shareholder of the parent.  The shareholder cannot bring a single action against the subsidiary’s wrongdoers.  At best the shareholder can only act indirectly to compel the directors of the parent to cause the parent to exercise its right or locus to sue.

113.  It seems to me therefore that Mr. Strachan rightly questions whether the iterative use of Art. 248(1) gives rise to any true analogy with a common law multiple derivative action.

114.  The position then is as follows: I am not persuaded by Prof. Godinho’s argument.  I have doubts on Strachan’s 1^st objection to the iterative use of Art. 248(1).  But I believe that Mr. Strachan’s 2 other objections to such iterative use are valid.  Accordingly, I conclude that there is no good arguable case that EAST can bring a derivative action on behalf of Macao Co against any of the New Cotai Directors.

A.3.3 Derivative claims on behalf of Cyber Neighbour against 3 New Cotai Directors for breaches of fiduciary duty owed to Cyber Neighbour

115.  There are 2 problems with this set of claims.

116.  The first arises from Cyber Neighbour being a BVI company.  On the face of the relevant BVI statutory provision (Business Companies Act 2004 (BCA) s. 184C), it does not appear that BVI law recognises multiple derivate actions.

117.  The second arises from the nature of damages claimed by EAST on behalf of Cyber Neighbour.  Those damages appear to be no more than reflective loss, that is, the diminution in the value of Cyber Neighbour’s shareholding in Macao Co as a result of the New Cotai’s Directors’ alleged breaches of fiduciary duty.

A.3.3.1  Multiple derivative action under BVI law

118.  EAST claims locus to sue on behalf of Cyber Neighbour for wrongs done by the New Cotai Directors.  EAST is not a shareholder of Cyber Neighbour, but is a shareholder of a shareholder (Cyber One) of Cyber Neighbour.  Thus, EAST is seeking to bring a multiple derivative action on behalf of Cyber Neighbour.  It must satisfy the Konamaneni principle discussed above in connection with Macao law.  Here EAST has to show that BVI law recognises multiple derivative actions or something analogous to them.

119.  BCA s. 184C provides:-

“(1)   Subject to sub-s. (3), the Court may, on the application of a member of a company, grant leave to that member to:-

(a) bring proceedings in the name and on behalf of that company;

(b) intervene in proceedings to which the company is a party for the purposes of continuing, defending or discontinuing the proceedings on behalf of the company;

(2) Without limiting sub-s. (1), in determining whether to grant leave under that sub-section, the Court must take the following matters into account:-

(a) whether the member is acting in good faith;

(b) whether the derivative action is in the interests of the company, taking account of the views of the company’s directors on commercial matters;

(c) whether the proceedings are likely to succeed;

(d) the costs of the proceedings in relation to the relief likely to be obtained; and,

(e) whether an alternative remedy to the derivative claim is available.

(3) Leave to bring or interven in proceedings may be granted under sub-s. (1) only if the Court is satisfied that:-

(a) the company does not intend to bring, diligently continue or defend the proceedings as the case may be; or,

(b) it is in the interests of the company that the conduct of the proceedings should not be left to the directors or to the determination of the shareholders or members as a whole.

(4) Unless the court otherwise orders, not less than 28 days notice of an application for leave under sub-s. (1) must be served on the company and the company is entitled to appear and be heard at the hearing of the application.

(5) The court may grant such interim relief as it considers appropriate pending the determination of an application under sub-s. (1).

(6) Except as provided in this section, a member is not entitled to bring or intervene in any proceedings in the name of or on behalf of the company.”

120.  The parties’ experts on BVI law (Mr. Paul Webster QC for the Defendants, Mr. Richard Millett QC and Mr. Joe Smouha QC for EAST) all accept that multiple derivative actions are not possible in the BVI.  This is by reason, in particular, of ss. 184C(1) and (6).  The former sub-section only authorises the bringing of proceedings by a shareholder on behalf of the company of which the shareholder is a member.  The latter sub-section bars the bringing of common law derivative actions, so that either one can bring a single derivative action under the BCA or one cannot bring a derivative action at all.

121.  At the hearing, I also explored with Mr. Strachan and Mr. Manzoni the possibility (not mentioned by any of the parties’ BVI law experts) of using s. 184C(1) re-iteratively to achieve something like a multiple derivative action under BVI law.  However, although Mr. Manzoni again urged on me the possibility of so using s. 184C(1), it seems to me that similar difficulties to those which I have accepted in relation to Macao law would apply in relation to the iterative use of s. 184C(1).

122.  Mr. Millett has suggested that the word “proceedings” in s. 184C(1) can be read restrictively as referring only to “proceedings within the BVI”.  He argues that s. 184C(1) should consequently not be treated as precluding the Hong Kong Court in Hong Kong proceedings from allowing a common law multiple derivative action on behalf of a BVI company.

123.  I am unable to accept Mr. Millett’s suggestion.  The Konamaneni principle requires the Hong Kong Court to look at the domestic law of the place of incorporation.  I have to see whether that domestic law (here BVI law) allows multiple derivative actions.  Where (as all experts here agree) that domestic law does not recognise the bringing of a multiple derivative action, that is the end of the matter.

124.  Accordingly, there is no good arguable case that EAST can bring a derivative action on behalf of Cyber Neighbour against any of the New Cotai Directors.

A.3.3.2  Reflective loss

125.  The loss claimed on behalf of Cyber Neighbour is plainly a claim for reflective loss.

126.  EAST’s allegation is that a result of the New Cotai Directors’ breaches of duty, Cyber One, Cyber Neighbour, and Macao Co have suffered loss.  Spelled out in pedantic detail, EAST’s case runs thus:  Had the New Cotai Directors not acted in breach of their duties, a land grant modification would long ago have been made in Macao Co’s favour and the MSC project would have enjoyed an enterprise value of at least $18.6 billion.  Because there has been no land grant modification, Macao Co does not today enjoy such enterprise value and its net asset value has been (and continues to be) diminished.  Since Macao Co is worth less than it should be, Cyber Neighbour’s shareholding in Macao Co and (in consequence) Cyber Neighbour are worth less than they should be.  Since Cyber Neighbour is worth less than it should be, Cyber One’s shareholding in Macao Co and (in consequence) Cyber One are worth less than they should be.

127.  Two features of EAST’s derivative claims may be noted.

128.  First, EAST seeks to claim by way of derivative actions Macao Co’s loss as reflected through the shareholding chain from Cyber Neighbour up to Cyber One.  The derivative claim which EAST wishes to bring on behalf of Cyber Neighbour claims Cyber Neighbour’s loss as reflected from Macao Co’s loss.  The derivative claim which EAST wishes to bring on behalf of Cyber One claims Cyber One’s loss as reflected from Cyber Neighbour’s loss which in turn is loss reflected from Macao Co’s loss.

129.  Second, as far as its claim for lost enterprise value of $18.6 billion is concerned, EAST does not assert any parallel personal cause of action against the New Cotai Directors having as its measure of damages the lost enterprise value of $18.6 billion.  All of the personal claims which EAST asserts (whether in its Writ, Amended Writ, Re-Amended Writ and proposed Re-Re-Amended Writ) are for $689 million (the quantum of the 2^nd tranche payment said to be due from New Cotai).  EAST does not plead a personal cause of action against the New Cotai directors which claims the reflective loss quantum of $18.6 billion as EAST’s own damages entitlement.

130.  In Johnson v. Gore Wood & Co. [2002] AC 1 (HL) Lord Bingham (at 35E–36B) identified the following propositions in relation to claims for reflective loss:-

(1) “Where a company suffers loss caused by a breach of duty owed to it, only the company may sue in respect of that loss.  No action lies at the suit of a shareholder suing in that capacity and no other to make good a diminution in the value of the shareholder’s shareholding where that merely reflects the loss suffered by the company.  A claim will not lie by a shareholder to make good a loss which would be made good if the company’s assets were replenished through action against the party responsible for the loss, even if the company acting through the constitutional organs, has declined or failed to make good that loss.”

(2) “Where a company suffers loss but has no cause of action to sue to recover that loss, the shareholder in the company may sue in respect of it (if the shareholder has a cause of action to do so), even though the loss is a diminution in the value of the shareholding.”

(3) “Where a company suffers a loss separate and distinct from that suffered by the company caused by breach of a duty independently owed to the shareholder, each may sue to recover the loss caused to it by the breach of the duty owed to it but neither may recover loss caused to the other by breach of the duty owed to that other.”

131.  In defending EAST’s reflective loss claims, Mr. Manzoni relied on the 2^nd of Lord Bingham’s proposition.  Mr. Manzoni submitted that Macao Co may not have a cause of action against the New Cotai Directors.  If so, Mr. Manzoni contends that Cyber One and Cyber Neighbour should be entitled to bring actions against the New Cotai Directors claiming the reflective loss suffered by Cyber One and Cyber Neighbour respectively.

132.  In support of his submission that Macao Co may not have a cause of action against the New Cotai Directors, Mr. Manzoni relied on the following passage from Mr. Riquito’s affidavit evidence:-

“On a related note, the failure or omission of the shareholders meeting to approve a proposal on a given matter is deemed under Macao law to be a negative resolution.  This therefore includes failure to approve a given proposal by virtue of the required qualified voting majority not having been reached.  By way of example, at a meeting of New Cotai and [EAST], the indirect shareholders of Macao Co, on 20 August 2009, a resolution to approve a feasibility study to be delivered to the Macao Government was not passed by the shareholders.  Accordingly, by virtue of Article 9.1 of the Memorandum of Association of Macao Co ..., this meant that the directors of Macao Co were entitled not to act on or approve the feasibility study on the basis that the indirect shareholders of Macao Co had not passed the requisite resolution.  In my view, liability cannot extend to the directors in these circumstances under Macao law.”

133.  Assume Mr. Riquito is right.  Then (Mr. Manzoni reasons) Macao Co’s “negative resolution” had the result of rendering the New Cotai Directors immune in their capacity as Macao Co directors from a suit by Macao Co for breach of fiduciary duty in failing to respond to the Macao Government’s  request for a technical, economic and financial study.  That (Mr. Manzoni concludes) would justify Cyber One and Cyber Neighbour suing the New Cotai Directors for the reflective losses inflicted on Cyber One and Cyber Neighbour.

134.  There are at least 2 difficulties with Mr. Manzoni’s argument.

135.  The 1^st difficulty is that Mr. Manzoni’s own case is that Mr. Riquito is wrong in what he says about negative resolutions.  In his written submissions, Mr. Manzoni goes so far as to label Mr. Riquito’s evidence on the point as “a proposition of no consequence”.

136.  In his written submissions, Mr. Manzoni points out (I think rightly) that it “certainly cannot be suggested that what the New Cotai Parties have done in the present case is ordained by shareholders’ resolution”.

137.  Mr. Manzoni notes that the mere fact that shareholders have not resolved on something, does not mean that directors are authorised to breach their duties to the company.  Thus, in Mr. Manzoni’s graphic example, assume that, because of deadlock at a general shareholders meeting, a company fails to pass a resolution prohibiting a director from stealing from the company.  That “negative resolution” cannot possibly mean that the director may steal from the company.  As a matter of commonsense, one needs to look at the context of the “negative resolution”.  One has to look at all circumstances to discern whether the opposite of that which has been put to a vote has (as a result of a failure to pass the resolution) been implicitly authorised.

138.  In any event, I do not think that Mr. Riquito’s evidence goes so far as to justify the gloss suggested by Mr. Manzoni in oral argument.  All Mr. Riquito seems to be saying is that, if Macao Co’s shareholders in general meeting do not authorise the board to submit a feasibility study to the Macao Government, the board is not authorised to submit a feasibility study.  I do not read Mr. Riquito as advancing the surprising and extreme proposition that the New Cotai directors are absolved from all liability for breach of their independent duty to act at all times in Macao Co’s best interests (including, if appropriate, voting (or urging shareholders to vote) in favour of a resolution to submit a feasibility study).

139.  The 2^nd difficulty is related to the one just discussed.  It is that nowhere in its pleadings or affidavit evidence does EAST even hint that Macao Co is somehow unable to sue the New Cotai directors for wrongs inflicted upon Macao Co.  On the contrary, EAST’s pleaded case is that Macao Co has a cause of action against the wrongdoing of the New Cotai Directors.  That is why EAST seeks to bring a multiple derivative action on behalf of Macao Co to enforce such cause of action.

140.  Nowhere, prior to Mr. Manzoni’s oral submissions before me, did EAST suggest, even if only as a fallback position, that Macao Co has no cause of action against the New Cotai Directors due to the doctrine of negative resolution under Macao law.  If what Mr. Manzoni has submitted in Court were EAST’s actual case (as opposed (say) to an improvised last minute afterthought), one would have expected that case to have been set out with full particulars from the outset.

141.  The facts and matters said to give rise to a claim for reflective loss under Lord Bingham’s 2^nd proposition are material averments that need to be set out, with precision and rigour, in one’s pleading and in one’s affidavit evidence in support of service out of the jurisdiction.  This has to be done to assure the Court at an early stage that one has a good arguable case and the claim for reflective loss should be allowed to proceed.  Without such assurance, the Court may well strike out the claim for reflective loss at an early stage as an abuse of process and an unwarranted waste of time and expense.

142.  Unfortunately, that has not been done.  It seems to me far too late for Mr. Manzoni to spring his case on the supposed potential obstacle posed by negative resolution out of the blue in the course of oral submission.

143.  Mr. Manzoni’s written submissions advance miscellaneous reasons why the claims for reflective loss fall within Lord Bingham’s 2^nd proposition.  No reliance, however, is placed on the negative resolution point.

144.  Instead, it is suggested that, because all decisions of Macao Co have to be made at Cyber One level, then “it is possible” that Macao Co (and presumably Cyber Neighbour) may not have a relevant cause of action.  But this appears to me to be speculation.  It also seems contrary to the main thrust of EAST’s case.

145.  At the moment, EAST wants the best of both worlds.  It says that causes of action are available to Macao Co and Cyber Neighbour.  But EAST apparently also says that, on the assumption that it is wrong on its main contention (because the Court at the end of the day rejects EAST’s claims on behalf of Macao Co and Cyber Neighbour), then EAST wants to claim reflective loss on behalf of Cyber Neighbour (if EAST’s claims on behalf of Macao Co fail) or (alternatively) reflective loss on behalf of Cyber One (if EAST’s claims on behalf of Macao Co and Cyber Neighbour fail).

146.  But I do not think that EAST is entitled to bring such a case without more.  It cannot blow hot and cold at the same time.

147.  It does not follow, simply because the causes of action asserted by EAST on behalf of Macao Co or Cyber Neighbour fail, that Macao Co or Cyber Neighbour have no cause of action to recover their respective losses.  EAST may simply, for example, have asserted bad causes of action on behalf of Macao Co or Cyber Neighbour, when better causes of action could have been advanced on behalf of the 2 latter companies.  The failure of a cause of action X by a company C against wrongdoers Y does not necessarily imply that C has no viable cause of action against Y.  To come under Lord Bingham’s 2^nd proposition requires something more.

148.  It is not good enough to say (as EAST asserts) that everything is “a hugely complex interaction of facts, causes of action and losses covering numerous defendants”.  Complexity is not an excuse for vagueness.

149.  Vagueness is not acceptable when it falls squarely upon EAST to spell out in its pleading and affidavit evidence precisely why it asserts that:-

(1) contrary to its case that Macao Co has a cause of action, it may still be that Macao Co has no cause of action, so that Cyber Neighbour should be allowed to claim reflective loss; and,

(2) contrary to its case that Cyber Neighbour has a cause of action, it may still be that Cyber Neighbour has no cause of action, so that Cyber One should be allowed to claim reflective loss.

150.  EAST’s pleading and affidavit evidence do not now spell out unambiguously how its claims for reflective loss on behalf of Cyber One and Cyber Neighbour are supposed to fall within the exception to Lord Bingham’s 2^nd proposition.  EAST has to be frank.  It has to explain just why Macao Co and Cyber Neighbour do not (or may not) have causes of action against the New Cotai Directors.

151.  Finally, EAST’s affidavit evidence suggests that Cyber One may have incurred losses of $422 million as a result of the termination of agreements between Cyber One and the Taubman Group.  That termination is attributed by EAST to the misconduct of the New Cotai directors.  EAST also complains on affidavit about wasted expenses on consultancy agreements.  The waste is also attributed to the actions of the New Cotai Directors.

152.  Assume that Cyber One may have personal claims in respect of the termination and abortive consultancies.  Those may be (but have not been) expressly pleaded.  I do not, however, see how those potential personal claims of Cyber One against the new Cotai Directors affect the foregoing analysis of reflective loss.  The damages claimed by Cyber One would be the $422 million alleged to have been lost by it and the consultancy expenses which Cyber One says it needlessly incurred.  On their face, neither claim would appear to be for reflective loss.

153.  In my view, for the reasons discussed above, EAST has not shown an arguable or serious case to be tried on any of the derivative claims for reflective loss sought to be brought against the New Cotai Directors on behalf of Cyber One, Cyber Neighbour and Macao Co.

A.3.4     Derivative claims on behalf of Cyber One against 3 New Cotai Directors for breaches of fiduciary duty owed to Cyber One

154.  Mr. Strachan objects to this set of claims on 2 grounds.

155.  One ground has already been discussed.  That is that the derivative claim on behalf of Cyber One is claiming reflective loss from the New Cotai Directors (including the 3 in question here).  As I have stated, I do not believe that EAST has made out a good arguable case for a claim seeking reflective loss on behalf of Cyber One.  By itself, this failure to make out a good arguable case is fatal to EAST’s claim.

156.  The other ground is that BVI law has not authorised the derivative claim sought to be brought on behalf of Cyber One (a BVI company).

157.  Note that the claim here is for a single derivative action.  EAST as a shareholder of Cyber One seeks to bring a claim on behalf of Cyber One against the New Cotai Directors as wrongdoers.

158.  As we have seen, BCA s. 184C(1) recognises single (as opposed to multiple) derivative actions.  On this basis, Mr. Manzoni argues that the Konamaneni principle is satisfied: BVI law recognises the derivative action being proposed by EAST on behalf of Cyber One.

159.  But Mr. Strachan argues to the contrary.  He points out that s. 184C(1) requires the leave of the BVI Court before a single derivative action can be mounted.  EAST (Mr. Strachan points out) has not obtained such leave from the BVI Court, so its action here in Hong Kong on behalf of Cyber One is not authorised under the BCA. Konamaneni (Mr. Strachan concludes) has not been satisfied.

160.  Which of the 2 competing submissions is right depends on whether the requirement for leave is a matter of substantive or of procedural law.  If leave is a matter of substantive law, then under Konamaneni leave must be obtained from the BVI Court before the Hong Kong Court can allow the proposed single derivative action to proceed.  On the other hand, if the matter of obtaining leave is simply a procedural requirement, then the operative private international law principle is that matters of procedure are governed by thelaw of the forum.  In this case, the forum being the Hong Kong Court, the leave of the BVI Court would not be required.  The Hong Kong Court would instead determine whether or not to allow the proposed derivative action to proceed as a matter of Hong Kong procedural law.

161.  There is no dispute among the parties that it is for the Hong Kong Court to characterise the leave requirement under BVI as being either a matter of substance or of procedure.

162.  For what it is worth, in my view, the requirement for leave is simply a procedural matter, akin (say) to the need to obtain leave for the commencement of a judicial review.  Mr. Strachan suggests that because, in the BVI, one cannot undertake a derivative action unless the Court gives leave, a shareholder’s right to bring a derivative action must be substantive.  The right is brought into being by the grant of leave.  Mr. Strachan bolsters his argument by pointing out that, in assessing whether to grant leave, the BVI Court must assess whether the proposed derivative action proceedings are “likely to succeed”.  The BVI Court needs therefore (Mr. Strachan submits) to evaluate the substantive merits of the intended claim.

163.  I am not persuaded by Mr. Strachan’s submissions on this matter.

164.  In judicial review proceedings here, for example, the Court is similarly required to assess at the leave stage whether there is an arguable case with a reasonable prospect of success.  Despite this, no one (I think) would contend that the leave requirement is other than procedural.  The right of an applicant to bring a judicial review exists independently of the Court’s prima facie consideration of the substantive merits of the applicant’s case at the leave stage.  The Court’s view is merely preliminary and is only intended to weed out frivolous or hopeless cases so that time and money are not needlessly wasted.

165.  I am fortified in my view by an obiter dictum of Lord Millett in Waddington (at para. 55): “The question of whether the leave of the court is required is a procedural question governed by the lex fori.”  I also draw support from the reasoning of the decision of the Queensland Supreme Court in Virgtel Ltd. v. Zabusky [2006] QSC 66, involving a leave provision under a Nigerian statute.  There De Jersey CJ held (at para. 51) that the Nigerian leave requirement concerned “the mechanics of litigation, what formalities must be met before a proceeding may go forward” and “does not concern the ‘existence, extent of enforceability’ of the right (to bring a derivative proceedings), just the manner of its exercise”.

166.  Nonetheless, I only give my view “for what it is worth,” because in light of my conclusion on reflective loss, I do not need to determine the question of substance or procedure conclusively.

A.3.5 Personal claims against Silver Point and Oaktree for inducing New Cotai to breach the SPA

167.  The only criticism here is that the Amended Writ literally pleaded that Silver Point and Oaktree had induced Cyber One to breach the SPA.  That (the Defendants said) was untenable because Cyber One was not a party to the SPA.

168.  But, as I have mentioned, the reference to Cyber One was an obvious typographical error for New Cotai.  This error was corrected in the Re-Amended Writ which I have held was the version of the Writ for which leave to serve out was given.  Accordingly, there is no basis for setting aside the personal claims by EAST against Silver Point and Oaktree for inducing breach of the SPA.

A.4    Summary

169.  My conclusions so far may be summarised as follows:-

(1) Master Ng gave leave to serve the Re-Amended Writ on the External Defendants outside the jurisdiction.

(2) Subject to there being good arguable cases on the merits in relation to the External Defendants (as to which see sub-paras. (3) to (7) below), leave to serve out was properly sought under Order 11, rr. 1(1)(c) and (d).

(3) EAST’s personal claims against the New Cotai Directors (including the 3 who are External Defendants) for inducing the breach of the SPA by themselves are untenable.

(4) EAST’s multiple derivative claims on behalf of Macao Co against the New Cotai Directors (including the 3 who are External Defendants) are untenable because on the available evidence multiple derivative claims are not recognised under Macao Law.

(5) EAST’s multiple derivative claims on behalf of Cyber Neighbour against the New Cotai Directors (including the 3 who are External Defendants) are untenable because:-

(a)    on the available evidence multiple derivative claims are not recognised under BVI law; and,

(b)   Cyber Neighbour’s claims contravening the no reflective loss principle.

(6) EAST’s single derivative claims on behalf of Cyber One against the New Cotai Directors (including the 3 who are External Defendants) are untenable because they violate the no reflective loss principle.

(7) EAST’s personal claims against Silver Point and Oaktree for inducing breach of the SPA by New Cotai are tenable.

170.  The Re-Amended Writ contains 2 other sets of claims as follows:-

(1) Personal claims against the New Cotai Directors, Silver Point and Oaktree for unlawful interference with EAST’s business.

(2) Derivative claims on behalf of the Joint Venture Companies against New Cotai, Silver Point and Oaktree for inducing the New Cotai Directors to breach their fiduciary duties.

171.  But these 2 sets of claims have now been abandoned by EAST.  The claims are not among the causes of action advanced in EAST’s Statement of Claim.  Further, in its proposed Re-Re-Amended Writ, EAST asks for leave to delete those claims.  Since EAST has signalled its intention not to pursue the 2 sets of claims, there is no need to consider them further here.

172.  The net result is that I should set aside the leave granted for service of the Re-Amended Writ on Mr. Moross, Mr. Baker and Mr. Vora outside the jurisdiction.  There is no good arguable case in respect of EAST’s personal and derivative claims made against them.

173.  On the other hand, there is a good arguable case in respect of EAST’s personal claims against Silver Point and Oaktree for inducing New Cotai to breach the SPA.  I refuse to set aside the service of the Re-Amended Writ on Silver Point and Oaktree outside of the jurisdiction.

A.5    Whether material non-disclosure by EAST

174.  An application for leave for service outside of Hong Kong is normally made ex parte.  That was how EAST proceeded here.  Because the application is made ex parte, there is a duty on an applicant such as EAST to make full and frank disclosure of all facts and matters which may have a bearing on the Court’s decision to grant leave.

175.  Mr. Strachan says that it was material to EAST’s application for service outside Hong Kong for the Court to have been provided with evidence that multiple derivative actions were recognised under Macao and BVI law.  Such material was not presented to the Court.  But had the Court been furnished with such evidence, the Court may have refused leave for service on the basis that neither Art. 248(1) nor s. 184C recognise multiple derivative actions.

176.  I agree.

177.  Especially since it was legally advised, EAST must be presumed to have been familiar with the Konamaneni principle.  In order to establish a good arguable case for its proposed multiple derivative actions, EAST would at least have had to explain why (to the best of EAST’s knowledge, information or belief) Macao and BVI law both recognise multiple derivative actions.

178.  I am prepared to accept that the failure to refer in any way to BVI or Macao law in EAST’s application for service outside the jurisdiction was an inadvertent omission.  According to EAST’s affidavit evidence, EAST apparently did not consider that it could even be remotely suggested that BVI or Macao law did not recognise multiple derivative actions.

179.  Nevertheless, as has been mentioned, on their face Art. 248(1) and s. 184C only sanction single derivative actions.  It follows that, had the Court’s attention been drawn to those provisions at the ex parte stage, the Court may well have refused leave.  The failure to say anything about the 2 provisions must amount to a material non-disclosure, however inadvertent.  The 2 provisions were important to the Court’s consideration of whether EAST had any good arguable case for service outside the jurisdiction.

180.  I add that a frank disclosure by EAST would also have entailed pointing out that EAST was seeking to make claims for reflective loss.  EAST ought to have then explained in its affidavit in support of service out why such reflective loss claims were arguably permissible under Johnson v. Gore-Wood.

181.  Consequently, as a matter of discretion, even if I had found otherwise than as summarised in Section III.A.4 of this Judgment, I would have set aside service outside of the jurisdiction in relation to Mr. Moross, Mr. Baker and Mr. Vora for material non-disclosure.

182.  EAST’s personal claims against Silver Point and Oaktree for inducing New Cotai to breach the SPA do not depend on the recognition of derivative actions under foreign law.  Nor are those claims seeking reflective loss.  EAST’s non-disclosure consequently is not material to those personal claims.  The non-disclosure cannot be a ground for setting aside service against Silver Point and Oaktree.

B.  Internal and External Defendants’ Strike Out Applications

183.  The External Defendants apply to strike out the Re-Amended Writ and parts of the Statement of Claim to the extent (and only to the extent) that they are unsuccessful in setting aside service on them outside the jurisdiction.

184.  Therefore, as far as strike out and the External Defendants are concerned, in light of my conclusions in favour of Mr. Moross, Mr. Baker and Mr. Vora on their setting aside application, only the personal and derivative actions against Silver Point and Oaktree in the Re-Amended Writ and Statement of Claim are of relevance.

185.  The causes of action in the Re-Amended Writ and the Statement of Claim do not correspond.  That is the rationale behind EAST’s application to amend the Re-Amended Writ.  EAST’s application is intended to remove the discrepancy between the 2 documents.

186.  Note, in this connection, that the Statement of Claim also makes derivative claims on behalf of the Joint Venture Companies against Silver Point and Oaktree for dishonest assistance and conspiracy.  Those derivative claims are not in the Re-Amended Writ, but appear in the proposed Re-Re-Amended Writ.  Those derivative claims seek damages or equitable compensation of $18.6 billion or an amount to be assessed.

187.  Insofar as the Re-Amended Writ is concerned, given the conclusions summarised in Section III.A.4 above, I should strike out the following paragraphs:-

(1) A2 and B7 (claiming derivative actions on behalf of Macao Co);

(2) A3 and B8 (claiming derivative actions on behalf of Cyber Neighbour);

(3) A4 and B9 (claiming derivative actions on behalf of Cyber One);

(4) B5 (claiming that the New Cotai Directors induced New Cotai to breach the SPA);

(5) B6 and C11 (making the now abandoned claims that the New Cotai Directors, Silver Point and Oaktree interfered with EAST’s business); and,

(6) C12, C13 and C14 (which are no longer being pursued by EAST, as may be seen from EAST’s Re-Re-Amended Writ seeking to substitute derivative claims for dishonest assistance and conspiracy in lieu thereof).

188.  However, also in keeping with my previous conclusions, I decline to strike out para. C10 of the Re-Amended Writ (alleging that Silver Point and Oaktree induced New Cotai to breach the SPA).

189.  On behalf of the Internal Defendants, Silver Point and Oaktree, Mr. Strachan further asks me now to strike out those parts of the Statement of Claim alleging dishonest assistance and conspiracy.  That is because the latter pleas do not correspond with anything in the Re-Amended Writ.

190.  The discrepant pleas are contained in the following parts of the Statement of Claim:-

(1) paras. 244 to 249 (derivative claims against New Cotai for dishonest assistance);

(2) paras. 250 to 255 (derivative claims against Silver Point and Oaktree for dishonest assistance);

(3) paras. 256 to 266 (personal and derivative claims for conspiracy);

(4) prayer A(2) (personal claim against New Cotai for conspiracy);

(5) prayer B(2) (personal claim against the New Cotai Directors for conspiracy);

(6) prayer C(2) (personal claim against Silver Point and Oaktree for conspiracy);

(7) prayer D(1) (derivative claim against New Cotai for dishonest assistance);

(8) prayer D(2) (derivative claim against New Cotai for conspiracy);

(9) prayer E(2) (derivative claim against New Cotai Directors for conspiracy);

(10)   prayer F1 (derivative claim against Silver Point and Oaktree for dishonest assistance); and,

(11)   prayer F2 (derivative claim against Silver Point and Oaktree for dishonest assistance).

191.  The causes of action in an operative version of a Writ should correspond with the causes of action in a Statement of Claim.  Unless and until the Court gives leave to amend the Re-Amended Writ, the latter pleading is the operative version of the Writ.  In those premises, I think that Mr. Strachan is right and I should strike out the paragraphs identified.

192.  I have held that EAST’s personal claims against the New Cotai Directors (whether Internal or External Defendants) for inducing New Cotai to breach the SPA are untenable.  That means that I should also strike out paras. 230 to 233 (personal claim for inducing New Cotai Directors to breach SPA) of the Statement of Claim and para. B(1) of the prayer.

193.  I have held that EAST’s derivative claims against the New Cotai Directors for breach of fiduciary duty are untenable.  It follows that paras. 238 to 243 of the Statement of Claim and para. E(1) of the prayer which concern those claims should be struck out.  The derivative claims also appear in paras. 244 to 249 and 263 to 266 of the Statement of Claim and paras. D(1), D(2) and E(2) of the prayer.  But I have already struck those out above.

C. EAST’s Application to amend the Re-Amended Writ

194.  The proposed Re-Re-Amended Writ retains much which I have just concluded ought to be struck out from the Re-Amended Writ.  Further, the Re-Re-Amended Writ proposes to bring in claims (for example, derivative claims on behalf of the Joint Venture Companies against various Defendants for dishonest assistance and conspiracy) which may be incompatible with this Judgment.

195.  It seems to me that the proposed Re-Re-Amended Writ needs to be radically revised before leave can be granted for its filing and service.  I should not grant leave for a Re-Re-Amended Writ until EAST’s lawyers are able to prepare a document which is consistent with this Judgment.

196.  Leave for the Re-Re-Amended Writ is accordingly refused.

D. Application to strike out parts of the Petition

197.  The Petition seeks various reliefs under s. 168A in respect of the conduct of the affairs of Cyber One.  EAST says that it has been unfairly prejudiced by such conduct.

198.  The Relevant Respondents apply to strike out various parts of the Petition.  I shall consider the targetted parts in succession.

199.  First, the Relevant Respondents say that paras. 85 to 89, 93(3) and prayer (3) of the Petition should be struck out because these advance a damages claim for the detriment to EAST’s shareholding in Cyber One caused by the breaches of New Cotai and the New Cotai Directors.  EAST’s claim here for damages is essentially the same as the reflective loss claim already discussed above.  The Relevant Respondents (EAST says) have by their conduct caused damage to Macao Co and that damage is reflected up the chain, adversely affecting the shareholdings of Cyber Neighbour, Cyber One, and ultimately EAST in the joint venture.

200.  In this connection, Mr. Jeremy Bartlett (appearing for the Relevant Respondents) draws my attention to Companies Ordinance (Cap. 32) s. 168A(2C).  That states:-

“For the avoidance of doubt, the damages that may be ordered by the court under [s. 168A] does not entitle a member, past member or then member of a specified corporation to recover by way of damages any loss that is solely reflective of the loss suffered by the specified corporation which only the specified corporation is entitled to recover under common law.”

201.  It is clear from s. 168A(2C) that EAST’s claim in the Petition for reflective loss should be struck out.  The claim is for loss suffered by Cyber One (the specified corporation), Cyber Neighbour or Macao Co.  At common law, it is for one or other of those companies to bring a claim.  As pointed out above, EAST has failed to explain why the Joint Venture Companies have no viable causes of action of their own against the alleged wrongdoers.

202.  I therefore strike out the paragraphs of the Petition just mentioned above.

203.  In prayer (1) of the Petition, EAST asks for New Cotai’s shares in Cyber One to be cancelled and Cyber One’s capital to be reduced accordingly.  Section 168A(2)(a)(iv) empowers the Court (among other things) to “make such order as it thinks fit,” including “for the purchase of the shares of any members of the specified corporation ... by the specified corporation”.  In the case of an order that the specified corporation purchase a member’s shares, the Court may make provision “for the reduction accordingly of the specified corporation’s capital”.  Note that the Petition nowhere suggests that Cyber One should buy back New Cotai’s Cyber One shares.

204.  Mr. Bartlett points out that it is unclear from the Petition why and how the Court can simply order Cyber One (a BVI company) to cancel New Cotai’s Cyber One shares and reduce Cyber One’s capital accordingly.  Why, for instance, would that not affect any creditors of Cyber One?  If there are creditors who may be affected, how can the Court make such Order without giving those creditors a chance to be heard on the matter?  It may be that the Court has jurisdiction to make the Order.  But there is no sufficient substratum of fact stated in the Petition (Mr. Bartlett says) which goes anywhere towards justifying the taking of such drastic step.

205.  Mr. Manzoni stresses that the relief of a capital reduction sought is theoretically possible under s. 168A.  He suggests that “[t]he terms upon which such cancellation (and capital reduction) ... may take place are matters which will have to be decided once the evidence is completed”.  So (Mr. Manzoni suggests) I should not strike out the relief sought at this stage.

206.  But, in my view, what Mr. Manzoni suggests is not how litigation should proceed.

207.  A Petition, just as any form of originating process (including a Statement of Claim and Originating Summons), must from the outset state a party’s case with precision and rigour.  It is not good enough to list indiscriminately in a prayer to the originating process any and all sorts of relief merely because theoretically (however unrealistically) the Court might grant such relief.

208.  A party must particularise the facts and matters justifying a prayer for relief specifically tailored to the complaint being made.  It is of no help to anyone (least of all the Court) to append to an originating process some vague prayer in the manner of a routine formula.  Such loose practice may have been tolerated before Civil Justice Reform (CJR).  But such practice can no longer be regarded as acceptable in light of the underlying objectives of CJR.

209.  The Court should be able to understand how a specific relief sought by a party logically and realistically follows from the complaints made in the originating process.  It is not a valid excuse to say that everything is just too complicated and one has to wait for the evidence to come out before a party can be expected to be pinned down to a specific prayer.

210.  To say that one has to wait for the evidence is to put the cart before the horse.  The evidence that is adduced in a given proceeding is determined by what is claimed in an originating process (including the prayer).  Civil litigation should not as a rule proceed the other way around where evidence is first to be produced before a party is compelled to state one’s case (and relief sought) with a degree of rigour.  Only relevant evidence needs to be produced and relevance is assessed by what is pleaded in the originating process.

211.  Accordingly, I strike out prayer (1) which I do not regard as supported or justified by the facts and matters currently stated in the Petition.  The relief sought is too vague.

212.  Prayer (2) of the Petition prays that New Cotai transfer its shares to EAST for a “nil consideration” as an alternative to New Cotai being ordered to sell its Cyber One shares to EAST.  According to Mr. Manzoni, the basis for the nil consideration is that “the way in which New Cotai has operated this joint venture has had the effect of denuding it of practical value”.

213.  Mr. Bartlett argues that there is simply no justification for the Court ordering that New Cotai hand over its shares to EAST for free.  I agree.

214.  EAST must certainly be entitled to seek an Order under s. 168A that New Cotai sell its Cyber One shares to EAST at a valuation to be determined by the Court.  But I see no basis for suggesting that the consideration should be “nil”.  I make 2 observations in this connection.

215.  First, in practical terms, there must remain some value in the joint venture.  That is presumably why EAST is committed towards obtaining a land grant modification from the Macao Government for the MSC site at the earliest possible moment.  EAST is not seeking to wind up the joint venture.

216.  Secondly, if the suggestion is that New Cotai has “denuded” the joint venture of value, that must be because of the alleged reduction in the enterprise value of the MSC project ultimately said to be reflected in the diminished worth of EAST’s Cyber One shares.  Thus analysed, the “nil consideration” claim is essentially another way of putting EAST’s claim for reflective loss.  I have already held that the claim is untenable.

217.  I would accordingly strike out the reference to “nil consideration” in prayer (2).

218.  Mr. Bartlett then attacks the request for injunctive relief in prayer (4).  The latter prayer reads:-

“Further or alternatively, such further or other relief as the Court considers just with a view to bringing an end [to] the matters complained of, including but not limited to such injunctive relief against [the Relevant Respondents] (or any of them) as may be necessary or appropriate to restrain the continuation of their wrongful conduct and to protect the interests of [Cyber One’s] members including EAST....”

219.  Note that the opening words of prayer (4) seeking “such further or other relief as the Court considers just” are reproduced in prayer (6).  The opening words of prayer (4) are thus redundant.

220.  Mr. Bartlett says the prayer for an injunction is unhelpful, no specific terms being suggested for that form of relief.  Mr. Manzoni says that the prayer is sufficiently clear for present purposes, given the complexity of the case.

221.  I do not think that the prayer for an injunction is helpful.  It appears to me far too vague to be of guidance to anyone as to what is sought to be enjoined.  I would strike out the prayer (4) in its entirety.

222.  Finally, Mr. Bartlett wishes to strike out prayer (5) seeking “such accounts and inquiries as may be necessary”.  Although vague, the words are often included in at the end of a Petition as a catchall relief.  However, without some idea precisely what accounts and inquiries are sought, the words are no more than an empty formula and are of no real help to anyone.  I would strike them out as serving little more purpose than that already served by prayer (6).

IV. CONCLUSION

223.  I now summarise (and comment upon) the Orders which I propose to make in each of the Summonses before me based on what I have decided in this Judgment.

A.  External Defendants’ Summons dated 1 April 2010 to set aside service out

224.  The leave granted to serve the Re-Amended Writ outside of the jurisdiction on the 6^th, 8^th and 10^th Defendants (but not the leave granted to serve the Re-Amended Writ on the 11^th and 12^th Defendants) is discharged.

225.  The relief sought in para. 2 of the Summons is refused.  There was no “purported service of the Re-Amended Writ” in the manner argued by the External Defendants.

226.  The declaratory relief sought in para. 3 of the Summons is unnecessary.  Accordingly, a declaration is refused as a matter of discretion.  In any event, the Court has jurisdiction in relation to the 11^th and 12^th Defendants.

227.  In the case of the Internal Defendants, Silver Point, and Oaktree, the Court has struck out a substantial part (but not all) of the claims in the Re-Amended Writ against them.   On the other hand, to the extent that they have been successful in challenging service on them outside the jurisdiction, the 6^th, 8^th and 10^th Defendants have expressly refrained from participating in the strike out application.  Further, the Amended Writ has been superseded by the Re-Amended Writ.  There is no point in now dismissing the Amended Writ.  In all the circumstances, I do not think that it is appropriate to make the Order sought in para. 4 of the Summons for the dismissal of the Amended Writ and Re-Amended Writ.

228.  There will be an Order Nisi as follows:-

(1) EAST shall pay 90% of the costs of the 6^th, 8^th and 10^th Defendants on this Summons.  The 90% reflects that fact that those Defendants have not been entirely successful on this Summons.  Much time was wasted on the latter Defendants’ unsuccessful claims that leave had only been granted by Master Ng for service out of the Amended Writ.

(2) The 11^th and 12^th Defendants shall pay 40% of EAST’s costs of this Summons.  The 40% reflects the fact that the 11^th and 12^th Defendants have failed to set aside service on them.  On the assumption that 20% of EAST’s costs of this Summons are roughly attributable to an External Defendant, 40% (20% x 2) of EAST’s costs are to be attributed to resisting the claims of the 11^th and 12^th Defendants in this Summons.

B.  External Defendants’ Summons dated 29 June 2010 to strike out the Re-Amended Writ and Statement of Claim

229.  This is only relevant in the cases of the 11^th and 12^th Defendants.  In relation to them, the following are struck out:-

(1) paras. C11, C12, C13 and C14 of the Re-Amended Writ.

(2) paras. 250 to 255 and 256 to 266 and prayers C(2), F(1), and F(2) of the Statement of Claim.

230.  Note that para. C10 of the Re-Amended Writ is not struck out.

231.  There will be an Order Nisi that EAST pay the External Defendants’ costs of this Summons.

C. External Defendants’ Summons dated 7 April 2010 to strike out the Re-Amended Writ and Statement of Claim

232.  This Summons duplicates the 29 June 2010 Summons just mentioned, save that Silver Point and Oaktree do not here seek to strike out C10.  This is therefore a redundant Summons.  There will be no substantive strike-out order on it.

233.  There will be an Order Nisi that 95% of the External Defendants’ costs of this Summons are to be treated as part of the costs of their 29 June 2010 Summons.  The 95% is intended to achieve in a rough-and-ready manner the result that EAST does not bear the External Defendants’ costs of issuing an overlapping 29 June 2010 Summons.

D. Internal Defendants’ Summons dated 1 April 2010 to strike out parts of the Re-Amended Writ and Statement of Claim

234.  The following are struck out:-

(1) paras. A2, A3, A4, B5, B6, B7, B8 and B9 of the Re-Amended Writ.

(2) paras. 230 to 233, 238 to 243, 244 to 249 and 256 to 266, and prayers A(2), B(1), B(2), D(1), D(2), E(1) and E(2) of the Statement of Claim.

235.  There will be an Order Nisi that EAST pay the Internal Defendants’ costs of this Summons.

E.  EAST’s Summons dated 29 March 2010 to amend the Re-Amended Writ

236.  Leave to amend the Re-Amended Writ is refused.

237.  There will be an Order Nisi that EAST pay the Internal Defendants’ costs of this Summons.

F.  External Defendants’ Summons dated 28 June 2010 to file the 5^th Affidavit of Gareth Huw Thomas out of time

238.  The Affidavit was in play during the hearing before me.  Leave is granted for its late filing.

239.  There will be an Order Nisi that the External Defendants bear EAST’s costs of and occasioned by this Summons.

G. Relevant Respondents’ Summons dated 1 April 2010 to strike out parts of the Petition

240.  The following are struck out from the Petition:-

(1) paras. 85 to 89, 93(3) and prayers (1), (3), (4) and (5).

(2) the words “for nil consideration, alternatively” from prayer (2).

241.  There will be an Order Nisi that EAST pay the Relevant Respondents’ costs of this Summons.

H. Miscellaneous matters

242.  There will be liberty to apply to finalise the wording of any Order consequent upon this Judgment.

243.  There will be a Direction Nisi certifying all 6 Summonses before me as fit for 2 (but not 3) counsel.  There will also be a Direction Nisi that all Costs Orders (including in relation to the External Defendants’ Summons to file Mr. Thomas’ 5^th Affidavit) are to be taxed, if not agreed.  The applications before me appear to constitute one discrete event.  I therefore do not add “in any event”.