QUAESTUS CAPITAL PTE LTD v. EVERTON ASSOCIATES LTD AND ANOTHER

HCA 1027/2020

[2021] HKCFI 1367

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1027 OF 2020

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D E C I S I O N

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Introduction

1.  These proceedings have arisen out of the arrangements for a “non-recourse loan” to be advanced on the security of certain shares listed in Hong Kong.  The plaintiff is the borrower and owner of the shares in question.  The loan had not been advanced, but the shares pledged had been sold on the market without the plaintiff’s knowledge.  The plaintiff has since brought this action against the lender and the custodian of the shares as the 1^st and 2^nd defendants herein respectively. The principal application now before the court is the 2^nd defendant’s summons challenging the jurisdiction of the Hong Kong courts on the basis, in particular, of an exclusive jurisdiction clause in favour of the courts in London.

Background

The parties

2.  The plaintiff is a private equity firm incorporated in Singapore which carries on the business of trading in crude oil petroleum products.  Among other assets, the plaintiff holds shares in China Metal Resources Utilization Ltd (“China Metal”), a company listed on the Stock Exchange of Hong Kong (Stock Code: 1636).

3.  The 1^st defendant, Everton Associates Ltd (“Everton”), is a company incorporated in the Cayman Islands which carries on the business of making loans.

4.  The 2^nd defendant, Axis Capital Markets Ltd (“Axis”), is a company incorporated in the United Kingdom, with the business of, among other things, providing brokerage services to customers.

The documentation and custodian arrangements

5.  In about April 2020, the plaintiff wished to obtain finance in the sum of around HK$500 million for its business operations and, through the recommendation of a friend of Mr Steven Kwek (the sole director and shareholder of the plaintiff), engaged China GH Ltd as consultant to source such loan capital.  China GH Ltd recommended Everton as a potential lender, and negotiated the terms of the loan with Everton on behalf of the plaintiff.  Eventually, a term sheet was issued by Everton which the plaintiff accepted on 13 April 2020 (“Term Sheet”). It stated that the loan would be an “equity collateralised non‑recourse non‑title transfer term loan” based on China Metal shares as collateral at 52% of their market value.  It was stated that except upon the occurrence of an event of default, there would be no change in beneficial ownership of the stock, and the lender would not have the right to liquidate the collateral or short the pledged securities.

6.  On 21 April 2020, the following written agreements or instruments were executed:

(1)  a Loan Agreement, pursuant to which Everton was to advance a non‑recourse loan of up to a maximum of HK$450 million to the plaintiff, secured by a pledge of the plaintiff’s 280 million shares in China Metal.  The Loan Agreement contains, among others, the following terms:

“3. Collateral

(a) Pledge. As collateral security for all of the Obligations, the Borrower hereby grants, transfers, assigns and conveys to the Lender a continuing security interest in, and pledges and grants a charge on, all currently existing and hereafter acquired or arising Collateral to secure prompt repayment of any and all Obligations…

(b) Brokerage Account. At least three (3) days prior to the first Funding Date, the Borrower shall transfer to and/or maintain in the Account all the Pledged Shares. … Borrower shall remain the beneficial owner of the Account, provided that following an Event of Default the Lender may sell or otherwise dispose of the securities and assets therein in accordance with the terms herein …

(c) Non-Recourse Loan. The Lender agrees that, except as otherwise expressly provided in this Agreement, the responsibility to make payments hereunder is a non-recourse obligation of the Borrower, such that, for repayment of the Notes, the Lender shall only look to the Collateral and/or the other instruments of security that secure the Notes, and may not subsequently make any claim or institute any action or proceeding against the Borrower or any successors or assigns of the Borrower for any deficiency remaining after collection upon the Collateral.

(d) NTT Loan. The Lender shall not Transfer any Pledged Shares prior to an Event of Default, after which time the Lender may Transfer the Pledged Shares. …

…

(g) No Short Sales, Return of Collateral. Lender shall not have the right to liquidate the Collateral, or to make short sales of same, during the term of the Loan, except upon occurrence of an Event of Default. At such time as all of the Borrower’s Obligations have been paid in full, the Pledged Shares shall be returned to the Borrower to the extent and in the manner set forth herein. The Lender acknowledges and agrees that all shares of Common Stock, including the Pledged Shares, are fungible, such that the Lender’s obligation to return the Pledged Shares herein is understood to mean the delivery to the Borrower of such number of shares of Common Stock as is equal to the total number of Pledged Shares required to be delivered to the Lender hereunder.

…

6. Event of Default.

(a) Events of Default. Each of the following events shall constitute an “Event of Default”:

…

(12) If the Market Price for any Trading day is less than 50% of the Market Price for the Trading Day immediately preceding any Funding Date, or if the Market Price for any Trading Day within 90 Trading Days following a given Funding Date is less than 50% of the Market Price for the Trading Day immediately preceding such Funding Date;

…

(b) Remedies. Following the occurrence of any Event of Default, the Lender shall have the right to exercise all of the remedies conferred hereunder …:

…

(2) The Lender shall have the right (but not the obligation) to exercise all rights with respect to the Collateral as if it were the sole and absolute owner thereof.

…

16.  Governing Law and Venue.  This Agreement and any dispute, disagreement, or issue of construction or interpretation arising hereunder whether relating to its execution, its validity, or the obligations provided herein or performance shall be construed under and governed by the internal laws of Hong Kong.  The Borrower hereby consents to the exclusive jurisdiction of all the courts located in Hong Kong for the purpose of any suit, action or other proceeding arising out of any of the Borrower’s obligations under or with respect to this Agreement or the other Loan Documents, and expressly waives any and all objections the Borrower may have as to venue in any of such courts. …”

Under clause 1 (Definitions), “Transfer” means:

“ to sell, trade, transfer, assign, convey or otherwise dispose of title to securities (for clarification, Transfer does not include Portfolio Protection Arrangements which may be effective)”,

and “Portfolio Protection Arrangements” mean:

“ any arrangements or transactions effectuated to mitigate the risk of loss of principal, assets or securities values, including without limitation effecting a pledge, encumbrance, repurchase arrangements, hypothecation and/or loan of or on securities”;

(2)   a Pledge Agreement whereby the plaintiff agreed to pledge 280 million shares in China Metal to secure the loan under the Loan Agreement; and

(3)   the plaintiff issued a Secured Promissory Note to Everton for the sum of HK$450 million.

7.  These agreements required the plaintiff to transfer the collateral into a brokerage account.  The securities broker specified in the Loan Agreement was Look’s Securities Ltd (“Look’s Securities”), a brokerage firm in Hong Kong nominated by Everton.  On about 21 April 2020, the plaintiff, Everton and Look’s Securities entered into a Collateral Management Agreement regulating the custodian arrangements.  On about 1 June 2020, pursuant to the Loan Agreement and the Pledge Agreement, the plaintiff deposited 94 million China Metal shares (“Shares”) with Look’s Securities.

8.  A few days later, on 5 June 2020, Mr Vladamir Blagojevic, director of Everton, emailed Mr Kwek of the plaintiff, stating that there would be delay of the funding because of bank compliance matters in Austria, but that Everton had spoken with Axis where Everton “ha[d] the funds already immediately”, and requested the plaintiff to open an account with Axis.  He further wrote: “Once the shares are in Axis, Everton is committed to have Axis wire out the 1^st tranche loan within one to two working days”.  The plaintiff agreed and, on the same day, it signed an Amendment Agreement with Everton to amend the Loan Agreement to change the specified broker from Look’s Securities to Axis. 

9.  On 9 June 2020, the plaintiff, after opening an account with Axis (“Account”), entered into a Brokerage Account Control Agreement (“Brokerage Agreement”) with Everton and Axis in relation to the custodian arrangements.  Clause 3.1 of that agreement provides that Axis represents and warrants to Everton that Axis maintains the Account for the plaintiff at Axis.  Clause 6 provides that Axis will send copies of all statements and confirmations for the Account simultaneously to the plaintiff and Everton, and that Axis shall use reasonable efforts to promptly notify Everton and the plaintiff if any other person claims that it has an interest in property in the Account.  In addition, clause 10.1 is an English choice of law clause and clause 10.2 contains an exclusive jurisdiction clause in favour of the courts in London, as set out in §32 below.

10.  On about 15 June 2020, the Shares were transferred from Look’s Securities to an account maintained with Deutsche Bank AG in Hong Kong (“DBHK”) ultimately for Axis.  According to Axis, it held securities accounts with Argon Financial Ltd, which used ADM Investor Services Ltd as its prime broker, which in turn used Société Générale SA as its custodian; and Société Générale SA in turn used DBHK, a CCASS participant, as its custodian to hold the Shares.

Disposal of the Shares

11.  The plaintiff alleges that notwithstanding no money had been lent pursuant to the Loan Agreement, the Shares were disposed of, without its knowledge, through a number of steps:

(1)   On 9 June 2020, Everton entered into a Credit Agreement and a Hypothecation Agreement with Keyway Holdings Ltd (“Keyway”) whereby Everton apparently agreed to hypothecate the Shares to Keyway.  Keyway is a company incorporated in Hong Kong.

(2)   On 15 June 2020, the day when the Shares reached DBHK ultimately for Axis’s account, Everton issued an Entitlement Order to Axis, instructing it to “hypothecate” the Shares to Everton.  Axis thereupon hypothecated the Shares to Everton’s account with Axis.  For the meaning of an “Entitlement Order”, see clause 1 of the Brokerage Agreement quoted in §26 below.

(3)   On 16 June 2020, Everton informed Axis that it was hypothecating the Shares to Keyway, and sent Axis the Credit Agreement and Hypothecation Agreement with Keyway dated 9 June 2020.  Axis then (notionally) transferred the Shares from Everton’s account to Keyway’s account with Axis.

(4)   On 16 June 2020, Keyway issued a “Securities Lending Direction Letter” to Axis and stated that it would be lending the Shares to 360 HK Ltd (“360HK”).  360HK is a company incorporated in Belize.  Axis then (notionally) transferred the Shares from Keyway’s account to 360HK’s account with Axis.

(5)   On 16 June 2020, 360HK sold the Shares on the market for HK$38,720,438.  The proceeds were used to purchase certain securities which were then hypothecated to another account‑holder with Axis called Adam International Investments Ltd (“Adam”), a company incorporated in Hong Kong with the same registered office and company secretary as Keyway.  At CCASS level, what happened was apparently that the Shares were moved by DBHK from Société Générale SA’s account to an account held by Bank of New York Mellon with DBHK.  Subsequently, the Shares were transferred to an account with a company called Instinet Pacific Ltd pursuant to certain SWIFT instructions.

(6)   Adam then carried out further trading in securities and transferred certain securities to its account maintained with Regent Capital Partners Inc.  As far as securities derived from the Shares are concerned, since September 2020 Adam had apparently held only 1.1 million shares of Earthasia International Holdings Ltd (HKSE Stock Code: 6128) in its account with Axis.

12.  On 16 June 2020, the share price of China Metal fell dramatically from about HK$2.8 per share to about HK$0.22 per share at its lowest and closed at HK$0.50.  The plaintiff alleges that, unknown to it at the time, the plunge in the share price was in fact caused, at least in part, by the sale of the Shares by 360HK on that date.  China Metal made an announcement that except the fact that a small proportion of the shares owned by its Chairman (Mr Yu Jianqiu) were sold by forced sale by certain stockbrokers, it was not aware of any reasons for the price movements of its shares.

13.  By emails dated 17 and 18 June 2020, Everton relied on the drop in the share price of China Metal as a reason for refusing to provide funds and requested the plaintiff to deposit more shares with Axis in order to get more funding.

14.  On 19 June 2020, the plaintiff, having conducted a CCASS search and found to its surprise that the Shares were no longer with DBHK, told Everton that the latest funding notice from Everton was unacceptable and asked for the return of the Shares.  On 20 June 2020, Mr Blagojevic of Everton replied that they would like to continue funding based on the latest funding notice.  As to the Shares, he wrote:

“ The shares are subject to the Portfolio Protection Arrangements as defined in the loan agreement. As such they are subject to repurchase agreements, hypothecation and/or lending of those securities. We have sent enquiries to our Portfolio Protection counterparties as to whether they have entered into any such agreement and their ability to call shares back. These portfolio protection arrangements are entered into once the loan agreement and collateral management agreements are executed and the loan is subsequently put in force to help reduce some of the risk the lender bears on a non-recourse loan. As long as the collateral value is stable and the collateral shares aren’t subject to many of the current catalysts that we weren’t aware of when these agreements were executed and the loan was put in force, these arrangements don’t have a material impact. Unfortunately without our knowledge, that was not the case in this instance.

Please remember that this is not a situation of our making, but due to non‑disclosure of many factors.  We were not made aware that the chairman of the company in regards to his own holdings in the company had so many margin loans outstanding, nor were we aware that there was such a significant short interest and short request for the stock.  The short reports, delays in order to financials and chairman having many margin loans seem to have created a very detrimental impact to the stock and the collateral.”

15.  On 21 June 2020, Everton sent a Notice of Default dated 20 June 2020 to the plaintiff (copied to Axis), alleging that various events of default had occurred such that Everton had the right to deal with the Shares as their sole and absolute owner.

16.  Axis had, meanwhile, according to the plaintiff, concealed from the plaintiff the disposal of the Shares, through for example the following steps:

(1)   Mr Richard Hutchison of Axis stated in an email to the plaintiff dated 19 June 2020:

“ I can confirm that you (300069) are still the beneficial owner of 94,000,000 shares in 1636.HK, China Metals Resources Utilization Ltd. These shares were transferred in Free of Payment on 12/06/2020 and as per the brokerage control agreement we are all party to, hypothecated to Everton Associates Limited (300016) on 15/06/2020.”

(2)   On 19 June 2020, Axis sent a statement transaction record dated 18 June 2020 to the plaintiff, which recorded only that on 15 June 2020 the plaintiff had hypothecated the Shares to Everton, but did not record the transfer to Keyway, the transfer to Instinet Pacific Ltd, and the transfer to the buyer from 360HK.

(3)   Mr Hutchison stated in an email to the plaintiff’s solicitors dated 21 June 2020:

“ In the meantime, as you have requested and subject to my confirmation with our counsel on Monday, we will not [e]ffect any transactions whatsoever with respect to assets or securities in your client’s account unless and until we get mutual directions from the parties, and we will be apprising the lender of the same.”

17.  On 22 June 2020, the plaintiff issued the writ herein against Everton and Axis.

The proceedings

18.  After the writ was issued, there were skirmishes in late June and early July 2020 in which the plaintiff attempted to apply for an injunction but those steps turned out to be abortive.  By summons dated 3 August 2020, the plaintiff sought a proprietary injunction and a Mareva injunction against both defendants.  By affidavits of 3 and 26 August, the plaintiff applied ex parte for an order for service of the proceedings out of the jurisdiction on Everton and Axis.  The orders for service out on Everton and Axis were granted on 30 September and 12 October respectively.

19.  After service was effected, on Axis issued an application by summons 23 November for an order to set aside service of the writ, a declaration that the court has no jurisdiction over it, and an order that all further proceedings in the action be stayed as against it.

20.  On 27 November, Wilson Chan J adjourned the plaintiff’s summons for injunction and Axis’s jurisdiction summons to be heard together, and imposed an interim proprietary injunction on the defendants pending the substantive hearing of the summonses.

21.  The plaintiff filed its statement of claim on 18 December. The main allegations and claims may be summarised as follows:

(1)   Everton and Axis together with Keyway, 360HK and Adam carried out a fraudulent scheme to deprive the plaintiff of the Shares.

(2)   Everton made certain representations to the plaintiff via the Term Sheet, to the effect, broadly, that Everton would advance a non‑recourse loan to the plaintiff; the Shares would be deposited in a restricted custody account; the plaintiff would remain the beneficial owner of the Shares; and Everton would not liquidate or short the Shares except upon the occurrence of an event of default.  Everton made further representations to the plaintiff via the Loan Agreement of a similar nature based on the provisions therein.

(3)   The plaintiff was induced by these representations to enter into the Loan Agreement and the Pledge Agreement and to transfer the Shares into an account at Look’s Securities and later to agree to have the Shares transferred to a custodian account with Axis on 15 June 2020.

(4)   Axis made representations to the plaintiff via the Brokerage Agreement (in particular, clauses 3.1 and 6) that Axis would hold the Shares in the Account maintained for the plaintiff and would promptly notify the plaintiff if any other person claimed that it had an interest in the property in the Account.

(5)   The plaintiff was induced by Everton’s and Axis’s representations to enter into the Amendment Agreement and the Brokerage Agreement and to agree to transfer the Shares from Look’s Securities to the Account in Axis.

(6)   Despite Everton’s failure to advance any loan to the plaintiff, Everton and/or Axis took steps together with Keyway, 360HK and/or Adam to dispose of the Shares without the plaintiff’s knowledge or consent.  In particular, by the purported “hypothecation” of the Shares, Everton and Axis transferred the ownership of the Shares to Keyway.  Such transfer was wrongful and dishonest as it was made without the plaintiff’s knowledge or consent, before any event of default had occurred, and when Everton had not advanced any loan to the plaintiff.

(7)   The disposal of the Shares caused or contributed to the significant drop in the share price of China Metal from around $2.80 per share on 15 June 2020 to around $0.50 per share on 16 June 2020 and the lowest to around $0.22 per share on 24 June 2020.

(8)   Everton and Axis took steps to conceal the dissipation of the Shares from the plaintiff and misled the plaintiff into believing that the Shares had remained in the Account.

(9)   The representations made by Everton via the Term Sheet and the Loan Agreement and the representations made by Everton and Axis via the Brokerage Agreement were false.  In particular, the defendants never intended to keep the Shares in the Account, and Axis never intended to provide accurate information about the transactions in the Account to the plaintiff or inform the plaintiff if any other person claimed that it had an interest in the Shares.

(10)   Everton and Axis made their representations fraudulently, and have committed a fraud on the plaintiff and deprived the plaintiff of the Shares.  Alternatively they have committed the tort of deceit against the plaintiff, as a result of which the plaintiff has suffered loss of $286.7 million (being the value of the Shares based on the price per share on 15 June 2020).  Further or alternatively, the defendants had wrongfully and with intent to injure the plaintiff by unlawful means conspired together to carry out a fraudulent scheme to defraud the plaintiff of the Shares and to conceal the fraud and the proceeds of the fraud from the plaintiff, causing loss of $286.7 million to the plaintiff.

(11)   Even if Axis was not a party to the fraudulent scheme, it knew or ought to have known that it was unconscionable for it to retain the Shares or their traceable proceeds.

(12)   Everton and/or Axis are holding the Shares and/or their traceable proceeds on constructive trust in favour of the plaintiff.

(13)   Axis dishonestly assisted Everton in its wrongful disposal of the Shares or their traceable proceeds; further or alternatively, Axis received the Shares or their traceable proceeds with knowledge of the plaintiff’s beneficial interest therein, and is liable to account to the plaintiff in the sum of $286.7 million.

(14)   By way of relief, the plaintiff claims, inter alia, declarations that the Loan agreement, the Pledge Agreement and the Brokerage Agreement are null and void ab initio and that Everton and/or Axis hold the Shares or their traceable proceeds on trust for the plaintiff; orders for account and inquiries; an injunction restraining disposition or dealing with the Shares or the traceable proceeds; and damages for fraud or deceit or for conspiracy in the sum of $286.7 million.

22.  On 7 April 2021, Everton filed its Defence and Counterclaim, seeking a declaration that an event of default has occurred under the terms of the Loan Agreement, and that Everton has thereafter held the Shares as a sole and absolute owner or otherwise as trustee for other parties to whom the Shares have been hypothecated.

23.  In the 3^rd affidavit of Mr Richard Hutchison of Axis, filed in compliance with the court’s order for disclosure, it was said that the sales of the Shares, which were borrowed by 360HK from Keyway, were not carried out by Axis.  360HK had been given access to a “Direct Market Access” platform called “IRESS” for trading securities, and could trade securities on its own via this platform without giving instructions to Axis which might cause delay to the trades.  After 360HK traded securities via the platform, Axis would carry out all the necessary back‑end processes, including matching the trades and completing the transactions.  Axis did not have any “visibility” over the whereabouts of the Shares after the sales.

24.  In December 2020, Mr Blagojevic of Everton also filed an affirmation for disclosure, stating that the hypothecation of the Shares did not involve any change of beneficial ownership and was carried out pursuant to the Portfolio Protection Arrangements referred to in the Loan Agreement.  Everton hypothecated the Shares to Keyway.  Mr Miodrag Perovic of Keyway told Mr Blagojevic that Keyway had lent the Shares to another company, namely, 360HK.  Everton had no further information as to the present location of the Shares.

The issues on Axis’s summons

25.  Based on the parties’ arguments relating to Axis’s jurisdictional challenge, the following issues arise, which I deal with in turn below:

(1)   Are there serious issues to be tried on the plaintiff’s claims against Axis?

(2)   Is there a good arguable case that the plaintiff’s action against Axis falls within Order 11 rule 1(1)(b), (f) and/or (p) of the Rules of the High Court (Cap 4A)?

(3)   As regards the exclusive jurisdiction clause in the Brokerage Agreement:

(a)    Do the claims against Axis fall within the scope of the clause?

(b)    Is the clause impeached by the fraud alleged by the plaintiff?

(c)    If the clause applies, is there nevertheless strong cause for the plaintiff to be allowed to continue its action as against Axis in Hong Kong?

(4)   Has the plaintiff satisfied the court that in all the circumstances Hong Kong is clearly or distinctly the appropriate forum for the trial of the action?

(5)   Should the order for service out of the jurisdiction be set aside for material non‑disclosure in the ex parte application?

Serious issues to be tried

26.  For Axis, Mr Jin Pao SC, relying on the following provisions of the Brokerage Agreement, submits that it was the parties’ agreement that Axis had to act in accordance with the instructions of Everton:

“ 1. Control by Lender. Broker will comply with all instructions it receives directing it to transfer, withdraw, redeem, pledge or hypothecate any funds, securities or other property in the Account (each an ‘Entitlement Order’) originated by Lender without further consent by or notice to Customer, provided that Lender may not provide such notification in respect of a transfer, nor shall the Broker act on any such Entitlement Order relating thereto, unless Lender has previously provided to Broker a written notice in accordance with the notice provisions contemplated in this Control Agreement.

2. Customer’s Rights in Account.

2.1 Except as otherwise provided in this Section 2, Broker acknowledges that Customer, in order to secure its Obligations to Lender under the Loan Agreement, has granted, and is hereby granting, to Lender exclusive control over the Account, including without limitation the sole right to exercise any Entitlement Orders, and this Control Agreement shall constitute notice thereof to Broker.

…

7. Broker’s Responsibility.

…

7.2 Broker will not be liable to Customer for complying with Entitlement Orders originated by Lender (including without limitation under Section 9.3 below), even if Customer notifies Broker or Broker believes that Lender is not legally entitled to issue the Entitlement Order, unless Broker takes the action after it is served with an injunction, restraining order or other legal process enjoining it from doing so issued by a court of competent jurisdiction, and has had a reasonable opportunity to act on the injunction, restraining order or other legal process.

7.3 This Control Agreement does not create any obligation of Broker except for those expressly set forth in this Control Agreement. Without limiting the foregoing, Broker shall not be required to investigate whether Lender is entitled under Lender’s agreements with Customer to give an Entitlement Order. Broker may rely on, without inquiry, notices and communications it believes given by the appropriate party.

…

9. Termination; Survival.

…

9.3    If Lender notifies each of Broker and Customer in writing that an event of default has occurred under the Loan Agreement, this Control Agreement will thereupon immediately terminate without any further action on the part of the parties and Broker shall promptly transfer all property and other amounts in the Account to Lender or pursuant to instructions issued by or on behalf of Lender.”

27.  Mr Pao submits that Axis is not a party to the Loan Agreement or the Pledge Agreement, and only came into the picture when it was appointed the custodian pursuant to the Brokerage Agreement over a month after the Loan Agreement.  Axis acted in accordance with its obligations under the Brokerage Agreement in hypothecating the Shares to Everton.  There was no duty on Axis to investigate whether Everton was entitled to issue such instruction. There was no ground for complaint by the plaintiff when all that Axis had done was following Everton’s instructions, as the plaintiff had agreed that Axis should do so.  Axis did not conceal from or lie to the plaintiff about the status of the Account.  It was true that the plaintiff retained ownership as the Shares had only been hypothecated away.  Axis was not involved in, and had no visibility over, 360HK’s sale of the Shares and subsequent transactions with its proceeds.  He submits therefore that there is no serious issue to be tried as against Axis, and that the plaintiff’s true grievance lies against Everton.

28.  I do not accept Axis’s contention.  While there are clauses in the Brokerage Agreement limiting the duties of Axis and protecting it from liability, the plaintiff’s complaints go beyond claims for poor performance or breach of that agreement.  The agreement itself is said to contain fraudulent misrepresentations to the plaintiff.  Axis is said to have conspired with Everton by unlawful means to deprive the plaintiff of the Shares.  Whether the plaintiff could still meaningfully be said to have retained beneficial ownership of the Shares after they had been “hypothecated” away seems to me debatable.  How Axis could innocently have told the plaintiff on 19 June 2020 that it remained the beneficial owner of the Shares when they had already been sold by 360HK on the market also seems to me to raise issues that warrant investigation at trial.  A reckless statement may amount to fraud at common law: Derry v Peek (1889) 14 App Cas 337, 376.

Order 11

29.  The plaintiff has to demonstrate a good arguable case that its claims against Axis fall within one of the “gateway” provisions in Order 11 rule 1(1). In the ex parte application for service out, paragraphs (b), (f) and (p) of rule 1(1) were relied upon:

“ (b) an injunction is sought ordering the defendant to do or refrain from doing anything within the jurisdiction (whether or not damages are also claimed in respect of a failure to do or the doing of that thing).”

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

“ (p) the claim is brought for money had and received or for an account or other relief against the defendant as constructive trustee, and the defendant’s alleged liability arises out of acts committed, whether by him or otherwise, within the jurisdiction.”

30.  Mr Pao, rightly in my view, recognises the force of the plaintiff’s contention that because the Shares were sold by 360HK on the market in Hong Kong, that is where the plaintiff’s loss was suffered, which would satisfy Order 11 rule 1(1)(f). The plaintiff has shown a good arguable case of an available gateway.

Scope of the exclusive jurisdiction clause

31.  As stated above, there are three questions arising from the exclusive jurisdiction clause in the Brokerage Agreement, the first of which is whether as a matter of construction the clause applies to the claims made against Axis in this action.  Although approached as separate issues, this question is connected with the second question.

32.  Clause 10.2 of the Brokerage Agreement provides:

“ Consent to Jurisdiction; Venue; Jury Trial Waiver. Each of the parties hereto hereby consents to the exclusive jurisdiction of the courts sitting in London, England, as well as to the jurisdiction of all courts from which an appeal may be taken from the aforesaid courts, for the purpose of any suit, action or other proceeding by any party to this Control Agreement, arising out of or related in any way to this Control Agreement, or any related document. Each of the parties hereto hereby irrevocably and unconditionally waives any defense of an inconvenient forum to the maintenance of any action or proceeding in any such court, any objection to venue with respect to any such action or proceeding and any right of jurisdiction on account of the place of residence or domicile of any party hereto. …”

33.  The Brokerage Agreement should be construed in accordance with its governing law — English law.  There is no dispute between the parties that the proper approach under English law to the construction of a clause of this kind is set out in Fiona Trust and Holding Corporation & others v Privalov & others [2007] UKHL 40.  In particular, at §13, Lord Hoffmann stated:

“In my opinion the construction of an arbitration clause should start from the assumption that the parties, as rational businessmen, are likely to have intended any dispute arising out of the relationship into which they have entered or purported to enter to be decided by the same tribunal. The clause should be construed in accordance with this presumption unless the language makes it clear that certain questions were intended to be excluded from the arbitrator’s jurisdiction. As Longmore LJ remarked, at para 17: ‘if any businessman did want to exclude disputes about the validity of a contract, it would be comparatively easy to say so’. ”

34.  Mr Scott submits that the fraud claims are formulated on the basis that the Brokerage Agreement did not represent a genuine transaction but was an instrument used in the fraud, and do not arise out of and do not relate to the Brokerage Agreement. Rather they arise out of and are related to the fraud scheme in which Axis was involved.  Likewise, he submits that the knowing receipt claim against Axis arises from its knowledge of the fraud scheme or of the wrongful disposal of the Shares, not from any provision in the Brokerage Agreement.  He further submits that the Brokerage Agreement is not one entered into between “rational businessmen” as referred to in the cases, but between a victim (the plaintiff) and “crooks” (the defendants).

35.  On this issue I prefer Axis’s submissions.  As Mr Pao says, the words “any suit, action or other proceeding by any party … arising out of or related in any way to this Control Agreement, or any related document” are very wide words.  Such and similarly wide wording reflects an effort to exclude the possibility of an argument that a claim may be founded in tort or on some other legal basis with the consequence that it is not captured by the agreed dispute resolution mechanism.  The intention demonstrated by the attempt to be comprehensive should be respected by the court: Briggs, Agreements on Jurisdiction and Choice of Law, §4.43.  The presumption that the parties are likely to have intended any dispute arising out of the relationship they have entered into, whether arising in contract or in tort or as some other causes of action, to be decided by the same tribunal, is applicable.  I cannot assume that Axis is a fraudster, as Mr Scott’s submissions invite me to do.

36.  As a matter of construction, it seems to me that the contractual intention evinced by the wide wording of clause 10.2 is that all disputes and claims arising out of or related in any way to the Brokerage Agreement, whether classified in their legal nature as contractual, tortious, restitutionary or equitable, are to be resolved in the courts in London.

37.  The plaintiff’s claims against Axis, whether for fraud or knowing receipt, arose out of its custody of the Shares which came about as a direct result of the Brokerage Agreement, and their subsequent disposition.  Although there are claims made for fraud and conspiracy, the fraud and conspiracy relate to the Brokerage Agreement and the related Loan Agreement: see e.g. Donohue v Armco Inc & others [2000] EWCA Civ 94 at §30.[1] In my view, they are claims that are subject to the exclusive jurisdiction clause. 

Whether the exclusive jurisdiction clause is not binding because of fraud

38.  Mr Scott’s next argument is that the exclusive jurisdiction clause cannot be raised by Axis against the plaintiff’s claims which are predicated upon the whole Brokerage Agreement being part of the fraud scheme and therefore null and void.  “Fraud unravels everything”: Lazarus Estates Ltd v Beasley [1956] 1 QB 702, 712; absent the assumption of honesty and good faith on the part of each party, they would not deal: HIH Casualty and General Insurance Ltd v Chase Manhattan Bank [2003] 2 Lloyd’s Rep 61, §15.  Since any agreement on the part of the plaintiff to the Brokerage Agreement was vitiated by the fraud, there was no real assent to the exclusive jurisdiction clause which was therefore not binding on the plaintiff.

39.  Mr Pao submits in response that it is well established that a jurisdiction clause is regarded as a separate agreement from the substantive agreement between the parties, and that unless specific attack is directed against the jurisdiction clause, it is not excluded from application to a dispute involving claims that the agreement as a whole is vitiated such as by fraud, mistake, illegality or the like. 

40.  The parties have not made submissions on which law governs this question.  It seems to me that again English law as the governing law of the contract should govern, but this is inconsequential as there appears to be no difference between English law and Hong Kong law in this regard.  The general principles are not in dispute and they in my view support Mr Pao’s contention.  In Fiona Trust, Lord Hoffmann said that an arbitration clause

“ must be treated as a ‘distinct agreement’ and can be void or voidable only on grounds which relate directly to the arbitration agreement”[2]

and that

“ the arbitration agreement can be invalidated only on a ground which relates to the arbitration agreement and is not merely a consequence of the invalidity of the main agreement.”[3]

Likewise Lord Hope said in that case:

“ The doctrine of separability requires direct impeachment of the arbitration agreement before it can be set aside. This is an exacting test. The argument must be based on facts which are specific to the arbitration agreement. Allegations that are parasitical to a challenge to the validity to the main agreement will not do.”[4]

41.  Similarly, in Deutsche Bank AG & others v Asia Pacific Broadband Wireless Communications Inc & another [2008] 2 CLC 520 at §24, it was said:

“ It is only if the jurisdiction clause is itself under some specific attack that a question can arise whether it is right to invoke the jurisdiction clause. Examples of this might be fraud or duress alleged in relation specifically to the jurisdiction clause.”

42.  The courts in Hong Kong have applied the same principles: see Hiromi Okada v Tomohiro Okada & another [2018] HKCFI 2310 at §§38‑46 per Ng J; China National Geological & Mining (HK) Ltd v Tianjin Hopetone Co Ltd [2020] HKCFI 1338 at §§48-57 per DHCJ Le Pichon.

43.  Applying these principles, it seems to me that there is no specific attack on the jurisdiction clause in this case.  The fraud alleged is directed against the entire Brokerage Agreement (and indeed against the Loan Agreement and the entire transaction).  There is no suggestion that the plaintiff was not aware of the jurisdiction clause or was specifically misled into agreeing to give the English courts exclusive jurisdiction.  There is nothing extraordinary about the jurisdiction clause itself, conferring as it does exclusive jurisdiction on the English courts in relation to a contract a party to which is an English company carrying on regulated business there.  The plaintiff says that the fraud alleged is a fundamental one that suggests the entire Brokerage Agreement was itself a sham and an instrument of fraud.  But this in my view does not take this case out of the general principles.  The reason that, according to the plaintiff, the jurisdiction clause should not have effect is the fraud that led the plaintiff to enter into the Brokerage Agreement, with the consequence that the jurisdiction clause, which was agreed as part of that agreement, is also vitiated.  Such an argument is one that, according to the authorities, the doctrine of separability precludes.

44.  The case of China Baoli Technologies Holdings Ltd (formerly known as Rex Global Entertainment Holdings Ltd) v Orient Equal International Group Ltd & others (HCA 1399/2016, 12 June 2017), relied on by Mr Scott, does not support the opposite conclusion.  It was simply a decision that a party who had submitted in an ex parte application for leave to serve out that the jurisdiction clause could be impeached if fraud or mistake affecting the entire agreement was established as alleged, was not guilty of a material misrepresentation of the law.[5]  Further, it appears that New York law which might be the relevant applicable law took a less strict view of the doctrine of separability.[6]

Whether there is strong cause to permit the plaintiff to sue Axis in Hong Kong notwithstanding the exclusive jurisdiction clause

45.  This brings me to the third issue concerning the exclusive jurisdiction clause, i.e. whether the plaintiff has shown strong cause that the action should continue in Hong Kong notwithstanding the clause. For the plaintiff Mr Scott submits that a very important factor is that to enforce the exclusive jurisdiction clause in the Brokerage Agreement would inevitably result in multiple proceedings in different jurisdictions in this case which concerns an alleged overarching fraud scheme and conspiracy to which Everton and Axis (together with Keyway, 360HK and Adam) were parties.  Among other things, the court determining such a claim would need to assess the credibility and form a judgment as to the honesty and motives of Everton and Axis respectively.  The interests of justice are best served by the submission of the whole dispute to a single forum so that the court can make a reliable and comprehensive judgment on all the matters in issue.

46.  Further, Mr Scott says, the Brokerage Agreement is an ancillary agreement to the Loan Agreement, which also contains an exclusive jurisdiction clause, but in favour of the Hong Kong courts.  Both the Loan Agreement and the Pledge Agreement contain a Hong Kong governing law clause.  The plaintiff is pursuing its claims against Everton in Hong Kong.  Everton has accepted service of the writ and filed a defence and counterclaim.  It is also submitted that as the Shares or the proceeds have gone through a number of Hong Kong companies, ie Look’s Securities, Keyway, Instinet Pacific Ltd and Adam, and as the chain of transfers actually took place in Hong Kong via DBHK, the documents relating to the transfers are likely to be located in Hong Kong.  The traceable products, being shares in Earthasia International Holdings Ltd, are also Hong Kong listed securities.

47.  In response, Mr Pao submits that the plaintiff had a choice over the jurisdiction of the custodian.  This is correct as far as it goes.  The Term Sheet stated: “A licensed and registered London‑based or Hong Kong‑based brokerage firm shall serve as custodian for the duration of this loan.  Borrower may select which jurisdiction is preferred”.  The original choice, however, was Look’s Securities, a Hong Kong‑based firm, and the Collateral Management Agreement between the plaintiff, Everton and Look’s Securities provided for Hong Kong governing law and non‑exclusive jurisdiction for the Hong Kong courts.  It was only when Everton said on 5 June 2020 that it was having difficulties with the Austrian source of funds but had ready funds with Axis that the plaintiff agreed to change the custodian to Axis.

48.  Further, Mr Pao submits that the potential for multiplicity of proceedings in dispute involving the plaintiff, Everton and Axis was entirely foreseeable at the time of the Brokerage Agreement.  In this connection he relies on Lammas Global Corporation v Barclays Bank (Suisse) SA (HCA 2411/2009, 13 April 2011).  There, the plaintiff, Lammas, had opened a bank account with Barclays Suisse and the account opening documents contained a clause conferring exclusive jurisdiction on the place where the bank’s office with which Lammas maintained its account was located, which the court ultimately held to be Switzerland.  Later, at a meeting in Hong Kong, representatives of Barclays plc recommended to Lammas an investment connected with Mr Bernard L Madoff.  When that investment became lost in the Madoff Ponzi scheme, Lammas sued both Barclays Suisse and Barclays plc (and four other Barclays subsidiaries) in Hong Kong.  Acceding to the defendants’ application, inter alia, to set aside service against Barclays Suisse and to stay the proceedings against Barclays plc, Saunders J said:

“ 33. The burden is on Lammas to show strong cause, unforeseeable at the time of entering into the banking contract containing the exclusive jurisdiction clause, in November 2002, why full effect should not be given to Article 26. I accept Mr Bleach’s submission that at the time the account was opened it was foreseeable that dealings in respect of the account would be in Hong Kong and that any claims made against Barclays Suisse in respect of the account may well be accompanied by claims against Barclays plc which could be brought in Hong Kong.”

49.  Here, also, Mr Pao submits, it was entirely foreseeable that the plaintiff might have occasion to sue both Everton and Axis and that in such event it would have to commence litigation both in Hong Kong and in London.

50.  In my view, however, Lammas Global is a very different case on the facts.  There, Barclays plc had agreed to submit to the jurisdiction of the Swiss courts, and had indeed applied for a stay of the action in Hong Kong on the basis of forum non conveniens in favour of the Swiss courts (see §§11(ii), 13, 36 of the decision).  As Saunders J said in a passage immediately following the one quoted above:

“ 34. If the proceedings continue in Hong Kong against the 2^nd to 6^th defendants [i.e. Barclays plc and the four other subsidiaries], and also proceed against Barclays Suisse in Switzerland, there is a risk of multiplicity of judgments. That risk can be avoided by staying the proceedings against the remaining defendants, to enable proceedings to be brought against them in Switzerland.”

Further, on Barclays plc’s application for stay, he said:

“ 38. Having regard to the fact that Barclays Suisse must be sued in Switzerland, and that because the claims against Barclays Suisse and Barclays plc are so inter‑related that they should be heard together to avoid a risk of inconsistent decisions, Hong Kong is not the natural and appropriate forum for the action against Barclays plc by Lammas.”

51.  Far from saying that multiplicity of proceedings was a consequence which was foreseeable by Lammas and which it had to accept, Saunders J took the view that the claims against Barclays Suisse and Barclays plc were inter‑related and should be heard together. 

52.  In contrast, here, Everton has not taken part in Axis’s summons and its position on jurisdiction is not entirely clear.  The relationship and interaction between the exclusive jurisdiction clause in the Loan Agreement between the plaintiff and Everton (in favour of Hong Kong) and the exclusive jurisdiction clause in the Brokerage Agreement between the plaintiff, Everton and Axis (in favour of London) has not been the subject of any submissions or debate in these proceedings.  Conceivably Everton may seek to enforce the exclusive jurisdiction clause in the Loan Agreement and resist being sued in London.  More importantly, Axis has confirmed that it does not contend that the plaintiff should sue Everton in London together with Axis. Axis’s position is therefore that if the plaintiff sues both Everton and Axis, there should be two sets of proceedings, one in London and another in Hong Kong.

53.  Mr Pao also relies on the general statement in Noble Power Investments Ltd v Nissei Stomach Tokyo Co Ltd [2008] 5 HKLRD 631 at §40 where Ma CJHC said in relation to strong reasons why a jurisdiction clause should not be enforced, “one is really talking about factors that were not in the reasonable contemplation of the parties at the time the agreement was made”, and on Li Lian International Ltd & others v Herport Hong Kong Ltd & another [2019] HKCFI 826 in which Noble Power was applied.  However, again, the facts are very different.  The defendant in Li Lian International, Herport, was a non‑vessel operating common carrier, who had issued its own bills of lading to cargo interests containing an exclusive jurisdiction clause in favour of Hong Kong, but had also subcontracted the carriage to NYK (the third party), who was the slot charterer of the vessel in question, on NYK’s bill of lading which contained an exclusive jurisdiction clause in favour of Tokyo.  There were already proceedings involving the time charterer, the owner and the builder of the vessel in Tokyo.  Herport claimed that it should be permitted to bring third party proceedings against NYK in Hong Kong rather than Tokyo because it would otherwise lose the “juridical advantage” of being able to obtain a monetary judgment against NYK, and would suffer “juridical prejudice” as its claim in Japan would be time‑barred or would be postponed or dismissed pending the limitation action proceeding there.  Ng J held that such disadvantage or prejudice was not shown to have been outside the reasonable contemplation of the parties at the time of the contract and did not constitute strong reasons for departing from an exclusive jurisdiction clause. 

54.  The question of multiplicity of proceedings, with all the attendant problems including the risk of inconsistent findings, especially in a case in which the central allegation is a conspiracy to defraud, was not material in Li Lian or Noble Power; but this lies at the forefront of the relevant considerations in the present case.

55.  In The El Amria itself, the English Court of Appeal upheld the first instance judge’s refusal to stay the English action brought by the plaintiff cargo interests against the defendant carrier for damages for breach of contract and/or negligence in and about the stowage, custody and care of the cargo on board the vessel, despite an exclusive jurisdiction clause in favour of the Egyptian courts.  A dominant reason was that the plaintiff had also brought an action in England against the Mersey Docks and Harbour Co, who was not bound by the clause.  In his judgment Brandon LJ said (at p 128):

“ I agree entirely with the learned Judge’s view on that matter, but would go rather further than he did in the passage from his judgment quoted above. By that I mean that I do not regard it merely as convenient that the two actions, in which many of the same issues fall to be determined, should be tried together; rather that I regard it as a potential disaster from a legal point of view if they were not, because of the risk inherent in separate trials, one in Egypt and the other in England, that the same issues might be determined differently in the two countries.”

56.  Mr Scott relies on this and other cases cited in Donohue v Armco Inc & others [2001] UKHL 64 at §27.  In Donohue,the Armco companies complained that a secret agreement was made between four former senior Armco executives (one being Mr Donohue), pursuant to which the Armco group was defrauded into injecting a substantial sum of money into certain subsidiaries for them to be sold to two of the four senior executives and their personal companies.  Five Armco companies started proceedings in New York against ten defendants including the four senior executives and their respective companies, alleging an international fraud.  Mr Donohue brought proceedings in England seeking an anti‑suit injunction to restrain the New York action against him on the basis of the exclusive English jurisdiction clauses contained in the contractual documentation, and applied to join the other senior executives and their companies as co‑claimants in England.  Reliance is placed by the plaintiff in particular on the following passages in Lord Bingham’s speech:

“ 33. … If strong reasons are to be found (and the need for strong reasons is underlined in this case by the potential injustice to Mr Donohue, already noted, if effect is not given to the exclusive jurisdiction clauses) they must lie in the prospect, if an injunction is granted, of litigation between the Armco companies on one side and Mr Donohue and the PCCs on the other continuing partly in England and partly in New York. What weight should be given to that consideration in the circumstances of this case?

34. I am driven to conclude that great weight should be given to it. The Armco companies contend that they were the victims of a fraudulent conspiracy perpetrated by Messrs Donohue, Atkins, Rossi and Stinson. Determination of the truth or falsity of that allegation lies at the heart of the dispute concerning the transfer agreements and the sale and purchase agreement. It will of course be necessary for any court making that determination to consider any contemporary documentation and any undisputed evidence of what was said, done or known. But also, and crucially, it will be necessary for any such court to form a judgment on the honesty and motives of the four alleged conspirators. It would not seem conceivable, on the Armco case, that some of the four were guilty of the nefarious conduct alleged against them and others not. It seems to me plain that in a situation of this kind the interests of justice are best served by the submission of the whole dispute to a single tribunal which is best fitted to make a reliable, comprehensive judgment on all the matters in issue. A procedure which permitted the possibility of different conclusions by different tribunals, perhaps made on different evidence, would in my view run directly counter to the interests of justice.

…

36. In my opinion, … the ends of justice would be best served by a single composite trial in the only forum in which a single composite trial can be procured, which is New York, and accordingly I find strong reasons for not giving effect to the exclusive jurisdiction clause in favour of Mr Donohue. …”

57.  Mr Scott has also referred to a recent English decision in PJSC National Bank Trust & another v Boris Mints & others [2021] EWHC 692 (Comm) in which the court refused to set aside leave to serve the proceedings out of the jurisdiction on several defendants on forum non conveniens grounds, laying importance on the need to avoid multiplicity of proceedings and inconsistent decisions especially in cases where an overarching conspiracy is alleged.

58.  There is in my view considerable force in the plaintiff’s submission.  This is a case where an overarching fraud scheme is alleged against Everton and Axis (allegedly also involving two Hong Kong companies, namely, Keyway and Adam, and a Belize company, 360HK, though none of them has yet been joined in the proceedings).  Documents disclosed and evidence given by or against one defendant in the proceedings against it ought to be available in the proceedings against the other.  The interests of justice are best served by having one tribunal adjudicating on the plaintiff’s claims against both defendants in the same suit.  Not only is this desirable and will prevent waste and duplication of costs, but it is in my opinion necessary for the purpose of avoiding what I would likewise regard as a potential disaster from a legal point of view, ie separate actions in different jurisdictions culminating in two separate trials and two judgments by two different tribunals, each based on incomplete materials, with an obvious risk of inconsistent findings.

59.  Mr Pao seeks to distinguish Donohue from the present case.  First, he submits that although a conspiracy is alleged in the present case, it would be quite possible for it ultimately to be found that Everton was fraudulent but Axis was not, unlike Donohue where it was apparently not conceivable on Armco’s case there for some of the alleged conspirators to be guilty of the conduct alleged against them and others not.  Secondly, there were claims brought by the Armco companies against Mr Donohue in New York that were not covered by the exclusive English jurisdiction clauses.  Thirdly, there were claims brought by the Armco companies in New York against other persons that were also not covered by the exclusive jurisdiction clauses relied upon by Mr Donohue.

60.  As to the first point, in my view the risk of inconsistent findings would remain.  There could for example still be a finding by one court that Everton and Axis conspired together, but an inconsistent finding by the other court that there was no conspiracy.  Different inconsistent permutations are possible.  Nor does point deal with all the other forensic reasons why a single set of proceedings is highly desirable.  The distinction drawn does not detract from the need to avoid multiple proceedings in different jurisdictions in this kind of case.  As to the second and third points, there will plainly be continuing proceedings in Hong Kong against Everton in any event.  As mentioned above, Axis does not contend that there should only be one set of proceedings against both defendants in London.

61.  Mr Pao also emphasises that the exclusive jurisdiction clause in the Brokerage Agreement has a real basis, in that Axis is an English company and runs a regulated business there.  It has no presence in Hong Kong, and Mr Hutchison has said that Axis would not have entered into the Brokerage Agreement had the other parties insisted on adopting Hong Kong law as the governing law or the Hong Kong courts as the exclusive forum.  I recognise that prima facie Axis has a contractual right for any dispute arising out of the Brokerage Agreement to be resolved by the courts in London.  But the remedy being sought here, in the form of the setting aside of the service of the writ, is discretionary, and if in accordance with the principles established by authorities there is strong cause for allowing these proceedings to continue as against Axis in Hong Kong, then that discretion should be exercised by refusing an order for setting aside.  This does not completely denude the clause of effect, for, as at present advised, I see no reason why Axis could not claim damages for any loss it has suffered as a result of the plaintiff’s breach of the exclusive jurisdiction clause (such as any additional expense incurred in having to litigate in Hong Kong as compared to England): see Donohue, at §§36, 48 & 75; Briggs, Agreements on Jurisdiction and Choice of Law, §6.68.  Further, Mr Scott has referred to other proceedings in this jurisdiction in which Axis is already a party, which shows that Axis is not being required in this case to litigate in a completely unfamiliar environment.  It will in addition remain open for Axis to argue in these proceedings, based on the governing law clause in the Brokerage Agreement, that the claims against it are governed by English law.

62.  For these reasons I am satisfied that there is strong cause for not giving effect to the exclusive jurisdiction clause in favour of Axis by setting aside service of the writ on it.

Whether Hong Kong shown to be appropriate forum

63.  The parties have also addressed me on the question of forum non conveniens, but it seems to me that it is only significant if I find that the exclusive jurisdiction clause does not cover the claims in question or is impeached.  In the light of my conclusion above in these two aspects, and the further conclusion that there is strong cause or strong reason not to specifically enforce the clause, it seems to me unnecessary at this stage to consider further the question of forum non conveniens as such: see Noble Power, §§37-40.

Material non‑disclosure

64.  As the applicant in the ex parte application for leave to serve the proceedings out of the jurisdiction, it was incumbent upon the plaintiff to make full and frank disclosure to the court.  Failure to do so can be a ground for setting aside the ex parte order.  The related principles are well established and need not be set out here.

65.  While the affidavit dated 3 August 2020 used for the ex parte application did set out the relevant part of clause 10.2 in full, I consider that the disclosure was deficient.  The affidavit seemed to suggest that it would be appropriate for the court to order service out notwithstanding the exclusive jurisdiction clause, simply because the claims were founded not in contract but in tort, arising out of Axis’s alleged fraud, deceit, conversion and conspiracy, and the plaintiff was seeking a declaration that the Brokerage Agreement was null and void.  As explained above, these matters do not render the exclusive jurisdiction clause inapplicable to the plaintiff’s claims.  No reference at all was made in the affidavit to the need to show strong cause or strong reasons why the Hong Kong court should assume jurisdiction despite the exclusive jurisdiction clause in favour of London, and no attempt was made to demonstrate such strong cause other than a mere statement that the Brokerage Agreement is an agreement ancillary to the Loan Agreement which is governed by Hong Kong law and subject to the exclusive jurisdiction of the Hong Kong courts.  The omission is all the more surprising given that in the earlier interlocutory battle in July 2020, Axis’s counsel had already provided a skeleton argument referring to the principle that an exclusive foreign jurisdiction clause should be decisive unless strong cause is shown to the contrary, citing Prime Deal (HK) Enterprises Ltd v The Hongkong and Shanghai Banking Corporation Ltd (HCA 2142/2002, 2 July 2002) and Hiromi Okada v Tomohiro Okada, supra.  The relevant principles and authorities could anyway easily be found in the books: see eg Hong Kong Civil Procedure 2020, pp 171-176.

66.  Regrettable though the inadequate disclosure was, I have come to the conclusion that this failure on the plaintiff’s part should not result in service out being altogether denied but should instead be reflected in costs.  I have in particular taken into account three factors.  First, Axis has not suggested that the non-disclosure was deliberate, and it would not be right for me to infer lack of probity rather than of competence.  Secondly, if this were the plaintiff’s first application for leave to serve out on Axis, I would, for the reasons set out above, have granted it.  Thirdly, the interim proprietary injunction was granted by the court on 27 November 2020 on an inter partes basis in full knowledge of Axis’s pending jurisdiction challenge.  In other words, the plaintiff had not obtained an illegitimate advantage through an ex parte injunction based on non‑disclosure.

67.  To mark the court’s disapproval of such failure I consider it appropriate that there should be no order as to costs on Axis’s summons even though the plaintiff has successfully opposed it.

Miscellaneous matters

68.  The plaintiff has taken out a summons dated 3 August 2020 seeking as against both defendants (i) a proprietary injunction in relation to the Shares and their traceable proceeds, and (ii) a Mareva injunction restraining removal or disposition of assets up to the value of HK$286.7 million.  An interim proprietary injunction had been granted on 27 November 2020 pending the substantive resolution of the summonses.  Axis has indicated in Mr Hutchison’s 4^th affidavit of 29 January 2021 that it would not oppose the continuation of the proprietary injunction should its jurisdictional challenge fail.  For its part, the plaintiff has abandoned the application for a Mareva injunction.

69.  In the light of my conclusion on Axis’s summons, I make an order that the injunction granted in paragraph 1 of Wilson Chan J’s order dated 27 November 2020 as against Axis do continue until trial or further order, with an order nisi that costs be reserved to the trial judge.  (An order to the same effect was made as between the plaintiff and Everton by consent on 26 April 2021.)

70.  Arising from the plaintiff’s decision not to pursue the application for a Mareva injunction (and for an ancillary order for disclosure of general assets), on ordinary principles it should have to pay the related costs to Axis.  Because of the overlap with the proprietary injunction in the evidence, it seems to me however that apportionment and payment should be deferred to the end.  I therefore order that the plaintiff do pay Axis’s costs relating to the application for Mareva injunction and ancillary disclosure order in the plaintiff’s summons dated 3 August 2020 in any event, to be taxed if not agreed, with a certificate for two counsel.

71.  The plaintiff’s summons also seeks a separate order for disclosure concerning the whereabouts of the Shares and their proceeds of sale.  An order was made in terms on 27 November 2020 and an affidavit has been filed by Axis in compliance.  The plaintiff has asked for an updating affidavit, to which, Mr Pao says, Axis has no objection.  I therefore order that Axis do file and serve a further affidavit within 14 days pursuant to paragraph 2 of Wilson Chan J’s order, bringing the position up to date.  On a nisi basis, costs be reserved to the trial judge.

72.  On 16 April 2021 the plaintiff filed the 4^th affidavit of Tang Chong Jun in reply on its own summons.  On 23 April 2021 it filed a summons asking for leave for that affidavit to be used in opposing Axis’s summons.  I refuse leave.  It came too late.  Axis, who should have the last word on its application, did not have a chance to respond.  Most of the affidavit concerns other proceedings involving some of the entities that feature in the present case, but their relevance is in doubt.  The plaintiff’s summons dated 23 April 2021 is therefore dismissed, with costs to Axis with a certificate for two counsel on a nisi basis.

Conclusion on Axis’s summons

73.  For the above reasons, I conclude that there are serious issues to be tried on the substantive claims against Axis and that there is a good arguable case that jurisdiction exists under at least Order 11 rule 1(1)(f).  The exclusive jurisdiction clause in favour of London in the Brokerage Agreement is wide enough to cover the plaintiff’s claims and has effect notwithstanding the plaintiff alleges that the Brokerage Agreement was part of a fraud.  There is however strong cause to allow the proceedings to continue as against Axis in Hong Kong notwithstanding the clause.  There was material failure on the plaintiff’s part in the ex parte application to draw attention to the applicable legal principles relating to exclusive jurisdiction clauses and demonstrate how they were met, but this is adequately marked by depriving the plaintiff of the costs of Axis’s summons.  There will therefore be an order that Axis’s summons be dismissed, and an order nisi that there be no order as to costs on that summons.