YANFULL INVESTMENTS LTD v. DATUK OOI KEE LIANG

CACV 114/20 16

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 114 OF 2016

(ON APPEAL FROM HCA NO 687 OF 2015)

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J U D G M E N T

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Hon Lam VP:

1.  I respectfully agree with the judgment of Kwan JA.

Hon Kwan JA:

2.  This is an appeal by the plaintiff, Yanfull Investments Limited (“Yanfull”), against the decision of L Chan J on 15 April 2016 (“the Decision”), in which the judge struck out the action against the defendant, Datuk Ooi Kee Liang (“Ooi”), on the ground of limitation.

3.  The order for striking out was made in an application by summons issued by Ooi on 15 September 2015 and amended on 13 April 2016 for the following orders and relief under Order 12 rule 8(1)(a) to (c) and rule 8(2)(b) and (2A) of the Rules of the High Court:

(1)   an order declaring that the concurrent writ of summons issued by Yanfull on 19 May 2015 has not been duly served on Ooi in that Yanfull has failed to serve the writ on Ooi in Malaysia in compliance with Malaysian law;

(2)   an order that the purported service of the writ on Ooi be set aside on the ground in (1);

(3)   an order that the ex parte order made by Master Hui on 15 May 2015 granting leave to Yanfull to issue and serve the concurrent writ on Ooi out of the jurisdiction in Malaysia be set aside in that:

a.  Yanfull failed to make full and frank disclosure to the court; and/or

b.  Yanfull failed to show a serious question to be tried as to the merits of the claims; and

(4)   all further proceedings in this action be stayed on the ground of forum non conveniens in that the High Court of Malaya at Kuala Lumpur in Malaysia is the more appropriate forum and/or on the ground of abuse of process of the court in that Yanfull has commenced another action in Kuala Lumpur High Court Suit No.: 22NCC-100-04/2015 against Ooi (“the KL Suit”) on substantially similar or the same subject matters as those of the present action.

Background

4.  The background matters, taken largely from the initial parts of the Decision, and supplemented by other matters not in dispute, may be stated as follows.

5.  Yanfull is a company incorporated in Hong Kong.  It is a wholly owned subsidiary of a Malaysian company, Golden Plus Holdings Berhad (“Golden Plus”).  The shares of Golden Plus were listed in the Malaysian Stock Exchange[1]. Yanfull has a wholly owned subsidiary incorporated in Shanghai called Yanfull (Shanghai) Co Ltd (“Yanfull Shanghai”).  Yanfull Shanghai owns a construction and development project in Shanghai called the Royal Garden (“the Shanghai Project”).

6.  Ooi is a property developer residing in Malaysia.  At the material time, he was the CEO and beneficial owner of two Malaysian companies, Indian Corridor Sendirian Berhad (“IC”) and Pembangunan Qualicare Sendirian Berhad (“Qualicare”).

7.  On 25 July 2007, Golden Plus made an announcement that Yanfull had entered into a management agreement with a Hong Kong company, One China Idea Development Limited (“CIDL”), to develop phase 2 of the Shanghai Project. It was alleged by Ooi that CIDL was given full and exclusive rights to manage and operate the business of Yanfull Shanghai and the latter was to receive in return a small proportion of the proceeds of sale of units in the Shanghai Project.

8.  Over the period from August to December 2007, Qualicare and IC acquired a total of 19.745% of the issued share capital of Golden Plus.  The purchases of the shares were financed by Kuwait Finance House (Malaysia) Berhad (“Kuwait Finance”).  Yanfull alleged the purchases were made with a view to Ooi eventually becoming the controlling shareholder of Golden Plus.

9.  On 28 December 2007, Qualicare and IC served on Golden Plus a notice of requisition to convene an EGM of the shareholders on 26 January 2008 to consider and vote on proposals to replace the existing directors.  On the same day, Qualicare and IC brought a derivative action on behalf of Golden Plus in the Malaysian High Court against the executive directors of Golden Plus, alleging misappropriation of assets with an ex parte application for Mareva injunctions, which were granted.

10.  On 31 December 2007, Qualicare and IC applied for and obtained from the Hong Kong court ex parte Mareva injunctions against Yanfull and CIDL, restraining them from dealing with or disposing of HK$647 million odd.  The writ was issued on 2 January 2008 (“the 2008 Action”), advancing a derivative action on behalf of Golden Plus that Yanfull and CIDL were misappropriating the assets of Golden Plus through their management agreement.  The return date of the injunctions was 1 February 2008.

11.  In support of the application for the Mareva injunctions, Ooi made an affirmation stating that in relation to the undertaking in damages, IC and Qualicare were companies of financial substance with substantial unencumbered assets, which, if required, could be made available to fortify their undertakings in damages, or to pay any damages ordered, pursuant to their undertakings in damages.  These statements are referred to as “the Undertakings Representations” in the statement of claim in the present action.

12.  However, Ooi had, on behalf of IC, executed on 17 December 2007 two charges over all the Golden Plus shares held in the name of IC in favour of Kuwait Finance.  He did not disclose this in his supporting affirmation for the Mareva injunctions.

13.  On 18 January 2008, Yanfull applied to discharge the injunctions, to strike out the statement of claim and dismiss the 2008 Action.  Reyes J ordered IC and Qualicare to pay into court HK$8 million by 31 January 2008 as fortification of their undertaking in damages.

14.  IC and Qualicare did not provide the fortification on 31 January 2008.  On the return date of 1 February 2008, they served a notice seeking to discontinue the 2008 Action.  On 1 and 4 February 2008, Deputy High Court Judge Carlson discharged the injunctions, granted an anti-suit injunction prohibiting IC and Qualicare from litigating the case in the 2008 Action again, ordered indemnity costs against them, ordered an inquiry of the damages suffered by Yanfull and CIDL pursuant to the undertakings in damages of IC and Qualicare, and granted leave for the 2008 Action to be discontinued.

15.  IC and Qualicare applied for leave to appeal against parts of the order of Deputy Judge Carlson.  The application was dismissed by Rogers VP on 31 July 2008.

16.  Yanfull and CIDL brought proceedings in Malaysia to enforce the orders of Deputy Judge Carlson.  On 16 April 2008, they obtained Mareva injunctions in the Malaysian High Court against IC and Qualicare to restrain them from dealing with their shares in Golden Plus up to the value of HK$20 million until the disposal of the inquiry into damages in the 2008 Action and the payment of damages, and worldwide Mareva injunctions to restrain the disposal of assets up to approximately HK$60 million.

17.  On 29 April 2008, CIDL and Yanfull filed particulars of claim of their loss in the inquiry of damages.  CIDL claimed over HK$70 million and Yanfull HK$87.5 million.

18.  The trial of the inquiry of damages was scheduled to commence on 20 April 2009.  The parties reached a settlement and a consent judgment was entered by Deputy Judge Carlson on 20 April 2009 (“the Consent Judgment”) by which IC and Qualicare were to pay Yanfull HK$35 million in damages and HK$5 million in costs.

19.  IC and Qualicare did not pay Yanfull anything pursuant to the Consent Judgment.  IC was wound up in June 2010 and Qualicare in April 2013, in undefended proceedings in Malaysia.  Yanfull’s attempts in Malaysia to enforce the Consent Judgment have not yielded any recoveries.

20.  Yanfull issued the writ against Ooi in the present action on 30 March 2015 with a statement of claim.  On 15 May 2015, Master Hui granted leave for a concurrent writ to be issued and served on Ooi in Malaysia.

21.  On 19 April 2015, Yanfull issued the writ against Ooi and other directors of IC and Qualicare in the KL Suit.

The claims in the present action

22.  The causes of action pleaded in the statement of claim against Ooi are: (1) abuse of the civil procedure by the 2008 Action; (2) malicious prosecution in the 2008 Action; and (3) deceit of Yanfull (and the court) through fraudulent misrepresentations and related misconduct[2].

23.  The salient allegations of Yanfull as pleaded may be summarised as follows:

(1)   Ooi devised a strategy to pursue his ambition to take full control of the board of Golden Plus.  He caused IC and Qualicare to requisition an EGM of the shareholders of Golden Plus to vote on the replacement of the existing directors.  In the run-up to the EGM, he took steps to engender maximum publicity adverse to the existing board, in order to woo over as many non-aligned shareholders as possible.  IC and Qualicare brought derivative actions on behalf of Golden Plus in Malaysia and Hong Kong and obtained Mareva injunctions against CIDL and Yanfull.  The claims of misappropriation of assets of Golden Plus through the management agreement of CIDL and Yanfull were unfounded and speculative.  Ooi made false allegations and statements in his affirmation in support of the injunctions, including the Undertakings Representations, knowing that they were untrue and false.  The actions and injunctions were widely publicised, causing the board of Golden Plus to be subjected to hostile press coverage and regulatory inquiries.

(2)   Ooi’s strategy was to bring about the voting on the proposal to remove the existing directors (at the EGM on 26 January 2008) before the ex parte injunctions were likely to be set aside.  Once he had secured control over the board, he would settle or discontinue the derivative actions.  The 2008 Action was brought for the ulterior and improper purpose of implementing his takeover strategy.  He knew there was no reasonable or probable cause to bring the 2008 Action or to seek the Mareva injunctions and had no intention to bring the action to trial.

(3)   He knew that the undertaking in damages proffered on behalf of IC and Qualicare was false, illusory and fraudulent, because IC’s shares in Golden Plus were charged to Kuwait Finance, contrary to his statement that its assets were unencumbered, and the value of the only assets of IC and Qualicare was exceeded by IC’s indebtedness to Kuwait Finance.  He intended that the judge and Yanfull would rely upon the Undertakings Representations.

(4)   From 31 December 2007 until 4 February 2008, by reason of and in reliance on the Undertakings Representations, by which Ooi had induced Deputy High Court Judge To to grant the ex parte Mareva injunctions, “the only lawful course open to Yanfull was to suspend its business and all work on the Shanghai Project, thereby incurring substantial losses (which later became the subject of its claim in the Inquiry in Damages).  From 4 February 2008 until 20 April 2009, in reliance upon Dato Ooi’s continuing Undertakings Representations, Yanfull pleaded and progressed its case in the Inquiry in Damages without seeking offshore protective orders against [IC and Qualicare] or against Dato Ooi”[3].

(5)   On 20 March 2009, a statutory demand for a non-existent debt was issued against IC by a Malaysian private company owned or controlled by associates of Ooi.  Ooi knew the statutory process to wind up IC for the alleged debt had commenced.  By causing IC and Qualicare to enter into the contract with Yanfull incorporated in the Consent Judgment, Ooi represented that IC and Qualicare could and would perform their joint and several contracts to pay the agreed sum of HK$40 million (“the Consent Judgment Representations”), knowing that Yanfull and the court were likely to rely upon them by causing the Consent Judgment to be made.

(6)   The Consent Judgment Representations were false and untrue in that Ooi knew when he made them that the value of IC’s only assets being the Golden Plus shares was substantially exceeded by its debt to Kuwait Finance, that IC and Qualicare could not perform their Consent Judgment contracts without the provision of the required HK$40 million from him, and that a statutory demand preceding winding-up proceedings had been issued against IC.  Ooi had no intention of causing IC and Qualicare to perform their Consent Judgment contracts and he intended to allow IC to be wound up.

24.  Yanfull claimed against Ooi the loss and damage as pleaded in §50:

“(1) the loss and damage arising from Dato Ooi causing [IC and Qualicare] to default upon their joint and several contracts to pay to Yanfull, in compromise of the Inquiry in Damages, [the 2008 Action] and the Malaysian Proceedings, namely HK$40 million plus interest in the sum of HK$18,989,589.04 from 20 April 2009 to 26 March 2015 at the Court’s judgment rate, which is continuing to accrue at a daily rate of HK$52,026.27 up until the date of judgment; and

(2)   the loss and damage incurred in trying to enforce the Consent Judgment against [IC and Qualicare], namely: Legal fees (including disbursements) … Total HK$2,652,371.63.”

The Decision

25.  The judge refused to set aside service of the writ on Ooi for irregular service[4]. He found there was material non-disclosure by Yanfull of the KL Suit, which was a parallel proceeding brought by Yanfull, but considered the non-disclosure was innocent and would have discharged the ex parte injunction and re-granted it with costs of the application to be paid by Yanfull[5].  These holdings are the subject of a respondent’s notice by Ooi in this appeal.

26.  On the issue whether there were serious questions to be tried in respect of the three causes of action in the statement of claim, the judge held in favour of Yanfull in respect of the causes of action in abuse of the civil procedure by the 2008 Action[6] and malicious prosecution in the 2008 Action[7]. Ooi did not seek to challenge these holdings on appeal.  On the remaining cause of action of deceit, the judge held there was no serious question to be tried and he would have struck out this claim even if he would allow the action to proceed[8].

27.  The judge held the causes of action in abuse of the civil procedure and malicious prosecution accrued at the latest on 4 February 2008 when the 2008 Action was discontinued and the six-year limitation period expired on 4 February 2014.  Hence, the present action commenced on 30 March 2015 was time barred and he struck out this action on the ground of limitation[9].

28.  On forum non conveniens, the judge ruled in favour of Ooi that Malaysia is the appropriate forum and he would have stayed these proceedings in favour of the Malaysian court if he had not struck out this action[10].

The grounds of appeal

29.  Mr Barrie Barlow SC, who appeared with Mr David Chen for Yanfull on appeal and below, advanced these four broad grounds of appeal.

30.  First, he contended that the judge acted without jurisdiction or was in disregard of the settled principle of audi alteram partem in dismissing the action without notice to the parties and without affording them an opportunity to be heard on the issue of limitation.

31.  Second, the judge was wrong to hold that the causes of action in abuse of the civil procedure and malicious prosecution were time barred.

32.  Third, the judge was wrong to hold that the cause of action in deceit disclosed no serious question to be tried.

33.  Fourth, the judge was wrong to hold that Malaysia is the appropriate forum for the trial of Yanfull’s claims.

34.  The grounds will be considered in the order mentioned above.

If the judge had acted without jurisdiction or in disregard of settled principle

35.  Mr Barlow pointed out that the summons of Ooi before the judge did not seek any order to strike out Yanfull’s claim, whether pursuant to Order 18 rule 19 or the inherent jurisdiction of the court.  The only reliefs sought were pursuant to Order 12 rule 8(1)(a) to (c) and rule 8(2)(b) and (2A), as mentioned at the outset of this judgment.

36.  He submitted that if Ooi wished to strike out the action on the ground of limitation, he could either plead the limitation defence and seek the trial of a preliminary issue or apply to strike out the action on the ground it is frivolous, vexatious or an abuse of process.  In Ooi’s summons, he did not seek to strike out the action, nor did he raise the limitation defence as a preliminary issue or otherwise.  He referred us to Ronex Properties Ltd v John Liang Construction Ltd [1983] 1 QB 398 at 405A to B and 408B to D to make good his submissions.

37.  He further submitted while Order 1B rule 2[11] permits the court to strike out of its own motion, rule 2 expressly requires the court to give the parties at least three days’ notice if the court proposes to make such an order[12], see Wingames Investments Ltd v Mascot Land Ltd (No 2) [2013] 1 HKLRD 1186 at 1197, §16, and to stipulate in the order that any party affected by it has the right to apply to set it aside[13]. No such notice was given by the judge, nor did the Decision contain any statement that Yanfull could apply to set aside, vary or stay the Decision.  Hence, Mr Barlow contended that the jurisdiction to make an order of its own motion was not engaged and the Decision was plainly wrong in striking out the action on the ground of limitation.

38.  In the present case, as Ooi was seeking to set aside the order granting leave to issue and serve the concurrent writ out of the jurisdiction, he did not file a defence as that might be regarded as submitting to the jurisdiction of the Hong Kong court.  The threshold for a defendant who wished to contend, in an application under Order 12 rule 8 that there is no serious issue to be tried is equated to that applicable on a strike-out (Ren Yun Liang v China Merchants Bank Co Ltd [2007] HKEC 159 at §32; GDH Ltd v Creditor Co Ltd [2008] 5 HKLRD 895 at §19; Dong Shing F&T Co Ltd v Hanmec Co Ltd [2010] 5 HKLRD 261 at §42).  One of the grounds on which Ooi sought to set aside the ex parte order was that Yanfull failed to show a serious question to be tried as to the merits of the claims.  In that regard, he had raised the issue of limitation in his affirmation filed in support of his summons, stating that as the 2008 Action was discontinued on 4 February 2008, the claims of Yanfull were time barred and liable to be struck out[14].  Yanfull asserted in its affirmation in answer that limitation should be an issue for trial and contended that time should run from the date of the Consent Judgment on 20 April 2009 so the writ issued on 30 March 2015 was within time[15].  In Ooi’s affirmation in reply, he reiterated his position in the first affirmation.  Yanfull clearly knew that limitation was in issue in the application before the judge.

39.  Mr Kenny Lin, who appeared with Mr Lincoln Cheung for Ooi before the judge and on appeal, informed us that the issue of limitation was hotly debated in counsel’s skeleton submissions and fully argued before the judge.  There is no reason to think that fair opportunity had not been given to Yanfull to make effective submissions on this issue, before the judge ordered the action to be struck out on the limitation ground.

40.  Under Order 18 rule 19(1), the court may, either of its own motion or on application, at any stage of the proceedings order to be struck out any pleading and may order the action to be dismissed, on one or more of the grounds as specified under that provision.  Apart from the statutory power, there is also the parallel power under the inherent jurisdiction of the court to strike out pleadings which are obviously frivolous or vexatious, or are otherwise an abuse of process of the court, even in the absence of a specific application, provided that a fair opportunity to be heard has been afforded to the party affected (Ng Yat Chi v China Resources (Holdings) Co Ltd [2005] 3 HKC 506 at §§26 to 34).  I do not agree with Mr Barlow that the inherent jurisdiction of the court to strike out a pleading of its own motion was superseded by the statutory powers in Order 18 rule 19(1)[16] and Order 1B rule 2.  As stated in Ng Yat Chi at §26, there was statutory power for the court to strike out of its own motion even before Order 18 rule 19(1) was amended to make this clearer.  Nor do I think his submission is supported by the passage he cited in Hong Kong Civil Procedure 2017, vol 1 at §18/19/1.

41.  In this instance, even though the summons did not seek an order to strike out the claims, the limitation issue was clearly raised from the start and there was adequate opportunity for Yanfull to respond to this in evidence and to make submissions.  The limitation issue was raised in the context of whether there was a serious question to be tried as to the merits of the claims, the threshold of which is equated to striking out.  Provided that the court was entirely satisfied there was no serious question to be tried as to the merits in view of the limitation ground, which had been clearly raised and fully argued, there is no jurisdictional obstacle for the court to exercise the power of its own motion to strike out a plainly vexatious suit which was an abuse of process.  As was rightly observed by A Cheung J (as he then was) in Ng Yat Chi at §32, “the exercise of the power to strike out or to stay the abusive proceedings so as to protect the court’s own procedure and interest cannot be dependent upon the making of an application by the opposite party.”

42.  The statements in Ronex Properties cited by Mr Barlow must be read in context.  The English Court of Appeal was concerned with a situation in which the third party applied to strike out the third party notice on the ground that it disclosed no cause of action since the alleged causes of action were time barred.  No third party statement of claim had been served and the defendant’s claim was indicated in only the broadest terms (at 403E to G).  The court rejected the contention that the third party notice could be struck out as disclosing no cause of action merely because the third party might have a limitation defence, as it is trite law that the limitation statutes bar the remedy not the right and they do not even have this effect unless and until pleaded and even when pleaded, they are subject to exceptions such as acknowledgment of a debt or concealed fraud, which may be raised by way of reply (at 404D to E).

43.  It was in that context that Donaldson LJ (as he then was) said at 405A to B: “… in a very clear case, he can seek to strike out the claim upon the ground that it is frivolous, vexatious and an abuse of the process of the court and support his application with evidence.  But in no circumstances can he seek to strike out on the ground that no cause of action is disclosed.”  What Stephenson LJ said at 408B to D was to similar effect.  So the right course is to apply to strike out the claim as frivolous, vexatious and an abuse of process on the basis that the claim is statute barred.  If that is done, the claimant and the court would know that limitation is raised, evidence can be filed by the applicant if necessary and the claimant can file evidence to meet the plea of limitation such as an acknowledgment of debt, concealed fraud or any matter which may show that the claim is not vexatious or an abuse of process.

44.  Mr Barlow contended there was “no meaningful evidence of fact” on the issue of limitation as Yanfull was not required to adduce the evidence which would have been necessary “had it been facing a Ronex Properties type of strike out application”.  I do not accept this contention.  Yanfull was well aware of the limitation issue raised in the first supporting affirmation.  As mentioned earlier, even though the summons did not specifically apply for an order to strike out the claims, it had sought to set aside the concurrent writ on the basis Yanfull failed to show a serious question to be tried as to the merits of the claims in that they were time barred.  Yanfull had full opportunity to respond to the plea of limitation and had filed such evidence in response as it saw fit.  The course adopted here by the parties was in no way contrary to what was said in Ronex Properties.

45.  Mr Barlow submitted that the exercise of the court’s power under Order 18 rule 19 to strike out of its own motion is subject to Order 1B rule 2.  The passage in Hong Kong Civil Procedure 2017, vol 1 at §18/19/3A that he cited does not support his proposition.  I think the correct position is to the contrary.  The power conferred on the court in Order 1B rule 2 to make an order of its own motion is qualified by the opening words “except where a rule or some other enactment provides otherwise”.  Order 18 rule 19(1) makes such provision to empower the court to strike out a pleading and order the action to be dismissed of its own motion.  The provisions relied on by Mr Barlow, namely Order 1B rules 2(3) and (5), do not apply here.  In any event, ample notice was given to Yanfull of the limitation issue that it was contended by Ooi that Yanfull’s claims were liable to be struck out on that basis.  The present situation is a far cry from Wingames Investments Ltd in which a mandatory injunction order was made by the judge of his own motion in the absence of any application by the parties and without affording them the opportunity to file evidence.

46.  There is no merit in this ground of appeal.

If the causes of action in abuse of the civil procedure and malicious prosecution were time barred

47.  The judge had held there was no serious question to be tried in respect of the claim in deceit and he would have struck out this claim even if he would allow the action to proceed.  He therefore considered the limitation issue only in respect of the remaining causes of action in abuse of the civil procedure and malicious prosecution.  I propose to follow the same scheme and to consider whether the plea of limitation succeeds only in respect of abuse of the civil procedure and malicious prosecution.

48.  It is not controversial that these two causes of action in tort are only actionable on proof of damage and there is no cause of action (and therefore time does not begin to run) until some identifiable damage is actually incurred.

49.  Mr Barlow contended in the court below and before us that these causes of action did not accrue until the making of the Consent Judgment on 20 April 2009.  The judge took the view that “the losses accrued or were incurred upon the granting of the injunction[17], not upon the making of the consent judgment”[18], and held that “the cause of action in this action accrued at the latest on 4 February 2008”[19] and “this action was therefore barred on 4 February 2014.”[20]

50.  Mr Barlow’s arguments went as follows:

(1)   Yanfull’s loss did not accrue upon the granting of the Mareva injunctions on 31 December 2007, as at that time IC and Qualicare were not under any liability to pay damages to Yanfull.  At that time, the 2008 Action was not yet determined in Yanfull’s favour and the injunctions were not yet discharged.  The claim in malicious prosecution did not accrue until the 2008 Action was determined in Yanfull’s favour, citing Jae Hoon Oh v Richdale [2005] 2 HKLRD 285 at §12 and Gilding v Eyre (1861) 10 CB (NS) 592 at 604 in which Willes J stated the rule of law that “no one shall be allowed to allege of a still depending suit that it is unjust” and “this can only be decided by a judicial determination, or other final event of the suit in the regular course of it.”

(2)   Yanfull’s original losses began immediately following the grant of the Mareva injunctions on 31 December 2007 and, thereafter, within the 2008 Action, Yanfull sought compensation against IC and Qualicare resulting in Deputy Judge Carlson ordering an inquiry in damages on 4 February 2008 and culminating in the Consent Judgment of 20 April 2009.  Yanfull’s previous causes of action in respect of its losses arising from the misconduct of IC and Qualicare in obtaining the Mareva injunctions had merged within and were extinguished by the Consent Judgment of 20 April 2009, citing Spencer Bower and Handley on Res Judicata (4^th ed) at §§19.01 and 19.02.

(3)   The earliest date when Yanfull’s loss accrued occurred upon the making of the Consent Judgment on 20 April 2009, when the maliciously instituted proceedings were determined in Yanfull’s favour.  The order of Deputy Judge Carlson on 4 February 2008 stipulated in §1 that IC and Qualicare do have leave to discontinue the 2008 Action on terms set out in the order, which included the term in §4 there was an inquiry into damages.  Deputy Judge Carlson made further rulings in the 2008 Action thereafter up until the Consent Judgment.  Yanfull’s causes of action could not accrue until the Consent Judgment was in place.

(4)   The judge was wrong to rely on §27 of the statement of claim in the present action in which it was pleaded that “from 31 December 2007 until 4 February 2008”, Yanfull had to suspend its business and had incurred substantial losses (which became the subject of its claim in the inquiry of damages) as a result of the Mareva injunctions.  The pleading was not evidence. There was no evidence before the judge to support his finding that Yanfull suffered loss as a result of the Mareva injunctions.  And Yanfull did not file evidence in this regard because the summons did not apply for a striking out of the claims on the limitation ground.  Further, the judge elided and confused Yanfull’s original losses with the pleaded losses in §50 of the statement of claim, in which it was pleaded that Yanfull’s loss and damage arose from Ooi causing IC and Qualicare to default upon their contracts to pay the agreed sum of HK$40 million under the Consent Judgment.

(5)   Yanfull’s causes of action could not accrue until its discovery of Ooi’s deceit.  The judge was wrong to hold “there was nothing material on the accrual of the cause of action that was not known to Yanfull on or before 4 February 2008” and that sections 26 and 31 of the Limitation Ordinance cannot assist Yanfull[21].  As pleaded in §36 of the statement of claim, from 20 March 2009 to 20 April 2009, Ooi had concealed from Yanfull and the court that the statutory process to wind up IC had commenced in Malaysia.  It was further pleaded in §§ 40 to 45 that after the Consent Judgment, Ooi concealed from Yanfull and the court the steps he took to wind up IC and Qualicare to ensure that they would default on the Consent Judgment.

51.  I do not agree with the above submissions.

52.  I have no quarrel with the proposition that the causes of action in abuse of the civil procedure and malicious prosecution should arise from the date when an essential ingredient in the torts occurred, namely when the 2008 Action was determined in Yanfull’s favour, and time should not run from the date when the Mareva injunctions were obtained.  The gravamen of the claims in abuse of civil procedure and malicious prosecution lay in the bringing of the 2008 Action and the obtaining of the Mareva injunctions maliciously, without reasonable cause, and for an ulterior and improper purpose.  The proceedings were terminated in favour of Yanfull when leave to discontinue the 2008 Action was granted with an order for inquiry of damages.  The causes of action accrued when such determination was made on 4 February 2008.

53.  The fact that Deputy Judge Carlson made further rulings in the 2008 Action after 4 February 2008 is irrelevant[22].  They do not alter in any material way the determination made on 4 February 2008.

54.  The judge was entirely correct in holding that the Consent Judgment “merely quantified and liquidated the accrued losses of Yanfull”[23]. The relevant parts of the judgment of McHugh NPJ in Kensland Realty Ltd v Tai, Tang & Chong (2008) 11 HKCFAR 237 at §§157 and 160 as quoted by the judge in §47 provide a lucid explanation.  Rather than quoting these passages verbatim again, I will paraphrase what McHugh NPJ said with regard to the present situation in this way.

55.  The time for bringing the claims in abuse of civil procedure and malicious prosecution runs from the moment Ooi (who misused IC and Qualicare as façade for his wrongdoing and was therefore personally liable) incurred liability to pay damages to Yanfull.  That moment occurred on 4 February 2008 when the 2008 Action was discontinued and an inquiry of damages was ordered.  That the loss and damage could not be quantified, or was not known, at that moment is not relevant.  Even though the quantification of liability had to await the Consent Judgment, the liability and its quantification were fixed as from the earlier date when liability was incurred by Ooi.  The Consent Judgment determined the rights and liabilities of Yanfull as at the date when the facts giving rise to those rights and liabilities arose, namely, that the abusive litigation in the 2008 Action was discontinued and an order for inquiry of damages made.  The liability incurred by Ooi to Yanfull on these claims did not arise on the entering of the Consent Judgment, which merely determined pre-existing rights and liabilities.

56.  Damage flowed from Ooi’s wrongful act in causing his companies to obtain the injunctions and bringing the 2008 Action and the cause of action was complete when that action was discontinued and the order for inquiry of damages made.  Mr Barlow was constrained to accept that Yanfull’s losses began immediately following the grant of the Mareva injunctions even though he also asserted there was no evidence before the judge that Yanfull suffered loss as a result of the Mareva injunctions.  Whether there was such evidence is not material for present purpose.  What matters is that it is Yanfull’s case as pleaded that it had suffered loss as a result of the injunctions from 31 December 2007 to 4 February 2008.  That the damage flowing from the wrongful act increased as time passed and was eventually quantified at HK$40 million by the Consent Judgment does not affect the position when time was to run for the purpose of limitation.  Nor is the legal position affected by how loss and damage was pleaded in §50 of the statement of claim, see §158 of Kensland Realty.

57.  The contention that Yanfull’s causes of action arising from the maliciously instituted proceedings had merged within and were extinguished by the Consent Judgment is quite simply wrong.  The Consent Judgment merely quantified the loss and damage suffered by Yanfull arising from the maliciously instituted proceedings in the 2008 Action; it has not extinguished Yanfull’s causes of action in abuse of civil procedure and malicious prosecution at all.  The extracts cited in Spencer Bower and Handley on Res Judicata have no bearing to the present situation.  They are concerned with the principle that a person in whose favour a court has pronounced a final judgment is precluded from recovering before another competent tribunal in the same jurisdiction a second judgment against the same party on the same cause of action.  One of the bases on which this plea of former recovery is justified is the merger rule, that the cause of action for which judgment is given merges in the judgment and ceases to exist and cannot support a second action.  There is no merger here.  The order in February 2008 gave rise to liability arising from the maliciously instituted proceedings, the Consent Judgment in April 2009 quantified that liability.

58.  The submission that Yanfull’s causes of action could not accrue until its discovery of Ooi’s deceit of the matters pleaded in §§36, 40 to 45 of the statement of claim is untenable.  These matters related to subsequent measures taken by Ooi in an attempt to avoid liability to compensate Yanfull arising from the undertaking in damages and as subsequently quantified in the Consent Judgment.  They are not part of the essential ingredients in the causes of action in abuse of the civil procedure and malicious prosecution.  As explained earlier, the gravamen of these claims in tort lay in the bringing of malicious proceedings, which were terminated in Yanfull’s favour when they were discontinued on 4 February 2008.  Yanfull was fully aware that Ooi instigated the 2008 Action and the Mareva injunctions “as a ploy … to gain control of Golden Plus” and protested at the abuses of the process of the court in the affirmation[24] filed in support of its application on 15 January 2008 to discharge the Mareva injunctions, to strike out the claim and dismiss the 2008 Action.  The judge was plainly right in holding that “there was nothing material on the accrual of the cause of action that was not known to Yanfull on or before 4 February 2008” and that sections 26 and 31 of the Limitation Ordinance are of no assistance to Yanfull.

59.  This ground of appeal fails.

If there was serious question to be tried for the claim in deceit

(a) The Undertakings Representations

60.  The judge held there was no serious question to be tried for the claim that the Undertakings Representations made by Ooi are false and Yanfull had relied on them and suffered loss.  His reasons are that they were not representations made to Yanfull and Yanfull had not relied on them either.  The judge noted the Undertakings Representations were made to the court and not to Yanfull. Yanfull had also disagreed with them and disputed them.  It had produced the share charges executed by IC and Qualicare to show that the representations were false.  It also sought and was given an order of fortification of undertaking by Reyes J on 18 January 2008 requiring IC and Qualicare to pay HK$8 million into court on 31 January 2008 to fortify their undertakings[25].

61.  Mr Barlow contended that the judge was wrong in the above holdings and made these submissions:

(1)   The Undertakings Representations, contained in Ooi’s 1^st affirmation in support of the Mareva injunctions, were made to the court and to the other parties to the 2008 Action, including Yanfull. Ooi undertook to the court to serve his affirmation on Yanfull and had served it on Yanfull.  Chitty on Contracts (32^nd ed), vol 1 at §7-031 was cited in support.

(2)   There is no inconsistency between Yanfull’s exercise of its legal right to challenge Ooi’s evidence in his 1^st affirmation and Yanfull’s reliance on the Undertakings Representations.

(3)   Yanfull’s reliance on the Undertakings Representations was as pleaded in §§27 and 49 of the statement of claim.  Whether Yanfull had relied on the representations is a question of fact to be investigated and resolved at trial.

(4)   For the purpose of striking out on the ground that a claim discloses no reasonable cause of action, no evidence is admissible and the court must examine the merits of the claim upon the pleadings alone.  The statement of claim disclosed a reasonable cause of action in deceit arising from the Undertakings Representations.

(5)   Whatever the precise juridical nature of Yanfull’s entitlements to enforce the cross-undertaking in damages in the Mareva injunctions, those entitlements merged within the Consent Judgment.

(6)   Ooi is answerable for the Undertakings Representations he made in his 1^st affirmation notwithstanding that he was not a party in the 2008 Action.

62.  In my view, the claim in deceit founded on the Undertakings Representations is plainly bad, for two main reasons.

63.  The first main reason is that given by the judge and as submitted by Mr Lin.  As a matter of substantive law, an undertaking in damages does not give rise to a cause of action and no action, set-off or counterclaim can be founded on it.  This is well established by authorities, see Wingames Investments Ltd at §§22 to 29 and the cases cited by Fok JA (as he then was), most notably CT Bowring & Co (Insurance) Ltd v Corsi & Partners Ltd [1994] BCC 713 at 729A to B, 729H to 730A and 731B to D.

64.  The reason lies in the special feature of a cross-undertaking in damages given by a party in applying for an injunction.  The undertaking is given to the court, not to any opposite party.  In relation to such undertaking, the court acts or declines to act in its own right and exercises a broad equitable jurisdiction, “not merely as an umpire in an adversarial process between the parties, though obviously having full regard to the position of the parties and to the interests of justice”  (CT Bowring, at 731C, per Sir Michael Kerr). As stated by Millett LJ (as he then was) at 729A to B:

“Although the defendant is claiming monetary compensation for loss which it alleges it has sustained as a result of the injunction, it has no independent cause of action to recover such loss. It cannot bring separate proceedings, whether by writ or counterclaim in the existing proceedings. Its claim arises out of and is wholly dependent upon the plaintiff’s cross-undertaking. Its only remedy is to enforce the cross-undertaking by applying under the liberty to apply in the proceedings in which the cross-undertaking was given.”

And at 729H to 730A:

“… the court’s power to order an inquiry as to damages is discretionary. … The source of the court’s discretion to refuse to order an inquiry is its inherent jurisdiction to release or vary an undertaking which has been given it.”

65.  As submitted by Mr Lin, it is ultimately for the court to decide whether or not such an undertaking is to be enforced and how it is to be enforced.  Yanfull could not have enforced the undertaking as of right by disregarding the court’s discretion and further transform it into a cause of action to bring new proceedings.

66.  The second main reason this claim is bad is because of the witness immunity rule.  This was not raised in the court below but we drew it to the attention of the parties and referred them to Sum Cheung Wai v Tsui Hin Yuet [2016] 4 HKLRD 742 and the relevant parts in the judgment of Lam VP, in which this rule was discussed at §§23, 24, 42 to 47, 54 and 55.

67.  The witness immunity rule protects witnesses in respect of evidence given by them in the course of legal proceedings, in the interests of the administration of justice.  Where this rule applies, no civil action may be brought against the witness in respect of the evidence given, even if the evidence is false and malicious.  The absolute immunity rule is “designed to encourage freedom of speech and communication in judicial proceedings by relieving persons who take part in the judicial process from the fear of being sued for something they say” (Taylor v Director of the Serious Fraud Office [1999] 2 AC 177 at 208, per Lord Hoffmann). This rule however has no application to the tort of malicious prosecution, the rationale being that in respect of malicious prosecution, the action “is not brought in respect of evidence given in court but is brought in respect of an alleged abuse of process of court” (Roy v Prior [1971] AC 470 at 477 to 478, per Lord Morris of Borth-y-Gest; see also Martin v Watson [1996] 1 AC 74 at 88, cited in Sum Cheung Wai at §54).

68.  In this instance, the Undertakings Representations, as pleaded in §§13 and 14 of the statement of claim, were contained in Ooi’s 1^st affirmation in the 2008 Action[26].  This was evidence given by a witness in legal proceedings and the witness immunity rule applies.  The result is as stated in the extracts below, cited in Darker v Chief Constable of West Midlands [2001] 1 AC 435 at 465 D to E and 456G to H and Sum Cheung Wai at §§44, 45 and 24:

“But it does not matter whether the action is framed as an action for defamation or as an action analogous to an action for malicious prosecution or for deceit or, as in this instance, for combining or conspiring together for the purpose of injuring another; the rule of law is that no action lies against witnesses in respect of evidence prepared (Watson v M‘Ewan [1905] AC 480), given, adduced or procured by them in the course of legal proceedings. The law protects witnesses and others, not for their benefit, but for a higher interest, namely, the advancement of public justice.” (Cabassi v Vila (1940) 64 CLR 130 at 141, per Starke J)

“Whatever form of action is sought to be derived from what was said or done in the course of judicial proceedings must suffer the same fate of being barred by the rule which protects witnesses in their evidence before the court and in the preparation of the evidence which is to be so given.” (Marrinan v Vibart [1963] 1 QB 528 at 535, per Sellers LJ)

“If proceedings are commenced, and if the events complained of either lead to those proceedings, so that the court process is abused, then it is appropriate for the tort of malicious prosecution, or a related tort based on malicious abuse of the process of the court, to be available so as to afford the claimant a remedy, and it is justifiable that such a claim should not be defeated or precluded by the witness immunity rule.” (Crawford v Jenkins [2016] QB 231 at §56, per Sir Timothy Lloyd)

69.  The claim in deceit against Ooi in respect of his false evidence in the Undertakings Representations is wholly misconceived.  If it is alleged that in giving false evidence the court process was abused, the proper claims to be brought are malicious prosecution and abuse of the civil procedure.

70.  It is unnecessary to deal with Mr Barlow’s other arguments mentioned above.  The judge had been right to conclude that there was no serious question to be tried for the claim in deceit based on the Undertakings Representations.

(b) The Consent Judgment Representations

71.  For the Consent Judgment Representations, the judge held that even if Yanfull should have relied on them in entering into the Consent Judgment, the fact that it turned out to be an empty judgment was not because of Yanfull’s reliance on the representations, but because of the impecuniosity of IC and Qualicare.  He reasoned that if Yanfull should have chosen not to rely on those representations, it would have gone ahead with the trial of the inquiry in damages.  It might have obtained more or less than the HK$40 million in the Consent Judgment, but it would still not be able to obtain any payment as neither IC nor Qualicare had any money to pay.  Hence Yanfull suffered in not being paid not because of the Consent Judgment Representations or Yanfull’s reliance on them, but because of the impecuniosity of IC and Qualicare.  He would have struck out this claim even if he were to allow the action to proceed[27].

72.  Mr Barlow made these arguments:

(1)   It is Yanfull’s case that the Consent Judgment Representations were false because Ooi never had any intention to perform the contract embodied in the Consent Judgment.  In reliance on the representations, Yanfull did not negotiate for security or take other steps to secure the discharge of the obligations of IC and Qualicare under the Consent Judgment.  Had Ooi disclosed that IC and Qualicare might be unable to pay, Yanfull would have insisted on security to be provided, or agreed to settle for a lower amount but with additional security.  These considerations are separate and distinct from the impecuniosity of IC and Qualicare.

(2)   There was no evidence before the judge that IC and Qualicare were impecunious at the date of the Consent Judgment.

(3)   The judge’s grounds for striking out this claim are fact sensitive.  It was not plain and obvious that the claim was without merits and the claim should have been allowed to go to trial.

73.  I agree with Mr Lin there is no causal link between the Consent Judgment Representations and Yanfull’s alleged loss.  As pleaded in the statement of claim, Ooi had caused the statutory process to wind up IC to be commenced before the Consent Judgment was entered.  And as the judge had reasoned, if Yanfull had gone ahead with the trial of the inquiry in damages, it would still not be able to obtain any payment as neither IC nor Qualicare had any money to pay.  The Consent Judgment Representations could not have caused any additional loss and damage to Yanfull.  Whatever security Yanfull might or might not have sought from IC and Qualicare would be illusory. I note that Yanfull’s application to seek additional security pending the inquiry of damages was dismissed by Deputy Judge Carlson on 7 August 2008, having been told by IC and Qualicare that they had no assets in Hong Kong other than just over HK$2 million already paid into court and having taken a realistic view that it was very unlikely there ever would be assets in Hong Kong beyond the amount paid into court.

74.  I agree with the judge there was no serious question to be tried in the claim in deceit based on the Consent Judgment Representations.

If the action should be stayed for forum non conveniens

75.   Having reached the conclusion that there were no serious questions to be tried in the claims in deceit and that the claims in malicious prosecution and abuse of the civil procedure should be struck out as time barred, the ex parte order of the Master granting leave to issue and serve the concurrent writ out of jurisdiction must be set aside.  It is not strictly necessary to consider whether all further proceedings in this action should be stayed on the ground of forum non conveniens.

76.  As arguments on this have been advanced, I propose to deal with them as obiter.

77.  The judge dealt with this shortly, in light of his conclusions.  He took the view that Malaysia is the appropriate forum, as Ooi is a resident there, and the merits of the 2008 Action and/or the alleged ulterior motive is best canvassed there.  If he had not struck out the action, he would have stayed the proceedings in favour of the Malaysian court[28].

78.  Mr Barlow submitted the burden is on Ooi to show that the court should exercise its discretion to grant a stay, and this required him to show not merely Hong Kong is not the natural or appropriate forum for the trial of this action, but that there is another available forum which is “clearly or distinctly more appropriate” than Hong Kong.  The emphasis is on “appropriate” rather than “convenient” because it is not simply a matter of practical convenience.  The purpose is to identify the forum “with which the action has the most real and substantial connection”, see Rambas Marketing Co LLC v Chow Kam Fai David [2001] 3 HKC 250 at 254A to C.

79.  He contended that Ooi has not adduced any or any cogent evidence to demonstrate that the Malaysian court is clearly or distinctly a more appropriate forum.

80.  He pointed out that the torts pleaded were all committed in Hong Kong: the 2008 Action was brought in Hong Kong and the Undertakings Representation and the Consent Judgment Representation were made here.  The torts are therefore governed by Hong Kong law.  Even if one or more of the acts relevant to the torts were not committed in Hong Kong, applying the “substance” test, all three causes of action arose in Hong Kong, see Shanghai Reeferco Container Co Ltd v Waggonbau Elze GmbH [2005] 2 HKLRD 711 at §§41 and 42.

81.  He submitted that the jurisdiction in which a tort has been committed is prima facie the natural forum for the determination of the dispute (China North Industries Investment Ltd v Chum [2010] 5 HKLRD 1 at §§88 to 95).  The Hong Kong court is in a better position to analyse the law on the tort of malicious prosecution committed in Hong Kong.  Yanfull is a Hong Kong company.  The judge was wrong to take into account the domicile of Golden Plus, IC and Qualicare, as these companies are not parties to the action.  Ooi had travelled to Hong Kong to give evidence for the 2008 Action.  Even if Yanfull’s loss was sustained in Shanghai (which is denied), neither party suggested that Shanghai is an appropriate forum.  The applicable law on Yanfull’s causes of action remains Hong Kong law.

82.  I agree with Mr Lin the burden is not on Ooi to show there is another available forum which is “clearly or distinctly more appropriate” than Hong Kong.  Where a plaintiff institutes proceedings in Hong Kong not as of right but has to seek leave to serve the defendant out of the jurisdiction under Order 11, the burden will not be on the defendant to demonstrate there is an alternative forum which ought to entertain the action, but the legal burden is on the plaintiff all along to show that Hong Kong is clearly the appropriate forum for the trial of the action.  The burden is the obverse of that applicable where a stay is sought of proceedings brought in Hong Kong as of right (Noble Power Investments Ltd v Nissei Stomach Tokyo Co Ltd [2008] 5 HKLRD 631 at §21(2)).  So unless the plaintiff satisfies the court that Hong Kong is clearly the more appropriate forum for the trial of the action than any available alternatives suggested by the defendant, the court’s jurisdiction under Order 11 will not be exercised (Dong Shing F&T Co Ltd v Hanmec Co Ltd at §48).

83.  I agree also with Mr Lin that Yanfull has failed to discharge the burden of showing that Hong Kong is clearly the appropriate forum for the trial of this action.  The place of commission of the tort is not determinative, it is no more than a convenient starting point or prima facie position (The Peng Yan [2009] 1 HKLRD 144 at §28).  The companies heavily involved in these proceedings – Golden Plus, IC and Qualicare – are Malaysian companies.  Their business affairs were governed by the company law of Malaysia. Ooi is a resident there.  Mr Lin also pointed to the fact that Yanfull issued the KL Suit in Malaysia against Ooi and other directors of IC and Qualicare as a factor that militates strongly against Hong Kong being clearly the more appropriate forum.

84.  There is no valid basis to interfere with the discretion that the judge would have exercised in granting a stay of proceedings in favour of Malaysia.

The respondent’s notice

85.  Mr Lin indicated at the hearing that the respondent’s notice would not be pursued if the appeal is not successful.  There is therefore no need to deal with this.

Conclusion and costs

86.  I would dismiss Yanfull’s appeal.  As costs should follow the event, I would make an order nisi that Yanfull is to pay Ooi’s costs of this appeal, with a certificate for two counsel.

Hon Macrae JA:

87.  I agree with the judgment of Kwan JA.