SECURITIES AND FUTURES COMMISSION v. ISIDOR SUBOTIC AND OTHERS

CACV 510/2021
CAMP 530/2021
(Heard Together)

[2022] HKCA 1909

CACV 510/2021

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 510 OF 2021

(ON APPEAL FROM HCA NO 1277 OF 2019)

__________________________________

__________________________

AND

CAMP 530/2021

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 530 OF 2021

(ON AN INTENDED APPEAL FROM HCA NO 1277 OF 2019)

________________________

________________________

(Heard Together)

___________________

J U D G M E N T

___________________

Hon Yuen JA (giving the Judgment of the Court):

Background

1.  In the first quarter of 2016, a company called Ching Lee Holdings Ltd (“the Company”) proposed a listing on the Growth Enterprise Market of the Hong Kong Stock Exchange by the placement of 300,000,000 shares in an initial public offering.  Trading commenced on 29 March 2016.

2.1.  The Securities and Futures Commission (“SFC”) alleges that from February to September 2016, a number of individuals and companies (“the Syndicate”) acted together in a scheme (“the Scheme”) to carry out false trading in the shares, and/or to create or maintain an artificial price for them, in contravention of s.274(1) and s.274 (3)¹ respectively of the Securities and Futures Ordinance Cap.571 (“SFO” or “the Ordinance”).

2.2.  The SFC alleges that the Syndicate or their nominees

-  acquired placement shares in the Company;

-  between March and September 2016, matched “buy” and “sell” trades of the shares so as to create a false appearance of wide investor interest and to maintain artificially inflated prices;

-  between July and September 2016, obtained loans from two lenders (“the lenders”) using, as security, shares in the Company which had been trading at inflated prices;

-  in September 2016, disposed of some of the shares they controlled at a profit, causing a drop in the share price of 90%;

-  transferred some of the proceeds of sale out of Hong Kong; and

-  defaulted in repayment of the loans.

2.3.  The SFC says that as a result of the Scheme,

-  the price of the shares went from the placing price of $0.283 on 29 March 2016 to $5.05 - $5.98 (between 12 May and 2 September) and then fell to $0.45 on 7 September 2016;

-  the Syndicate obtained profits estimated at more than $124 million, and losses estimated at more than $101 million were suffered by 896 market investors (“the market investors”) and the lenders.

The Action

3.  In HCA1277/2019 (“the Action”)², the SFC brought proceedings against 18 defendants³ who are alleged to be members of the Syndicate, asserting that they had contravened the SFO⁴.  The proceedings were brought under s.213 SFO.

Section 213 SFO

4.  The material parts of s.213 SFO for the purposes of this appeal are summarized below.

ss.(1)

Where:

(a)  a person “has contravened” a provision of the Ordinance⁵, or has aided, or induced, or has been involved, or conspired with others in doing such acts (in short, “contravened”), or

(b)  it “appears” to the SFC that a contravention has occurred, is occurring, or will occur in the past/present/future,

the Court of First Instance (“CFI”), on the SFC’s application, may, subject to ss.(4), make any order set out in ss.(2).

ss.(2)

(2)  The orders are:

(a)  an injunction against the occurrence (or continued occurrence) of any contravention referred to in ss.(1)(a);

(b)  where a person has been/is/ will be involved in a contravention referred to in ss.(1)(a), an order that he take such steps as the CFI may direct, including restoration of the parties to any transaction to the pre-transaction position;

(c)  an injunction against (among other things) disposing of, or dealing with any property;

(d)  appointment of an administrator of a person’s property;

(e)  a declaration that a contract relating to securities to be void or voidable to any extent;

(f)  an order directing a person to do or refrain from doing an act to secure compliance with any other order made under this section; 

(g)  any order ancillary to the above.

ss.(3A)

If the contravention is by an open-ended fund company or persons connected with it, the CFI may also on the SFC’s application, make any order under ss.(3C).

ss.(4)

The CFI shall, before making an order under ss.(1) or ss.(3A), satisfy itself, so far as it can reasonably do so, that it is desirable to do so, and that the order will not unfairly prejudice any person.

ss.(6)

The CFI may grant an interim order pending determination of an application under ss.(1) or ss.(3A).

ss.(7)

The CFI may make an order under ss.(1) or ss.(3A) irrespective of whether the subject of the order intends to commit a contravention again, or has previously done or not done so, and even though there may be no imminent danger of damage to anyone if the order is not made.

ss.(8)

Where the CFI has power to make an order against a person under ss.(1) or ss.(3A), it may, in addition to or in substitution for such order, make an order requiring the person to pay damages to “any other person”.

ss.(9)

The CFI may reverse, vary, discharge or suspend an order made under ss.(1), ss.(3A) or ss.(6).

Claims/relief

5.  The following, in summary, were sought in the RASOC:

(1)  a declaration that the defendants had contravened s.274 and/or s.295;

(2)  a restoration order under s.213(2)(b) to restore the market investors and the lenders to the positions in which they were in before the impugned transactions;

(3)  an order under s.213(8) requiring the defendants to pay damages to the market investors and the lenders;

(4)  an order under s.213(2)(a), (f) and/or (g) to restrain the defendants from false trading and/or creating or maintaining an artificially inflated price for such dealings;

(5)  a Mareva injunction against assets of the defendants;

(6)  an order under s.213(2)(d) to appoint an administrator to receive the frozen assets of the defendants.

The Eastmore defendants

6.  The matters before this court involve only the 2^nd, 3^rd, 13^th, 14^th, 18^th and 19^th defendants (“the Eastmore defendants”).  The 2^nd defendant is a national of Canada, and the 3^rd defendant is a national of the United States.  The 13^th defendant is incorporated in the Cayman Islands, the 14^th and 19^th defendants are incorporated in Delaware, USA, and the 18^th defendant is incorporated in the Republic of Seychelles.  It was therefore necessary to serve them out of the jurisdiction.

Affirmation in support of application for service out       

7.  On 11 July 2019, Ma Wing Shan, a Senior Manager in the Enforcement Division of the SFC, made an affirmation⁶ of 100 pages in support of its application for service out on the Eastmore defendants.  In the affirmation, Ma stated on the basis of the exhibited documents that there was strong evidence to show that each of the defendants “has contravened”⁷ s.274 and/or s.295⁸.

DHCJ Liu’s Order

8.  On 15 July 2019, the SFC applied ex parte before DHCJ Liu (“the deputy judge”) for leave to serve the Eastmore defendants out of the jurisdiction under Order 11 rule 1(1)(f) (“Gateway F”⁹) and rule 1(1)(b) (“Gateway B”¹⁰) of the Rules of the High Court (“RHC”).  The deputy judge gave an order:

-  restraining some of the Eastmore defendants¹¹ from removing assets within Hong Kong, and disposing of, or dealing with, assets whether within or outside Hong Kong, to the value of $124,880,056; and

-  giving leave to issue and serve a concurrent writ against all the Eastmore defendants out of the jurisdiction.

Gateway F

9.1.  This gateway under Order 11 rule 1 provides that service of a writ out of the jurisdiction is permissible with the leave of the Court if in the action begun by the writ –

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

Gateway B

9.2.  Gateway B provides that service of a writ out of the jurisdiction is permissible with the leave of the Court if in the action begun by the writ –

“(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)”.

Subsequent applications to the Court

10.1.  There were a number of subsequent applications to the Court, including the following.

(1)  On 1 November 2019, the Eastmore defendants issued a summons under Order 12 rule 8 RHC, primarily for a declaration that the court had no jurisdiction over them in respect of the subject matter of the claims or relief in the Action, an order that the leave given by the deputy judge be set aside, and an order that the interim injunction against the 2^nd, 13^th, 14^th and 19^th defendants be discharged (“the Set Aside application”).

(2)  On 29 May 2020, the SFC issued a summons for an order that, in the event that the leave given by the deputy judge is set aside, fresh leave be given to serve the Eastmore defendants out of the jurisdiction under rule 1(1)(c) (“Gateway C”¹²) (“the Gateway C application”).

Gateway C

10.2.  Gateway C provides that service out of the jurisdiction is permissible with the leave of the Court if in the action begun by the writ –

“(c) the claim is brought against a person duly served within or out of the jurisdiction and a person out of the jurisdiction is a necessary or proper party thereto”.

The Main Decision

11.1.  The Set Aside application and the Gateway C application, together with another application which is immaterial to this appeal, were heard on 19 March 2021 by Au-Yeung J (“the judge”).

11.2.  On 23 July 2021, the judge gave a detailed Decision (“the Main Decision”)¹³ holding that the SFC had demonstrated a good arguable case for service out of the jurisdiction on the Eastmore defendants under both Gateways F and B. Accordingly, she dismissed the Set Aside application.

11.3.  In those circumstances, it was not necessary for the judge to consider the Gateway C application.  Nevertheless, the judge held that she would not have exercised her discretion to give leave, as the SFC had not applied to extend the validity of the writ (which had not expired at the time when the Gateway C application was filed, but had expired by the time of the hearing), and had not properly supported it with affidavit evidence.

Eastmore defendants’ application to CFI for leave to appeal

12.1.  On 6 August 2021, the Eastmore defendants issued a summons in the Court of First Instance for leave to appeal the Main Decision, and for a stay of proceedings pending determination of the appeal.

12.2.  A draft notice of appeal containing 7 grounds was attached.  Grounds (2) to (6) dealt with Gateway F.  Ground (7) dealt with Gateway B.  Ground (8) was a “wrap-up” ground for the contention that no gateway at all is available for regulatory enforcement claims under the SFO.

The judge’s Leave to Appeal Decision

13.  After written submissions were filed by both sides, the judge gave a decision on 8 November 2021 (“the Leave to Appeal Decision”) in which she gave leave to appeal only for Grounds (2) - (5), i.e. in relation to Gateway F.  The judge declined to grant a stay.

Eastmore defendants’ appeal in CACV510/2021

14.1.  Pursuant to the leave given by the judge, on 17 November 2021, a Notice of Appeal was filed in CACV510/2021.

14.2.  We note that the text in some of the grounds in the Notice of Appeal are different from those for which the judge gave leave.   In Grounds (2) and (3) of the Notice of Appeal, the word “Applications” has been substituted for the word “Claims”. Presumably, the substituted word was thought to be more consistent with the Eastmore defendants’ argument that the SFC can only make “applications” under s.213 SFO and does not have “claims” as such.  Nevertheless, any changes made to grounds of appeal for which a first instance judge has given leave should have been made the subject of amendments, and should not have been “slipped in” without prior notice to the other party and the court.

14.3.  On 1 December 2021, the SFC filed a Respondent’s Notice to affirm the Main Decision on the ground that once leave is obtained under Gateway B, such leave is for the entire action regardless of whether it also obtained leave under Gateway F.

Eastmore defendants’ renewed application for leave to appeal in CAMP 530/2021

15.  On 22 November 2021, the Eastmore defendants filed a summons in this court in CAMP530/2021 for leave to appeal on the grounds rejected by the judge.

Directions

16.  On 24 February 2022, the court gave directions for the hearing of CACV510 and a “rolled-up” hearing of the application for leave to appeal in CAMP530.

SFC’s draft application

17.  Before the hearing, on 10 June 2022 the court received a copy of a letter from the SFC to the solicitors for the Eastmore defendants indicating that in the event that the appeal is allowed, the SFC would apply for a new injunction against the 2^nd, 3th, 14^th and 19^th defendants, and suggesting certain directions.  The correspondence was accompanied by a draft summons applying for leave to serve out under Gateway C.

Issues before this court 

18.  In short, the issues before this court were:

(a)  was the judge wrong to give leave to serve out of the jurisdiction under Gateway F?

(b)  was the judge wrong to give leave to serve out under Gateway B?

If the Eastmore defendants succeed on issues (a) and (b), then this court would have to consider whether to give leave to the SFC to serve out under Gateway C.

Discussion

Legal principles to be applied in applications for service out of the jurisdiction

19.1.  In Fong Chak Kwan v Ascentic Ltd and others ¹⁴, one of the issues before the Court of Final Appeal (“CFA”) was whether the critical consideration in interpreting Gateway F was:

-  (as the respondent contended) the natural and ordinary meaning, or

-  (as the appellant contended) its context and purpose, the purpose being to identify a sufficient connection with Hong Kong in order to justify the exercise of extra-territorial jurisdiction [§71].

19.2.  Lord Collins (with whom the rest of the court agreed) held that the gateways should be construed in their natural and ordinary meaning.  He held:

-  the jurisdictional test comprises a number of elements, compliance with a gateway being only one of the elements [§112];

-  Order 11 rule 1(1) does not reveal a legislative purpose that every gateway must be construed to require a real connection with Hong Kong [§109] eg. in Gateway C, as well as Gateways A, D and M, the link may be tenuous [§§105, 110];

-  the other elements of the jurisdictional test include the question of discretion [§106], which is not restricted exclusively or mainly to forum conveniens [§111].

19.3.  Thus, when the court construes the gateways, it should not superimpose an additional requirement of a “real” or “substantial” connection between the foreign defendant and Hong Kong.  It will give permission to serve out of the jurisdiction if there is a good arguable case that a claim passes through a gateway (within both the letter and the spirit [§117]) and it is shown that Hong Kong is the proper place to bring the claim [§112].  As for the merits, the court would have to be satisfied that there is a serious issue to be tried.  This is the approach to be applied to all applications for service out of the jurisdiction.

Power to serve proceedings under s.213 out of the jurisdiction

20.1.  We will deal first with the overarching argument¹⁵ of Mr Alder, counsel for the Eastmore defendants, that there is no power under existing legislation to effect service out of the jurisdiction of an originating process issued pursuant to section 213 SFO.

20.2.  This argument is based on a passage in the judgment of Kwan J (as she then was) in SFC v C¹⁶(the title of which case was changed to Kayden in the CFA¹⁷) where she said:

“55. There is an apparent lacuna in the existing legislation to provide for a power to effect service out of jurisdiction of an originating process issued pursuant to section 213 of Cap. 571. There is no separate provision in the [RHC] for this, unlike the provision made for an originating summons under the Arbitration Ordinance Cap.341 in Order 73 rule 7".

20.3.  In Kayden, the proceedings, based on s.213, were commenced by the SFC by way of originating summons (“OS”).  There were four defendants, Kayden (a BVI company) being the 4^th defendant.  Kwan J was persuaded to give an ex parte order for service out on Kayden under Gateway B, but later discharged the order at the inter partes stage, not only for material non-disclosure, but also on the ground that the case was outside the scope of Gateway B.

20.4.  The Court of Appeal¹⁸ allowed the appeal from Kwan J on new grounds.  The matter then went to the CFA which overturned the Court of Appeal on the new grounds and restored Kwan J’s order.

20.5.  However, the following aspects of that case (set out in the CFA Judgment) are relevant to the proper understanding of §55 in Kwan J’s judgment on which Mr Alder relies:

-  the SFC had issued the OS against four defendants (Kayden was a BVI trust company with no assets in Hong Kong [§28]); as far as the other three defendants were concerned, two had not been properly served, and Kayden was not a necessary or proper party to the claim against the remaining defendant [§43];

-  the OS was based, not on a case of contravention under s.213(1)(a) SFO, but solely on the “appearance” or “suspicion” basis under s.213(1)(b) that the defendants had been involved in insider dealing [§34];

-  most importantly, the relief sought in the OS concerned the freezing of assets and disclosure only (which were only interim orders); the SFC did not suggest that it was seeking to prove a contravention of the SFO [§26]; thus the OS did not seek any redress for any wrongdoing within the jurisdiction, and it did not contain any claim for final or substantive relief [§§50, 52 & 54]; as explained by the Privy Council in Mercedes Benz v Leiduck¹⁹, that entirely undermined the SFC’s application for leave to serve out under Gateway B [§27];

-  although s.213(2)(b) was listed in the margin of the OS, Kwan J had rejected the SFC’s argument that a claim for restoration had thereby been included; the CFA assumed (without deciding) that it was possible to institute a claim under ss.(2)(b) as a claim for final or substantive relief, but such a case had not been asserted on the facts before the judge [§§34, 41];

-  when the case reached the CFA, new leading counsel instructed by the SFC sought to “reconstitute” its case by asserting that there had been actual contraventions of s.291 SFO, and purporting to seek final relief by adding claims for restoration under ss.(2)(b), an account of profits, payment of money due, etc [§72]; however, the CFA held that it was impermissible to do so at that late stage [§74].  The CFA expressly “kept open” the question whether final relief can validly be sought under s.213 as the question “has not been properly brought before the court”.

21.1.  It would be noted from the above that by “keeping open” the question referred to above, the CFA did not adopt Kwan J’s view in §55 (if that view is construed broadly to mean that there was a lacuna in the legislation to effect service out of all proceedings based on s.213 SFO, whatever the relief - interim or final - sought in those proceedings).  The CFA expressly said that Kayden “was not the occasion for pronouncing on the point raised by Lord Pannick QC for the [SFC] on the true construction and therefore scope of s.213 of the [SFO] ...” [§2]²⁰.

21.2.  In any event, we do not consider that §55 of Kwan J’s judgment in Kayden should be construed so broadly.  Kwan J was faced with a case where the SFC only sought interim relief in the OS, with the result that, it was simply not permissible for the court to give leave to serve out under Gateway B (Mercedes Benz v Leiduck).  At §63, the judge said “I reach my decision with regret that this court cannot properly give leave to serve the [OS] on the 1^st, 3^rd and 4^th defendants out of the jurisdiction under [Gateway B], but I have no discretion in the matter” [§63].  It was in the context of the interim nature of the relief sought that she drew a comparison with the Arbitration Ordinance, for which Order 73 r.7 RHC provides:

“(3) Service out of the jurisdiction of an [OS] or summons by which an application for an interim measure under section 45(2) of the Arbitration Ordinance (Cap.609) or for an order under section 60(1) of that Ordinance is made is permissible with the leave of the Court”. (Emphasis added).

21.3.  So understood, it is clear that Kwan J was not holding that under no circumstances could proceedings under s.213 SFO be served out of the jurisdiction, and §55 of her judgment should be understood to refer to cases where interim relief only was sought.  In the present case, the RASOC clearly contains claims for final and substantive relief.

Leave to serve out under Gateway F

22.  Gateway F applies to a claim which is founded on a tort.

23.1.  The Eastmore defendants do not dispute the judge’s summary²¹ of the characteristics of torts, including statutory torts, of which the following are material in the present case:

(1)  There is no universal definition of a tort.

(2)  A claim in tort can be created by common law or statute.  For those created by statute, it is not necessary for the statutory cause of action to be analogous to a pre-existing common law cause of action in tort: Lew Footwear²².

(3)  ...

(4)  The presence of a ‘duty’ towards a person generally or a class of persons is an element of tort: Prentice.

(5)  If the statute provides that a person ‘shall not ... engage in [certain types of conduct]’, that is prohibiting certain conduct, breach of which may result in liability in tort: Prentice.

(6)  ...

(7)  A claim in tort is redressable by unliquidated damages (although not every statute which creates a liability to pay damages creates a tort): Prentice §§18 & 27.

(8)  The mere fact that other discretionary remedies (eg injunction or declaration) may be available should not alter the proper characterization of a cause of action as a tort: Lew Footwear.  (Emphasis added)

23.2.  The elements emphasized above which are the primary ingredients of a tort are found in s.213.  In particular, ss.(8) expressly provides for a claim for unliquidated damages.

24.1.  The nub of the Eastmore defendants’ argument is that s.213 SFO does not empower the SFC, which is a regulator and not a market investor, to make a claim founded on a tort. We do not agree.  First, purely as a matter of construction, ss.(1) stipulates that the SFC is the only entity that is empowered to make an application under s.213.  And yet where the court has power to make an order against a person under ss.(1) or ss.(3A), the court expressly has power under ss.(8) to order²³ damages to be paid to “any other person”.  The wording of s.213 as a whole makes it clear that the “other person” does not refer to the SFC.  Since that “other person” cannot claim damages by making an application under s.213 SFO himself, it follows that such a claim could only be made through the SFC, otherwise ss.(8) would be rendered completely meaningless.   Accordingly, s.213 clearly entitles the SFC to make a claim for ss.(8) damages on behalf of the “other person(s)”, being in the present case, the market investors and the lenders.

24.2.  Further, in Tiger Asia, the Court of Appeal held that there may be circumstances when proceedings may be taken by the SFC for the benefit of investors, citing as an example, executory contracts which the court may declare void under ss.(2)(e)²⁴.  The Court of Appeal and the CFA in that case rejected the arguments that the court had jurisdiction under s.213 only where the defendant has been found by a criminal court or the Market Misconduct Tribunal to have contravened provisions in the SFO.

24.3.  Lord Hoffmann held:

“The answer to these arguments is that the remedies provided under s.213 serve a different purpose from the penalties which can be imposed by a criminal court or the MMT. [Discussion of the penalties imposed by the criminal court or the MMT]. Section 213 on the other hand provides remedies for the benefit of parties involved in the impugned transactions. They include injunctions and the appointment of receivers to secure property with a view to recovery by the victims of market misconduct, orders that particular transactions be unwound, orders declaring particular transactions to be void or voidable. In these proceedings the SFC acts not as a prosecutor but as protector of the collective interests of persons dealing in the market who had been injured by market misconduct. Proceedings under s.213 are the public law²⁵ analogue of actions for damages by individuals under s.305 rather than a substitute for a criminal prosecution or proceedings before the MMT. They are plainly civil proceedings and therefore do not attract the protection accorded to criminal defendants”²⁶.

25.1.  Mr Alder argued that the use of the word “may” in ss.(1) and what he called the “smorgasbord of remedies” under s.213 militate against the claim being founded on a tort.

25.2.  We do not agree. First, ss.(1) gives the court powers to make one or more of the orders in ss.(2).  Some of those orders are discretionary in nature, hence the need to use the word “may” in ss.(1).  In any event, even reading the word “may” as giving the court a discretion in relation to the making of all the orders in ss.(2), it would be difficult to envisage a situation where ss.(1) and ss.(4)²⁷ would result in a court exercising a discretion not to order damages if the ingredients of a statutory tort are found to exist.  The court has held that “the width of the section and of the powers it confers on the court are ‘characterised by their extreme flexibility’ and ‘should not be judicially cut down’”²⁸.  It would be ironic if such width and flexibility had the contrary effect of negating or nullifying the ingredients of a tort which the court has found to exist and which would otherwise result in liability.

25.3.  In Lew, the court held: [§181]

“The mere fact that other remedies may be available as a matter of the court’s discretion ought not alter the proper characterisation of the cause of action as a tort. Indeed, injunctive and declaratory relief might also be ordered by the court in relation to causes of action founded in tort. That this is so does not alter the nature of the underlying cause of action. It would be somewhat peculiar if the fact that there are even more expansive remedies available ... would have the consequence that a cause of action that would otherwise be characterised as a tort would cease to be so characterised”.

26.1.  The Eastmore defendants do not dispute for present purposes that:

-  the pleaded losses have been suffered in Hong Kong by the market investors and/or the lenders²⁹; and

-  if the market investors individually had brought claims under s.281³⁰ or s.305³¹ or s.391³² SFO, those statutory claims would be founded on a tort and thus would pass through Gateway F³³.

26.2.  In Tiger Asia, the Court of Appeal held³⁴ that s.213 was complementary to the civil liabilities created by s.281 and s.305.  It would be illogical if claims under s.281 or s.305 brought by individual market investors would pass through Gateway F, but claims brought for their benefit by the SFC under s.213 would not.  As G Lam J said in Qunxing³⁵:

“There is a very real risk that the purpose of the legislature in enacting s.213(2) would be defeated if it was regarded as providing merely a machinery for enforcing rights already vested in the investors under the common law or other provisions ...”.

27.  In respect of the other elements of the jurisdictional test, the Eastmore defendants also do not dispute that:

-  s.213 and s.274 SFO have extra-territorial effect³⁶;

-  the facts satisfy the standard of good arguable case for service out³⁷; and

-  Hong Kong would be the appropriate forum for the trial of the action under the principles of forum conveniens³⁸.

28.  As for the merits of the case, the Eastmore defendants also accept for present purposes that the RASOC raises a serious issue to be tried against each of them (but excluding entitlement to remedies)³⁹.

29.1.  Finally, we agree with the judge that leave to appeal should not be given for Ground (6), in which the Eastmore defendants argue that there was no finding that the contraventions of the individual defendants took place in Hong Kong, and the court should not have “grafted” common law concepts of joint tortfeasorship or conspiracy onto the claim under the SFO.  If that argument is correct, then it would have been necessary for the SFC to establish a good arguable case that the double actionability rule was satisfied.

29.2.  First, s.213(1)(v) refers expressly to a conspiracy, but contains no specific definition of the term. As such, the judge was clearly entitled to adopt the common law concept of conspiracy.  Further, as the judge held in the Leave to Appeal Decision, she had considered in substance where the conspiracy was committed and found that it was in Hong Kong [§§99-100 of the Main Decision].  There is no challenge to the principles applied by the judge at §§94-98 of the Main Decision before arriving at that view.

30.  For the reasons set out above, we reject the arguments of the Eastmore defendants that the claim was not founded in tort and we see no error in the judge’s grant of leave to serve out under Gateway F.

Leave to serve out under Gateway B

31.  The judge refused to give leave to appeal against her decision to give leave under Gateway B.  The Eastmore defendants argued that the SFC had adduced no evidence to show a continuing breach or risk of further breach by them, and that the injunction sought was lacking in specificity.

32.  It is clear from the Main Decision that the judge was well aware that an injunction would only be granted if the court finds that there is an appreciable risk of future conduct by the defendants [§103], and that the court would not grant an injunction that was too wide or ill-defined or which sought to restrain conduct outside the jurisdiction [§105].  The judge was also well aware of the Eastmore defendants’ arguments but rejected them for the reasons set out in §§109-118.

33.1.  In their renewed application for leave to appeal, the Eastmore defendants are challenging the judge’s evaluative assessment of the evidence.  In AmTrust Europe Ltd v Trust Risk Group SpA⁴⁰, the UK Court of Appeal explained the reason for circumspection by an appellate court in its approach to a first instance judge’s assessment of the merits at the interlocutory stage of a jurisdictional challenge [§32].  Even in a case of an appeal from the judge’s construction of a contract, the appeal court held that at the interlocutory stage, the question is not “what does the contract mean” but “who has much the better of the argument” [§35].  Some circumspection is needed even where the decision is one to which there can only be one correct answer [§42].  In the present case, there was evidence on the scale and sophistication shown in the Scheme in which the Eastmore defendants are alleged to have played important roles.  There was evidence entitling the judge to take the view that an injunction was required to restrain such activities⁴¹.

33.2.  In challenges to jurisdiction, “the interlocutory stage must not become a trial”.  If less circumspection is shown at the appellate stage of what remains an interlocutory process stage, first instances judges may be led to an approach “which is closer to a determination of the issue than is required by the application of the test” of who has the better argument [§38].

33.3.  Applying this approach, it is clear that this court should not give leave to appeal on Gateway B as the proposed appeal has no reasonable prospect of success and there is no other reason in the interests of justice why it should be heard.

Disposition

34.  In light of our conclusion on Gateways F and B, it is not necessary to deal with the SFC’s Respondent’s Notice or its draft application on Gateway C.  The appeal in CACV 510/2021 and the summons in CAMP530/2021 are dismissed.  It follows that the application for a stay is also dismissed.  We would make an order nisi that the Eastmore defendants pay the SFC’s costs with certificate for two counsel.  As this was a hearing of the appeal together with the application for leave to appeal, we would order costs to be taxed rather than attempt a summary assessment.