SUSANTO WING SUN CO LTD v. YUNG CHI HARDWARE MACHINERY CO LTD

[On evidence that the contract sued upon was concluded not in Hong Kong as alleged by the plaintiff but by receipt of a facsimile acceptance in Taiwan, leave to serve out of the jurisdiction set aside]

1988 No. A8177

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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1. There is before the court an application in an action in which the defendant is a Taiwanese company. The plaintiff has sought ex-parte, and has obtained, leave to serve the writ outside the jurisdiction pursuant to the provisions of order 11 of the Rules of the Supreme Court.

2. The plaintiff relies on 0.11, r.1, Case (d) (i), under which the court may give leave for service of a writ outside the jurisdiction where the claim of the plaintiff is based upon a contract which was made within the jurisdiction. It is said, for the plaintiff here, that the contracts the subject of its claim in the action were made in Hong Kong.

3. Leave was granted accordingly by Deputy Judge Ryan on 23rd December 1988. The judge also made an order for substituted service of the writ. The court is now concerned with the defendant's application to set aside the order of the judge which, in accordance with the usual practice, had been obtained by the plaintiff ex-parte. The hearing before me is an inter-partes hearing; and I have to approach the matter afresh.

4. The evidence originally led in support of the application made by the plaintiff discloses that the agreements upon which the plaintiff relies were two agreements in Chinese. The first was dated 12th January 1988, the second 26th March 1988. They were contracts for the sale of goods and machinery by the defendant to the plaintiff. It was said that these agreements were "concluded in Hong Kong" on or about the dates I have mentioned. It is said that each of the two agreements were faxed to one Tjhin Ping Sie of the plaintiff (who was in Hong Kong) by Mr Cheung Sze Yau of the defendant (who was in Taiwan). It is said that immediately upon receipt of each agreement, Mr Tjhin signed the agreement in acceptance and faxed the same with his signature thereon to the defendant. Mr Tjhin was fully authorised by the plaintiff to enter into the agreements on its behalf.

5. The proposed statement of claim was in evidence. Paragraphs 2 and 3 read as follows :-

"2. By an Agreement in Chinese dated the 12th January 1988 and made in Hong Kong between the Plaintiff and the Defendant, in consideration of the Plaintiff paying a purchase price of NT$6,293,300, the Defendant agreed inter alia to supply and deliver (including installation of) a set of Latex surgical and examination gloves complete equipment with accessories to the plaintiff in Hong Kong."

3. By a further Agreement in Chinese dated 26th March 1988 and made in Hong Kong between the plaintiff and the Defendant, in consideration of the Plaintiff paying NT$6,293,300, per set of machine, the Defendant agreed to supply and deliver (including installation of) 4 sets of 30M emulsion Latex gloves machine to the plaintiff in Hong Kong."

6. It appears however that the contracts were concluded in Taiwan a not in Hong Kong; because it was in Taiwan that the communication of the plaintiff's acceptance of the offer was received by the defendant. The rule relating to communications by telex is now well settled and the same rule must, in my judgment, apply to communications by facsimile. The general rule is that as between principals the contract, if any, is made when and where the acceptance is received : See Entores Ltd v Miles Far East Corporation [1955]2 Q.B. 327; and Brinkibon Ltd v. Stahag Stahl und Stahlwarenhandlesgesellschaft mbH [19831 A.C.34. As I have said, the cases demonstrate that the rule to which I have referred applies to instantaneous communication between principals. In my judgment, the like rule must apply where the communication is not to a principal but to an agent with authority to accept the communication. It is accepted for present purposes that the communication was merely to an agent for the defendant, one George Nien; but the terms in which his agency is described in the plaintiff's own evidence admits of no doubt that he must have had full authority, among other things, to receive an acceptance of a contractual offer.

7. The plaintiff, very sensibly and responsibly recognising all this, has expanded its description of the manner in which the contracts were concluded. The plaintiff has now deposed fully to the nature of its case and the evidence in support of it. This evidence shows some inconsistencies, but it is not for me to attempt to evaluate them at this stage. It is sufficient to say that the manner in which the contracts are now said to have been concluded is quite different from the manner in which the contracts were originally said to have been concluded in the evidence before the judge.

8. In Parker v. Schuller (1901) 17 T.L.R. 299, a similar point arose. The plaintiff, having obtained leave to issue a writ for service out of the jurisdiction under Order 11, rule (e), upon an affidavit alleging a breach of contract within the jurisdiction, the court, upon the defendant's applying to set aside the writ and the service upon the ground that that breach did not occur within the jurisdiction, refused to allow the plaintiff to, set up and rely upon another and distinct cause of action. The decision was a decision of the Court of Appeal whereby that court reversed a decision of Mr Justice Lawrance, who had refused at chambers to set aside the writ of summons in the action and the service of notice thereof on the defendants out of the jurisdiction. The facts are immaterial, but I will read some extracts from the judgments as reported. The Master of the Rolls said (according to the report) that :-

"It was enough in the present case to say that that was not the cause of action endorsed on the writ of summons, nor the cause of action alleged in the affidavit upon which leave to issue the writ and to serve notice thereof out of the jurisdiction was granted. The claim was for non-delivery of the goods. It was not until the case came into this court that the plaintiff set up another cause of action. That could not be allowed."

Lord Justice Collins said that he :-

"... decided the case solely on the ground that the plaintiff had tied himself, by the affidavit upon which he obtained leave to issue the writ and to serve notice thereof out of the jurisdiction, to the cause of action for non-delivery of the goods at Liverpool."

Lord Justice Romer said that :-

"Moreover, in his Lordship's opinion an application for leave to issue a writ for service out of the jurisdiction ought to be made with great care and looked at strictly. If a material representation upon which the leave was obtained in the first instance turned out to be unfounded, the plaintiff ought not to be allowed, when an application was made by the defendant to discharge the order for the issue of the wirt and the service, to set up another and a distinct cause of action which was not before the judge upon the original application."

9. Upon this case, Mr Andrew Li Q.C. for the defendants mounted a formidable argument that in the present case, the leave granted by the judge ex-parte to serve the writ out of the jurisdiction ought to be set aside. He pointed out that the present stance of the plaintiff involved a departure from the facts as originally put before the judge and also a departure from those set out in the statement of claim served, pursuant to the leave given by the judge, in the form of the draft before him.

10. In answer, Mr Robert Tang Q.C., in an admirably succinct and clear submission, in effect reminded the court that it is here to do justice in a sensible way. He accepted that the plaintiff's case had been expanded since the original application had been made for leave and he accepted that the court could well exercise its power to set aside the order for that reason, as had been done in Parker v. Schuller (above). But, as Mr Tang reminded me, in such circumstances, the plaintiff can always apply again for a fresh order, as is pointed out (if any authority were needed to buttress the common sense of the matter) in the Supreme Court Practice 1988, at 11/4/l.

11. Furthermore, there is the authority of Mr Justice Cross in Macaulay (Tweeds) Ltd v. Independent Harris Tweed Producers Ltd (1961) R P C 184 to the effect that the court is not bound to set aside the order. Mr Justice Cross said :-

"The question as I see it is essentially one of degree. The negligence may be so serious as to justify the court in discharging the order even though it is satisfied that the deponent had no intention to deceive the court. On the other hand, if the judge is satisfied that there was no intention to deceive and the mis-statement is not grossly negligent, he may think it better not to visit it with a penalty which may fall as heavily on the defendants as on the plaintiffs, since the plaintiffs can, ex hypothesi, make a fresh application which will succeed."

12. As Mr Li in reply suggested, the judge in the Macaulay (Tweeds) case (above) was concerned with an error in stating the full facts. Here, he says, the error is more fundamental. The error goes to the root of the cause of action; because, on the plaintiff's own evidence, it appears, contrary to its assertion, that the contract must be taken to have been made in Taiwan. Since the plaintiff not only deposed to facts which lead inevitably to that conclusion, but has pleaded them, this is not a case like Macaulay (Tweeds), but a case more like Parker v. Schuller.

13. I accept this submission. It seems to me that a claim based on the plaintiff's pleaded case, disclosing (when the law is properly applied to the facts) that the contracts on which the plaintiff relies were made not in Hong Kong but in Taiwan, cannot possibly be allowed to be brought in the exercise of the exorbitant jurisdiction of the court against a Taiwanese defendant. One must be careful in exercising this jurisdiction; and in my judgment, a proper degree of care for the protection of foreign defendants necessitates, in a case where the plaintiff has been forced to change its ground as to where and how the contracts were actually made, a decision in favour of the defendant, once the ground originally relied on by the plaintiff has gone.

14. Other points were adumbrated before me by Mr Li on behalf of the defendants. He was prepared to submit that full or frank disclosure had not been made in the evidence on which leave was granted; and that that was reckless. He was prepared to submit that there was no material available to support the contention that even an arguable case had been advanced that the contracts were made in Hong Kong. And, lastly, he was prepared to submit that, even if he was wrong so far, the court should nevertheless set aside the order made by the judge for substituted service. However, since the first point is determinative of the matter, I have not thought it necessary, or even desirable, to call on counsel to address arguments to me on these other points. For the reasons I have endeavoured to state, I take the view that the order for service of this writ out of the jurisdiction ought to be set aside; and I will order accordingly.