CLARK QUANTUM KENT (FORMERLY KNOWN AS JOHN MOHAMMAD CLARK AND JOHN JULIUS TASCA) v. HAI TIN LTD (FORMERLY KNOWN AS ALLIED FINANCE ASIA LTD) AND OTHERS

HCA 961/2017

[2020] HKCFI 393

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 961 OF 2017

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DECISION

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1.  This was an application of Clark Quantum Kent (formerly known as John Mohammad Clark and John Julius Tasca) (“the plaintiff”) by summons dated 21 November 2019 for (1) leave to appeal the Decision dated 7 November 2019 setting aside the order dated 17 April 2018 of Master M Wong granting the plaintiff leave to serve his amended concurrent writ of summons (“the amended writ”) on IHAG Holding AG (“D4”) and Privatbank IHAG Zürich AG (“D5”) out of the jurisdiction; and (2) that there be a stay.

2.  Pursuant to the order dated 6 December 2019 of Madam Justice Au-Yeung, the plaintiff’s application is dealt with on papers instead of an oral hearing.

3.  The relevant backdrop to this application is set out in the Introduction and Background sections of the Decision (§§2-32) to which reference should be made.

Grounds of appeal

4.  The draft Notice of Appeal (“the draft Notice”) is a prolix document of some 14 pages. In §8 of his written submissions dated 16 December 2019, the plaintiff set out a “summary” of the basis for the intended appeal, consisting of no fewer than 11 subparagraphs (numbered (a) to (k)). §8(k) was not a ground as such but (tellingly[1]) posed a question - had the plaintiff made out a prima facie case as set out in more detail in the draft Notice of Appeal?

5.  The principal grounds discernible from the plaintiff’s extensive summary and the draft Notice are considered under the headings below.

(1)  Failure to apply the correct test in determining whether there was a serious issue to be tried: §8(a), (c) and (h)[2]

6.  RHC Order 14 has no application to any claim based on an allegation of fraud: see Order 14, rule 1 (2) (b). In other words, summary judgment is not available in any such action.

7.  As I understand it, the plaintiff extracted the following proposition from that provision: “no summary dismissal in fraud/dishonesty cases”.

8.  The argument now made is that when considering whether there is a serious issue to be tried, by parity of reasoning, the court may not descend to the merits of a fraud or dishonesty-based claim because any refusal of leave to serve out of the jurisdiction would be equivalent to a summary dismissal of a claim involving fraud/dishonesty.

9.  I confess to having difficulty in following the logic of the argument. In §59 of the Decision, I concluded that, in the absence of authority supporting the plaintiff’s approach, there was no basis for the court not to be concerned with the merits of the plaintiff’s claim based on fraud/dishonesty for the purposes of Order 11. I remain of that view.

10.  The recent English Supreme Court case of Lungowe and others v Verdanta Resources Plc [2019] UKSC 20 at §42 et seq cited by the plaintiff is not on point since the case did not concern any claim in fraud/dishonesty.

11.  It was also said that in the absence of a defence and/or contrary evidence challenging the plaintiff’s pleaded case, the court ought to have proceeded on the basis of the plaintiff’s case and accepted the facts as pleaded unless patently incorrect.

12.  As explained in §§60-61 of the Decision, the 2 cases cited by the plaintiff at the hearing do not support his submissions. It has not been explained in what respects the court erred in arriving at its conclusion that the court should consider both the pleadings and the affidavit evidence when determining whether there was a serious issue to be tried.

(2)  Merits of the plaintiff’s claims not properly considered or not considered at all: §8(d) and (i)

13.  §2 of the draft Notice stated that in determining whether there was a serious issue to be tried, the court “took into account irrelevant matters or otherwise gave weight to matters which [it] should not have attributed such weight to” and proceeded to narrate over 6 pages of the draft Notice 19 apparent instances. In this regard, as will become apparent, the ‘justification’ or ostensible reason put forward in §2 (prefacing the 11 sub-paragraphs) for submitting an unconventional draft Notice - that the court made “a final (but summary) dismissal” of the plaintiff’s case - is simply wrong[3].

14.  The plaintiff’s lengthy narrative in §2 of the draft Notice is impossible to address because, as D4 and D5 submitted, it is a mixture of

(a) matters not pleaded by the plaintiff such as the allegation[4] (i) that D5[5] “should be taken to have known” or “had reason to know” that the actual trustee was Allied Finance Asia Ltd etc; and (ii) of receipt of overcharged fees[6];

(b) evidence not before the court at the substantive hearing[7]; and

(c) new arguments/assertions as to merits “as expanded” in the draft Notice[8], but without referencing the pleadings or the affidavit evidence. 

15.  §2 sought to bolster up the plaintiff’s case by providing “more detail”[9]. If more detail was indeed required, that should have been provided prior to making the leave application rather than at this late stage, by way of the draft Notice.

16.  The court was criticised for having “made a final (but summary) dismissal” of the plaintiff’s claims.  But that was not the case as the plaintiff well knew. A decision to set aside leave for service out is an interlocutory decision: Pacific Electric Wire & Cable Ltd v Texan Management Ltd, unreported, FAMV 71-73/2007, 13 March 2008, §7. Otherwise, the plaintiff would have appealed as of right rather than to seek leave as he has done.

17.  The setting aside of the Master’s order was the inevitable consequence of the plaintiff’s failure to show that there was a serious issue to be tried on the merits of any of his claims against D4 and D5. As explained in §§64-88 of the Decision, that was because either insufficient particulars had been pleaded and/or inadequate evidence had been adduced in support of the plaintiff’s various causes of action.

18.  A recurring complaint is the absence of any defence, requests for further and better particulars etc and contrary evidence challenging the plaintiff’s case. But as stated in §62 of the Decision, such absence is immaterial given that at the leave to serve out stage, the burden is on the plaintiff to establish a prima facie case and that there is a serious issue to be tried. 

(3)  Misdirection on the test or elements for dishonesty: §8(b), (e)-(g) and (i)

19.  Given that the parties were ad idem[10] as to the legal requirements necessary to establish knowing receipt and dishonest assistance at the hearing, what the court did was to apply those legal requirements.

20.  It is not understood how it is now said that the court’s treatment of the required elements was wrong as a matter of law. The plaintiff has not identified the passages in the Decision that show that a different (and erroneous) test was applied or that different/unnecessary legal requirements were considered and applied.

21.  The court considered the pleadings as well as the evidence adduced in light of the legal requirements that were common ground before reaching various conclusions, for example, at §§72 and 83. It also took note of the timeline of events derived therefrom as well as the persons involved at each stage from the pleadings and the evidence filed.

22.  The matters now alleged in the draft Notice and highlighted by the defendants in §15 of their written submissions opposing leave to appeal (set out in §23 below) were never pleaded.

23.  The new allegations made are the following:

(a) D4 and D5 “had clear reasons to be suspicious about the lawfulness of [certain but unspecified] actions” and “failed to make the necessary enquiries to satisfy itself of that lawfulness”: the draft Notice §3;

(b) “D4 and/or D5 had plenty of reasons to doubt, but it did not conduct the enquiry that it ought to have done”: the draft Notice §4;

(c) “it is perfectly apparent both that the Bank had reason for doubt in so far as the transaction was entirely untested and in fact had doubts as demonstrated by the repeated comments over an extended period made by banks senior management including Mr Walchli …”: the draft Notice §5(c);

(d) “in this case, the Bank knew of the circumstances in which Mirabaud wished to terminate its relationship with the beneficiary, and that the beneficiary was to that extent vulnerable, and that this vulnerability was increased by the doubts expressed by the Trustee and AFTAG concerning his mental stability”: the draft Notice §5(f);

(e) “the Bank permitted the beneficiary’s interests to be subsumed to its own interests in ensuring the availability of these funds for management” and “[it] clearly took no steps to verify whether the beneficiary’s approval had been obtained for the scheme”: the draft Notice §5(h); and

(f) the allegations concerning the alleged knowledge of D5 listed in subparagraphs (i)-(iv) of the draft Notice §5(h).

24.  These new unpleaded and unparticularised allegations are impermissible and cannot be entertained.  

25.  It would appear from section (3) of the plaintiff’s reply submissions and §5(h) of the draft Notice that the plaintiff is conflating his case against D4 and/or D5 with that of D8 as if D4 and/or D5’s knowledge at all material times was no different from that of D8. That will not do.

Conclusion

26.  For the reasons stated, the plaintiff has failed to establish that his intended appeal has reasonable prospects of success. It follows that the plaintiff’s application for leave to appeal falls to be dismissed.

The plaintiff’s application for a stay

27.  §3 of the plaintiff’s summons reads as follows:

“Alternatively, if leave is refused, execution of the Judgment be stayed pending the Plaintiff’s intended renewed application to the Court of Appeal to appeal from the Judgment”.

28.  The Decision allowed the defendants’ appeal from the order granted by the master and set aside the master’s order. This court’s order was effective from the date of the Decision, 7 November 2019.

29.  The defendants submitted that because the master’s order has already been set aside, it can only be restored upon the plaintiff successfully obtaining leave to appeal and upon his being successful in his intended appeal.

30.  Although the plaintiff maintained that the master’s order is not set aside if this court’s order were stayed, in my view, conceptually, that is incorrect. There was nothing left to be stayed by this court, quite apart from the fact that no reasons have been advanced as to why a stay is necessary.

Order

31.  Accordingly, the plaintiff’s summons dated 21 November 2019 is dismissed with costs to the defendants, such costs to be summarily assessed separately.