MAN WON CO LTD AND ANOTHER v. TAY VI BING AND OTHERS

--------------------------------

-----------------

JUDGMENT

-----------------

Clough, J.A. :

1. This is the judgment of the court.

2. The second and third defendants (who are resident in Singapore and Malaysia respectively) appeal against the order of Barnett J. made on the 14th February 1990 setting aside the order of Master Chan made on the 22nd November 1989 which set aside the ex parte order of Master Woolley made on the 2nd June 1989 giving the second plaintiff (a Singapore company) leave to issue concurrent writs in this action and to serve the writ on the second and third defendants out of the jurisdiction.

3. The proceedings culminating in the hearing of this appeal have had a chequered history resulting in the unusual situation that by the time of the hearing of the appeal on the 17th and 19th July the action had been set down for trial and the hearing date fixed for the 28th January 1992. This unusual state of affairs has given rise to a side issue on waiver and submission to the jurisdiction which arose in the following circumstances.

The waiver issue

4. When Barnett J. set aside Master Chan's order on the 14th February 1990 he directed the second and third defendants to file a defence within 28 days and retained any application that might be made for extension of time. On the 12th March 1990 the second and third defendants filed and set down their notice of appeal against the order of Barnett J. On the next day they issued a summons, which was served on the second plaintiff, applying for an extension of time for filing their defence pending the disposal of their appeal. When the application was heard by Barnett J. on the 14th March 1990 it was successfully opposed by the second plaintiff's solicitor. It appears from an attendance note of one of the solicitors involved that the judge, who allowed the applicants 14 days to file their defence, must have accepted that it would be unfair to allow the appeal to hold up the first plaintiff's claim and that there was no reason why the second and third defendants should not be made to get on with the action pending the appeal on the footing that they would be compensated by costs if the"appeal succeeded. The second and third defendants filed their defence on the 28th March 1990.

5. The hearing of the appeal was fixed for the 29th June 1990, but on the 17th April 1990 Fuad V.P. made a consent order granting the second and third defendants' application (by their summons issued on the 12th April 1990) to adjourn the hearing to a date to be fixed after the 29th June 1990 in consultation with counsel's diaries. The appeal having thus been thus consigned to limbo the usual interlocutory proceedings in the action continued. The second and third defendant's attended the hearing of the plaintiffs' summons for directions on the 3rd May and on the 17th May 1990 the two defendants filed and served their lists of documents. On the 12th March 1991 their solicitors attended the hearing before Mr. Registrar Betts when the action was set down for trial.

6. The trial having been fixed for hearing between the 28th January and the 10th March 1992, on the 24th April 1991 the second and third defendants served a notice of intention to proceed with this appeal on the second plaintiff. On the 4th June 1991 the hearing of the appeal was fixed for Wednesday the 17th July. On Friday the 12th July the second plaintiff filed, and served on the second and third defendants, a notice of motion applying to strike out the appeal on the ground (set out in a Schedule to the notice of motion) that, by filing their defence and taking the subsequent steps in the action outlined above, and failing to set down the appeal for hearing before the action was set down for trial, the second and third defendants had submitted to the jurisdiction. In the alternative the second plaintiff sought leave to serve on the second and third defendants a respondent's notice in the form of the Schedule raising (as grounds for affirming the judge's order) the same Matters as were relied upon for the strike out application.

7. At the hearing of the appeal Mr. Barlow contended, in support of the second plaintiff's notice of motion, that having failed before Barnett J. and appealed against his order, it had been incumbent upon the two defendants to avoid submitting to the jurisdiction and to proceed promptly with their appeal. Citing Bankers Trust Company v. Galadari [1986]2 Lloyd's Rep 446 (C.A.), Mr. Barlow argued that the two defendants should have appealed expeditiously and that if judgment had been obtained against them in default of defence it would have been aside on their application. The fundamental principle was, he submitted, that if a party chose to challenge the jurisdiction he must not submit to it as the two defendants, who had been advised by leading counsel, had deliberately done. The late resurrection and prosecution of the appeal amounted in all the circumstances Mr. Barlow argued, to an abuse of the process and the appeal should be regarded as incompetent. As to the jurisdiction of this court to strike out an appeal as being an abuse of the process or frivolous or vexations, Mr. Barlow cited Aviagents Ltd. v. Balstravest Investments Ltd. [1966]1 WLR 150 (C.A.) for the proposition that an appellate court has power to control its own proceedings by striking out a notice of appeal in a case where an appeal was plainly not competent.

8. This court dismissed the second plaintiff's application at the beginning of the hearing, indicating that it would consider the proposed respondent's notice later. In the present case, where the alleged waiver occurred after the judge's order was made, we considered that the question raised by the second plaintiff's strike out application was not one of incompetence but abuse of the process, to which this court may well have had jurisdiction: see Burgess v. Stafford Hotel Ltd. [1990]1 WLR 1215 (C.A.) per Glidewell L.J. at pp.1220A-1221D (which was not cited). However, assuming (without deciding) that this court did have jurisdiction to strike out an appeal which was an abuse of the process, it seemed to us that the second and third defendants had not been guilty of waiver in all the circumstances and that whilst the prosecution of the appeal had been very dilatory, the delay which had occurred had been consented to by the second plaintiff.

9. We accepted Mr. Aiken's submission that, this being an unusual case where waiver was being alleged to have occurred at the stage where the stay application had been made without prior waiver and the two unsuccessful defendants were appealing against the refusal of the application, the normal test for waiver laid down by Cave J. in Rein v. Stein (1892) 66 L.T.469 at p.471 could not be conclusive. Furthermore, the situation was not that envisaged in the practice note in the Supreme CourtPractice, Vol. 1, p.116 para 12/7-8/3 or in the passage in Dicey & Morris on the Conflict of Laws, Vol. 1, p.277, repeatedly cited by Mr. Barlow, where the editors are clearly dealing with the manner in which a party initially served out of the jurisdiction and seeking to challenge it (or avoid its exercise, in the case of Dicey & Morris) should conduct himself so as to avoid a waiver.

10. In the present case the second defendants took the proper course of applying to the judge for an extension of time to file a defence pending the disposal of the appeal. The second plaintiff opposed the application on the basis already indicated and persuaded the judge to refuse it in circumstances where his mind was not addressed to the possibility of the second plaintiff subsequently alleging that compliance with the judge's order (which had to be observed until set aside: Isaacs v. Robertson [1985] AC 97 (P.C.)) would amount to waiver and destroy the two defendants' appeal. We venture to think it to be highly probable that had the judge's mind been brought to bear on this possibility he would hot have accepted the second plaintiff's reasons for opposing the application for extension of time. It would not nave been a judicial exercise of discretion to refuse the extension of time, pending a genuine appeal, knowing that compliance with his order would have created a waiver and thereby nullified the appeal. We are confident that such a perverse thought could not have entered the judge's mind.

11. Having persuaded the judge to refuse the extension of time on the basis that the two defendants should get on with the action pending the appeal, it seemed to us that the second plaintiff was seeking to blow hot and cold by taking the waiver point and running arguments to the effect that the two defendants should have appealed against the judge's ruling on the time application or ignored the judge's order and let judgment be irregularly obtained in default of defence so that they could have it set aside. Moreover the waiver issue was being raised at the very last moment more than a year after the defence of the two defendants had been filed. We considered that the second plaintiff having persuaded the judge to make his order refusing an extension of time pending the appeal and requiring the two defendants to get on with the action on the basis that if the appeal succeeded costs would compensate the defendants, this court should not permit its jurisdiction to be invoked so as to enable the second plaintiff to take advantage of the predicament of the defendants, who had obeyed the order of the court made at the behest of the second plaintiff. Indeed the application itself, although claimed by counsel to be one based on fundamental principles of jurisdictional waiver (which the court was invited not to transgress), savoured strongly of abuse of the process and did not seem to us to reflect favourably on the second plaintiff.

12. As regards the second plaintiff's application to file a respondent's notice out of time, in our view this was an alternative which should only be permitted if the court had held that the second and third defendants had submitted to the jurisdiction and prosecuted their appeal in abuse of the process but that the court did not have jurisdiction to strike out the appeal. Having concluded that there has been no waiver or abuse of the process by the two defendants we now formally refuse leave to file the respondent's notice.

The substantive appeal

13. The Plaintiff's writ was indorsed with a statement of claim against the nine defendants. It is a formidable document running to 68 paragraphs appearing under six rubrics, pleading what, on exhausting analysis, appear to be essentially simple claims in a manner which the judge described as crystal clear but which, we regret to say, we have found to be extremely convoluted, lacking in chronological sequence and seemingly oblivious of the basic requirements of Order 18 rule 7. Precious little enlightenment is to be obtained from the Affidavit evidence filed under Order 11 rule 4(1) in support of the plaintiff's application under Order 11 rule 1(1) for leave to serve the writ out of the jurisdiction because, the claims having peen pleaded at great length the evidence is primarily (and properly) directed to verifying the pleaded matter. Mr. Barlow informed the court on the first day of the hearing of the appeal that he proposed, on the resumption of the hearing on the second day, to provide a summary of the statement of claim. In the event this was not forthcoming. It would have saved this court much time in perusing the complex pleading.

14. The first plaintiff is a Hong Kong company. It was at ail material times a wholly owned subsidiary of the second plaintiff which is a Singapore bus company. The first three defendants ("the Tay defendants") are all members of the Tay family who at all material times until the 22nd January 1986 controlled the Board of the second plaintiff.   The Tay defendants constituted the Board of the first plaintiff until the 25th January 1986 or thereabouts.  The first defendant is resident in Hong Kong. The second defendant is resident in Singapore. The third defendant is resident in Malaysia. None of the remaining defendants are resident (or incorporated) out of the Hong Kong jurisdiction. The fourth, sixth and eight defendants are individuals alleged to have been nominees of the Tay defendants for the purposes of various impugned transactions. The fifth and seventh defendants are companies alleged to have played similar roles. The 9th defendant is alleged to be a company, incorporated on the 26th November 1985, whose shareholders and directors (none of them named in the statement of claim) are nominees (for principals not named in the statement of claim) and which has no place of business or personnel in Hong Kong.

15. It is pleaded (and admitted in the defence of the second and third defendants) that the Tay defendants held the following appointments at the following times:

16. The substance of the allegations of the second plaintiff against the Tay defendants is that in breach of their fiduciary duties, as director in the case of the first and third defendants, and as General Manager in the case of the second defendant, they embarked on a scheme whereby between the 22nd August and the 31st December 1985 they procured the second plaintiff to remit reserves amounting to (S)$10,000,001 the equivalent of (HK)$36,174,924.51 ("the remitted funds") to the first plaintiff in Hong Kong in order to fund or contribute to the funding of two property acquisition transactions into which they procured the first plaintiff to enter. In the course of those transactions the Tay defendants were to make personal and unauthorised (fraud is strangely not pleaded) gains by procuring the first plaintiff to purchase the relevant properties at prices in excess of their known market value from nominees of the Tay directors and to make illicit payments which were falsely described as commission (to their nominees) or were otherwise unauthorised.

17. It is pleaded that at the instigation of unauthorised letters dated the 25th October and the 9th November 1985 respectively, written by the third defendant as managing director of the second plaintiff, falsely expressed to be accompanied by appropriate payments, the Tay defendants as directors of the first plaintiff procured that company to increase its authorised capital to the extent necessary to facilitate the allocation by the first plaintiff to the second plaintiff of 36,000 one dollar shares, 28.8 million being issued on the 26th October and 7.2 million being issued on the 12th November 1985. It is also alleged that at a board meeting of the second plaintiff on the 23rd December 1985 the third defendant informed the board inter alia that (S)$10 million had been remitted to Hong Kong as paid up capital in the first plaintiff.

18. The first transaction into which top Tay defendants are alleged to have the first plaintiff to enter concerned a block of residential apartments in the course of construction at 304A Prince Edward Road, Kowloon ("the Prince Edward Road property"). The substance of the pleaded and verified allegations regarding this transaction are as follows. On the 25th September 1985 the Prince Edward Road property was on the market at a price of $13 million. On that date the Tay defendants procured two transactions in relation to that property. The first transaction was an agreement for sale of the property by the original vendor to the fourth defendant (a nominee of the Tay defendants) for $13 million. The second transaction was an agreement for the sub-sale of the property by the fourth defendant to the first plaintiff for $16 million, under which the first plaintiff was procured to pay a deposit of $2.5 million. The completion date for both agreements was the 30th April 1986.

19. Thereafter, on or about the 23rd November 1985 the Tay defendants procured the first plaintiff to pay the fifth defendant (the nominee of the Tay defendants) the sum of $240,000 which was falsely described in the company's records as commission and in respect of which the fifth defendant gave no consideration. The Prince Edward Road property purchase was eventually completed by the first plaintiff on the 30th April 1986 after the Tay defendants had ceased to control the management of that company and of the second plaintiff:

20. These matters give rise to a claim against the Tay defendants for $3.24 million by both plaintiffs. The second plaintiff's claim, with which this appeal is concerned, is pleaded in paragraphs 26 and 27 of the statement of claim. It is alleged in paragraph 26(1) that, by causing or allowing the second plaintiff to remit the remitted funds when they knew that $3 million (the amount in excess of the market value of the Prince Edward Road property) and $240,000 (the amount of the "commission paid to the fifth defendant) of those funds would be misapplied, the Tay defendants knowingly and intentionally were in breach of their fiduciary duty to the second plaintiff and thereby caused that company losses of $3.24 million for which they are accountable.

21. An alternative claim in conversion is pleaded in paragraph 26(2) in respect of the same sums amounting to $3.24 million. In paragraph 27 it is pleaded "Additionally or alternatively" that the Tay defendants "joined in a common unlawful purpose or conspiracy, the predominant purpose of which was to cause harm to the 1st and 2nd Plaintiffs by causing the 2nd Plaintiff to finance the purchase by the 1st Plaintiff of 304A Prince Edward Road at an over-value for HK$3 million" and that pursuant thereto they carried out the actions previously pleaded, the substance of which we have endeavoured to outline above.

22. The second material transaction concerned the acquisition by the first plaintiff of a property comprising 12 units of bungalow homes in Clearwater Bay ("the Clearwater Bay property"). The substance of the pleaded and verified allegations of the plaintiffs against the Tay defendants regarding this transaction are as follows. On the 7th November 1985 when, to the knowledge of the Tay defendants, the Clearwater Bay property had an estimated gross annual rental income of $3.3 million and was being offered for sale at a price of $30.6 million, they informed the board of the second plaintiff that the property had an estimated annual rental income of $4.2 million and was being offered for sale at a price of $45 million. The board of the second plaintiff resolved at the same meeting that the first plaintiff should purchase the Clearwater Bay property and that the first defendant should be authorised to execute any relevant documents on the first plaintiff's behalf. It was also resolved that the first plaintiff should borrow $15 million to finance the purchase and that the first defendant be authorised to execute all relevant documents.

23. It was further resolved that the second plaintiff "further invest up to S$2 million in the equity" of the first plaintiff for the purposes of financing the purchase. We mention that it had been pleaded in paragraph 22 that on the l4th Octobter 1985 (at a time when the Prince Edward Road property transaction had not been mentioned to it) the board of the second plaintiff had resolved that the company should "invest and/or loan up to a sum of S$8 million" in the first plaintiff. Thus, by the 7th November 1985, on these pleadings, the board of the second plaintiff had authorised the investment of S$10 million (the same amount as the remitted funds) in the first plaintiff.

24. On the 12th November 1985 the Tay defendants, as directors of the first plaintiff resolved that that company should purchase the Clearwater Bay property for $43 million, purporting to note that a "reduction" of $2 million on the sale price had been obtained. On the 15th November 1985 the first defendant informed the second plaintiff that toe purchase was proceeding at this reduced price and that arrangements would be made to borrow $15 million for the purchase.

25. Between the 15th and 18th November 1985 the Clearwater Bay property was to the knowledge of the Tay defendants the subject of the following three transactions:

26. On the 12th December 1985 the first defendant, acting with the knowledge and consent of the second and third defendants, signed the formal agreement on behalf of the first plaintiff. He had already procured the first plaintiff to pay the initial deposit of $4.3 million to the seventh defendant on the 10th December 1985. On the 16th December 1985 the first defendant, acting with the same knowledge and consent, caused the first plaintiff to pay the sum of $860,000 to the eighth defendant (the nominee of the Tay defendants). This sum, for which the eighth defendant gave no consideration, was falsely recorded in the first plaintiff's records as broker's commission". On the 21st December 1985 the first defendant acting with the same knowledge and consent procured the first plaintiff to pay the instalment of $17.2 million. All three agreements were completed on the 31st January 1986 after the Tay defendants had lost control of the management of both plaintiffs. The first plaintiff completed the third agreement with the' additional finance of a mortgage loan of $22 million obtained from a bank.

27. These matters give rise to a claim for $13.36 million against the Tay defendants by both plaintiffs. The second plaintiff's claim is pleaded in paragraphs 41 and 42 of the statement of claim by reference to the misapplication of $12.5 million (the amount in excess of the market value of the Clearwater Bay property) and $860,000 (the amount of the "commission" paid to the eighth defendant). This pleading alleges breach of fiduciary duty, conversion and conspiracy against the Tay defendants in the same terms, mutatis mutandis as the claim against the Tay defendants in paragraphs 26 and 27 in relation to the Prince Edward Road property.

28. The third head of claim by both plaintiffs against the Tay defendants is pleaded in paragraph 59 of the statement of claim and relates to the allegation that on the 22nd January 1986 the second and third defendants, with the knowledge and consent of the first defendant, caused the first plaintiff to pay the 9th defendant the sum of $1.35 million for which the 9th defendant gave no consideration. This payment is alleged in paragraph 59(2) to have been made in breach of the Tay defendant's fiduciary duty to both the plaintiffs. In paragraph 59(5) it is pleaded that by causing and/or allowing the second plaintiff to remit the remitted funds to the first plaintiff knowing that the sum of $1.35 million would be misapplied as alleged the Tay defendants "breached their fiduciary duty to the 2nd Plaintiff thereby causing it losses of HK$1.35 million for which they are accountable to the 2nd Plaintiff." No claim for conversion or conspiracy is made in respect of this sum.

29. The claims of the second plaintiff are in respect of the same sums, (with a prayer for an account of all moneys of the second plaintiff misapplied by the Tay defendants) as those made by the first plaintiff, which also makes a claim in respect of a sum of $2.1 million allegedly misapplied by the Tay defendants (with a prayer for an account of all moneys of the first plaintiff misapplied by the Tay defendants). Another significant matter is that both plaintiffs respectively made the same claims against all of the Tay defendants, one of whom, the first defendant, has been duly served within the jurisdiction. This is material in relation to Order 11 rule 1(1) (c).

30. When applying for leave to serve the writ out of the jurisdiction on the second and third defendants the second plaintiff relied on the following provisions of Order 11 rule 1(1):

31. Master Woolley having granted leave to both the plaintiffs, the second and third defendants applied under Order 12 rule 8 to set aside his order in a summons framed "on the ground that the claim of the 2nd Plaintiff in this action does not fall within any of the cases within Order 11 rule 1(1) of the Rules of the Supreme Court and the court has no jurisdiction to give leave for service of the Writ of Summons to the 2nd Plaintiff out of jurisdiction (sic)....". The summons was supported by an affirmation of the second defendant which, although not expressed to be based on professional advice, was wholly forensic in character and contained no evidence directed to persuade the court not to exercise its undoubtedly discretionary jurisdiction under the combined effect of Order 11 rule 1(1) and 4(2) : see Spiliada Maritime Corporation v. Cansulex [1987] AC 460 (H.L.) per Lora Goff at pp.480H-481B, but was confined to alleging that the claims of the second plaintiff against the second and third defendants did not fall within Order 11 rule 1(1), so that, by implication, the court's jurisdiction might not be exercised at all. Thus in paragraph 7 of his affirmation the second defendant affirmed:

32. The affirmation concluded on the same note in paragraph 9 in which the second defendant affirmed:

Thus, whilst it was accepted that (if the allegations against them were true) the second plaintiff could sue the Tay directors, it was being asserted that the breaches of duty (if any) by those directors occurred in Singapore and so the court could have no jurisdiction. Nothing is said in this affirmation regarding the jurisdiction conferred by Order 11 rule 1(1) (c) which had been invoked by the second plaintiff.

33. The order made by Master Chan on the 22nd November 1989 setting aside the ex parte order of Master Woolley granting leave was expressed to be made:

34. When the matter came before Barnett J. he appears to have rejected, inter alia, an argument that the remedy of the second plaintiff lay against the first plaintiff (and not against the Tay defendants). Having formed the view that there was a clear case against the first defendant, who had been served within the jurisdiction, the judge held that it was also clear that the second and third defendants were necessary and proper parties to the proceedings. He therefore concluded that, under Order 11 rule 1(1) (c) alone, leave to serve out of the jurisdiction had been properly obtained. He went on to give reasons for also upholding leave under Order 11 rule 1(1) (e) and (f).

35. On appeal Mr. Aiken (who did not appear below) sought to develop an argument in support of grounds contained in the second plaintiff's notice of appeal contending that the judge had erred in failing to consider that, even if the court had jurisdiction in this case under any of the heads in Order 11 rule 1(1), to grant leave to serve out of the jurisdiction, the onus was upon the second plaintiff to satisfy the court (see Order 11 rule 4(2)) that it was a proper case for the exercise of the jurisdiction. Mr. Barlow strongly objected to this matter being raised on appeal for the first time. We consider that this objection should be upheld. Mr. Aiken conceded that no argument had been raised on" discretion below. We accept Mr. Barlow's important point that, had discretion been raised as an issue there would inevitably have been evidence filed on both sides directed to it (as frequently occurs in these cases). This is not therefore a situation where this court would permit a new point to be raised on appeal. Moreover we were not persuaded that there were any grounds for contending that the judge had failed to remind himself that Order 11 rule 4(2) conferred a discretion on the court to grant leave which he was exercising (albeit without argument on the question of discretion) when he made his order.

36. The scheme of Mr. Aiken's argument on appeal was first to advance reasons for impugning the judge's decision that Order 11 rule 1(1) (e) and (f) were applicable and then to conclude with arguments on Order 11 rule 1 (1) (c). In our opinion the matter is more conveniently considered by first dealing with the issue under rule 1(1) (c), because this is a case where all the claims of the second plaintiff against the second and third defendants are also made against the first defendant, who has been duly served within the jurisdiction. It follows that if the judge's decision is upheld under Order 11 rule 1(1)(c) there is no practical purpose in considering the application of rule 1(1) (e) or (f), because all the second plaintiff's claims against the second and third defendants will have been the subject of valid service out of the jurisdiction.

37. In relation to rule 1(1) (c) Mr. Aiken raised a preliminary point that there had been no compliance with Order 11 rule 4(1) (d) which provides that:

In support of his submission Mr. Aiken cited the judgment of Barnes J. in Kwan v. Ferrari S.P.A. (1988, No. A506: unreported), where, at p.8, emphasis was placed on the necessity for full compliance with rule 4(1) (d).

38. This point was taken below and rejected by the judge, we think rightly, in the circumstances of this case. In paragraph 5 of his affidavit in support of the application for leave to serve out of the jurisdiction Mr. Cotterill, the plaintiffs' solicitor, had deposed his belief (his means of knowledge being stated to be information received form the plaintiffs) that the second and third defendants were indebted to the second plaintiff under the claims set out in the statement of claim. The nature of the claims was referred to generally in paragraph 7, followed, in the same paragraph, by the statement that details of those matters were contained in the statement of claim. In paragraph 8 Mr. Cotterill deposed that the first and second plaintiffs had "like claims against the 1st Defendant as they do against the intended 2nd and 3rd Defendants who are necessary and proper parties to this Action," adding that the first defendant had an address within the jurisdiction. This was followed, in paragraph 10, by the evidence that the deponent had advised the first and second plaintiffs and he verily believed that they had a good cause of action against the second and third defendants.

39. We agree with the judge that the effect of Mr. Cotterill's evidence summarised above, was, as Mr. Cotterill confirmed in paragraph 4 of his subsequent affidavit sworn on the 13th February 1990, the same as if he had made an affidavit deposing to the relevant matters in the precise terms of rule 4(1) (d). Such an incantation would have added nothing to the effect of the evidence actually given by Mr. Cotterill. Whilst compliance with rule 4(1) (d) is clearly an important jurisdictional requirement for the application of Order 11 rule 1(1) (c), we have no hesitation in agreeing with Barnett J.'s acceptance that the evidence in this case complied with rule 4(1) (d) and we do not consider it necessary to apply Order 2 rule 1 which Mr. Barlow invoked if the court were against him on this point.

40. The substance of Mr. Aiken's argument on the rule 1(l) (c) issue was that when deciding whether the second and third defendants were necessary or proper parties it was important to analyse the second plaintiff's claims against the first defendant and that such analysis indicated that there was no real issue between the second plaintiff and the first defendant. The real issue, Mr. Aiken contended, relying on the principles regarding derivative actions applied in Prudential Assurance Co. Ltd. v. Newman Industries Ltd. (No. 2) [1982] Ch 204 (C.A.) at pp.222G-224D, was between the first plaintiff (who had suffered loss if the facts alleged in the statement of claim were established) and the first defendant. He went on to contend that if that were once accepted and if the court accepted his earlier arguments against the application of rule 1(1) (e) and (f) in relation to the second and third defendants, then the appeal should succeed

41. In this part of his argument Mr. Aiken did not contend (and it does not seem to have been contended below on behalf of the second and third defendants) that in themselves the claims in respect of misfeasance, conversion and conspiracy against the first defendant (who had been duly served within the jurisdiction and has made no application to strike out the statement of claim) disclosed no cause of action. However, when making submissions regarding rule 1(1) (f) relating to the claim against the second and third defendants in conversion, he contended on the authority of Orton v. Butler (1822) 5 B & Ald.652 and Foster v. Green (1862) 7 H.&N.881 applied in Lipkin Gorman v. Karpnale Ltd. [1991]3 WLR 10 (H.L.) per Lord Templeman at p.15E-F, that conversion does not lie for money taken and received as currency.

42. This is trite law. The pleading on behalf of the second plaintiff in paragraph 17 of the statement of claim alleges that during the relevant period the Tay defendants "caused the 2nd Plaintiff to remit to the 1st Plaintiff a total sum of Singapore $10,000,001....". There is no elaboration regarding the means by which this was done. Mr. Barlow contended that it had not been pleaded that the $36.17 million had been remitted to Hong Kong by being carried here in currency, adding that a banker's draft or a telegram effecting a telegraphic transfer can be converted. This is also trite law but it does not avail the second plaintiff in the present case where its evidence in support of its application for leave to serve out of the jurisdiction consists of the verification of a pleaded case which merely alleges the transmission of sums of money.

43. It seems to us that the necessary implication from such pleading and evidence is that money was transferred from the first to the second plaintiff and received "'as currency" in the sense that if it were sued for it could not be required to be repaid in specie. It follows that as between the second plaintiff and the first defendant there can be no cause of action in conversion and therefore, for the purposes of rule 4(1) (d), no real issue in conversion which the second plaintiff may reasonably ask the court to try. The absence of any real cause of action in conversion would also be fatal to the claim for leave to serve the second and third defendants out of the jurisdiction under rule 1(1)(f) and rule 4 (2).

44. In the absence of any argument to the contrary on behalf of the second and third defendants, we have considered the appeal on the basis that, for the purposes of the "real issue" question under rule 4(1) (d) as between the second plaintiff and the first defendant it is not disputed that the statement of claim as verified pleads a valid cause of action for misfeasance and conspiracy against the first defendant. In this connection the difficulties created, on the facts pleaded, concerning the allegations, in paragraphs 27 and 42 of the statement of claim that the predominant purpose of the alleged conspiracy (or conspiracies) was to cause harm to the first and second plaintiffs, are removed by the decision of the House of Lords in Lonrho Plc v. Fayed [1991] 3 WLR 188 overruling Metall und Rohstoff A.G. v. Donaldson Lufkin & Jenrette Inc. [1990] 1 QB 391 (C.A.) and, by implication, The Wing On Bank Ltd. v. Wai Man Estates Ltd. [1990] l HKLR 377.

45. The crucial question, which was really the main substance of Mr. Aiken's argument on the rule 4(1) (d) issue was whether, as he argued (and we apprehend Miss Maria Yuen argued below) there was no real issue between the second plaintiff and the first defendant because the reality of the situation was that it was the first plaintiff, not the second plaintiff who had suffered the loss. Thus, Mr. Aiken submitted, if the first plaintiff should recover from the first defendant in full the second plaintiff would have suffered no loss and the second plaintiff would not be permitted to recover twice in respect of the same loss. Again, Mr. Aiken submitted, if the first plaintiff's claims were to be established, but not satisfied, it is highly likely that the second plaintiff's claims would not be satisfied.

46. These are submissions of substance which raise a difficult issue (which also arises regarding the second plaintiff's claims against the second and third defendants) but we consider that the judge is not to be faulted for rejecting similar arguments below in the context of an appeal concerning an application for leave to serve out of the jurisdiction where Order 11 rule 4(2) required him to consider inter alia whether it had been made by the second plaintiff "sufficiently to appear" to the court that the initial jurisdictional requirements of rule 1(1) (c) had been satisfied. It is well settled that the exercise of the exorbitant jurisdiction of the court under Order 11 rule 1(1) is not lightly to be exercised. However the plaintiff is not required to discharge the standard of proof which must be attained at the trial or to prove the matter beyond all reasonable doubt, but he must show a good arguable case, something better than a prima facie case assessed by looking primarily at the plaintiff's case and not attempting to try disputed facts on affidavit: see The Supreme Court Practice, Vol. I pare 11/1/6.

47. It seems to us that there is a good arguable case for contending that the present unusual circumstances are distinguishable from those under consideration in the Prudential Assurance Case where the rule in Foss v. Harbottle (1843) 2 Hare 461 was applied. The first plaintiff is suing in accordance with that rule. The question is whether there is any sound reason for holding that because the first plaintiff has (on the facts alleged) the right to recover secret profits made by its directors (and thereby also restore the allegedly misapplied funds of its principal company, the second defendant), the second defendant can be said to have no independent concurrent right to recover the same profits by reason of the alleged misapplication of corresponding amounts of the second defendant's funds.

48. Whilst we intend to decide nothing which might embarrass the parties or the trial judge hereafter, we consider that, on the facts alleged, it is strongly arguable that the second plaintiff has just as much right to sue the first defendant (and all the Tay defendants) as does the first plaintiff. Mr. Barlow rightly accepted that double recovery could not be permitted against the Tay defendants but that does not mean that the second defendants has no right to sue.

49. Exhaustive examination of issues of law is not unknown in Order 11 (1) cases: see for example the Metall & Rohstoff case cited above. However in the present case where the Tay defendants have kept off the important question of discretion below (and been precluded ;from raising it on appeal) we have not had the benefit of the exhaustive argument on a difficult and complex legal issue which will be appropriate at trial. On the argument we have heard we are satisfied that the judge was right to conclude that second defendant has shown a good arguable case for there being a real issue which the second plaintiff may reasonably ask the court to try as between it and the first defendant. The claims of the second defendant against the second and third defendant being the same as its claims against the first defendant, we consider that the second and third defendants were necessary or at least proper parties to the second defendant's claims and the judge was right to hold that the strict jurisdictional requirements of rule 1(1) (c) had been satisfied..

50. In view of these conclusions it is not necessary to determine the arguments on behalf of the second and third defendants in relation to rule 1(1) (e) and (f) (as relevant to the conspiracy claim only). Accordingly the appeal is allowed only to the limited extent of discharging the judge's order in so far as it gave leave in respect of the second defendant's claim in conversion against the second and third defendants, and that claim against those defendants is dismissed.

51. As the appeal has very substantially failed there will be an order nisi giving the second plaintiff the costs of the substantive appeal. There will also be an order nisi giving the second and third defendants the costs of the second plaintiff's motion.