ALLIED WELI DEVELOPMENT LTD AND ANOTHER v. CHUANG YUE CHIEN, EUGENE AND OTHERS

HCA 57/2018

[2020] HKCFI 2746

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 57 OF 2018

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DECISION

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1.  This is the substantive hearing of 2 summonses relating to a protective writ in this action issued on 9 January 2018 (“the Writ”):

(1)     The 1^st defendant Chuang Yue Chien, Eugene (“D1”)’s summons dated 29 July 2019 (“D1’s summons”):

(a)      to set aside the ex parte order of Master Grace Chan dated 31 December 2018 (“1^st the extension order”) renewing the validity of the (unserved) Writ until 8 January 2020 (§1) and for other relief (§§2-3); and

(b)      to strike out the indorsement of claim in the writ (§4).

(2)     The Plaintiffs’ summons dated 2 September 2019 to strike out D1’s summons under RHC O 18 r 19.

I.     BACKGROUND FACTS

2.  The 1^st Plaintiff, Allied Weli Development Limited (In Liquidation) (“the Company”) was an investment holding company closely associated with D1 who founded it in 1996 and served as its permanent managing director from 1 November 1996 to 11 November 2009.

3.  The 2^nd Plaintiffs, John Howard Batchelor and Kenneth Fung (“the Liquidators”) were appointed as the joint and several liquidators of the Company on 8 July 2016.

(A)     Events culminating in the winding-up of the company

4.  In June 2011, the Company entered into a deed of guarantee with Penta Investment Advisers Limited (“Penta”) in respect of an investment Penta had made in one of the Company’s 29 subsidiaries.

5.  In January 2012 Penta issued a demand under the guarantee for approximately HK$210 million.  The Company denied liability resulting in Penta having to commence proceedings in the High Court in September 2012 to enforce its claims.  The judge found for Penta on 14 October 2014. The Company’s appeal was dismissed on 18 August 2015 and its application to the Court of Appeal for leave to appeal to the Court of Final Appeal was refused on 11 December 2015.

6.  Penta presented a winding-up petition in October 2015 based on an unmet judgment debt assessed at HK$235 million.  The winding-up order of the Company was made in February 2016.  The Company appealed which appeal was ultimately dismissed in July 2017.

7.  Both Harris J and the Court of Appeal commented on the critical need for investigation into the affairs of the Company.  The Court of Appeal noted the drastic diminution of the Company’s assets: see Re Allied Weli Development Limited, HCCW 337/2015, unrep., 22 February 2016 at §2 and CACV 58/2016, unrep., 18 July 2017 at §6.8.

(B)     Events precipitating the issuance of protective writs

8.  Upon their appointment on 8 July 2016, the Liquidators began their investigations into the affairs of the Company but their attempts to gather in and preserve its assets were frustrated by

(1)     the absence of any books and records of the Company being made available; and

(2)     the lack of any meaningful cooperation from the Company’s former directors, officers, solicitors and other persons previously involved in the affairs of the Company including D1.

9.  It transpired that shortly after Penta issued its statutory demand, on 6 August 2015, the Company moved its place of registration to the Marshall Islands and the conduct of the Company’s management and business was moved to Taiwan and/or the Marshall Islands.  Those matters created additional obstacles and inevitably hampered the Liquidators’ investigations.

10.  When the Liquidators visited the Company’s place of business shortly after taking office, they were told that the Company had never operated from that address and were escorted out by security.

11.  In July 2016, the Liquidators requested a meeting with D1[1] as well as incumbent directors and former directors and officers identified through public records all of whom are defendants in this action.  

12.  However, the Liquidators’ efforts from July 2016 onwards to obtain information and documents from, and for interviews with, former management, direct and indirect shareholders and related entities were met with fierce resistance, obstruction and non-cooperation. 

13.  Meanwhile, the Liquidators liaised with Jonten Hopkins, the Company’s auditors for documents. In April 2017, the auditors provided the Liquidators with the 4 years of audited accounts and audit papers of the Company from 2011 to 2014.

14.  In July/August 2018, Jonten Hopkins produced an additional 175,000 pages of documents to the Liquidators.

15.  While the Company’s audited accounts as at 31 March 2012 showed net assets of HK $2.86 billion, the Liquidators found zero assets[2].  Based on investigations they were able to carry out, it transpires that

(1)     following Penta’s demand under the guarantee in January 2012, in March and April 2012 the Company’s shareholding was substantially reorganised (“the Reorganisation”); and

(2)     in May 2012, the Company, through a series of transactions substantially divested itself of all its assets (its property, its interest in its subsidiaries, receivables and other assets) to associated companies under the control of the Company’s former indirect shareholders (“the Divesting Transactions”).

16.  The Divesting Transactions comprised 3 parts:

(1)     The Dividend (valued at over HK$257 million): an in specie distribution by the Company to its shareholders of the Company’s 100% interest in Hennabun International Group Limited (BVI) (“HIGL”)[3] and its 28 indirect subsidiaries.

(2)     The Asset Transfer: a transfer of over HK$52.5 million of assets to a “fellow subsidiary”.

(3)     The Receivables Assignment: the assignment of HK$2.6 billion of intercompany receivables to a “fellow subsidiary” for HK$1.

17.  Denuded of its assets, Company is wholly insolvent.  Yet, the Company had funds to fight the guarantee proceedings including an unsuccessful attempt to seek leave from the Court of Appeal to appeal to the Court of Final Appeal.

18.  There are letters of support from the Company’s ultimate holding company, HEC Capital Limited (Cayman) (“HEC Capital”) which expired on 31 March 2015.  That might have been a source of funding for the guarantee proceedings.

19.  Instructions for the appeal against the winding-up order was from an individual Lee Kuo-Juy of Taiwan said to be the Company’s sole shareholder.  When the Liquidators enquired as to the consideration received from the Taiwanese investor, the Company’s solicitors Lam & Co said there was nothing: there were no documents.  No further response was received.

20.  On 22 December 2017 the Liquidators having identified potential causes of action, issued 2 protective writs (“the 2017 writs”) against various individuals (including D1) to preserve potential claims relating to the Divesting Transactions.  On 9 January 2018, the Liquidators issued the present Writ against 66 defendants (including D1) and consolidated the claims in the 2017 writs into one.

21.  The potential causes of action are encapsulated in the indorsement of claim in the Writ, specifically, those arising out of the Company’s decision to enter into the guarantee and the subsequent non-performance of the deed, the Reorganisation, the Divesting Transactions and the preparation of the Company’s financial statements.

22.  Breaches of directors’ duty, dishonest assistance, knowing receipt, and unjust enrichment, conspiracy and negligence are the types of claims likely to be pursued.

(C)     Events since the writ

23.  Shortly after the Writ was issued, D1’s solicitors (“Haldanes”) requested the Plaintiffs’ solicitors (“Kirkland”) for service of all the writs upon D1, pursuant to RHC O 12 r 8A (1).

24.  In February 2018, Kirkland provided reasons why the Plaintiffs would not serve the writs on their clients.  Nothing further was heard concerning the request until July 2019. 

25.  In April and May 2018, Haldanes and Kirkland corresponded further regarding interview requests and provision of information without any agreement being reached.

26.  The Liquidators concluded that they had little option but to compel assistance from persons and entities believed to have information and/or documents, principally the past officeholders by making a section 286B application in HCCW 337/2015 (“HCCW 337”) against 9 respondents (“the respondents”) on 29 June 2018 (“the 286B application”).

27.  The 9 respondents other than (i) Lam & Co (solicitors for the Company), (ii) Andrew Lam[4] (at the material time a full-time consultant to the Company under a service agreement dated 1 June 2009) and (iii) Karen Lo (who is D1’s wife) were all former directors and/or officers of the Company.

28.  The Liquidators considered that the orders sought would enable them to reconstitute the Company’s knowledge, understand the reason for its collapse and to assess whether any viable claims exist, and if so, the defendants to such claims and prospects of recovery on any judgment.

29.  Obfuscation and obstruction on the part of the respondents resulted in evidence in opposition only being filed between 23 November and 13 December 2018, almost 6 months after the date of the Liquidators’ application. The hearing was scheduled for 11 and 12 March 2019.

30.  If the respondents’ evidence is taken at face value, none of them has any meaningful information, documents or recollection of what happened to the Company’s HK$2.86 billion worth of assets, who was involved and who benefited from the Divesting Transactions - a case of collective amnesia.

31.  Meanwhile, the documents produced by the former auditors in July/August 2018 required time for a high-level review to be conducted.

32.  The Liquidators considered that they needed further time and were not in a position to determine whether the Plaintiffs would proceed with any claims because of the significant challenges encountered in their investigations described above and further highlighted in §54 below.  They hoped to gain insight through the 286B application into who was responsible for orchestrating the Divesting Transactions and their commercial purposes and who ultimately received the benefit of those Transactions.

33.  It was in those circumstances that, on 21 December 2018, the Plaintiffs applied ex parte for an order extending the validity of the Writ for a period of 12 months (“the 1^st extension order”).

(D)    The 286B application

34.  The hearing took place on 11 and 12 March 2019 but was adjourned part heard with a further two-day hearing on 14 and 17 May 2019 before Recorder Jason Pow SC.

35.  On 6 May 2019 the Liquidators filed Batchelor 2 in HCCW 337 to update the Court on (i) the Liquidators’ review of the Jonten Hopkins documents and (ii) the progress of the 286B application.  This resulted in an adjournment[5] on 14 May 2019 to allow the respondents the opportunity to file evidence in reply.

36.  The hearing resumed on 13 August and concluded on 17 September 2019.  The decision has been reserved which is expected to be handed down in December 2020.

37.  Meanwhile, Haldanes filed a notice to act for D1 in this action on 12 July 2019 and on 29 July 2019, filed an acknowledgement of service of the writ and D1’s summons.  

38.  Also on 29 July 2019, the 7^th defendant (“D7”) one of the 9 respondents to the 286B application sought discovery from the Liquidators of documents referred to in Batchelor 1 and 2, pursuant to  O 24 rr 10-11A.

39.  An application for a 2^nd extension order was made ex parte and granted on 20 December 2019 extending the validity of the Writ to 8 January 2021 (“the 2^nd extension order”).

II.     D1’ S APPLICATION

40.  Mr Barlow SC, leading counsel for D1 advanced 2 reasons for setting aside the ex parte order (s):

(1)     no good grounds were provided for the grant of the 1^st and/or 2^nd extension order(s); and

(2)     there was material non-disclosure.

A. WHETHER THERE WERE GOOD GROUNDS 

(1) Abuse of Process

(a)   Delay in Appointing Liquidators

41.  D1’s submissions focused on abuse, starting with a complaint that the Liquidators could have been appointed in October 2014 after Penta obtained judgment against the Company.  Instead, Penta did not do so until July 2016.

42.  This complaint appears to be totally unfounded.  The Liquidators do not choose and cannot dictate the date of their own appointment.  In so far as there is criticism of the petitioning creditor, it is equally unfounded as it is premised on the petitioning creditor’s knowledge of the Reorganisation and Divesting Transactions, leaving the Company with no assets.

43.  There is not a scintilla of evidence to establish the necessary premise. Rather, the Company contested its liability all the way up to the Court of Appeal, creating the impression that it had the funds to do so.   

(b)   Adequacy of information for an informed decision

44.  Mr Barlow placed considerable reliance on the Court of Appeal’s judgment in China Medical Technologies Inc (In Liquidation) v Bank of China (Hong Kong) Limited [2019] 2 HKLRD 710 which, in his view, was a case with considerable similarities to the present case.

45.  In the China Medical case, the main issue was whether there were good reasons for the extension order.  Kwan JA stated (at §40) that the power to extend the validity of a writ under O 6 r 8 (2) should only be exercised for good reason, and whether there was good reason depended on all the circumstances of the particular case and the question whether an extension should be allowed was one for the discretion of the Judge.

46.  D1 relied heavily on the following passage from §60 of the judgment:

“… An extension would not have been justified to increase the liquidators’ knowledge in relation to the participation of the former management or other individuals in the fraud … nor in relation to the location of misappropriated assets.”

47.  Granted, the China Medical case did concern liquidators who had issued a protective writ and obtained an extension on the basis that they required further information before they could make an informed decision as to whether to proceed with any of the potential claims against the bank but that is as far as it goes.  The passage relied on cannot be applied in a vacuum, devoid of context.  Rather, it has to be viewed in the context of the facts of that case which, as explained below, are materially different from those pertaining in the present case.  

48.  In the China Medical case, pending an application under section 221 for the production of documents and oral examination of the bank’s employees, the liquidators applied for an extension of the writ, claiming that despite all reasonable efforts they required further information.  On that basis the master granted an extension.

49.  A week later, Harris J[6] dismissed the plaintiff’s section 221 application, holding, inter alia, that the liquidators did not need any more information to decide whether they had a viable claim.  The Court of Appeal dismissed the plaintiff’s application for leave to appeal in relation to that part of the decision.

50.  The bank successfully applied to set aside the extension on the basis that there were no good reasons for the extension and that the liquidators were guilty of material non-disclosure in failing to inform the master of the dismissal of the section 221 application.  The plaintiff unsuccessfully appealed that decision.

51.  D1 submitted that the present case is very similar to the China Medical case.  However, there are material differences.  That case concerned a claim by liquidators against a bank after investigations by liquidators showed that the plaintiff’s management had perpetrated a fraudulent scheme to misappropriate the plaintiff’s assets.  The action was against a 3^rd party ie the bank rather than the former directors and other persons and entities related to the Company.  It was not a case where the liquidators (as here) had to reconstitute the knowledge of the Company because, inter alia, of the matters stated in §8 above.  

52.  As Kwan JA remarked (at §45) “the central point … pertains to the adequacy of information for the liquidators to make an informed decision whether to proceed with the claims against the defendant.”  That consideration is necessarily highly fact-sensitive and the facts of a particular case cannot be transposed to another case with a different set of facts.

53.  Moreover, in the context of the section 221 application, Harris J reached a firm conclusion of the adequacy of information[7].  Whilst not determinative when it came to the setting aside application, after reviewing the evidence, Au-Yeung J reached the same conclusion.

54.  The challenges confronting the Liquidators in the present case are considerable and include the following:

(1)     the Liquidators started at a serious disadvantage in terms of time available for their investigations in that by the time they were appointed, over 4 years had already elapsed for potential claims in relation to the Reorganisation and Divesting Transactions;

(2)     they were then met with the situation described in §§8-19 above which was nothing less than a wall of resistance;

(3)     the lack of cooperation of the former directors and officers of the Company left the Liquidators with little choice but to make the 286B application on 28 June 2018 in the expectation of establishing a level playing field;

(4)     the 9 respondents to the 286B application took 6 months to file their affidavits/affirmations which only ranged from 5 to 9 pages in length;

(5)     other than D1 and his wife (D20), the remaining 7 respondents all appear to be affected by a general state of amnesia as regards events/transactions that occurred under their watch, at a time when they were in office[8];

(6)     that the Group may have operated in many respects as a single enterprise without a strict demarcation between legal entities and formal appointments within the Group[9] was a distinct possibility; and

(7)     the additional production of documents by the Company’s former auditors in July and August 2018 required time for a high-level review to be conducted.

55.  The circumstances prevailing in the present case is a far cry from those in the China Medical case, clearly distinguishable on the facts. Here, the Liquidators had no input and/or assistance from former management.  Rather, they had limited time within which to reconstitute the knowledge of the Company, piecing together such bits of information as they are able to uncover.

56.  D1 submitted that on the evidence adduced, the Liquidators had sufficient information to bring viable claims against 8 of the 66 defendants, namely D2 to D5 who were directors at the relevant time, D20 as well as two corporate entities within the group namely, D18 (Hennabun Capital Group Limited) and D15 (HEC Capital). 

57.  The individual defendants D1 named were D1’s co-respondents to the 286B application.  There would have been no need for the 286B application if D1 were correct.

58.  In my view, the notion that the Liquidators should proceed at half-cock in a case such as the present is risible.

(c)    Indorsement of Writ

59.  The generality, scope and breadth of the indorsement was the subject of adverse comment.  D1 described it as “bizarre”, covering every civil cause of action.

60.  Mr Lam SC, leading counsel for the Liquidators referred to Moulin Global Eyecare Holdings Limited v Olivia Lee Sin Mei (2014) 17 HKCFAR 466 where (at §28) in the context of the contents necessary for an indorsement, Gummow NPJ set out 4 propositions including the following:

“(b) The indorsement is not in the nature of a pleading, does not form part of the pleadings, and should not be read as such; rather, the indorsement marks out the perimeter or range of the area within which the plaintiff may express its claim in a formal fashion in the statement of claim whether as originally filed or as sought to be amended;”

61.  The Writ while broadly framed, nonetheless delineates the perimeter of the Liquidators’ claims, determined by the transactions described in, inter alia, §§15-16 above.  It is accepted that the Liquidators do not have sufficient information to particularise who did what, who knew what, who was the controlling mind of the Company but that is due to the difficulty confronted in reconstituting the knowledge of the Company in the absence of meaningful assistance from former management.

62.  It is to be noted that the formulation of protective writs is often necessarily broad: the protective writ in Re China Medical Technologies Inc [2016] 2 HKLRD 962 was also broadly framed but attracted no criticism from the Judge.

(2)        Material non-disclosure

63.  There are 3 respects in relation to which it was said that there had been material nondisclosure.  

(a)   Failure to disclose the speculative nature of the claim against D1

64.  D1’s case is that at the date of the 1^st ex parte application, the 1^st Plaintiff had no known or identifiable cause of action against D1 in that there is no suggestion that D1 received any of the mis-applied assets or was enriched unjustly or otherwise; and no evidence concerning D1 to justify a fraud claim against him.  It was stressed that although D1 was the founder and had been managing director of the Company for many years, he “retired” in 2009.  The Reorganisation and Divesting Transactions about which complaint is made had nothing to do with D1 since they did not occur until 2012, well after his retirement.

65.  It was submitted that the Plaintiffs were seeking through the 1^st extension order to warehouse litigation and to allow the Liquidators to “fish” for a case not known to exist, in the hope that something would turn up.

66.  But the Liquidators have adduced evidence to show that D1’s “fingerprints” can be found on the Company’s dealings after his retirement such as the following:

(1)     D1 continued to retain a 41.12% indirect interest[10] in the Company;

(2)     the Company’s direct and indirect shareholders’ were the beneficiaries of the Reorganisation and Divesting Transactions (collectively “the events”) and D1’s wife Karen Lo (“D20”) was the largest known ultimate shareholder at the time;

(3)     D1 continued to be involved in the Company’s affairs before and after the events. In the guarantee proceedings, there is evidence that D1 met with Penta on a number of occasions even after Penta had already called on the guarantee; in July 2012 D1 offered (by letter) to make payments to Penta; and in April 2013, emails relating to the guarantee proceedings were sent and copied by Lam & Co, solicitors for the Company to D1 for his input;

(4)     payments of at least HK$21.7 million were made by the Company in 2011/2012 for the renovation of the property at 85 Repulse Bay Road which did not belong to the Company but was utilised by D1 and his then de facto wife, D20, and recorded in the Company’s account as “for director benefit” notwithstanding D1 and D20’s denial of holding any office at the time.

67.  Those matters were explored during the five-day hearing for the 286B application now pending decision.

68.  The need to look beyond the de jure directors to identify the true controlling mind and will of the Company follows from the fact that the de jure directors and the company secretary claimed to have no material knowledge and cannot shed light on the circumstances in which the Company divested itself of $2.86 billion of assets.

69.  In the circumstances, the characterisation of the Liquidators’ extension application as “a fishing exercise” is misguided and must be rejected.

70.  Choy Bing Wing v Chief Executive of HKSAR [2006] 1 HKLRD 666 and Nomura International Plc v Granada Group Limited [2008] Bus L R 1 were cited to the Court as examples of abuse.  In the present context, no meaningful assistance can be derived those authorities.

(b)      Failure to disclose at the time of the ex parte application that 12 months would not have been sufficient

71.  As appears from the chronology under section I (B) and (C) above, the respondents to the 286B application only filed their evidence in November/December 2018 after considerable procrastination, necessitating unless orders in some instances.

72.  The criticism that the Plaintiffs must have known that an extension of 12 months would be inadequate is both unjustified and unfair.  Specifically, the court’s diary is not a matter within the Plaintiffs’ control.

73.  It should be noted that even after the 286B application went part heard and the respondents were given leave to file evidence in reply to Bachelor 2, unless orders had to be made in relation to several of the respondents (including D1 and D20) for the filing of their reply evidence.  That D1 should now seek to shift the blame to the Liquidators by raising this unmeritorious ground of non-disclosure is regrettable.

74.  When a matter goes part-heard necessitating adjournments, scheduling difficulties often arise.  The Plaintiffs cannot be held responsible for the delay that has occurred when, in truth, the respondents have themselves caused and/or contributed in no small measure to that delay.

(c) Failure to disclose that an extension would deprive D1 of an accrued limitation defence

75.  D1 relied on the following extract from Kwan JA’s judgment in the China Medical case (referencing the categorisation made by Lord Brandon in Kleinwort Benson Ltd v Barbrak Ltd [1987] AC 597 at 615H-616C[11]):

“83. Limitation issues are of crucial importance to the exercise of the discretion whether to extend the writ and for how long … it would be unlikely for there to be good reason for extension in category (2) cases and even less likely in category (3) cases.

84. It is therefore incumbent on the liquidators to present the relevant limitation points clearly, unequivocally and comprehensively …”

76.  D1 again sought to place reliance on the facts of the China Medical case and referred to various passages of the judgment of Au-Yeung J.  But, as earlier noted, the China Medical case involved a totally different set of facts.  

77.  The question essentially is whether the Liquidators have presented a fair and accurate picture of potential arguments that D1 may raise.

78.  Time limitation issues are specifically addressed in section I.1 of Batchelor 1.  The potential causes of action set out in the Writ largely arise out of and in relation to the Reorganisation and Divesting Transactions with the latter occurring in May 2012.   

79.  The claims most likely to be pursued (for breach of directors’ duty, dishonest assistance, knowing receipt, unjust enrichment, conspiracy and negligence) could have accrued by 2012.

80.  §221 of Batchelor 1 states:

“Accordingly: (a) if the extension subject to the current application is not granted, certain Defendants may prima facie be entitled to assert a time limitation defence if a similar writ was issued now pursuing claims in connection with the Reorganisation and Divesting Transactions, which claims would have accrued more than 6 years ago; and (b) by corollary, if the extension order is granted, this will deprive those Defendants who would otherwise be entitled to assert such a time limitation defence from doing so.”

81.  §223 invited attention to certain claims set out in the indorsement in respect of which causes of action may have accrued more than 6 years prior to the issue of the Writ[12] which were then identified: (a) the Plaintiffs’ claim in respect of the entry by the Company into the guarantee on or about 24 June 2011; (b) withdrawals from the Company’s bank account referred to in 1(f) of the indorsement; and (c) possibly, letters of support given by HEC Capital to the Company in connection with the 2013 and 2014 Accounts.

82.  On a fair reading of section I.1 of Batchelor 1 summarised above, the Court’s attention had been drawn fairly and squarely to the fact that if the extension sought were granted, it could deprive certain Defendants from an accrued limitation defence. 

83.  In my view, it has not been shown that there has been any material non-disclosure on the part of the Plaintiffs.

84.  While Kwan JA expressed the view that it would be unlikely for there to be good reason for extension in a category (2) case, I do not read the China Medical case as precluding any extension ever being granted in category (2) situations.

85.  The Court still retains a discretion and whether it should be exercised is highly fact-sensitive. It would depend on the facts pertaining in the particular case and in an appropriate case, there could be good reason for exercising the discretion to grant an extension. The present case is one such case.

86.  For all the reasons set out above, D1’s summons is dismissed.

III.     THE PLAINTIFFS’ SUMMONS

87.  The Plaintiffs challenged D1’s locus to issue D1’s summons on the basis that in civil proceedings, the jurisdiction of the Court against a defendant is premised upon service being effected on him: see Cameron v Liverpool Victoria Insurance Co Ltd [2019] 1 WLR 1471 at §14 citing Dresser UK Ltd v Falcongate Freight Management Ltd [1992] QB 502 with approval.

88.  It is common ground that the Writ has not been served on D1.

89.  The marginal notes to D1’s summons reference, inter alia, O 12 r 8; O 32 r 6.  Although O 12 r 8A was not specifically referenced, in view of the Court of Appeal’s decision in Premier Fashion Wears Limited v Chow Cheuk Man [1994] 1 HKLR 377, it was common ground that the omission does not disentitle D1 to relief under r 8A if the Court thought it appropriate.

90.  In his reply submissions, Mr Barlow submitted that O 32 r 6 entitles any person, whether a party or not, who is affected by an ex parte order to ask the Court to set it aside.

91.  He cited Shineland Corporation Limited v Gladford Ltd & Others, HCMP 1972/2017, unreported, 30 November 2017 for the proposition that jurisdiction over the parties is founded on submission and not service.  While service is the usual manner of the Court assuming jurisdiction over a party, jurisdiction can arise by the party submitting itself to the same: see Shineland at §24.

92.  In view of that authority, Mr Lam acknowledged that the Court certainly has jurisdiction in the present case but drew a distinction between what he described as “the broader theoretical jurisdiction” as distinct from “the narrower practical jurisdiction”.  However, what was not clear to the Court was the dividing line between the broader and the narrower jurisdiction referred to and the appropriate litmus test is to be applied to determine into which category a particular case falls.

93.  Mr Lam submitted that except where the order made by the Court has a significant impact on the defendant such as a Mareva injunction or an Anton Piller order or where, as in Shineland, his property rights are affected the registration of a lis pendens over his property, “otherwise,” the Plaintiffs maintain that the proper procedure for a defendant would be to take out an application under O 12 r 8A.

94.  Those may be examples of what would fall within the narrower practical jurisdiction but is hardly a satisfactory approach since those examples cannot be exhaustive of the situations that could arise.

95.  As I understand it, the subtext of the submission is that the present case does not fall within the narrower practical jurisdiction and therefore the Court should not entertain the summons unless D1 can bring himself within O 12 r 8A which has a much higher threshold: see China Medical Technologies, Inc (in liquidation) v KPMG (a firm) [2018] HKCFI 655 (unrep,) 23 March 2018 and HKCP 2020 at 12/8A/1.

96.  InShineland, Recorder Stewart Wong SC did not consider the passage in the Dresser case cited by Lord Sumption in Cameron on which the Plaintiffs rely to be of assistance in that the Dresser case was decided in the context of article 22 of the Brussels Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters, concerning when a Court in a contracting state is first seised of an action: see §§26-28.

97.  The Plaintiffs referred to the decision of DHCJ To in D7’s application[13] in Allied Weli Development Limited (In Liquidation) v    Chuang Yue Chien [2020] HKCFI 2151 for discovery pursuant to O 24 rr  10-11A where (at §42) in rejecting D7’s application, the Judge was of the view that D7 had no right to participate in the hearing or to contest those applications and the only right exercisable by her was to invoke O 12 r 8A.

98.  That decision cannot assist the Plaintiffs in the present case because it did not concern an ex parte order affecting D7.

99.  For my part, either the Court has jurisdiction or it does not.  If it does have jurisdiction under O 32 r 6, then it is a matter of whether D1 can succeed on the merits.

100.  It follows that the Plaintiffs’ summons falls to be dismissed.

IV.     ORDER

101.  For the reasons set out above, it is ordered that (1) D1’s summons be dismissed and (2) the Plaintiffs’ summons be dismissed.

102.  There is to be in an order nisi of costs of

(1) D1’s summons in favour of the Plaintiffs with certificate for 2 counsel, and

(2) the Plaintiffs’ summons in favour of D1 with certificate for counsel,

such costs to be summarily assessed and payable forthwith.  Directions for summary assessment will be given separately.