FONG CHAK KWAN v. ASCENTIC LTD AND OTHERS

CACV 358/2020

[2021] HKCA 1138

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 358 OF 2020

(ON APPEAL FROM HCPI NO. 242 OF 2016)

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J U D G M E N T

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

I. Background

1.  The plaintiff is a Hong Kong permanent resident.   He claimed that the 1^st and the 2^nd defendants were his employers under a contract of employment (the ‘Employment Contract’).  The 1^st defendant is a Hong Kong company and the 2^nd defendant is a company in the United States of America (‘USA’).

2.  On 10 October 2014, while the plaintiff was assigned by the defendants to work in a sewage treatment factory in the Mainland in Ningbo City, he accidentally fell into the trench of a tank.  He suffered serious personal injuries.  He returned to Hong Kong four days after the accident and received medical treatment in hospitals here.

3.  On 7 March 2016, the plaintiff commenced the present action against the defendants.  The 1^st defendant was served in Hong Kong and a defence was filed.  The plaintiff then applied for leave to serve a concurrent writ of summons on the 2^nd defendant in the USA.  On 17 October 2016, Master Roy Yu granted the order (‘the Yu Order’).  Leave to serve out was based on three gateways in Order 11, rule 1 of the Rules of the High Court (‘RHC’) :

1)  Gateway (C) : the 2^nd defendant is a proper and necessary party to the claim;

2)  Gateway (D) : the claim is brought for breach of a contract made within the jurisdiction (rule 1(1)(d)(i)) or it was made by an agent within the jurisdiction on behalf of a principal outside the jurisdiction (rule 1(1)(d)(ii));

3)  Gateway (F) : the claim is founded on a tort and the damage was sustained, or resulted from an act committed, within the jurisdiction.

4.  The plaintiff duly served the concurrent writ on the 2^nd defendant in the USA.  The 2^nd defendant did not acknowledge service and an interlocutory judgment was entered against the 2^nd defendant for damages to be assessed.

5.  The plaintiff and the 1^st defendant later reached a settlement of the claim against the 1^st defendant.  The 1^st defendant agreed to pay the plaintiff, inter alia, an ex gratia sum of $325,000 together with another ex gratia sum of $250,000 as costs.  The settlement was made on a without admission of liability basis.  On 18 May 2018, Master Roy Yu made a consent order in terms of the settlement.

6.  Shortly after the settlement on 26 July 2018, the Employees Compensation Assistance Fund Board (‘the Board’) successfully obtained an order to be joined as the 3^rd defendant in this case. 

7.  On 1 November 2018, the Board issued a summons to set aside the Yu Order and the interlocutory judgment and to stay the present action against the 2^nd defendant on the basis of forum non‑conveniens.

8.  The summons was heard by Marlene Ng J and she dismissed the summons on 29 April 2020.  She found that the 2^nd defendant is a proper party under Gateway (C).  In respect of Gateway (D), she found that the proper basis is that the proper law of the Employment Contract is Hong Kong law under rule 1(1)(d)(iii) and not (i) and (ii). 

9.  In respect of Gateway (F), she found that the proper basis is based on the first limb of rule 1(1)(f), namely, the damage was sustained in Hong Kong.

10.  The Board sought leave to appeal against the Judge’s decision.  She granted leave on the ground that the law on Gateway (F) requires further guidance from the Court of Appeal.  The Board now appeals.

II.     Gateway (F)

11.  This focus of the appeal is on Gateway (F) which we will now deal with.

1)     The principles

12.  This application for obtaining leave to serve originating process (in this case a writ) out of Hong Kong is based on Order 11 RHC.  The principles for obtaining leave are 1) there is a good arguable case that the case comes within the gateway, 2) there is a serious issue to be tried on the merits of the case and 3) Hong Kong is the appropriate forum under the principles governing forum conveniens for the trial of the action.

13.  The gateway relating to tort is Order 11, rule 1(1)(f) which provides that :

‘ (f) the claim is founded on a tort and the damage was sustained, or resulted from an act committed, within the jurisdiction;’

14.  The issue that arises is what is the correct interpretation of the term ‘the damage’ in the light of the recent English decisions of Brownlie v Four Seasons Holdings Inc. (Brownlie No. 1) [2018] 1 WLR 192 and Brownlie v FS Cairo (Nile Plaza) LLC (Brownlie No. 2) [2021] 2 All ER 605.

2)     Dynasty Line Ltd

15.  Before we come to these cases, it is of note that Gateway (F) was previously considered by this Court in Dynasty Line Ltd v Sukamto Sia [2009] 4 HKLRD 454 where this Court followed the approach of the English Court of Appeal in Metall und Rohstoff AG v Donaldson, Lufkin & Jenrette Inc [1990] 1 QB 391 which interpreted the same rule and held :

‘ 33. In considering whether damage is sustained in Hong Kong it is sufficient if some significant damage had been sustained here: see Slade LJ in Metall Und Rohstoff Ag v Donaldson Lufkin & Jenrette Inc [1990] 1 QB 391 at p.437.’

16.  The English rule at that time (which was introduced in 1987) was the same as ours.  As Slade LJ observed in Metall & Rohstoff at page 437, until 1987 leave could be given only if the action begun by the writ was founded on a tort committed within the jurisdiction and most of the decided cases turned on that wording.  The rule was changed in 1987 to give effect to the Brussels Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters (the ‘Brussels Convention’) (see Schedule 1 to the Civil Jurisdiction and Judgments Act 1982) and the decision of the European Court of Justice in Handelskwekerij G.J. Bier B.V. v. Mines de Potasse d’Alsace S.A. (Case 21/76) (‘Bier’) [1978] Q.B. 708.  The United Kingdom (‘UK’) was then part of the European Community (‘EC’).  Metall & Rohstoff itself was not an EC case, it was concerned with service out on American companies.  Slade LJ held at page 437 :

‘ As the rule now stands it is plain that jurisdiction may be assumed only where (a) the claim is founded on a tort and either (b) the damage was sustained within the jurisdiction or (c) the damage resulted from an act committed within the jurisdiction.’

17.  Dealing with Conditions (b), Slade LJ stated :

‘ Conditions (b) raises the question: what damage is referred to? It was argued for A.C.L.I. that since the draftsman had used the definite article and not simply referred to “damage,” it is necessary that all the damage should have been sustained within the jurisdiction. No authority was cited to support the suggestion that this is the correct construction of the Convention to which the rule gives effect and it could lead to an absurd result if there were no one place in which all the plaintiff’s damage had been suffered. The judge rejected this argument and so do we. It is enough if some significant damage has been sustained in England.’

18.  At page 449, Slade LJ held :

‘ Significant damage has been suffered within the jurisdiction. That is enough. It is not incumbent on M. & R. also to show that that damage was caused by tortious acts committed by the defendants within the jurisdiction.’

3)     Brownlie (No. 1)

19.  Apart from dealing with jurisdictional cases concerning the EC, the English courts at the same time continue to deal with non‑EC jurisdictional cases.  The UK current rules as Baroness Hale of Richmond PSC observed in Brownlie (No.1) (a non‑EC case) are the Civil Procedure Rules (‘CPR’).  She held :

‘ 40 Under the CPR, the equivalent rule to RSC Ord 11, r 1(1)(f) was contained in CPR r 6.20(8): “a claim is made in tort, where ― (a) damage was sustained within the jurisdiction; or (b) the damage sustained resulted from an act committed within the jurisdiction.” The definite article was omitted from (a), in line with the holding of the Court of Appeal in Metall und Rohstoff AG v Donaldson, Lufkin & Jenrette Inc [1990] 1 QB 391, 437, that (a) did not require all the damage to be sustained in England; it was enough if “some significant damage” had been sustained here; and similarly that (b) did not require that all the acts constituting the tort be committed in England; it was enough if the tort was in substance committed here. Neither the Rules of the Supreme Court nor the Civil Procedure Rules required that permission be given to serve out of the jurisdiction if the relevant gateway applied; there was always a discretion not to do so, exercised in accordance with the principles laid down in Spiliada Maritime Corpn v Cansulex Ltd [1987] AC 460. In the CPR, this was reflected in rule 6.21(2A): “the court will not give permission unless satisfied that England and Wales is the proper place in which to bring the claim.’

20.  Baroness Hale stated that this ‘gateway’ is now provided under CPR Practice Direction 6B, paragraph 3.1(9)(a) permitting the court to grant permission for service out of the jurisdiction of :

‘ a claim ... in tort where ―(a) damage was sustained [or will be sustained] ... within the jurisdiction ...’

The words in brackets were not in force at the times relevant to the decision, see Brownlie (No. 2) at [9].  The relevant principles in Spiliada referred to by Baroness Hale are, of course, the principles on forum conveniens.

21.  In Brownlie (No. 1), Sir Ian Brownlie Q.C., the distinguished international lawyer and his family met with an accident in Egypt while on holiday there.  Sir Ian died and his widow sued in England seeking damages against the hotel which organised the excursion during which the accident occurred.  The Supreme Court held that the hotel was not the proper defendant but it also went on to consider the relevant rule for service out.  Two different views emerged from the decision.  The majority view (Baroness Hale, Lord Wilson JSC and Lord Clarke of Stone‑cum‑Ebony) is that a claim in tort may be brought in England if damage is suffered in England as a result of personal injuries inflicted abroad.  The minority view (Lord Sumption JSC and Lord Hughes JSC) is that the claim cannot be brought in England.

4)     The majority view

22.  We will discuss the majority view in Brownlie (No. 1) first. Baroness Hale contrasted the UK EC and non‑EC jurisprudence on jurisdictional rules.  She referred to Article 5(3) of the Brussels Convention which provided that a person domiciled in a contracting state could be sued in another contracting state in matters relating to tort, delict or quasi‑delict ‘in the courts for the place where the harmful event occurred’ [36]. She first referred to Bier where the European Court of Justice (‘ECJ’) interpreted the phrase ‘the place where the harmful event occurred’ as referring both to the place where the damage occurred and the place of event giving rise to it, so that the claimant could choose between them.  She then referred to the subsequent ECJ decisions which restricted this interpretation.

23.  Baroness Hale at [37] explained the holding of the ECJ in Dumez France SA v Hessische Landesbank (Case 220/88) [1990] ECR I‑49 as follows :

‘ article 5.3 did not permit a claimant claiming for damage, which was the consequence of harm suffered by other persons who were the direct victims of the harmful act, to bring proceedings in the place where the claimant sustained the damage.’

24.  Baroness Hale at [38] also set out the ECJ’s holding in Marinari v Lloyds Bank plc [1996] QB 217 as follows :

‘ article 5.3 did not cover every place where adverse consequences of an event which had already caused actual damage elsewhere could be felt. It did not refer to the place where the victim claimed to have suffered financial loss consequential on actual damage arising and suffered by him in another member state.’

25.  Baroness Hale then referred to and approved the first instance UK cases dealing with non‑EC jurisdictional rule such as Booth v Phillips [2004] EWHC 1437 (Comm); [2004] 1 WLR 3292, Cooley v Ramsey [2008] EWHC 129 (QB); [2008] IL Pr 27, Harty v Sabre International Security Ltd (formerly SIS Iraq Ltd) [2011] EWHC 852 (QB), Wink v Croatia Osiguranje DD [2013] EWHC 1118 (QB), Stylianou v Toyoshima [2013] EWHC 2188 (QB), Erste Group Bank AG (London Branch) v JSC ‘VMZ Red October’ [2013] EWHC 2926 (Comm); [2015] EWCA Civ 379, CA and Pike v Indian Hotels Co Ltd [2013] EWHC 4096 (QB). These cases consistently held that a claim in tort may be brought in England if damage is suffered there as a result of personal injuries inflicted abroad. 

26.  Baroness Hale then stated the following :

(1)  The drafters of the English rules did not intend them to mirror the interpretation later given to the Brussels Convention :

‘ 50 Indeed, I see no reason to think that those who framed the RSC and CPR intended them precisely to mirror the interpretation later given to the Brussels Convention. The language used in the Rules, although no doubt intended to widen the gateway so as to encompass the cases covered by the Brussels Convention, is quite different from the language of the Convention. The Dumez and Marinari decisions came afterwards, to restrict the scope of the language used in the Convention, but they do not override the language of the Rules in non-EU cases. They are of no help in construing Rules which have remained in essentially the same language ever since. If the Rules Committee had wanted to assimilate the Rules after the decisions in Booth and Cooley, they could easily have done so, and now more easily, as the gateways are contained in a Practice Direction rather than a Rule.’ (emphasis added)

(2)  There are differences in the EC and non‑EC schemes :

‘ 51 It is also necessary to bear in mind the difference between the two schemes. The European scheme deliberately eschews any discretion in favour of clear and certain rules, in the context of a scheme which governs, not only jurisdiction, but also recognition and enforcement of the resulting judgments. No doubt that is why the Court of Justice was anxious to restrict the scope of the Bier decision by drawing the direct/indirect distinction. That is not a feature of the English scheme, which retains the “valuable safety valve” of discretion, a discretion which need not be limited to the Spiliada principles, but can concentrate on the real question, which is “the proper place for the resolution of the dispute” (as Professor Briggs puts it).’

(3)  She disagreed with the minority view advocated by Lord Sumption who drew a distinction between ‘direct’ and ‘indirect’ damage and who equated ‘damage’ in the English rule with the ‘damage which completes the cause of action’ :

‘ 52. I also have great difficulty with the approach to “damage” adopted by Lord Sumption JSC. He appears to equate “damage” in the Rule with the damage which completes the cause of action. It is true that damage is an essential component of some torts, such as the tort of negligence and the economic torts, so that it is necessary to know if and when the cause of action is complete for purposes such as limitation. But damage is not an essential part of every cause of action in tort. There are many torts which are actionable per se, without proof of damage: trespass to the person, trespass to goods, libel and some slanders are the obvious examples. There is no particular reason to think that completion of the cause of action is what the framers of the Rules had in mind when they used the word “damage”. They are more likely to have had the ordinary and natural meaning of the word in mind. I would be very reluctant to disagree with the several first instance judges who held that this refers to the actionable harm caused by the wrongful act alleged. In this they have the support of a very distinguished Court of Appeal in New South Wales, in Flaherty v Girgis (1985) 63 ALR 466, where Kirby P and Samuels JA agreed with McHugh JA, construing a similar jurisdictional rule, that “damage, therefore, is to be contrasted with the element necessary to complete the cause of action; it includes all the detriment, physical, financial and social which the plaintiff suffers as a result of the tortious conduct of the defendant”: p 482.

53.  Furthermore, it is quite clear that damage can be suffered by the same person in more than one place, just as the wrongful acts can be committed in more than one place. The Court of Appeal in the Metall case must have been right to say that the Rules contemplated the possibility of there being jurisdiction in more than one place.  Nor do I find the distinction between direct and indirect damage easy to draw in all cases.  If I am seriously injured in a road accident, the pain, suffering and loss of amenity that I suffer are all part of the same injury and in cases of permanent disability will be with me wherever I am.’ (emphasis added)

(4)  The discretionary aspect of the forum conveniens principles in obtaining leave will restrict forum shopping :

‘ 54. I do, of course, take the point that the claimant should not be in the position of choosing where to bring the claim. But in my view the discretion should be robust enough to prevent that. It is looking for a substantial reason to allow a claim against a foreign defendant to be brought in the courts of this country and the courts have always treated such cases with caution. And it is important to bear in mind that, in a tort claim, the applicable law will be the law of the country where the events took place.’

(5)  The ordinary and natural meaning of the language used in the rule should be adopted :

‘ 55. I was for a while attracted by a middle course, which would restrict “damage” to the continuing bodily (physical or psychological) effects of the wrongful act, because these are part and parcel of the initial injury, but excluding consequential financial losses. But it is difficult to find a warrant for that in the language used and in some torts the damage is wholly financial, so that separating out the direct and the consequential would be even more difficult. In the end, therefore, I would adopt the ordinary and natural meaning of the language used in the Rules.’

27.  Lord Wilson was of the following view :

(1)  The procedure rule for non‑EC cases should not be narrowly construed in the same way as EC cases :

‘ 61 Our procedural rules for such service have therefore needed to be wide enough to enable us to comply with our duties under EU law. But it does not follow that, even if the natural construction of our rules indicates a wider gateway to service out of the jurisdiction in the case of a claim unconstrained by EU rules of jurisdiction, construction of them should be narrowed to the size of the gateway set by the EU rules, as interpreted by the Court of Justice.’

(2)  Referring to Slade LJ’s statement in Metall und Rohstoff on significant damage, he stated :

‘ 62 …… Indeed in 2000, when rule 6.20(8) of the CPR replaced rule 1(1)(f) of Order 11, the definite article was removed from the words “the damage was sustained” in order to reflect the decision in the Metall case.

63     …… Where, by contrast, the jurisdiction of the English court is not governed by EU law, the decision in the Metall case demonstrates that our rules create a gateway wider, as is now clear, than EU law would permit.’

(3)  He would not interpret the word ‘damage’ in Practice Direction 6B by reference to ‘the damage’ which violates the interest protected by the law and which completes a cause of action in tort :

‘ 64 I, for my part, would not interpret the word “damage” in paragraph 3.1(9)(a) of Practice Direction 6B by reference to “the damage” which violates the interest protected by the law and which completes a cause of action in tort. The absence of the definite article demonstrates the contrary; and, in that it therefore has to be accepted (as Lord Sumption JSC accepts in para 23 above) that “damage” for the purposes of the paragraph can be wider than the damage which violates the interest and which completes the cause of action, I find the relevance of the latter concept, whatever its importance in the substantive law of tort, to be elusive.’

(4)  It is legitimate to interpret the word ‘damage’ as extending to the secondary damage sustained in England which flowed from the primary damage sustained abroad by reference to the overriding objective of the CPR :

‘ 65 It would, to put it at its lowest, be legitimate to interpret the word “damage” as extending to the secondary damage which the claimant and her husband’s estate sustained in England and which flowed from the primary damage sustained in Egypt. CPR r 1.2(b) obliges a court which interprets another of its rules to seek to give effect to the overriding objective of enabling it to deal with cases justly. So, if an otherwise legitimate interpretation better serves the ends of justice, it ought in principle to be adopted.’

(5)  The appropriate forum conveniens inquiry can restrict abuse :

‘ 66 Is it possible that proponents of the narrow interpretation fail to invest due confidence in the appropriate forum inquiry? Is not that inquiry sufficiently muscular to exclude claims founded only on a tenuous amount of damage sustained in England? Lord Sumption JSC contends in para 31 above that the main factor which determines such an inquiry is the practicality of litigation. But in the Spiliada case, cited at para 40 above, Lord Goff of Chieveley held (i) at p 474F-G that the question was not one of mere practical convenience; (ii) at p 480B-C that the court had to take into account the nature of the dispute as well as the legal and practical issues which it raised; and (iii) at p 480G that the fundamental requirement was to identify the forum in which the case might suitably be tried in the interests of all the parties and of the ends of justice.’

28.  Lord Clarke agreed with the reasons of Baroness Hale and Lord Wilson.

5)     The minority view

29.  The minority view of Lord Sumption and Lord Hughes is as follows :

(1)  The issue is whether damage arising from a tort (which results in personal injury and death) is limited to direct damage and not indirect damage :

‘ [20] ……Accordingly, the question at issue on this appeal is whether, when a tortious act results in personal injury or death, “damage” is limited to the direct damage, ie the physical injury or death, or extends to the indirect damage, ie the pecuniary expenditure or loss resulting. On the latter view, the English court would have jurisdiction. The 2015 amendment extends the test to prospective torts and prospective damage, but will not affect the question what “damage” means in this context.’

(2)  Damage in the present case means direct damage :

‘ 23. There is, however, a more fundamental reason for concluding that in the present context “damage” means direct damage. It concerns the nature of the duty broken in a personal injury action and the character of the damage recoverable tor the breach. There is a fundamental difference between the damage done to an interest protected by the law, and facts which are merely evidence of the financial value of that damage. Except in limited and carefully circumscribed cases, the law of tort does not protect pecuniary interests as such. It is in general concerned with non‑pecuniary interests, such as bodily integrity, physical property and reputation which are inherently entitled to its protection. Of these, bodily integrity has been described as “the first and most important”: Parkinson v St James and Seacroft University Hospital NHS Trust [2002] QB 266, para 56 (Hale LJ). Where these interests are deliberately or negligently injured, the tort is complete at the time of the injury, notwithstanding that damage is an essential element of it. This is the basis of the rule that all damage flowing from bodily injury or damage to property must be claimed in one action, which may be brought as soon as the claimant has been injured or his property damaged. And, although damage is an essential element of the cause of action in tort, the limitation period in respect of any damage flowing from the breach will run from that time. I would readily accept that that “damage” as that word is used in the rule is not necessarily limited to the damage which serves to complete a cause of action in tort. But the two concepts are clearly related, even if they are not coterminous.’

(3)  The draftsman of the Practice Direction did not intend to provide ‘damage’ should extend to financial or physical consequences of the damage by reason of the language used and two policy considerations.

‘ 28 The first is that in different ways all the jurisdictional gateways in the Practice Direction are concerned to identify some substantial and not merely casual or adventitious link between the cause of action and England. This is a purpose which is better served by locating jurisdiction in the place where the relevant interest of the claimant was damaged than by asking where he or she experienced the effects of the damage. To revert to the example of a ship damaged in a collision, the physical damage sustained at the time of the collision has a real connection with the country in which it happened, whereas the connection with the country where it was repaired or would have earned freight is likely to be adventitious. In the context of personal injury, a principle which located damage in the place where the pecuniary consequences of the accident were felt or where any continuing pain, suffering or loss of amenity were experienced would in the great majority of cases confer jurisdiction on the country of the claimant’s residence. It would confer on the English courts what amounts to a universal jurisdiction to entertain claims by English residents for the more serious personal injuries suffered anywhere in the world. Yet that would be far too wide to be consistent with principle. English law has never asserted a jurisdiction for its courts on the basis of the English identity of the claimant, whether by virtue of residence, domicile or nationality. Personal connections between the parties and England are generally relevant to jurisdiction only in the case of the defendant, for example because the claim form can be served on him there or because paragraph 3.1(1) of Practice Direction 6B applies by virtue of the defendant’s English domicile. This is the fundamental reason why I am unable to accept Baroness Hale PSC’s analysis of this issue. It appears to me to produce a test for jurisdiction so wide as to conflict with the purpose of the rule.

29  The second policy consideration concerns the history of the tort gateway and its relationship with article 5(3) of the Brussels Convention and Regulations.  Article 5(3) is one of a number of provisions for special jurisdiction. It authorises proceedings in tort “in the courts for the place where the harmful event occurred or may occur”, notwithstanding the general rule that suit must be brought in the jurisdiction of the defendant’s domicile.

30  It is fair to say that the construction of the Brussels Convention and Regulations depends in part on policy considerations which are irrelevant in the context of the English rules governing jurisdiction over non-EU defendants.  Both the Convention and the English rules recognise the possibility that there may be more than one eligible jurisdiction for a given dispute.  But the Brussels Convention and Regulations are a code for allocating jurisdiction between EU member states.  Acceptance of jurisdiction allocated in accordance with them is mandatory, and not merely permissive as it is under the English rules.  None the less, I consider that the principle adopted by the Court of Justice should be followed for two reasons.  The first is that they embody an analysis of what constitutes “damage” which, like Mustill LJ in the Eras Eil Actions case, I regard as unanswerable.  It is not so much a proposition of law as the application of basic logic to the facts.  The second reason is that in its current form, the jurisdictional gateway in the English rules for claims in tort was deliberately drafted so as to assimilate the tests for asserting jurisdiction over persons domiciled in an EU member state and persons domiciled elsewhere…….’

(4)  The jurisdictional gateways and the discretion as to forum conveniens serve different purposes :

‘ 31. ...... The jurisdictional gateways and the discretion as to forum conveniens serve completely different purposes. The gateways identify relevant connections with England, which define the maximum extent of the jurisdiction which the English court is permitted to exercise. Their ambit is a question of law. The discretion as to forum conveniens authorises the court to decline a jurisdiction which it possesses as a matter of law, because the dispute, although sufficiently connected with England to permit the exercise of jurisdiction, could be more appropriately be resolved elsewhere. The main determining factor in the exercise of the discretion on forum conveniens grounds is not the relationship between the cause of action and England but the practicalities of litigation. The purpose of the discretion is to limit the exercise of the court’s jurisdiction, not to enlarge it and certainly not to displace the criteria in the gateways.’

6)       Brownlie (No. 2)

30.  In Brownlie (No. 2), the widow sued the proper defendant and divergent views emerged again on the correct interpretation of the relevant rule because the Supreme Court in Brownlie (No. 1) had emphasised that the views expressed on the rule for service out was obiter in nature.  McCombe LJ and Underhill VP adopted the majority view of Brownlie (No. 1) while Arnold LJ adopted the minority view.

7)     The majority view

31.  McCombe LJ was of the following view :

(1)  Metall and Rohstoff  provides the answer to the inquiry :

‘ [49] …… The requirement to show an arguable case of ‘significant damage’ derived from the Metall und Rohstoff case is sufficient for the understanding of the meaning of our rule.’

(2)  The distinction between direct and indirect damage is meaningless:

‘ [53] To my mind the distinction between ‘direct’ and ‘indirect’ damage is virtually meaningless in the present context when one is asking the proper question whether a claimant has suffered ‘significant damage’ in the jurisdiction. Even in cases of economic loss, moreover, I can see no reason why the suffering of ‘significant damage’ in this country might not amount to a proper ‘connecting factor’ between this country and a foreign defendant, even if other such damage is suffered elsewhere, justifying the assumption of jurisdiction in a proper case. There is no need to import the legalistic niceties inherent in the concepts of direct and indirect damage. Such jurisdiction may not necessarily be exclusive. It may be that other ‘significant damage’ is inflicted in the defendant’s country also and the rules of that country may give its courts jurisdiction also. It is then a question of balance for the court to decide whether this country’s jurisdiction should be asserted in the face of a parallel jurisdiction of the courts of the country abroad.’

32.  Underhill VP accepted the majority view in Brownlie (No. 1) :

‘ [159] …… As everyone agrees, the language of the Practice Direction is capable of both a wide and a narrow interpretation, and I do not believe that the history of the circumstances in which it took its current form affords any clear guide to which should be preferred. Accordingly, the choice between the two interpretations depends on general considerations of legal principle and policy. It seems to me that the real question is whether it is appropriate to have a gateway so wide that it would admit any claim in tort where the claimant has suffered significant damage of any kind within England and Wales, and thus to leave it to the discretion formerly known as forum non conveniens to restrict what would otherwise be an exorbitant exercise of jurisdiction. I see the force of Lord Sumption’s objection (see paras [28] and [31]) that such a use of the discretion is contrary to principle, but Lady Hale (at para [54]) and Lord Wilson (at para [66]) considered and specifically rejected that objection. I also see the force of the point made by Arnold LJ at para [75] above about the increased scope for dispute at the permission stage; but that cannot be decisive in itself, and the majority in the Supreme Court must be taken to have appreciated that a ‘robust’ or ‘muscular’ deployment of the discretion would increase the scope for such disputes and must have regarded that as acceptable.’

33.  Arnold LJ of the minority held :

(1)   In respect of forum conveniens :

‘ [75] …… I accept that, other things being equal, this is a factor which favours a broader, rather than a narrower, construction of the gateways. In my view, however, it is important not to place too much weight on this factor. Save in clear-cut cases, disputes as to the appropriate forum are expensive and uncertain. They are expensive because of the need for evidence and argument as to the connections between the dispute and the respective fora, and they are uncertain because they depend upon judicial evaluation. It would therefore be unsatisfactory to adopt an interpretation of gateway 9a which is so broad that most of the work in identifying cases in which foreign defendants should be brought before an English court is left to be done by forum conveniens. That would be a recipe for litigation.’

(2)  The damage claimed in that case are indirect damages :

‘ [91] In the case of damages suffered by Sir Ian’s estate and damages for Lady Brownlie’s bereavement and loss of dependency, these seem to me plainly to be indirect consequences of the death of Sir Ian in Egypt. In the case of Lady Brownlie’s own pain, suffering and loss of amenity, I agree with Lady Hale in Brownlie I at [53] that the position is less clear cut. As she says, someone who is injured suffers pain and loss of amenity wherever they are. It seems to me, however, that the direct consequences of the tort took place in Egypt: it was there that Lady Brownlie suffered the injury that caused her the pain and the loss of amenity she experienced. She only experienced pain and loss of amenity in England and Wales because she subsequently returned here.’

8)      Our view

34.   Dynasty Line Ltd is binding on this Court unless it can be shown that it is plainly wrong.  No argument has been advanced that it is plainly wrong.  On the contrary Metall and Rohstoff upon which Dynasty Line Ltd was based received endorsement from the majority in Brownlie (No. 1) and Brownlie (No. 2).  On this ground alone, the Board’s appeal on Gateway (F) can be dismissed.

35.  The thrust of the argument of Mr. Wong SC (together with Mr. Wang) for the Board is that the majority in Brownlie is wrong and the minority is right.  We disagree.   First of all, although the views expressed by the majority in Brownlie (No. 1) are obita, as Underhill VP observed in Brownlie (No. 2) :

‘ [158] ...... However, I do not think that it would be right to treat the judgments of the majority as if they were no more than a contribution to the debate that deserves our respect and careful consideration. In my view the approach that accords proper weight to a fully considered but obiter view of a majority in the Supreme Court should be the same as that which a first-instance court takes to the decision of a court of co-ordinate jurisdiction, namely that we should follow it unless we are satisfied that it is clearly wrong. It would be easier for us to be satisfied of that if it could be demonstrated that the argument before us had raised aspects of the tort gateway issue of which the Supreme Court may have been unaware; but we have seen the printed cases and we also have the earlier judgment of this Court, and it seems that the essential points made in the arguments before us were all squarely before the Court.’

36.  We would adopt the same view as Underhill VP on how we should treat the obita views expressed in Brownlie (No. 1).

37.  Second, the words in our Order 11, rule 1(1)(f) are simple and straightforward.  The natural and ordinary meaning is clear and the threshold is satisfied if the damage is sustained in Hong Kong.  It is important to bear in mind the context why the phrase ‘significant damage’ was used in Metall & Rohstoff.  It was in response to the argument that by the use of the words ‘the damage’ with the definite article, it was necessary for all the damage to have been sustained within the jurisdiction.  This argument was roundly rejected and Slade LJ held ‘It is enough if some significant damage has been sustained in England’ : see [17] above.

38.  To adopt the issue as framed by Lord Sumption (whether damage is limited to direct or indirect damage) will, with respect, unnaturally force the discussion into a strait jacket, and ignore the ordinary and natural meaning of the words ‘the damage’.  There is no reference in our rule to direct or indirect damage, or the damage which completes the cause of action.  To adopt such a construction would require a re‑writing of the language used in our rule.

39.  In Vile v Von Wendt (1979) 103 DLR (3d) 356, the Divisional Court of the Ontario High Court of Justice was dealing with the service out provision under its rule 25(1)(h) which reads as follows :

‘ (h) in respect of damage sustained in Ontario arising from a tort or breach of contract committed elsewhere;’

40.  Linden J giving judgment of the three judge court held at page 362 :

‘ Damage certainly includes injury but it also includes more than that. It includes all of the different heads of damage and various expenses that may be suffered as a result of tortious conduct.’

41.  We agree with this view.  Mr. Wong referred to Muscutt v Courcelles (2002) 213 DLR (4th) 577 and submitted that Canada has since reviewed its jurisprudence on intra‑provincial service to reflect the one country value of Canada.  In our view, this does not affect the construction of the rule in Vile.

42.  Further, the words of McHugh JA in Flaherty cited by Baroness Hale in Brownlie (No. 1) are that damage is to be contrasted with the element necessary to complete the cause of action and includes all the detriment, physical, financial and social which the plaintiff suffers as a result of the tortious conduct of the defendant.  We agreed with Flaherty.  As Lord Wilson observed, the distinction between direct and indirect damage is elusive.  We further echo the view of McCombe LJ that the distinction between direct and indirect damage is virtually meaningless.  In the context of a personal injury case, it is difficult to decide at what point the cause of action of tort is completed.   An example, as submitted by Mr. Harris SC (together with Mr. Wong) for the plaintiff, is pneumoconiosis which is an occupational disease of the fibrosis of the lungs by reason of exposure to mineral dust such as silica or asbestos.  It extremely difficult to decide in such a type of case the completion of the cause of action.  The description that the distinction between direct and indirect damage is elusive is most appropriate.  It is precisely because of the difficulties in deciding when the disease was contracted that the Pneumoconiosis and Mesothelioma (Compensation) Ordinance (Cap. 360) was enacted to allow a worker to seek compensation by reference to a statutory defined ‘date of diagnosis’ by the Pneumoconiosis Medical Board. 

43.  Mr. Wong submitted that our rule is based on the English 1987 rule which was introduced to give effect to the Brussels Convention and therefore we should accord it the narrow interpretation given by the European jurisprudence.  No legislative history was provided in this appeal.  In any event, the argument carries no weight.  As seen earlier, even in the UK, a distinction is drawn between the EC and non‑EC jurisdictional basis for service out. 

44.  Mr. Wong referred to Erste Group Bank AG, where the English Court of Appeal (per Gloster LJ at [104]‑[105]) held that the effect of the first instance authorities is to make this gateway extraordinarily wide and it had serious reservations as to whether those first instance cases were right.  Nonetheless, Gloster LJ held that it was unnecessary for her to decide in that appeal whether these cases should be overruled and she pointed out that the damage in that case was sustained in New York and not in England.  In any event, the majority in Brownlie (No. 1) approved of the first instance authorities.

45.  Mr. Wong further referred to Man Diesel & Turbo SE and another v IM Skaugen SE and another [2019] SGCA 80 where the relevant Singapore rules for service out is :

‘ (f)(ii) the claim is wholly or partly founded on, or is for the recovery of damages in respect of, damage suffered in Singapore caused by a tortious act or omission whenever occurring;’

46.  In that case, there were four distinct claims and the first instance judge held all four claims satisfied the gateway requirement.  The Singapore Court of Appeal held only two of them satisfied the requirement.  The decision turns on the facts of that case as to whether the damage was suffered in Singapore.  The relevant part of the judgment on its rule is :

‘ [77] We find the following extract in Halsbury’s Laws at para 75‑051 to be a useful summary of the relevant principles on O 11 r 1(f)(ii):

Secondly, the court may also grant leave if the claim is wholly or partly founded on, or is for the recovery of damages in respect of, damage suffered in Singapore caused by a tortious act or omission occurring anywhere. This provision allows the court to assume jurisdiction based on damage suffered in Singapore.  The provision does not expressly require that the damage suffered in Singapore be significant, but it must probably not be merely trivial.  Two kinds of claims are in fact enumerated in this sub-rule: claims founded on damage, and claims for the recovery of damages. This distinction reflects the difference (in the domestic common law) between torts where damage is part of the cause of action and torts where damage is not.  The phrase ‘wholly or partly’ qualifies only the first type of claim.  The significance of this is that if damage is suffered both in Singapore and elsewhere, a claim founded on all the damage wherever occurring can be brought in Singapore (since the claim needs only be partly founded on the damage in Singapore), whereas if the claim is only for the recovery of damages and not founded on damage, the claim is restricted to the damage suffered in Singapore.’

47.  One can see immediately that the discussion is in the context of the language used in the Singapore rule.  The case does not assist us in the construction of our own rule.

48.  We would be unnecessarily prolonging the discussion if we go on further.  It is sufficient for us to adopt the approach of the majority in Brownlie (No. 1) and (No. 2) while recognizing the word in the English rule is ‘damage’ and our words are ‘the damage’.  As Slade LJ held in Metall & Rohstoff, the use of the definite article ‘the’ does not mean all the damage must be sustained in the jurisdiction which assumes jurisdiction, and the majority in Brownlie has adopted the construction in Metall & Rohstoff.  The absence of the definite article ‘the’ in the English rule does not prevent this Court from adopting the majority view.  We should construe the phrase ‘the damage’ in its nature and ordinary meaning.  There is no room to import ‘direct and indirect damage’ or ‘damage which completes the cause of action’ into our rule.  The forum conveniens principles will prevent forum shopping and ensure there is no overstepping of our extra‑territorial jurisdiction.

49.  In this case, the plaintiff is a Hong Kong resident.  Although it is said that he had habitually resided in Shenzhen in the Mainland, he returned to Hong Kong four days after the 10 October 2014 accident in Ningbo and sought medical treatment here.  He was hospitalized from 15 to 30 October 2014 in the Prince of Wales Hospital and the Tai Po Hospital.  He subsequently received medical treatments from other hospitals and clinics.  He suffered from

(1)  Head injury with mild subarachnoid haemorrhage;

(2)  Palsy of the superior oblique muscle of the right eye;

(3)  Left shoulder injuries, namely undisplaced fracture of scapula and complete massive rupture of rotator cuff;

(4)  Fracture of left 3^rd and 4^th ribs;

(5)  Undisplaced fracture ilium;

(6)  Subtrochanteric fracture of the femur at the left hip;

(7)  Left shoulder biceps tendon injury; and

(8)  Mild post‑concussion syndrome.

50.  He was granted sick leave from 30 October 2014 to 11 August 2017 continuously totalling 1,015 days.

51.  He claimed damages for pain suffering and loss of amenities, loss of earnings both past and future, loss of earning capacity and special damage. 

52.  We accept great caution must be exercised in granting leave under Order 11 in view of the exorbitant jurisdiction of this Court on a foreign defendant.  But there is no question of forum shopping in this case and the plaintiff must have suffered significant damage here in Hong Kong to satisfy the Gateway (F) threshold.  The Judge was correct on Gateway (F).

III.     Gateway (C)

53.  Order 11, rule 1(1)(c) provides that service out is permissible with leave if :

‘ (c) the claim is brought against a person duly served within or out of the jurisdiction and a person out of the jurisdiction is a necessary or proper party thereto;’

1)      The principles

54.  In Nilon Ltd v Royal Westminster Investments SA [2015] BCC 521, Lord Sumption repeated the applicable principles to the Gateway (C) jurisdiction :

‘ 15. In AK Investment CJSC v Kyrgyz Mobil Tel Ltd [2011] UKPC 7; [2012] 1 WLR 1804 the Judicial Committee also set out the principles applicable to the “necessary or proper party” head of jurisdiction (at [73] et seq.), and emphasised these points:

(1)  The necessary or proper party head of jurisdiction was anomalous, in that, by contrast with the other heads, it was not founded upon any territorial connection between the claim, the subject matter of the relevant action and the jurisdiction of the English courts.

(2)  Caution must always be exercised in bringing foreign defendants within the jurisdiction under that head, and in particular it should never become the practice to bring in foreign defendants as a matter of course, on the ground that the only alternative requires more than one suit in more than one different jurisdiction.

(3)  The fact that the defendant within the jurisdiction (D1 or the “anchor defendant”) is sued only for the purpose of bringing in the party outside the jurisdiction (D2) is not fatal to the application for permission to serve D2 out of the jurisdiction, but it is a factor in the exercise of the discretion.

(4)  The action is not properly brought against D1 if it is bound to fail.

(5)  If a question of law arises on the application which goes to the existence of jurisdiction, the court will normally decide it, rather than treating it as a question of whether there is a good arguable case.

(6)  The question of the merits of the claim is relevant to the question of whether the claim against D1 is “bound to fail” and to the question whether there is a “serious issue to be tried” in relation to the claim against D2; and there is no practical difference between the two tests, and they in turn are the same as the test for summary judgment.

(7)  In considering the merits of the claim, whether the claim against D1 is bound to fail on a question of law should be decided on the application for permission to serve D2 (or to discharge the order), but it would not normally be appropriate to decide a controversial question of law in a developing area, particularly because it is desirable that the facts should be found so that any further development of the law should be on the basis of actual and not hypothetical facts.

(8)  The question whether D2 is a proper party is answered by asking:

“supposing both parties had been within the jurisdiction would they both have been proper parties to the action?” ’

2)     Indicia of employment

55.  In this case, Mr. Wong accepted that the 2^nd defendant was the employer of the plaintiff but disagreed that the 1^st defendant was also his employer.  Accordingly, he submitted that the action is not properly brought against the 1^st defendant as the anchordefendant because it is bound to fail.  He submitted all the indicia point towards the 2^nd defendant as the employer.   Clause 2 of the Employment Contract describes the nature of work of the plaintiff and he is to carry out the work ‘as per written instruction by the 2^nd defendant’.  Clause 4 deals with the wages : it provides that payment is to be made on the 30^th day of the month by the 1^st defendant and reimbursed by the 2^nd defendant within 30 days of receipt of an invoice.  Overtime payment will be paid if authorised by the 2^nd defendant.  The holiday and overtime work must also be approved by the 2^nd defendant.  The plaintiff must submit a vacation request if he wishes to take vacation and the 2^nd defendant has the right based on business needs to deny the request.  Clause 5 deals with insurance.  Medical, life and automobile insurance approved by the 2^nd defendant will be paid at cost upon submission of the relevant documents.  The 2^nd defendant shall reimburse the cost of prescribed medications for a specific diagnosis.  All requests for reimbursement of medications must be signed by the service administrator of the 2^nd defendant’s service centre. Clause 6 deals with lodging and communication expenses :

‘ Documented and approved business related interntional/long distance/roaming calls will be reimbursable at cost in addition to the monthly allowance and must be invoiced separately with approval by the Service Administrator of the Brentwood [i.e. 2^nd defendant] Service Center.’

56.  Clause 7 deals with travelling allowance and other expenses.  It provides, among other things, that other travelling costs and expenses for food and lodging outside of Hong Kong, which would be incurred for other projects of the 2^nd defendant, must be approved in writing by the 2^nd defendant.  Clause 8 deals with gasoline and vehicle allowances.  It provides that all major vehicle maintenance must be pre-approved in writing by the 2^nd defendant.  Clause 10 deals with payment methods.  Payment is to be remitted in US dollars via wire transfer by the 2^nd defendant to the 1^st defendant within 30 days of receipt of debit note by the 2^nd defendant’s offices. Clause 11 deals with termination of employment contract.  Clause 11A deals with termination by the 2^nd defendant.  Clause 11B deals with termination by the plaintiff.  It further provides that in either case, the plaintiff agrees to immediately return all the 2^nd defendant owned, leased or rented property in an approved condition and have no claim thereof. It further provides that should ‘the plaintiff default on any of these conditions, the 1^st defendant shall take full responsibility for all items not returned in a usable condition’. 

57.  It is apparent from the terms of the Employment Contract that the 1^st defendant’s obligations under it was very limited.  It was responsible for actual payment of monies under Clause 4 and Clause 10 but had no control over them and acted more like a conduit through whom the 2^nd defendant paid the plaintiff.  Further, the Employment Contract did not give the 1^st defendant any control or responsibility over the plaintiff’s work and employment, and the 2^nd defendant effectively took full control over every aspect of the same from the work to be done by the plaintiff to the plaintiff’s holiday/vacation arrangements, and the plaintiff’s expenses and allowances.

58.  The Judge held that there are other pointers in the Employment Contract which showed that the 1^st defendant was the employer as well :

(1)  Both the 1^st and 2^nd defendants signed the Employment Contract.  Ultimately, the employer/employee relationship would have to be elicited by cross-examination of the witnesses as to the intention of both defendants who signed the contract;

(2)  The plaintiff’s work was not confined to the work instructed by the 2^nd defendant because other terms of the Employment Contract such as ‘[this] description is not intended to define all possible requirements of the position’, and ‘[additional] responsibilities may at times be required on a temporary basis’, would arguably envisage the possibility of the 1^st defendant (being a contracting party of the Employment Contract) assigning tasks to the plaintiff. 

(3)  There was a good arguable case that in respect of Clause 4, the plaintiff could only look to the 1^st defendant for his remuneration, while the defendants had separate contractual arrangements whereby the 1^st defendant had to invoice the 2^nd defendant before the latter would reimburse the 1^st defendant.

(4)  If the 1^st defendant was not an employer, there was no commercial justification why the 1^st defendant who was a stranger to the employment relationship should be responsible for returning the property to the 2^nd defendant if the plaintiff failed to do so.  On the facts, the 1^st defendant has some role to play in relation to the work instructions concerning the plaintiff’s work done under the Employment Contract.  The 1^st defendant would translate and communicate instructions/reports between the plaintiff and the 2^nd defendant. The 1^st defendant and the 2^nd defendant will discuss and work out disagreements between the 1^st defendant and the buyer/end‑users over installation instructions. 

3)     Our view

59.  We disagree with the Judge.  Under the Employment Contract, all the indicia of an employer/employee relationship point towards the 2^nd defendant as the employer.  On the contrary, the pointers identified by the Judge as showing that the 1^st defendant was the employer are, in our view, rather strained and do not provide any proper basis for saying that the 1^st defendant was an employer of the plaintiff as well.  Under the good arguable case requirement, in order to succeed in obtaining leave to serve out, the plaintiff must have the ‘much better argument on the material available’ (Wink [18]).  In our view, the plaintiff failed to demonstrate that.

IV.     Gateway (D)

60.  Order 11, rule 1(1)(d) provides that service out is permissible with leave if :

‘ (d) the claim is brought to enforce, rescind, dissolve, annul or otherwise affect a contract, or to recover damages or obtain other relief in respect of the breach of a contract, being (in either case) a contract which –

(i)   -

(ii)   -

(iii)   is by its terms, or by implication, governed by Hong Kong law, ...’

1)     The Judge’s decision

61.  The Judge held that the governing law of the contract is determined by a 3-stage test :

(1)   whether the parties have expressly agreed upon the law to govern their contract and if so this will generally be respected;

(2)   in the absence of an express choice, whether there is factual basis for inferring an agreement on the governing law; and

(3)   failing 1)-2), a residual rule (i.e. a system of law by reference to which the contract was made or that with which the transaction has the closest and most real connexion) applies, see: Johnston, The Conflict of Laws in Hong Kong 3^rd ed paragraphs 5.004 and 5.009 at pages 217 and 221. 

62.  The Judge held Hong Kong law is the legal system with which the Employment Contract has its closest connection.  She accepted the plaintiff’s argument that the governing law of the Employment Contract is Hong Kong law :

(1)  The Employment Contract was drafted in English and not in Chinese;

(2)  As regards the parties to the employment contract, the plaintiff was domiciled in Hong Kong and the 1^st defendant was incorporated in Hong Kong.  The 2^nd defendant was not a Mainland company and had no corporate residence in the Mainland;

(3)  The plaintiff claimed the Employment Contract was concluded at the Hong Kong office of the 1^st defendant upon his acceptance of the offer made on behalf of the two defendants;

(4)  The Employment Contract did not expressly limit the plaintiff’s duties to be performed in the Mainland or exclusively in the Mainland, which was supported by the 2^nd defendant/Biwater Letter dated 19 September 2014 that showed the plaintiff was to be assigned to work on the 2^nd defendant’s project in Tsuen Wan, Hong Kong in September 2014 but for his injuries as a result of the accident;

(5)  The place of performance of the Employment Contract was not confined to the Mainland and some obligations under the Employment Contract (e.g. payment of salary and translation of work instructions for the plaintiff) invariably took place in Hong Kong;

(6)  Some Mainland elements in the Employment Contract were not generally determinative factors, e.g. there were clearly limits to the relevance of currency.

2)     Our view

63.  We are of the view that the Judge erred in holding that there was a good arguable case on Gateway (D) that the governing law of the Employment Contract is Hong Kong. Mr. Wong had submitted that the connecting factors point overwhelmingly in favour of Mainland law :

(1)  There is clear evidence to show that during the employment relationship between the plaintiff and the 2^nd defendant, the plaintiff’s job duties under the Employment Contract were almost exclusively conducted in the Mainland;

(2)  The plaintiff worked according to the Mainland public holiday calendar and received payments calculated in RMB as provided under the Employment Contract;

(3)  The plaintiff was stationed in Shanghai and was a habitual resident in the Mainland, with his family living in Shenzhen;

(4)  The 1^st and 2^nd defendants maintained offices in Shanghai, and the 2^nd defendant had no presence in Hong Kong;

(5)  The 1^st defendant played a limited role under the Employment Contract as a mere facilitative conduit of instructions and payment between the 2^nd defendant and the plaintiff.

(6)  The fact that the Employment Contract was in English and under the 2^nd defendant’s letterhead does not connect the contract with Hong Kong given the fact that the 2^nd defendant was a US‑based company with no presence in Hong Kong.

(7)  Further, the Judge should not have simply accepted the plaintiff’s claim that the Employment Contract was concluded at the 1^st defendant’s Hong Kong office.  Even up to the hearing, the plaintiff had not clarified how the Employment Contract was returned to him and how the 2^nd defendant notified him of its acceptance of the Employment Contract.  The Judge held however that in the absence of such information, there was no basis for adopting the rule for instantaneous communication, so the postal rule suggested the place of contract was the United States where the 2^nd defendant would have posted the Employment Contract to the plaintiff.  The Judge explained the difference between the two rules :

‘ 127. As a matter of general principle, a contract is made at the place where the acceptance is complete, ie “when the acceptance of an offer is communicated by the offeree to the offeror. And if it is necessary to determine where a contract is formed …… it appears logical that this should be at the place where acceptance is communicated to the offeror”. “In the case of instantaneous communication, the contract is complete when the acceptance is received by the offerer; in other words, the contract is made at the place where the acceptance is received ……” “Then there is the case – very common – of communication at a distance, to meet which the so-called “postal rule” has developed …… it seems logical to say that the place, as well as the time, of acceptance should be where (as when) the acceptance is put into the charge of the post office”.’

(8)  The plaintiff’s claim that the contract was concluded in Hong Kong carries no weight.  By contrast, the only factor showing the Hong Kong connection was the plaintiff’s collection of salary in Hong Kong. 

64.  It is not necessary for us to decide whether the proper law of the Employment Contract is the Mainland law or USA law.  It is sufficient for us to hold that in view of the factors identified by Mr. Wong, particularly the factor at [63(7)], the plaintiff has not shown that he has a good arguable case that Hong Kong law is the proper law and accordingly has not satisfied the gateway requirement.

V)     Forum conveniens

65.  Even if the Judge was wrong on Gateway (C) and (D), we do not consider that the Judge had erred in exercising her discretion in favour of the plaintiff under forum conveniens. No doubt, the accident had happened in Ningbo and the witnesses who may give evidence on the accident are based in Ningbo and not in Hong Kong but it does not mean that Hong Kong is not the appropriate forum to try the case.  Day in and day out, Hong Kong Courts hear cases with witnesses who are not in Hong Kong by means of video link or by taking evidence in the place where the witness resides.  Even if the trial may involve expert witnesses giving evidence on the Mainland law, this will not be a factor rendering Hong Kong as not the appropriate forum.  Hong Kong Courts frequently hear experts addressing laws of different jurisdictions and make findings accordingly.  It must be borne in mind that since the accident, the plaintiff has been in Hong Kong receiving treatment.  The evidence relating to his damage is clearly based in Hong Kong. The plaintiff has the benefit of legal aid in Hong Kong which is a juridical and personal advantage to him.  He will lose his right to legal aid in Hong Kong if the proceedings are stayed in favour of the courts in the Mainland.  As submitted by Mr. Harris for the plaintiff, it is not an uncommon practice for the Hong Kong Court to take into account the loss of right to legal aid in Hong Kong if the litigation is to be conducted in the Mainland, see Y v Y [1995] HKDCLR 43 at 48; H v M (unrep, FMCM 10288/2004, 6 July 2007) at [84]‑[86].  The burden is, of course, on the plaintiff on the issue of legal aid but, in our view, he has adduced sufficient material to show that it is uncertain whether there is legal aid available in the Mainland.    Should the Board wish to challenge this, it should have adduced contrary evidence on this point.   The plaintiff had submitted that there may be problems with limitation if the action is to commence in the Mainland now.  This point, however, was not raised below and we will not consider it.

VI.     Material non‑disclosure

66.  The Judge found that first, there were material non‑disclosures by the plaintiff on two matters.  First, the defendants’ presence in the Mainland by way of the 1^st defendant’s office and the 2^nd defendant’s Shanghai office and, second, the plaintiff’s then residence in Shenzhen and Shanghai, which would go to the issue of choice of law for the Employment Contract and the issue of forum conveniens.  But as the Judge accepted his explanation that the non‑disclosure was due to his inadvertence because many of the issues and the specific documents relied upon by the Board did not appear to him to be relevant at that time, she held there was no deliberate breach of the duty to give full and frank disclosure on the part of the plaintiff.  The Judge held that it was appropriate to continue with the Yu Order but even if she was wrong and the Yu Order ought to be discharged for material non‑disclosure, she would have regranted leave to the plaintiff to issue the concurrent writ of summons and to serve it on the 2^nd defendant out of the jurisdiction.

67.  Mr. Wong argued that the Judge should have found there were material non‑disclosure in respect of three other matters :

(1)  The plaintiff failed to disclose that he performed his job duty in the Mainland exclusively;

(2)  His resignation letter [the one before the current Employment Contract] was sent only to the 2^nd defendant and not the 1^st defendant; and

(3)  He did not disclose the signing information of the Employment Contract.

68.  Mr. Wong argued that if the Judge had considered these three other matters, she would not have held that the non‑disclosure was not deliberate.

69.  We do not see the relevance of these three matters or that they would prevent the court from exercising the discretion afresh in favour of the plaintiff.  First, as Mr. Wong submitted, these matters are only relevant to the issue of whether Hong Kong law is the proper law of the Employment Contract and forum non‑conveniens.The Judge’s acceptance of the plaintiff’s innocent explanation must apply to these three matters as well.  Second, it is pertinent to refer to the words of Hunter JA in Wo Fung Paper Making Factory Ltd v Sappi Kraft (Pty) Ltd [1988] HKC 10, [1988] 2 HKLR 346 when dealing with non‑disclosure in an application for leave to serve outside the jurisdiction.  Hunter JA held at page 357I :

‘ I turn now to the two principles I conceive to be relevant, in relation non‑disclosure. First the court’s power to discharge any order obtained ex‑parte for material non‑disclosure is salutary and necessary. As one of the earlier cases shows, ex‑parte Polignac [1917] 1 KB 486, it is there for the court’s own protection. It is necessary to prevent its processes being abused. Secondly, there is another equally significant principle in this jurisdiction. This is to make sure that the court does not get itself in a position of what might be called ‘counter-abuse’: where this sort of point is regarded by litigants as ‘a very present help in trouble’; and where problems arise on the substance to resort to attack as the best method of defence.’

70.  He held at page 358 F :

‘ I fear that there has been a failure in this case, in the court below, to concentrate upon the material facts, and to appreciate that disputed issues of facts simply go to the need for trial, and are of very very little value indeed in deciding whether a good arguable case has been made out. Furthermore, it seems to me that the point has to be tested by looking at the substance. That is why I am proposing to start with the question whether a good arguable case was shown at the inter‑partes stage. That is where I think you should start; not where judge started, and with respect where the argument started here, on the question of non‑disclosure.’

71.   Wo Fung Paper Making Factory Limited was specifically relied by Rogers VP in

Pacific Electric Wire & Cable Co Ltd [2007] 4 HKC 372 when he held there is no bar to a renewed application where non‑disclosure has occurred.

‘ 16. Following what Hunter JA said in Wo Fung and the other distinguished judges said in ex parte Polignac, it seems to me that there is certainly no absolute bar to a renewed application for service of a writ outside the jurisdiction in cases where there has been non‑disclosure of a material fact. ...

17.  To punish a party by preventing it from ever obtaining an order for service outside the jurisdiction on the basis that there has been a non‑disclosure of a material fact on the first application for service outside the jurisdiction, would be a punishment and not a matter of protection of the court’s own process.’

72.  We agree with the view of the Judge.

VII.     Conclusion

73.  Accordingly, the appeal is dismissed. 

VIII.    Costs

74.  We will make an order nisi that the Board is to pay 80% of the plaintiff’s costs of the appeal in order to reflect that the Board succeeded in Gateway (C) and Gateway (D).  We will grant certificate for two counsel.  The plaintiff’s own costs are to be taxed according to the Legal Aid Regulations.

IX.     The Board

75.  At the hearing, we expressed our concern about the approach of the Board in intervening in this case. 

76.  Our concern is first, the timing of the intervention and second, the extent of the intervention.  In respect of timing, the order to serve out of jurisdiction was obtained in October 2016.  The Board only applied to be joined as a party in July 2018 on the ground that it was not aware of the settlement between the plaintiff and the 1^st defendant until then.  It then applied to set aside the Yu Order in November 2018. But the Board was clearly aware of the proceedings since its commencement in March 2016.  The 2^nd defendant was known to be a foreign party by its address stated on the writ.  This must carry with it the procedural warning bell to the Board that an order to serve out of jurisdiction is required, there may be issues arising on service out and the 2^nd defendant may choose to ignore the proceedings.  The Board ought to be aware of the need for an early intervention.  Yet, seven years after the accident and five years after the commencement of the action, the proceedings are still ensnared by arguments on jurisdiction brought about by the Board’s application.  Mr. Wong submitted that the delay was, in fact, caused by the plaintiff himself in that he could have sued the 2^nd defendant in the Mainland in the first place.  In our view, this could not be a proper answer to our concern.  It begs the question in that it assumes that the plaintiff was not entitled to sue the 2^nd defendant in Hong Kong.  The inconvenience and expenses of a local resident suing in a foreign jurisdiction do not need elaboration.

77.  Our second concern is, more importantly, on the approach adopted by the Board in this case.  The starting point is that the Board is authorised and required to scrutinise and, if thought necessary, intervene in order to test the validity of the plaintiff’s case whether on liability, quantum or both, in carrying out its statutory duties : Wo Chun Wah v. Employees Compensation Assistance Fund Board (2019) 22 CFAR 515 per Ribeiro PJ at [44].  In this case no one can seriously criticise the Board for not discharging its duty if it was to accept the default judgment and take part in the assessment of damages.  This must be the most appropriate and economical way of dealing with the case when by the Board’s own admission, the 2^nd defendant was the employer of the plaintiff, and the potential witnesses of an accident which happened seven years ago are not based in Hong Kong.  Instead, it chose to challenge the plaintiff’s right to sue the 2^nd defendant in Hong Kong.  As the plaintiff only needs to fulfill any one of the three gateways in order to obtain leave, in respect of Gateway (F), the objective bench mark and criterion for the Board’s consideration must be the majority decision of Brownlie (No. 1) which is in line with this Court’s previous decision of Dynasty Line Ltd.  On this basis, any objective assessment must result in concluding that the plaintiff has satisfied the ‘good arguable case’ threshold for the first limb of Gateway (F).  But most extraordinarily, the Board said that the majority view is wrong and the minority view is to be preferred.  By advocating this stand, the Board must have forgotten its proper role under the ECAO.  It is not an ordinary hostile litigant with unlimited funds to litigate and with its own self interest to protect and advance.  On the contrary, it is the keeper of public funds collected from levies from employees’ compensation insurance policies for payment out in appropriate circumstances.  Its role is to prevent abuse by litigants seeking unmeritous claims for compensation from the fund, but not to put unnecessary obstacles in their rightful pursuit for damages arising from an employment related accident nor to pursue litigation simply because the majority view does not accord with its own perception of what is the correct law.  In our view, by such an intervention, the Board has strayed beyond its proper role under the statutory scheme.