HCA002951A/1987
1987, No. A2951
IN THE SUPREME COURT OF HONG KONG
HIGH COURT
_______________
BETWEEN
DEAK PERERA FAR EAST LIMITED
Plaintiff
(In liquidation)
and
R. LESLIE DEAK sued as the Personal Representative of Nicholas Louis Deak (deceased)
1st Defendant
OTTO EMIL ROETHENMUND AMERICAN NATIONAL BANK OF NEW YORK, formerly known as DEAK
2nd Defendant
NATIONAL BANK
3rd Defendant
CHASE MANHATTAN BANK, N.A.
4th Defendant
CANADIAN IMPERIAL BANK OF COMMERCE
5th Defendant
STANDARD CHARTERED BANK
6th Defendant
UNION BANK
7th Defendant
_______________
Coram: Hon. Barnes, J. in Chambers
Date of Hearing: 25th January 1988
Date of Delivery of Judgment: 5th February 1988
__________
JUDGMENT
__________
1. This is an appeal against a Master's decision dismissing an application which sought the setting aside of an order granting leave to issue a concurrent writ of summons and serve it out of the jurisdiction.
2. The original writ was issued on 20th May, 1987. The Statement of Claim avers that the Plaintiff company was incorporated in Hong Kong and was wound up by an order of this Court on 4th February, 1985 and that the Official Receiver was appointed liquidator.
3. The nature of the claims pleaded against the Defendants is set out, as follows, in the written outline of his submissions handed in by Mr. Fok, Counsel for the Appellant, the 7th Defendant:-
The action is brought against seven defendants on the basis of a number of different causes of action, arising from different factual situations.
The claim against the 1st and 2nd Defendants is based on their alleged breaches of fiduciary duty and breaches of trust.
The claim against the 3rd Defendant is based on its alleged knowing assistance in breaches of fiduciary duty by the 1st and 2nd Defendants and/or its own breach of fiduciary duty.
The claim against the 7th Defendant is based on its alleged wrongful transfer of funds from the Plaintiff's account with it, and/or its assistance in breaches of fiduciary duty/trust by the 1st and/or 2nd Defendants.
The claim against the 5th Defendant is based on its alleged unauthorised transfer on telex instructions of funds from the Plaintiff's account with it.
The claim against the 6th Defendant is based on its alleged unauthorised transfer on instructions by letter of funds from the Plaintiff's account with it.
The claim against the 7th; Defendant is based on its alleged unauthorised transfer on verbal and telex instructions of funds from the Plaintiff's account with it.
4. The 1st and 2nd Defendants are citizens of and reside in the United States of America. The 3rd and 7th Defendants are incorporated in the United States of America, carry on business there and are outside the jurisdiction. The 4th, 5th and 6th Defendants have addresses within the jurisdiction and have been served here.
5. The application for leave to serve the 1st, 2nd, 3rd and 7th Defendants outside the jurisdiction was lodged on 29th May, 1987. According to the affidavit filed in support of the application :
"the plaintiff's claim against the 4th, 5th and 6th Defendants is against companies served within the jurisdiction and the 1st, 2nd, 3rd and 7th Defendants are persons and companies out of the jurisdiction who are necessary and proper parties to the action."
An Order granting leave was made on 5th June, 1987.
6. On 26th October, 1987 the 7th Defendant filed the summons initiating the application which was subsequently dismissed by the Master who heard it on 1st December, 1987.
7. In the meantime, the solicitors for the 7th Defendant wrote on 17th November 1987 to the Official Receiver as follows :-
"We act, as you know, for both the 6th and 7th Defendants. The pleading as against the 7th Defendant ..... makes reference to telex instructions to the 7th Defendant and to a bank mandate.
Pursuant to Order 24 Rule 10 we give you notice to produce the telex or telexes and bank mandate referred to for our inspection ....."
8. R.S.C., 0.11, insofar as it is relevant to this appeal, provides as follows :-
"
1.
(1) ...... [ S] ervice of a writ out of the jurisdiction is permissible with the leave of the court if in the action begun by the writ
...........
(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.
..............
4.
(2) No such leave shall be granted unless it shall be made sufficiently to appear to the Court that the case is a proper one for service out of the jurisdiction under this Order."
9. The Plaintiff concedes that the 7th Defendant is not a necessary party but contends that it is a proper party within the meaning of Rule 1(c).
10. The test for determining who is a proper party within the meaning of the Rule has long been held to be any party who could have been properly joined in the action had that party been within the jurisdiction (1) . Mr. Fok concedes that the 7th Defendant would have been a proper party to the action if it had an address within the jurisdiction but submits that 19th century interpretations of the Rule have been corrupted by the development of the law concerning the forum non conveniens principle. Mr. Barlow's response to this, on behalf of the Plaintiff, is that the only point is whether service out of the jurisdiction should be allowed, that the forum argument should not be entertained without a prior application seeking leave to introduce it and that, if that had been done and heave granted, he would then have explained why it was necessary to proceed in Hong Kong.
11. In my view, the answer to the contending submissions is provided by Lord Goff's speech in Spiliada Maritime Corporation v. Cansulex Ltd. (The "Spiliada ")(2) . In his speech, with which all other members of the House expressed their approval, he said, at page 9 :-
"[ T] he law on this subject is still in a state of development; and it is perhaps opportune to review the position at this stage, and in particular to give further consideration to the relationship between cases where jurisdiction has been founded as of right by service of proceedings on the defendant within the jurisdiction, but the defendant seeks a stay of the proceedings on the ground of forum non conveniens, and cases where the Court is invited to exercise its discretion, under R.S.C., 0.11, to give leave for service on the defendant out of the jurisdiction."
12. In this consideration of the relationship between the two types of cases Lord Goff identified a fundamental principle applicable to both. Although that principle had hitherto borne the label "forum non conveniens" only when applied in cases of stay of proceedings, Lord Goff indicated that it was the identical principle, whether it bore that forum label or not, which was also applicable when the Court exercised its discretionary power under R.S.C., 0.11. Later in his speech he used the heading :
How the principle is applied in cases where the Court exercises its discretionary power under R.S.C., 0.11
and went on to say, at pp.13-4 :-
"
It seems to me inevitable that the question in both groups of cases must be, at bottom, that expressed by Lord Kinnear in Sim v. Robinow , (1892) 19 R. 665 at p. 668, viz. to identify the forum in which the case can be suitably tried for the interests of all the parties and for the ends of justice. That being said, it is desirable to identify the distinctions between the two groups of cases. These, as I see it, are threefold. The first is, as Lord Wilberforce indicated, in the 0.11 cases the burden of proof rests on the plaintiff, whereas in the forum non conveniens cases that burden rests on the defendant. A second, and more fundamental, point of distinction (from which the first point of distinction in fact flows) is that in the 0.11 cases the plaintiff is seeking to persuade the Court to exercise its discretionary power to permit service on the defendant outside the jurisdiction. Statutory authority has specified the particular circumstances in which that power may be exercised, but leaves it to the Court to decide whether to exercise its discretionary power in a particular case ...... Third, it is at this point that special regard must be had for the fact stressed by Lord Diplock in the Amin Rasheed Case, [ 1984] A.C. 50 at p.65, that the jurisdiction exercised under 0.11 may be 'exorbitant'. This has long been the law. In Societe Generale de Paris v. Dreyfus Brothers , (1885) 29 Ch. D. 239 at pp.242243, Mr. Justice Pearson said:
'
It becomes a very serious question ...... whether this court ought to put a foreigner, who owes no allegiance here, to the inconvenience and annoyance of being brought to contest his rights in this country, and I for one say, most distinctly, that I think this court ought to be exceedingly careful before it allows a writ to be served out of the jurisdiction.'
That statement was subsequently approved on many occasions, notably by Lord Justice Farwell in The Hagen, [ 1908] P. 189 at p.201, and by Lord Simonds in your Lordships' House in Tyne Improvement Commissioners v. Armement Anversois S.A. (The Brabo) , [ 1949] A.C. 326 at 350. The effect is, not merely that the burden of proof rests on the plaintiff to persuade the Court that England is the appropriate forum for the trial of the action, but that he has to show that this is clearly so. In other words, the burden is, quite simply, the obverse of that applicable where a stay is sought of proceedings started in this country as of right.Even so, a word of caution is necessary. I myself feel that the word 'exorbitant' is, as used in the present context, an old fashioned word which perhaps carries unfortunate overtones: it means no more than that the exercise of the jurisdiction is extraordinary in the sense explained by Lord Diplock in the Amin Rasheed case, [ 1984] A.C. 50 at 65. Furthermore, in 0.11 cases, the defendant's place of residence may be no more than a tax haven to which no great importance should be attached. It is also significant to observe that the circumstances specified in 0.11, r.1(1), as those in which the Court may exercise its discretion to grant leave to serve proceedings on the defendant outside the jurisdiction, are of great variety, ranging from cases where, one would have thought, the discretion would normally be exercised in favour of granting leave (e.g., where the relief sought is an injunction ordering the defendant to do or refrain from doing something within the jurisdiction) to cases where the grant of leave is far more problematical. In addition, the importance to be attached to any particular ground invoked by the plaintiff may vary from case to case. For example, the fact that English law is the putative proper law of the contract may be of very great importance (as in BP Exploration Co. (Libya) Ltd. v. Hung , [ 1976] 1 Lloyd's Rep. 471 .....); or it may be of little importance as seen in the context of the whole case. In these circumstances, it is, in my judgment, necessary to include both the residence or place of business of the defendant and the relevant ground involved by the plaintiff as factors to be considered by the Court when deciding whether to exercise its discretion to grant leave; but, in so doing, the Court should give to such factors the weight which, in all the circumstances of the case, it considers to be appropriate."
13. Under 0.11 the Court is faced with two issues a "jurisdictional issue" as to whether the applicant's claim falls within any of the "permissible" categories mentioned in r.1(1), and the "discretion issue" raised by r.4(2). Spiliada was concerned, almost exclusively, with the discretion issue. It affects Massey only to the extent of saying that, in one case, ground r.1(c) may tip the scales so that the discretion favours the applicant and yet, in another case, be of little importance when seen in the context of the whole case.
14. On the jurisdiction issue I accept Mr. Barlow's submission that Massey provides a sound basis for holding that the 7th Defendant is a proper party to the action and reject Mr. Fok's submission that Spiliada has pushed Massey towards irrelevance. On the discretion issue, however, I accept Mr. Fok's submission that Spiliada does require the Court to apply the forum non conveniens principle when considering that issue and reject Mr. Barlow's submission that there is no onus on him to show, ab initio , that the home forum is "conveniens ".
15. In the affidavit filed by the Plaintiff in support of the application the deponent swore as follows:
"
I believe that the banks may have had notice that the withdrawals were improperly made and may be liable to the Plaintiff as constructive trustees for the amounts withdrawn.
The Plaintiff was incorporated in Hong Kong and is being wound up by the Official Receiver. The Plaintiff's witnesses in the action reside in Hong Kong. It is probable that there will be witnesses of some or all of the Defendants from the United States of America or Canada. I believe that the 1st Defendant and the grid Defendant are reasonably wealthy and certainly not impecunious and to attend trial of the action in Hong Kong should not be of any serious handicap to them. However, the 2nd Defendant may be reluctant to come to Hong Kong because of fear of prosecution in respect of certain of his activities while a director of the Plaintiff. The 3rd and 7th Defendants are banks and to send their representatives to Hong Kong for trial of the action should not be of any serious hardship to them. The Plaintiff's claims against the Defendants will have to be decided according to Hong Kong law."
16. Mr. Fok submits that that affidavit is misleading in two important respects. Firstly, it suggests that the 7th Defendant might be liable as a constructive trustee whereas the claim against that Defendant specifically alleges breach of contract. Secondly, it implies that the Plaintiff' claim against the 7th Defendant will have to be decided according to Hong Kong law.
17. Mr. Barlow agrees that the Plaintiff's claim against the 7th Defendant in respect of a sum of $30,000 is based on a different cause of action from that relied on in respect of the claims against the 1st, 2nd and 3rd Defendants but he submits that, since it is the same sum which the Plaintiff seeks to recover from each of those Defendants, leave to serve outside the jurisdiction should be granted.
18. The claim is based upon an alleged breach of a banker-customer contract entered into in California between a bank with no address outside the United States of America and a customer incorporated in Hong Kong but then conducting business in the United States of America. The usual form of such a contract provides that the law of the banker's place of business must govern the interpretation of the contract's terms and that that same place of business must be the forum within which rights enforceable under the contract are to be litigated. The Plaintiff pleads no facts to show that this was an unusual banker-customer relationship but relies on a sweeping assertion that the claims against all "Defendants will have to be decided according to Hong Kong law". Given the likelihood that the Plaintiff agreed to litigate in a foreign forum and bearing in mind that the 7th Defendant has no place of business other than in the United States of America; that the person who constituted the Plaintiff's physical presence when the contract was entered into still resides in that country; and that the alleged breach occurred there, it seems to me that it would be exorbitant to require the 7th Defendant to litigate here -- exorbitant within Lord Diplock's meaning (3) because the appropriate forum, when one leaves aside for the moment the effect of r.1(c), is a Court in a foreign country whose jurisdiction is recognised under our conflict rules.
19. The only factor in the Plaintiff's favour that I can see in trying to comply with Lord Goff's "word of caution" is the ground invoked in support of the application. If that ground operated so as to give the Plaintiff some "legitimate personal or juridical advantage" which it would lose if forced to litigate elsewhere then that factor would have some weight in mitigating the exorbitancy situation just mentioned. Mr. Barlow submitted that if all claims were litigated here and the Plaintiff obtained judgment against more than one Defendant in respect of the $30,000 claim, then it would have an election as regards enforcing the judgment and the Defendants would be provided with an opportunity to claim contribution amongst themselves. It is difficult to see why the opportunity of making such an election would not still be available to the Plaintiff it if proceeded separately against the 7th Defendant in the United States. The other factor offers no advantage and causes no disadvantage to either the Plaintiff or the 7th Defendant. There was certainly no hint, in any of Mr. Barlow's submissions, of any injustice likely to be suffered by the Plaintiff in pursuing its remedy against the 7th Defendant in the United States. Even if I were persuaded to give some weight to the considerations advanced I still do not see how they could, in the circumstances of this case, tip the scales in favour of Hong Kong being adjudged the forum best suited to serve the interests of the parties and meet the ends of justice. The discretion issue must, therefore, be decided in the 7th Defendant's favour.
20. The Plaintiff submits that the 7th Defendant by its solicitors' letter of 17th November, 1987 took a step in the proceedings and thereby nullified the jurisdiction of the Court to set aside the Order granting leave to serve outside the jurisdiction.
21. The authorities to which counsel referred me for guidance as to what constitutes a "step" for this purpose were Eagle Star Insurance Co. v. Yuval Insurance Co. (4) , Ives and Barker v. Willans (5) and Musti11 and Boyd, Commercial Arbitration , p.421. From those authorities it appears that the 7th Defendant's conduct did not constitute "a step" unless it (a) demonstrated an election to abandon its right to have the service order set aside and (b) had the effect of invoking the jurisdiction of this Court.
22. The solicitors' letter was written after the filing of the summons applying for the order to be set aside. What the 7th Defendant sought was inspection of the bank mandate and the telexes referred to in the Plaintiff's claim. A key question on the 7th Defendant's application was the proper law of the contract alleged by the Plaintiff to have been breached. The documents in respect of which the 7th Defendant requested inspection were relevant to that question : inspection was not requested in respect of any document relevant to the merits of the Plaintiff's claim beyond the proper law of the contract issue. The 7th Defendant's conduct was, therefore, completely consistent with an intention to pursue its application to set aside : it was not conduct evincing an election to abandon its right. The 7th Defendant did not, therefore, nullify the Court's jurisdiction to set aside the Order.
23. I allow the appeal, set aside the Order granting leave to serve the 7th Defendant outside the jurisdiction and order the Plaintiff to pay the 7th Defendant's costs both here and before the Master. I grant liberty to apply.
(E. C. Barnes)
Judge of the High Court
(1) Massey v. Heynes , (1888) 21 QBD 330
(2) [ 1987] 1 Lloyd's Rep.1
(3) Amin Rasheed, at 65-66
(4) [ 1978] 1 Lloyd's Rep.357
(5) [ 1894] 2 Ch.478
Representation:
Mr. Barrie Barlow inst'd by Official Receiver for the Plaintiff.
Mr. J. Fok inst'd by Messrs. Deacons for the 7th Defendant.