WO FUNG PAPER MAKING FACTORY LTD v. SAPPI KRAFT (PTY) LTD

Courts, practice and procedure - R.S.C. 0.11, 0.12, r.8 - principles upon which leave to serve outside the jurisdiction is granted - conditions for disputing jurisdiction - degree of proof of compliance with 0.11 - "good arguable case" - "natural forum".

Whether application to set aside order giving leave for material non-disclosure is governed by 0.12, r.8 - what facts are material.

Whether Court has inherent jurisdiction to override express provisions of Rules of Court.

IN THE COURT OF APPEAL

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J U D G M E N T

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Fuad; V.P.:

1. This is an appeal from Orders made by Liu J. on 15th December 1987 by Wo Fung Paper Making Factory Ltd. ("Wo Fung") Who had sued Sappi Kraft (Pty.) Ltd. ("Sappi") a company incorporated in South Africa.

2. Wo Fung issued their Writ indorsed with a Statement of Claim on 10th March 1987. Their claim against Sappi, who manufacture and supply paper and cardboard, arose out of two sets of six contracts evidenced by 12 purchase orders for a form of packing material called "South African Liner Board". Of the 12 contracts relied upon, it was averred that the first four had been completed, and that there was short delivery under the fifth contract. There had been no delivery at all under the remaining seven contracts. Wo Fung pleaded in respect of each contract they had agreed to purchase the Liner Board and Sappi had agreed to sell it by its agent Irraffe Trading Co. Ltd., a Hong, Kong company. Delivery was to be made in Hong Kong.

3. On 13th March 1987 Wo Fung were granted leave by the Master to issue a concurrent Writ against Sappi and to serve it on them out of jurisdiction, in South Africa.

4. Sappi filed an Acknowledgment of Service on 15th July, 1987 indicating that they intended to contest the proceedings. They had, therefore, 14 days within which to apply for a summons they wished to dispute the jurisdiction of the Court. Before Liu J. they conceded that they were one day out of time when they filed their summons on 30th July. Sappi took a different stand before us. We allowed them to file and rely upon a Respondent's Notice out of time by which they averred that they had in fact made their 0.12, r.8 application within the time allowed. I propose first to deal with the appeal on the basis of the concession made to Liu J.

5. The marginal note to the summons indicated that the application was being made under "0.12, r.8 and/or 0.32, r.6 and/or the inherent jurisdiction" and the following Orders were sought.

(a) that the Master's Order of 13th March 1987 granting leave to issue and serve a concurrent writ upon Sappi out of the jurisdiction, in South Africa, be discharged,

(b) that the service  of the concurrent writ be set aside; and

(c) that the proceedings be stayed.

These are the grounds upon which the application was made:

"(1)    The Plaintiff has failed to show that the claims pleaded in the Statement of Claim herein fall within RSC Order 11 Rule (1).

(2)    The Plaintiff has failed to show that it has a good arguable case on the merits.

(3)     Alternatively, the Republic of South Africa is the natural and convenient forum for the determination of the dispute that is the subject of this action.

(4)    In any event the ex parte order of Master Perrior obtained by the Plaintiff was obtained through material non disclosure on the part of the plaintiff."

6. When the summons came before the Master, he refused to extend the time for the purpose of 0.12, r.8 holding that he had no jurisdiction to do so, but decided that there had been material non-disclosure by Wo Fung in their application for leave under 0.11 in relation to six of the purchase orders relied upon in the Statement of Claim. He discharged the ex parte Order of 13th March 1987 in respect of the claims based upon them, Wo Fung appealed and Sappi cross-appealed to the Judge in Chambers. Wo Fung asked for the summons of 30th July to be dismissed in its entirety and Sappi sought Orders for all the reliefs they had applied for by that summons.

7. I think it will be convenient here, to read 0.12, r.7 and the relevant parts of 0.12, r.8:

"7. The acknowledgment by a defendant of service of a writ or notice of a writ shall not be treated as a waiver by him of any irregularity in the writ or notice or service thereof or in any order giving leave to serve the writ of notice out of the jurisdiction or extending the validity of the writ for the purpose of service.

8. Dispute as to jurisdiction

8. (1) A defendant who wishes to dispute the jurisdiction of the court in the proceedings by reason of any such irregularity as is mentioned in rule 7, or on any other ground shall give notice of intention to defend the proceedings and shall, within 14 days thereafter, apply to the Court for -

                (a)     an order setting aside the writ or service of  the writ or notice of the writ one him, or

                (b)     an order declaring that the writ or notice has not been duly served on him, or

(c)    the discharge of any order giving leave to serve the writ or notice on him out of the jurisdiction, or

(d)    the discharge of any order extending the validity of thewrit forthe purpose of service, or

(e)    the protection or release of any property of the defendant seized or threatened with seizure in the proceedings, or

(f)    the discharge of any order made prevent any dealing with any property of the defendant, or

(g)    a declaration that in the circumstances of the case the court has no jurisdiction over the defendant in respect of the subject matter of the claim or the relief or remedy sought in the action, or

                (h)     such other relief as may be appropriate.

(2) Order 3, rule 5, shall apply in relation to the period of 14 days mentioned in paragraph (1) with the modification, that the said period may be extended by the Court only on an application made before the expiration of the period.

(3) An application under paragraph (1) must be made by summons and the summons must state the grounds of the application.

                (4) …..

                (5) …..

                (6)     A defendant who makes an application under paragraph (1) shall not.be treated as having submitted to the jurisdiction of the court by reason of his having given notice of intention to defend the action; and if the Court makes no order, on the application or dismisses it, the notice shall cease to have effect, but the defendant may, subject to rule 6(1) lodge a further acknowledgment of service and in that case paragraph (7) shall apply as is the defendant had not made any such application.

(7) Except where the defendant makes an application in accordance with paragraph (1), the acknowledgment by a defendant of service of a writ or notice of a writ shall, unless the acknowledgment is withdrawn by leave of the Court under Order 21, rule 1, be treated as a submission by the defendant to the jurisdiction of the Court in the proceedings."

9. By his Ruling of 19th November 1987 the learned judge held that the Court had inherent jurisdiction to extend time for the filing of a summons under 0.12, r.8 and had power, under the inherent jurisdiction and 0.32, r.6, to discharge the ex parte Order for service outside the jurisdiction for material non-disclosure.

10. The judge referred to the restriction-imposed by 0.12, r.8(2) and said that the inherent jurisdiction of the Court was only to be curtailed by statutory enactment. He then said that he knew of no legislation in clear terms or otherwise which seeks to divest or deflect the Court's inherent jurisdiction in matters canvassed in the instant appeal". He remarked that the R.S.C. derived their source from s.54 of the Supreme Court Ordinance, Cap.4, and that the rules were designed to govern procedure and administration. He added: "It was not in my view, intended or envisaged that the Court inherent jurisdiction would so abridged or abrogated."

11. The judge went on to reject a submission made on behalf of Wo Fung that an application to discharge an order granting leave to serve under 0.11 for material non-disclosure was also subject to 0.12, r.8(1), and (2).

12. Both in his Ruling of 19th November 1987 and in his judgment of 16th December, the judge referred to a considerable number of authorities, several from South Africa, on the inherent jurisdiction. In his judgment he also cited the Canadian case of Montreal Trust Co. v. Churchill Forrest Industries (Manitoba) Ltd. (1972) (2) D.L.R. (3d.) 75, where one of the judges of the Manitoba Court of Appeal had said: "Inherent jurisdiction cannot, of course be exercised so as to conflict with a statute or rule" and Liu J. commented: "It seems reasonably clear that 'statute or rule' .... was meant to refer to law and regulations which have legislative force."

13. There is a general provision relating to the power to extend time in s.72 of the Interpretation and General Clauses Ordinance, Cap. 1, which is in the following, terms:

"72. Where in any Ordinance a time is prescribed for doing any act or taking, any proceeding and power is given to a court, public body, public officer or other authority to extend such time, then the power may be exercised by the court, public body, public officer or other authority although the application for the same is not made until after the expiration of the time prescribed."

If one looks at the definitions of "Ordinance" and "subsidiary legislation" in s.3 of that Ordinance, one sees that the section could apply to rules of court. However, that section has application to the matter before as because the R.S.C. expressly deal with extension of time in procedural steps. In relation to the R.S.C., 0.3, r.5 has general application, modified in the context of 0.12, r.8(1) by the provisions of 0.12, r.8(2).

14. As the judge observed, the power to, make Rules of Court is vested in the Rules Committee by s.54 of the Supreme Court Ordinance. Provided any particular rule is intra vires the rule-making powers conferred upon the Committee by s.54, 55A, 55B, ,55C, 56 or 56A, since the, rule will have been made, under powers given by statute, the rule itself would have the power of a statute in matters of procedure. If any authority were needed for this proposition, it is to be found, for example, in the speech of Lord Summer in S.S. Hontestroom v. S.S. Saganorack [1927] A.C. 37, at p.47.

15. With very great respect to the judge, in my view he went clearly wrong when he was persuaded to accept the contention put forward on behalf of Sappi that the Court could use its inherent jurisdiction to break the fetters imposed by 0.12, r.8(2).

16. That rule was criticised as being "rigid and draconian" by Robert Goff. J. (as he then was) in Carmel Exporters Sales Ltd. v. Sea Land Services Inc. [1981) 1 All E,.R. 984, at p.989 (a case referred to by the judge).

17. Clearly the potentially harsh results of 0.12, r.8(2) were recognised in the United Kingdom because that rule was revoked there in 1983. However, the rule remained in force in Hong Kong when the matter was before Liu J.. I am given to understand that it.will be revoked here soon by amending rules which will shortly be published.

18. While 0.12, r.8(2) stood, the judge was bound by it and there was no escape from its pitiless embrace. Mr. Litton, who appeared for Sappi before us but not before the judge did not expressly concede that this was so, but did not press a contrary contention very hard upon us, relying more on other grounds as will be seen.

19. I would mention here that our attention was drawn to the decision of Macdougall J. given on 11th March this year in Wishbone Trading Co. Ltd. v. Abdur Rauf and Others, Civil Action No. 3599 of 1987. The judgment of Liu J., which is the subject of this appeal, was cited to Macdougall J. who declined to follow it. I entertain no doubt that he was right to do so for the reasons I have given. I respectfully endorse all that Macdougall J. had to say in rejecting the submissions advanced before him that the inherent jurisdiction of the Court could properly be prayed in aid to circumvent the restrictive provisions of 0.12, r.8(2).

20. It seems to me clear that unless a defendant has made an application under 0.12, r.8(1) within the time limited, he cannot dispute the jurisdiction of the Court on the ground (a) that the plaintiff's case does not fall within one or other of the provision's of or (b) that the plaintiff had not established, for the purpose of 0.11, r.4, that his case was a proper on for service outside the jurisdiction.

21. What then is the result? B y virtue of 0.12, r.8(7) Sappi's acknowledgment of service must be treated as a submission by them to the jurisdiction of the Court in the present proceedings.

22. In the circumstances, Sappi were not entitled to submit that Wo Fung had not shown that they had a "good arguable case" before leave was granted under 0.11 or that they had not discharged the burden of satisfying the Court that Hong Kong was the forum conveniens both issues which were decided in favour of Sappi.

23. Was Sappi permitted, outside the time allowed by 0.12, r.8(1), which could not be extended in view of the provisions of r.8(2), to apply to have the Master's ex parte Order of 13th March 1987 set aside under 0.32, r.6 or the inherent jurisdiction? Mr. Litton submits that such an application is not caught by 0.12, r.8(1). In my judgment, on a fair reading of 0.12, r.8 and on a proper understanding of the new scheme it introduced, Sappi were not permitted to do so. Although relying on material non-disclosure, they were asking, in effect, for an order under 0.12, r.8(1)(c) to discharge the order giving leave to serve the writ out of the jurisdiction. The words with which r.8(1) begins, make reference to reliance on irregularities mentioned in 0.12, r.7 but immediately afterwards the rule says: "or on any other ground".

24. Once service has been effected even where non-disclosure of material facts is relied upon, it As essentially the jurisdiction of the Court that is being challenged. It cannot, I think, be right to allow Sappi to maintain: "We are not in terms disputing the jurisdiction. We are invoking quite another power in the Court, to set aside the ex parte Order giving leave to serve on the ground of material non-disclosure, so we are not caught by 0.12, r.8(1) and (2)." In my judgment, this would be unreal. It seems clear that the rule-making authority intended every application which, if successful, would result in the defendant avoiding the jurisdiction of the Hong Kong courts to be made under 0.12, r.8 and within the time allowed, by the same simple procedure Unless 0.12, r.8(1) is complied with, the order giving leave to serve outside the jurisdiction must be treated as valid and every irregularity waived. This is the effect of 0.12, r.8(7). Sappi was properly before the Court for all purposes and they must be left to dispute the action on the merits.

25. I earlier mentioned the Respondent's Notice which we allowed to be placed before us. No one directly involved has given affidavit evidence about what occurred in the Registry on 29th July 1987. Obviously no one can really remember what happened.in relation to this summons after so long and it is likely that neither the filing clerk nor the Registry officials appreciated that 29th July was the last date by which the application had to be made and the consequences of being late.

26. Mr. Robert Arnold, a solicitor acting for Sappi, deposed that the affidavit to support the 0.12, r.8 summons was sworn on 29th July and that he gave the summons to the firm's litigation clerk, a Mr. Ng, with instruction's that it be issued that day. Later that day, Mr. Ng informed him that the Registry had refused to issue the summons because it felt that the time estimate endorsed upon it ("3 minutes") was unrealistic. He then instructed Mr. Mg that the time estimate related to what he called a "directions hearing" and that the summons had to be issued that very day.

27. Mr. Arnold went on to say that he had been informed. by a Mr. Lo his clerk who actually attended to issue the summons, that it took two attempts to issue it. On the first attempt, the judicial clerk at the Registry who was presented with it bad conferred with Mr. Hassan, the Chief Judicial Clerk, who had instructed Mr. Lo to get clarification from his principal about the time estimate given. Mr. Lo had then telephoned Mr. Ng who had been unable to obtain instructions as he (Mr. Arnold) had been out of the office. He had been informed by Mr. Lo that in those circumstances he must have returned to the office with the summons and given it back to Mr. Ng although he was unable to recall precisely what had occurred. By the time Mr. Ng received further instructions, he had been unable to issue the summons on that day and therefore had had no option but to return to the Registry and issue it on 30th July 1987.

28. When the proposed Respondent's Notice was seen by Mr Ku Ling Yu, a partner of the firm representing Wo Fung in this action he made enquiries from the Registry and deposed on 11th April 1988 that Mr. Hassan had informed him that the judicial clerk in question would have been either Mr. Hui or Mr. Lam. Mr. Hassan recalled having a word with the judicial clerk about this particular summons and that he had asked him to seek clarification from the person presenting the summons in case there had been a mistake in the estimated length of hearing given on the summons. Mr. Hassan said he had not instructed the clerk to refuse, to accept the summons. The purpose of his query, Mr. Ku was told, was to make sure that there was no mistake about the estimate given to avoid the waste of judicial time. So far as the practice of the Registry was concerned, according to Mr. Hassan's understanding, even if the person presenting the summons had ignored the request to clarify and had presented the summons for issuance and filing the judicial clerk would have allowed him to do so.

29. Mr. Ku deposed that after speaking to Mr. Hassan, he had spoken to Mr. Hui who was presently the clerk to the Registrar dealing with Registrar's summonses. Mr. Hui had no recollection of the matter and this was the first time he had become aware of the allegations made by Sappi's solicitors. He said that he rarely went downstairs to do the date fixing work except when Mr. K.H. Lam was away, and that if Mr. Hassan recollected that he was the judicial clerk who had spoken to Mr. Hassan during the event, it was likely that Mr. Hassan had been mistaken.

30. Mr. Ku then deposed that he had made enquiries from Mr. K.H. Lam. Mr. Lam told the deponent that owing to the lapse of time he could not recollect this particular event but he could explain the general practice and he had no reason to believe that the general practice would have been departed from. There was a standing instruction from the Registrar that the judicial clerk had to make sure that there was no mistake in the estimate of time. Quite apart from the question of wasting judicial time, the estimated length of hearing would have administrative implications. If a summons were marked with a 3 minutes estimate then it would go to the General Chambers lists and he (Mr. Lam) would be the person giving dates for such hearing. However, if the estimate were longer than 3 minutes then a special fixture would be given and it would the clerk next door who would give the dates. If he had been confronted with a summons with a 3 minutes estimate but with bulky affidavits he would have enquired on his own initiative, or after consultation with Mr. Hassan, whether there was any mistake as to the estimated time in case the person presenting it had come to the wrong room.

31. Mr. Ku was also told that this sort of request for clarification occurred very frequently and that Mr. Lam had no reason to believe that the events in the present case would have been handled any differently. If the person presenting the summons nevertheless requested that the summons be Issued he would have given a date to him. He would not and could not have refused the filing of the summons or any request for the summons to be filed.

32. These were the facts before us and we must address them, unsatisfactory though they are. Mr. Litton relied on a decision of the English Court of Appeal in support of his submission that the application should be treated as having been made in time i.e. on 29th July. We have the transcript of the judgment in Aly & Another v. Aly & Another dated 8th December 1983. This was a case where use had been made of postal facilities pursuant to practice directions applying to the Q.B.D. and Master's summonses. They provided, inter alia, that the letter of application, together with the requisite documents, must be posted in apre-paid envelope properly addressed to …" and "such an application shall be treated as having been made at the date and time of the actual receipt of the requisite documents, and for this purpose the date and time of the dispatch ... shall be wholly disregarded. The directions required the officer of the Court to affix an official stamp showing the date and time when the documents were received.

33. At the material time, the English R. 0.12, r.8(2) had not been revoked. The documents were received on 28th September 1982 and the stamp affixed on the covering letter bore that date. The documents themselves were not "stamped" on that date and the summons itself was not issued until 4th October.

34. The Registrar and later the Judge in Chambers took the view that the relevant date was 4th October when the summons was actually issued and not 28th September, and held in turn that they had no power to set aside the Writ and to discharge an order extending its validity because of the time limit imposed by 0.12, r.8.

35. The Court of Appeal (Eveleigh and O'Connor L.JJ.) took a different view. Eveleigh L.J. said:

" Now the word 'application', as one sees in the rules, had different shade of meaning, and there is no established technical meaning to the words apply to the Court' which are the words which appear in Order 12, rule 8(1). So one has to interpret those words, as I see it in a way that makes sense of the whole procedure that is being laid down, and it does not make sense to penalise a party who has done all that is in his power to do on the basis that a further act is required by the court which has not been done in time to allow the party to qualify for the relief for which he is asking. Consequently, one can only treat the words apply to the Court as meaning doing all that is in your power to do to set the wheels of justice in motion according to the procedure that is laid down for the pursuit of the relief which you are asking. That procedure in this case, was to apply for it in the manner laid down by the court; that he did, and he therefore in my judgment applied to the court for the relief which he was asking within the period of 14 days from the notice of intention to defend the proceedings. I therefore have come to the conclusion that the learned judge did have jurisdiction to deal with the matter."

36. In my judgment, it is for Sappi to establish that they did apply to the Court in time i.e. on 29th July 1987. The burden might not be a very heavy one and a Court will strive to interpret events in their favour so far as is possible to avoid the obvious unfairness of the rules in their present form, but I am bound to say that on the material before us, I feel quite unable to hold that when the firing clerk took the summons to the Registry on 29th July, Sappi made the application on that day. If be had left the summons there and the Registrar had stamped it with the following, day's date, it might have been possible to so hold. But that is not what happened. The Registry's query was perfectly sensible and proper. What is clear is that the filing clerk took the summons away and brought it back the next day, I find it impossible to conclude that on 29th July 1987 Sappi "had done all that it was in [their] power to do on the basis that a further act is required by the Court which has not been done in time to allow [them] to qualify for the relief for which [they were] asking" in Eveleigh L.J.s words I Would therefore distinguish Aly v. Aly for Ido not think it would be right to hold, on the material before us, that the ball, so to speak,was at the feet of the Registry. This only happened on 30th July the summons was re-presented, by which time it was too late. This sort of problem will not arise again after the amending rules come into force.

37. We have heard full argument from Mr. Litton and from Mr. Robert Tang (who appeared for Wo Fung before us) on the merits of the application if the Master and later the Judge in Chambers had jurisdiction to entertain it. I have consulted with my Lord, Hunter J.A. and he had been good enough to explain to me fully what he is about to say about the merits. I respectfully agree with him, that if the application can be regarded as having been made in time, it should not have succeeded upon any of the grounds put forward.

38. I would therefore allow this appeal and order that Sappi’s summons of 30th July 1987 be dismissed in its entirety.

Hunter, J.A. :

39. I entirely agree with my Lord's conclusions on the first two points with which he has dealt. First, this court has no inherent jurisdiction to extend the time limits under Order 12 rule 8(2), as it now stands, after their expiry. Secondly, Order 12 rule 8 constitutes single code and covers all applications howsoever based for any of the orders enumerated in rule 8(l).

40. In relation to the respondent's notice I have found the point a good deal more difficult. It is a very fine one. It is difficult to determine on the present evidence, all of which is very secondhand because no one really spotted the right point at the right time. It has no future significance after the impending timely death of Order 12 rule 8(2). It is a point upon which an adverse finding is frankly almost impossible, and certainly exceedingly embarrassing, to try to explain to the foreign litigant. From my part therefore I am happy to turn a Nelsonian blind eye; to make all necessary assumptions in the respondent's favour without deciding the point at all; and to proceed to consider the application on its merits, which I will now do.

41. The judge decided three points adversely to the plaintiffs. First he held them guilty of material non disclosure when making their ex-parte application under Order 11. Secondly he held that they failed to show that they had a good arguable case at the inter-partes stage under Order 12 rule 8. Thirdly he concluded that "the plaintiffs had not even begun to show that Hong Kong was the appropriate forum". It may be a striking commentary that we heard a great deal of argument upon the first point no separate direct argument on the second : and short submissions on the third.

42. I think it convenient at the outset to attempt to summarise what I see as the main relevant principles governing applications of this nature under Orders 11 and 12. I have drawn them principally, but not exclusively, from three decisions in the House of Lords; The Brabo⁽¹⁾; Vitkovice Horni v Korner⁽²⁾, and Spiliada Maritime Corp.v. Cansulex Ltd⁽³⁾. They can be summarised in this way :

(1)     This is what has been called an exorbitant jurisdiction. The court's basic jurisdiction is territorial. It is therefore a strong thing for the court to go outside its territory and to compel the foreigner to come here to defend himself. It must therefore be exercised with great caution see Spiliada⁽³⁾ at p 481.

(2)    There are two safeguards for the foreigner. First the applicant has to bring himself within one of the subparagraphs in Order 11 rule 1. Secondly the applicant has to satisfy Order 11 rule 4(2), and "make (it) sufficiently to appear to the court that the case is a proper one for service out". That as Lord Radcliffe pointed out in Vitkovice⁽²⁾ is really the heart of the rule.

(3)   In contract, the question whether a case is a proper one for service out falls to be answered by the tests in Spiliada⁽³⁾. These are ^.two ways, it seems to me, of expressing substantially the same concept. The first is Lord Keith's formulation of "natural forum" in the The Abidin Daver⁽⁴⁾ at p 415 where he defines the natural forum As being "that with which the action has the most real and substantial connection". The second is what Lord Goff called the basic principle and is his paraphase of Lord Kinnear's test in Sim v Robinow⁽⁵⁾. It is expressed by Lord Goff in these words at p 476 "the appropriate forum for the trial of the action i.e. in which the case may be tried more suitably for the^. interests of all the parties and the ends of justice". The onus of establishing that falls upon the plaintiff applicant.

(4)    The phase "sufficiently to appear" in Order 11 rule 4(2) is a guarded one and is carefully chosen, I think, to cover the two very different positions of the court, on an application like this, in relation to the law and the facts. As far as the law is concerned, if the facts are clear the court can readily decide that for itself. That conclusion may be decisive, directly or indirectly, see The Brabo^(l). Equally, and this is one of the court's primary functions under this rule, it can decide whether the facts alleged are sufficient^.in law to support the cause of action alleged. But on pure fact, and particularly upon disputed fact, it is in a very different position. It cannot make any finding for the simple reason that it cannot conduct a mini pre-trial in order to decide whether a proper trial is to take place. It therefore has basically to act upon asserted fact.

(5)    There are two stages to the enquiry. The first is the ex-parte stage under Order 11. I emphasise that it is ex-parte on documents. The practice does not envisage oral submissions ever being made except at specific request. Order 11 rule 4(1) specifies what the supporting  affidavit has to show. At that stage it seems to me that the court has to come to a provisional view (it being an ex-parte application) on three matters. The first is whether the applicant shows a prima fact case. I read the speeches in Vitkovice(2)as accepting that that is the burden of that stage, it may he for the simple reason.that when the court has only got one party's version before it, it can do very little more. That is how I read the speeches of Lord Simonds at p.876 the Lord Radcliffe at p 884, Lord Tucker at p 891. Secondly it has to consider the sufficiency in law of the facts alleged for example whether the applicant brings himself within any of the sub-rules and whether the facts alleged are sufficient prima facie to establish the.cause of action alleged. Thirdly the court has to consider the facts within the limited scope available. This really comes down to considering whether the facts are sufficiently, asserted in an apparently credible manner. The manner was put in this way in a case in contract by Lord Buckmaster giving the opinion of the Privy Council in. Hemeryck v William Lyall Shipbuilding(6) at p 701. He said :

"For the purpose of exercising the discretion which is conferred by the rules to be exercised (that is Order 11) it is sufficient if there appears reasonable evidence that a contract has been made".

(6) The second stage which may or may not be reached, follows a proper application under Order 12 rule R, Then the court has to consider all the evidence before it, and to determine in the light of that whether the plaintiff show a good arguable case. That it is the test laid down in Vitkovice⁽²⁾ at that stage. But the court's position on fact and law is the same as it was at the ex-parte stage. It cannot make any Findings of fact. It can certainly consider the legal sufficiency of the facts and whether there are legal holes or obvious failings in the plaintiff's case. It can in the words of Lord Goddard C.J. in Malik v National Bank of Czechoslovakia⁽⁷⁾ cited in Vitkovice⁽²⁾ at p 888, "if it can see by what appears on the affidavits that the case put up is a perfectly groundless one and one in which there is no substance at all, the court can refuse to give leave". Similarly if the case is demurrable or nearly so. But that is about the limit of the court's power and function on disputed facts under this jurisdiction. It follows that the existence of disputed facts is normally quite irrelevant to the question as to whether or not a good arguable case has been shown. Putting it in another way, the showing of a good arguable case does not postulate an Order 14 case, and is not negatived by the fact that good arguable defences may exist. The relevance of the dispute goes really to little more than the question of the suitability of the forum evidentially and it may be a factor to be brought in there. Otherwise normally speaking factual disputes are quite irrelevant.

43. I turn now to the two principles I conceive to be relevant, in relation to 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⁽⁸⁾, 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. The point was put in words upon which I will not attempt to improve by this court in Citibank v Express Ship Management. Service⁽⁹⁾; first in the judgment my Lord the Vice-President. He starts by citing, from the judgment of Browne Wilkinson J. in Thermax Limited v Schott Industrial Glass Limited⁽¹⁰⁾ that what are material are

"all facts that are relevant to the weighing operation which the court has to make, in deciding the point before it".

My Lord went on in these terms

"While the courts must be vigilant, and insist that full and frank disclosure be made in grounding affidavits for ex-parts applications for injunctions, Anton Piller orders etc, it is essential to bear in mind the true principle upon which this rule.is based. Unless the courts use the sanction which the principle gives only where the non-disclosure is of facts which are relevant to the ex-parte judges "weighing operation", an impossible burden would be placed upon applicants and their advisers, and affidavits ex abundanti will tend to contain all sorts of facts and exhibits which are not really necessary for the proper exercise of the court’s discretion when ex-parte relief is sought".

Likewise I am happy to adopt the observations of Macdougall J. who on p 1191 says

"It would be unfortunate if it were to be thought that in laying down the very sensible and necessary principles concerning disclosure of all material facts, the court have intended to give active encouragement to undeserving defendants to search ingeniously for facts which a plaintiff may innocently have failed to disclose, in the hope that a judge may consider them to be material and so discharge …."

the original order.

44. 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 but. 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.

45. So far as the plaintiff's case is concerned, it had already, been briefly summarised by my Lord. It is based upon two groups of contracts, said to be contracts in writing made with the defendant through its Hong Kong agent, a company called Irraffe. The first group of six contracts were all dated 24th. October 1935. They, were in substantially the same terms save for delivery Delivery extended under the contracts from December 1985 to March 1986. The plaintiffs plead that there was due performance of the first three contracts; that the fourth was performed late; that the fifth and sixth not at all, save for a trifling delivery under the fifth. This was notwithstanding that the Letters of Credit were extended under the fifth and sixth contracts several times, and ultimately to a date in November 1986.

46. The second group of six contracts, all dated 2nd January 1986, were made, the plaintiffs say, in an identical way. They provided for delivery between the months of April and June 1986. Under these, the plaintiffs say, there was no performance at all, notwithstanding their opening in respect of the first four contracts of relevant Letters of Credit all of which were also extended until dates in November of that year. They say they did not open Letters of Credit in respect to the last two, having regard to what they would describe as lamentable performance by the defendant. In those circumstances they claim damages for non delivery. They also put the matter on the basis of anticipatory breach. These facts were fully pleaded in the Statement of Claim. This is not an application that was based upon a general indorsement. The initial affirmation put before the court as exhibits all twelve contract documents.

47. In relation to that, three points basically were taken by the defendants. The first was an assertion that there was no contract. Irraffe, it is said, had no authority to bind the defendants. These contract forms were simply offers, not contracts. They required express acceptance by the defendants. The first four contracts were expressly accepted and none of the others were. They have exhibited in evidence the acceptance documents they say were sent directly to the plaintiffs. They are in an unusual form, which is perhaps equally consistent with and might be associated with, a internal document. Conversely the plaintiffs deny receipt of those documents.

48. In my view it can be seen at once that this is an ineffective and valueless point on the question of arguable case under Order 11 and order 12. When one looks at the contract documents, they themselves create an arguable point that they constitute agreements in wining. All the other matters which have been put in evidence go to the possibility of that prima facie conclusion being displaced upon further evidence at the trial by evidence of acceptance or course of dealing. That only goes to the need for a trial: it certainly does not detract from the conclusion that there is an arguable case.

49. Secondly it is said that there is a special term in the second group of contracts. This is true in fact. The special additional term is "this order is accepted subject to production space available". Again it is obvious that that could give arise to defences. But it is equally obvious that would be a matter for proof by the defendants that production space at the material times was not available. This likewise gives rise simply to potential arguments and potential defences. I should add that the provision is perfectly obvious, and could not have escaped notice by the Master. I say that because we were referred to the case of The Panaghia P(11) where the judge was critical of the plaintiff's failure to draw attention to a particular clause in a Charterparty. But that was a small clause tucked in at the end of a 70 clause Charterparty, which ran into nine pages, and which might well not.have been picked out.

50. Thirdly, and this eventually became almost the lynch-pin of Mr. Litton's argument, he relied strongly upon the fact that all the contracts contained another term to this effect : "specification to be advised thirty.days before production". The evidence shows that specifications were provided by Irraffe in respect of the first six contracts. I would emphasise that the specification only went to the width of the materials. The rest of the specification was in the document itself. But it is said that no specifications were provided in respect to the last six contracts, and this, Mr. Litton submits, shows that the plaintiffs had no arguable case at all against the defendants in relation to those contracts. With respect, I cannot start to accept that. It does not touch upon the case of anticipatory breach. It does not on the facts touch the simple premise that the need for a specification arises when there is an apparent indication by the sellers that they are about to manufacture. There was no such indication in this case. As Mr.Tang pointed out in reply, this is a feature which may or may not signify in this case: If first the defendants admit the contract; secondly they admit that they had production space; and thirdly they assert, a readiness and willingness to manufacture. That at the present moment looks a highly unlikely contingency. The first two propositions are being strenuously denied. In addition an assertion is made in the documents produced, which suggests that there were other good reasons namely price, why these goods were not being manufactured at that date. For these reasons I have no hesitation in concluding that these plaintiffs did show a good arguable case.

51. I then turn to the question of forum. Here the matter seems to me to be very clear and very simple. The arguable case is based upon a Hong Kong contract made in Hong Kong between persons then in business in. Hong Kong. It provides for delivery CIF Hong Kong. There was non delivery in Hong Kong. Damages would be measured by the market price of the material in Hong Kong. The plaintiffs principal witness happens to be a Cantonese speaker, who is in particular need of the services of Cantonese speaking, lawyers, and perhaps of the particular experience of Hong Kong courts in dealing with evidence through an interpreter. With the possible exception of the last, these.points must have been obviously apparent, on the face of the documents before the Master initially.

52. At the inter-partes stage two other factors. emerged. The first is that by chance the principal witness for the defence is also now working in Hong Kong. Secondly the factual issues advanced in the documents by the defendants are likely to be decisively affected by discovery. They are matters upon which oral evidence may or may not be required in due course. Contrary to the view reached by the trial judge, it seems to me, with respect, that it does not matter which of the Spiliada⁽³⁾ tests you propose, they both admit of only one answer.

53. I then come back, having deliberately put it last, to the point on non-disclosure. Here the judge relied upon the same three points. that I dealt with on the issue of arguable case, as constituting the non-disclosure. He concluded that-the Master could not have dealt properly with the issue of arguable case, unless some of the defendant's contentions had been put before him. I profoundly disagree. First these contentions are shown to be immaterial even at the inter-partes stage, as not affecting the question of good arguable case at all. Secondly at the ex-parte stage, all. that the plaintiffs knew was some very much more attenuated information in two telexes. For my part I can see no requirement for the plaintiffs to put those matters before the Master at that stage.

54. I therefore agree that Master Perrior's original order should not have been set aside, and that this appeal, should be allowed.

Penlington, J.A.:

55. I myself did not share the doubts felt by my Lord the Vice-President, as to whether the respondent did apply to the court within the time allowed by Order 12 rule 8. On the basis of the affidavits sworn, on balance, I consider that it did Apart from that now academic point I agree with the judgments which have just been delivered. Where a foreign company actively solicits sales in Hong Kong through an agent, I see no injustice if a commercial dispute arising therefrom is tried in these courts, unless there are clear reasons to the contrary. I see no such reasons here. I would also allow this appeal.

(1) [1949] AC 326

(2) [1951] AC 869

(3) [1987] AC 460

(4) [1984] AC 398

(5) (1892) 19 R 665

(6) [1921] 1 AC 698

(7) 176 LT 136

(8) [1917] 1 KB 486

(9) [1987] HKLR 1184

(10) [1981] FSR 289

(11) [1983] 2 LLOYD'S Law Rep 652