MERCEDES-BENZ AG v. LEIDUCK, HERBERT HEINZ HORST

IN THE COURT OF APPEAL

1994, No. 207
(Civil)

-Headnote-

Order 11 r1 Rules of the Supreme Court - leave to serve writ out of the jurisdiction - Application to discharge under O12 r8 by defendant who had not submitted to the jurisdiction - whether defendant required to show "merits" on such challenge to jurisdiction. Effect of O11 r1(1)(b) and (m) - Siskina [1979] AC 210, Carolina Insurance [1987] AC 24 and Channel Tunnel [1993] AC 334 considered.

IN THE COURT OF APPEAL

1994, No. 207
(Civil)

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J U D G M E N T

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Litton, J.A.:

1. This appeal concerns an ex parte order made under Order 11 rule 1(1) of the Rules of the Supreme Court by Deputy Judge Wilson on 29 April 1994. There were then two proposed defendants to the action: Mr Leiduck, a German national (D1) and Intercontinental Resources Company Limited, a Hong Kong registered company (D2). The plaintiff is a German corporation, the well-known manufacturer of motor vehicles, with its principal place of business in Stuttgart, Germany. The ex parte order of 29 April permitted service of the writ on D1 at the Palais de Justice Monaco or elsewhere in the Principality of Monaco. The time for acknowledgement of service was 26 days. D1 was then in detention in Monaco, pending criminal investigations for fraud. The writ was served on 5 May. It was not until 17 September that D1 applied under O12 r8 to have the ex parte order discharged, on the ground that the court had no jurisdiction over him in respect of the plaintiff's claim in the action. Keith J, by his judgment of 10 November 1994, acceded to that application. Hence the appeal by the plaintiff to this court.

The Plaintiff's claim in the action

The plaintiff's claim set out in the writ, as against D1, is as follows:

"(1) The sum of US$17,615,555,58 by way of principal and interest pursuant to promissory notes in favour of the plaintiff as personally guaranteed by the first defendant by means of an aval.

(2) The sum of US$16,500,000 as paid by the plaintiff to or for the first defendant the consideration for which has wholly failed so that the first defendant has had and received this sum to the use of the plaintiff.

(3) Damages for breach of fiduciary duty and any necessary inquiries in relation thereto.

(4) Alternatively an account of all sums paid by the plaintiff and profits therefrom and orders for payment of all sums found due together with interest thereon."

2. As against D2, the endorsement of claim is as follows:

"(1) The sum of US$6m paid to or on behalf of the 2nd defendant in breach of trust and received/applied for the benefit of the 2nd defendant so as to render the 2nd defendant a constructive trustee of the same.

(2) An order for the restitution or repayment of the said sum of US$6m.

(3) An account including an account of any profits made by the 2nd defendant as a result of the use of the said sum of US$6m.

(4) An order for discovery and disclosure in relation to the use and application of the said sum of US$6m."

Mareva injunctions

3. The leave of the court to serve the writ in Monaco was given at the same time as Mareva injunctions were ordered against the two defendants. From the supporting affidavit of the plaintiffs' solicitor, Mr Carolan, it is clear that the plaintiff's claims against the defendants, as set out in the writ, have no connection with Hong Kong. The only reason why proceedings were commenced in Hong Kong was because D1 was the registered owner of 99.9% of the shares in D2, a substantial Hong Kong trading company. The plaintiff had, in April 1994, commenced proceedings in Monaco against D1 for the same cause, but it is said that judgment is not likely to be given until December or January next year. The plaintiff's intention is not to have their claims against the defendants adjudicated in Hong Kong. The only reason for coming to Hong Kong was the Mareva injunction: to "freeze" the defendants' assets in Hong Kong, in particular D1's shareholding in D2, a private limited company, so that when judgment is given in the plaintiff's favour in Monaco, there would be assets on which such judgment could be enforced.

D2's position in the action

4. As regards D2, it became obvious early on in the litigation that the plaintiff's claim was misconceived. On 17 May, by consent, all the interim orders against D2 were set aside, with costs to be paid to D2 on an indemnity basis. On 22 August, the plaintiff's solicitors filed a notice of discontinuance against D2.

5. This effectively nullified any reliance which the plaintiff might otherwise have placed on r1(1)(c) of Order 11 as a foundation for the ex parte leave to serve the writ out of the jurisdiction on D1. Sub-paragraph (c) authorises service of a writ out of the jurisdiction where "the claim is brought against a person duly served... and a person out of the jurisdiction is a necessary or proper party thereto". The plaintiff had no claim against D2; that Hong Kong company was never under any legal liability to the plaintiff as alleged in the writ, hence, the plaintiff could not say that D1 was a "necessary or proper party" to any claim against D2. Having reached this point, it is unnecessary to decide whether Keith J was right or wrong when he held that the language of O11 r4(1)(d) also precluded any reliance by the plaintiff on sub-paragraph (c): he held that having regard to r4(1)(d), ex parte leave could only be granted after D2 had been served - in other words, that an undertaking by the plaintiff's solicitors to serve D2 first, within the jurisdiction, before D1 was served in Monaco, was not sufficient to comply with the requirements of sub-paragraph (c). Although I am inclined to the same view as Keith J, on the construction of sub-paragraph (c), it is not necessary to make a finding on the point.

6. This is not to say that the plaintiff's original claim against D2 drops out of the picture altogether: Mr Thomas QC, counsel for the plaintiff, relies on the claim against D2 in an oblique way, and this will become clearer when I deal with the main issue in this appeal, namely, the proper construction of Order 12 rule 8.

Order 12 rule 8

7. The rules under Order 12 have this general heading:

"Acknowledgement of service of writ or originating summons".

8. Rule 8 says:

"8. Dispute as to jurisdiction (O.12, r.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 the time limited for service of a defence, apply to the court for -

(a) ..., or

(b) ..., or

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

(d) ..., or

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

(f) the discharge of any order made to 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.

(3) An application under paragraph (1) must be made -

(a) ....

(c) in any other action, by summons or motion, and the notice of motion or summons must state the grounds of the application.

(4) An application under paragraph (1) must be supported by an affidavit verifying the facts on which the application is based and a copy of the affidavit must be served with the notice of motion or summons by which the application is made.

(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; ....

(7) Except where the defendant makes an application in accordance with paragraph (1), the acknowledgement by a defendant of service of a writ shall, unless the acknowledgement 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. As is plain from the wording of O12 r8, it provides the framework within which a foreign defendant might challenge the jurisdiction of the court over him. As regards the defendant against whom default judgment has been entered, O12 r8 is neutral. It clearly does not debar such a defendant from challenging the jurisdiction of the court. The only proviso is that he has not submitted to the jurisdiction of the court; para (6) expressly states that the fact of having given notice of intention to defend is not to be taken as a submission to the jurisdiction, where he makes an application under para(1).

Default judgment

10. As a matter of history, what happened in this case was this: on 24 June, judgment in default was entered against D1 for US$17.6 million and interest. On 28 July D1 instructed Messrs Robert W.H. Wang & Co. to act for him and on 2 August 1994 D1 made an application under O12 r6, for leave to give notice of intention to defend, for the purpose of subsequently making an application to dispute the jurisdiction of the court under O12 r8. This was a necessary step to take because O12 r6(1) states that except with the leave of the court, a defendant may not give notice of intention to defend in an action after judgment has been obtained therein: and the notice of intention to defend is a necessary preliminary step before the foreign defendant can challenge the court's jurisdiction. The O12 r6 application was contested by the plaintiff but Mr Justice Leong, after hearing full argument by counsel, made an order on 8 September granting D1 leave to give notice of intention to defend the action within 7 days, for the purpose of making the O12 r8 application. There has been no appeal against that order.

11. Having cleared the deck for a proper application under O12 r8, it would seem from a plain reading of that rule that D1 faced no other procedural obstacle; it was simply a question, yes or no, whether the plaintiff could show that the circumstances justified the grant of leave under one of the sub- paragraphs of O11 r1(1), to enable the court to assume jurisdiction in the action over D1.

Approach to construction of Order 12 rule 8

12. Mr Thomas, QC submits that, construed in a "broad and liberal" manner, O12 r8 does not permit a foreign defendant, against whom default judgment has already been entered, to make a bare challenge to jurisdiction, without showing that he has some merits in the litigation and that he has at least an arguable defence to the plaintiff's claim. Mr Thomas argues thus: D1 "deliberately" did not raise any defence; he has never said he had a defence to the plaintiff's claim; he was in contempt of court in failing to give discovery in aid of the Mareva injunction as ordered; he waited until his property in Hong Kong (his shareholding in D2) came under threat of "seizure" in execution of the default judgment before he instructed solicitors to challenge the jurisdiction of the court. A foreign defendant, says Mr Thomas, cannot "crash through all the barriers" just because he takes a jurisdiction point; the judgment dated 24 June 1994 ordering D1 to pay to the plaintiff the sum of US$17.6 million was, on the face of it, a regular judgment and must be obeyed; this "barrier" to the application under O12 r8 can only be knocked down if D1 was able to put forward facts on the merits of his case which would have persuaded a court to set aside the judgment under O13 r9. Mr Thomas underpins this submission by this further point: when D1 was served with the writ on 9 May, that was done on the basis of facts put forward, in all good faith, that the plaintiff had a viable cause of action against D2 and that D1 was a "necessary and proper party" to that claim, in terms of O11 r1(1)(c); D1 failed to acknowledge service of the writ and failed to give notice to defend within the 26 days allowed, and permitted the default judgment to be entered against him; this reinforces the argument that on his O12 r8 application he should show "merits" before the court could entertain the application.

13. Against this Mr Stone, counsel for D1, argues: the Hong Kong courts never had jurisdiction to entertain the claim brought against D1 by the plaintiff; in other words, the courts are not, and never were, authorised by law to consider the merits of the case; O12 r8 provides the frame-work for a dispute as to jurisdiction and nothing else; it is, in Mr Stone's words, a "kill or cure" remedy.

14. Substantially the same argument now put to us by Mr Thomas was advanced in the court below. Keith J disposed of it by saying:

"Mr Leiduck has not filed an affidavit of merits. However, if a defendant wishes to defend an action, not on the merits, but on the basis of the court's lack of jurisdiction, it would be absurd to require the usual affidavit of merits".

15. I agree with the judge. Any other approach would be to re-write the provisions of O12 r8.

Is D1 debarred from challenging the jurisdiction?

16. Obviously, where, on an objective view of the facts, a defendant is found to have submitted to the jurisdiction of the court, whether by taking a "fresh step" in the proceedings or for any other reason, he is of course bound by the default judgment until he succeeds in having it set aside under O13 r9. If he cannot show, on an application under O13 r9, that he has an arguable defence to the claim, he will fail. Where, however, he has not submitted to the jurisdiction and is making a properly founded application under O12 r8 to challenge the court's jurisdiction, it is difficult to see how his "conduct" is relevant. For my part, the line between a "waiver" of his remedy under O12 r8 and a "submission to the jurisdiction" is so fine as to be invisible. Either he has submitted to the jurisdiction, or he has not. If he has not, the "merits", whether in his conduct or in his case, are wholly irrelevant.

17. As to the facts, I do not think that Mr Thomas' submission that D1 had "deliberately" allowed the default judgment to be entered against him is well founded. The argument is based upon one supposition: that as early as 9 May, four days after D1 had been served with the writ in Monaco, he was represented by solicitors in Hong Kong. This refers to the hearing before deputy judge Cannon on 9 May when an extension of time was given to D1 to make disclosure of his assets. The formal order recites the fact that, at that hearing, "the solicitors for the 1st defendant" were heard. But, as is apparent from Mr Geoffrey Miles' affidavit of 8 September, this was a mistake. Mr Miles had no instructions to act for D1 at that hearing; he attended the hearing in order to keep a "watching brief", until he could actually get instructions from D1; and because he did not have instructions he did not go on the court record by filing a notice to act. His firm never in fact received instructions to act for D1 and had no funds for doing so.

18. It was not until 28 July that D1 had Hong Kong solicitors. On that day he gave instructions to Messrs Robert W.H. Wang & Co., and from that time on D1 through his solicitors acted expeditiously. The judge thought that the delay of nine weeks, between the time when notice of intention to defend should have been given, and the date when leave to give such notice was in fact sought, was insignificant. I agree. During that time D1 was in custody in Monaco. Nothing in the affidavits before us suggests that D1, with his eyes open, aware of the procedural rules in Hong Kong, chose to allow the default judgment to be entered against him; and nothing suggests that he deliberately waited until execution on that judgment was in progress before he challenged the jurisdiction of the court.

19. In short, D1 has never submitted to the jurisdiction of the court. The judge so found. That finding is unassailable.

Order 11 rule 1(1)(b)

20. This brings me to the heart of the issue on this appeal, namely, whether service of the writ out of the jurisdiction was authorised by r1(1)(b). Sub-paragraph (b) says that where in an action begun by the writ, "an injunction is sought ordering the defendant to do or refrain from doing anything within the jurisdiction (whether or not damages are also claimed in respect of a failure to do or the doing of that thing)", then leave to serve out might be given.

21. The first point to note is this. In the writ issued in this case, the plaintiff sought to recover from D1 certain sums of money; he was also asked to account in equity; there is no claim in the writ for an injunction.

22. An application for leave under O11 r1 must be supported by an affidavit stating (a) the grounds on which the application is made, and (b) that in the deponents' belief the plaintiff has a good cause of action: see Order 11 r4(1). Para (2) of the same rule states that "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".

23. In support of the application the plaintiff's solicitor made an affidavit in which he said:

"Jurisdiction over 1st Defendant

34. I believe that the plaintiff has good causes of action against the first defendant as an endorser on the promissory notes, for breach of contract, for money had and received and as constructive trustee....

35. I believe that the plaintiff has a good arguable case that the case is a proper one for service on the 1st defendant out of the jurisdiction under RSC Order 11 r1(1)(b). The plaintiff has a good cause of action recognized under Hong Kong law. The final order in that cause of action is likely to be made in the courts of Monaco. If, as I believe to be likely, the final order is made in the plaintiff's favour, the Hong Kong court will have jurisdiction over the 1st defendant under RSC Order 11r 1(1)(m) in an action to enforce such final order ...".

24. The only injunction the plaintiff has ever sought against D1 is the interim Mareva injunction, to "freeze" his assets up to the value of US$19m, pending the determination of the plaintiff's claim and in aid of any judgment which might subsequently be obtained in the action. That is the nature of a Mareva injunction. Plainly, this pre-supposes that the plaintiff has a viable cause of action which can properly be tried in the courts in Hong Kong; to use the application for an interim injunction as the foundation for an application for leave to serve the writ out of the jurisdiction is, in the words of Lord Diplock in The Siskina [1979] AC 210 at 257B, "an attempt to pull oneself up by one's own bootstraps".

25. Reading the plaintiff's solicitor's affidavit, it is clear that the plaintiff's claim against D1 arose from an agreement contained in a letter dated 8 July 1993 whereby D1 agreed to facilitate the sale of 10,000 Mercedes-Benz cars in Russia; pursuant to that agreement D1 received "advance promotion financing" in the sum of US$20m. This was explained in the solicitor's affidavit (para 4) as a sum "required to establish the promotional and logistical infrastructure in the country concerned, infrastructure to include such things as unloading facilities at a Black Sea port". The contract involved the sale in Russia of cars for US$870m.

Basis of jurisdiction

26. The general rule of law is that the jurisdiction of the Hong Kong courts over persons is territorial: see the statement of principle in The Siskina (supra) at 254F. The exceptions to this general rule are to be found in O11 of the Rules of the Supreme Court. The sub-paragraphs under r1(1) provide a complete code. It is quite clear that the plaintiff's contractual claim cannot come within paragraphs (d) and (e) of r1(1): the contract to facilitate the sale of cars in Russia, and to pay money to D1 for that purpose, has nothing whatever to do with Hong Kong.

27. Mr Thomas argues that the "doctrine" in The Siskina has been "reinterpreted" by the House of Lords in Channel Tunnel Group v. Balfour Beatty Ltd. (1993) AC 334. But, try as I might, I find it impossible to see how the decision or effect of The Siskina has changed in any way as a result of that case. I ignore for this purpose the provisions of sections 24 and 25 of the Civil Jurisdiction and Judgments Act 1982 which have considerably modified the effect of the Siskina in England, bringing the law in the United Kingdom more in line with that of the nations in the European Union. This was done by statute in the United Kingdom, and reinforces the point that, without statutory intervention, The Siskina remains in full force and effect. That is the law in Hong Kong.

28. The decision in The Siskina focussed on the proper construction of the English equivalent of the Hong Kong O11 r1(1)(b). The House of Lords held that, to come within that sub-paragraph, the injunction sought had to be part of the substantive relief to which the plaintiff's cause of action, as set out in the writ, entitled him. Otherwise, the court could not assume jurisdiction over the foreign defendant. In Channel Tunnel the question of jurisdiction was not in issue. If anything, the court there reinforced the authority of The Siskina: the House of Lords held that despite the amplitude of s37(1) of the Supreme Court Act 1981 - the Hong Kong equivalent is s21L(1) of the Supreme Court Ordinance - a claim to an interlocutory injunction under that section, incidental to and dependent on the enforcement of a substantive right in the action, could not exist in isolation. Section 21L(1), it will be recalled, says:

"(1) The High Court may by order (whether interlocutory or final) grant an injunction or appoint a receiver in all cases in which it appears to the High Court to be just or convenient to do so."

Sub-paragraph (m)

29. Realising that sub-paragraph (b) of r1(1) is not sufficient on its own to found jurisdiction, Mr Thomas calls in aid the provisions of sub-paragraph (m), which enable leave to be given where:

"(m) The claim is brought to enforce any judgment or arbitral award".

30. The argument runs thus: the fact that the plaintiff has not yet obtained a final judgment from the court in Monaco does not prevent the plaintiff from relying on sub-paragraph (m) because the action was in fact brought with a view to enforcing the judgment once obtained; a serious injustice will be caused if neither the Monaco court nor the Hong Kong court were to have jurisdiction to restrain the dissipation of D1's assets pending judgment in Monaco; in general, the court will, where possible in the interest of comity, seek to recognize and uphold the order of the court of a friendly state.

31. As far as comity is concerned, the proposition rubs both ways. As Lord Diplock said in The Siskina at 254H the jurisdiction exercisable over foreigners by the High Court is regarded as "exorbitant"; it runs "counter to the normal rules of comity among civilized nations. For this reason it has long been held that where there is any room for doubt as to their meaning the provisions of the sub-rules are to be strictly construed in favour of the foreigner...".

32. The court would simply be "second-guessing" the reaction of the government of the Principality of Monaco were it to reach out to a person within its jurisdiction; some might say that to subject such a person to the compulsive process of the Hong Kong courts is an infringement of the sovereignty of that Principality and not conducive to the comity of nations.

33. In my view, this case cannot be judged by the vague criteria of "fairness" advanced by Mr Thomas. It must, in the final analysis, be decided by the proper construction of the sub-paragraphs under r1(1). In my judgment, the meaning of sub-paragraph (m) admits of no doubt. As the plaintiff's solicitor said in the affidavit referred to earlier in this judgment, if a final judgment is given in the plaintiff's favour in the Monaco litigation, the Hong Kong courts will have jurisdiction over D1 under sub-paragraph (m), because the plaintiff will then be able to bring a claim to enforce such judgment. It must follow that as judgment has not been given, the court has no jurisdiction.

Conclusion

34. In my judgment, the court had no jurisdiction over D1 in respect of the plaintiff's claim as endorsed in the writ. Leave ought not to have been given to serve the writ out of the jurisdiction. Keith J was right to discharge the ex parte order of 29 April.

35. Once this point is reached, it is unnecessary to look further at the provisions of r4(2) which say:

"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."

36. This rule merely emphasizes the importance of a close scrutiny of an application for leave under r1(1). Even if the plaintiff can bring its case technically within one of the sub-paragraphs, it does not automatically follow that leave will be granted. Where, plainly, the claim does not fall within any of the sub-paragraphs, that is the end of the matter.

37. In my judgment the judge reached the correct conclusion in this case. The appeal should be dismissed.

38. Mr Thomas submits that if we should dismiss the appeal, we should nevertheless order a stay of our own order, to leave the Mareva injunction in place for a further seven days. This would enable the solicitors to take instructions from the plaintiff in Germany and to apply to this court for a further stay if necessary, pending an appeal to the Privy Council. This seems to me to stultify our own decision. Keith J was faced with the same request, which he granted with reluctance, and only because access to this court, in the hierarchy of appeals, was relatively easy. Keith J gave his decision on 10 November; we heard the appeal on 23-25 November; the same facility for accommodating speedy appeals would obviously not be available to the parties in the Privy Council. A stay pending appeal to the Privy Council would, in effect, be to reverse our own decision.

39. The assets now "frozen" are shares in D2, a private limited company, whose only directors are D1 and a Mr Yip. The shares are, presumably, in the sole control of the directors, as is the case with all private limited companies, and no transfers can be effective unless authorized by the directors. If the directors should, as a result of the judgment of this court, authorize a transfer of D1's shares and register Mr Yip or anyone else as the holder of those shares, and this is done purely to defeat the rights of creditors, it would be surprising if the creditors have no remedies in law. Shares are intangible property. They cannot be secreted away. I therefore question whether the apprehended harm, if no stay were granted, is as great as Mr Thomas suggests. I would, for my part, simply order that the appeal be dismissed, with an order nisi as to costs in D1's favour.

Cross-appeal on costs

40. On 2 August D1's solicitors took out an application under O12 r6 for leave to give notice of intention to defend, as a necessary preliminary step to his mounting a jurisdictional challenge under O12 r8. Leong J acceded to that applications and reserved the costs to be dealt with after the O12 r8 application was heard.

41. It would seem logical that, once the challenge to jurisdiction succeeded, D1 should get all the costs in the proceedings, including the costs reserved by Leong J. D1's fundamental point was, and has always been, that he should not be vexed In legal proceedings in Hong Kong, at the suit of the plaintiff, and in that regard he has succeeded. Moreover, once it became apparent that the plaintiff had no viable cause of action against D2, and this occurred within 10 days of the issue of the writ, the sole foundation for seeking leave to serve D1 in Monaco had gone. And yet the plaintiff proceeded to obtain default judgment against D1. The O12 r6 application was a necessary first step to challenging the court's jurisdiction, once default judgment was obtained. In a sense D1 was seeking an "indulgence", but this is an insubstantial point because the effect of our judgment is that the default judgment was irregular; the court had no jurisdiction to enter judgment; it must follow that the costs of proceedings to challenge jurisdiction, and to have all orders including the default judgment set aside, should follow the event, unless there was something in D1's conduct which required the court to approach the exercise of discretion differently. I cannot see the basis for not ordering the costs to follow the event; the "indulgence" sought by D1 is not a sufficient basis in this regard, particularly in view of the judge's finding that the delay in initiating proceedings was explicable.

42. I would allow the cross-appeal, set aside Keith J's order as to costs and order that the costs reserved by Leong J be paid by the plaintiff.

Bokhary, J.A.:

MERCEDES-BENZ'S APPEAL

The reality of this case

43. Mercedes-Benz wanted to serve Mr Leiduck out of the jurisdiction. So they applied for leave to do that. Their application was made in good faith. No deception was practised on the court.

44. Leave was granted. Pursuant to such leave and in accordance with it, Mr Leiduck was served in Monaco. He is in gaol there. But it is clear that he has access to lawyers there and, through them, to lawyers here. Also, he is by no means a total stranger here. We know that he holds a Hong Kong identity card. and we know that he controls a Hong Kong trading company.

45. Nevertheless, he failed to give notice of intention to defend within the time limited for his giving such notice. Accordingly, Mercedes-Benz obtained judgment in default against him. Still he did nothing.

46. It was only when his shares in the Hong Kong company which he controls were being charged to enforce the judgment that he applied to have it set aside.

47. He does not suggest that he has a defence on the merits. Nor does he offer any explanation why he let judgment go against him in default.

48. His challenge to the judgment involves going behind it to contend that the High Court was acting in excess of its powers when it granted Mercedes-Benz leave to serve him out of the jurisdiction. That contention of his is contested by them. Whether that contested contention is right or wrong is not obvious. Determining it takes up the courts' time in hearing the arguments and then forming a conclusion.

49. In my judgment, the courts ought not to accord time to such an exercise. Any time so accorded would be at the expense of a large body of litigants who do assert merits and await their day in court. And it would be accorded to a defendant who:

(i) has a judgment against him;

(ii) does not assert that such judgment is against the merits;

(iii) has let such judgment go against him in default;

(iv) has offered no explanation why he let that happen;

(v) has failed to comply with an order of the High Court for Mareva discovery even after an extension of time for making such discovery; and

(vi) has offered no explanation for his non-compliance with that order.

That is the reality of this case.

50. Even on the foregoing basis alone, I would allow this appeal.

The High Court did have power to permit service out of the jurisdiction

51. But since the judge did determine Mr Leiduck's contention that the High Court did not have power to permit service on him out of the jurisdiction, I will indicate why I take the view that the High Court did have power to do that.

Order 11. rule 1(1)(m)

52. One of the situations in which the High Court has power to permit service out of the jurisdiction is the one covered by item (m) of Order 11, rule 1(1). That is where "the claim is brought to enforce any judgment or arbitral award."

53. Mercedes-Benz's claim was brought to do that.

54. If Mr Leiduck had been served in Hong Kong, the courts here would certainly have had power to grant Mareva relief against him to prevent him from dissipating his assets here or elsewhere so as to defeat enforcement of the judgment which Mercedes-Benz expected to obtain against him in Monaco.

55. Item (m) speaks of "any judgment or arbitral award." (My emphasis). It does not speaks of a judgment or an arbitral award that has been obtained.

56. Where the word "judgment" appears, it is not inevitably confined to ones which have already been obtained. For example, this is the sentence by which the discussion on Mareva injunctions in the 1995 Supreme Court Practice commences at note 29/1/20 on p.523 of volume 1: "Many judicial systems provide means for preventing a defendant dissipating or concealing his assets so as to make a judgment against him worthless or difficult to enforce." Mareva injunctions may of course be granted both before and after judgment has been given. In the sentence quoted, therefore, the simple word "judgment" must cover both prospective and actual judgments.

57. As a matter of construction, there is no linguistic compulsion to restrict item (m) to judgments or arbitral awards which have been obtained.

58. Doing so would curtail the courts' power to do justice in appropriate cases. Inappropriate cases would of course be weeded out by a proper exercise of the court's discretion.

59. Nor does the comity of nations require that any such restrictive construction be placed on item (m). Indeed, such comity makes it important to guard the item against any such restriction. The existence of the power and its exercise in a case like the present one does not impinge upon the foreign state's sovereignty. Rather, it would give effect to that state's jurisdiction, protecting its courts from giving empty judgments.

60. I am aware of course that the usual case for invoking item (m) would be where a common law action is brought on a final judgment obtained abroad. But just because that is the usual sort of case for invoking the item, it does not mean that it is the only sort of case where that can be done. Moreover, it may be added that in Mansour v. Mansour [1989] 3 FLR 418, Lord Donaldson MR obviously did not confine the item to that sort of case. I say that because he said (at p.421 A-B) that it was not confined to "final' determinations. (My emphasis).

61. In my judgment, the leave which Mercedes-Benz were granted to serve Mr Leiduck out of the jurisdiction is warranted under item (m).

Order 11. rule 1(1)(b)

62. Mercedes-Benz also relies on item (b) of Order 11, rule 1(1). That is the item which covers the situation where "an injunction is sought ordering the defendant to do or refrain from doing anything within the jurisdiction (whether or not damages are also claimed in respect of a failure to do or the doing of that thing)".

63. Mr Thomas's argument on item (b) does not depend on his being right in his argument on item (m). Let it be assumed, he says, that item (m) means that judgment must have been actually obtained in the foreign court before leave to effect service out of the jurisdiction may be granted thereunder. Nevertheless, he submits, such leave may be granted under item (b) in a case like the present one.

64. Nor does Mr Thomas's argument on item (b) involve any suggestion that this Court should fail to follow the decision of the House of Lords in the Siskina [1979] AC 210. There are, it is true, positive indications (in South Carolina Insurance Co. v. Assurantie Maatschappij "De Zeven Provincien " N.V. [1987] AC 24 and in Channel Tunnel Group Ltd v. Balfour Beatty Construction Ltd [1993] AC 334) that the House of Lords may reconsider the law as laid down in the Siskina (supra). But if that is to be done, then it must be done by the House of Lords itself or, for Hong Kong, the Privy Council: possibly in this case itself if it should reach their Lordship. Unless and until that is done, however, this Court must follow the law as laid down in the Siskina (supra). And Mr Thomas is right in scrupulously avoiding any suggestion that we should not (even though he may eventually suggest to a tribunal above us that they should not).

65. Of course, even as we are bound by the earlier case, the Siskina (supra), so are we bound by the later one, the Channel Tunnel case (supra). Therefore, if there is a clear statement by the House of Lords in their later decision as to the correct appreciation of the doctrine laid down in their earlier decision, then this Court is bound by that statement.

66. There is such a statement. It is to be found in Lord Mustill's speech in the Channel Tunnel case (supra) with which speech every other member of the House of Lords hearing that appeal expressly agreed. This is what Lord Mustill said (at p.362 C-D):-

"... the doctrine of the Siskina, put at its highest is that the right to an interlocutory injunction cannot exist in isolation, but is always incidental to and dependent on the enforcement of a substantive right, which usually although not invariably takes the shape of a cause of action. If the underlying right itself is not subject to the jurisdiction of the English court, then that court should never exercise its power under section 37(1) by way of interim relief."

And that is what Lord Mustill provides (in the expression which he uses in the sentence immediately following that passage) as the "correct appreciation" of the Siskina doctrine.

67. If in a later case, the House of Lords considers it appropriate to guide us by providing a correct appreciation of a doctrine laid down in an earlier decision of theirs, then it would be unwise to read the earlier decision without making full use of such guidance.

68. So Mr Thomas is right when he invites as to read this passage in Lord Diplock's speech (at p.256 C-E) in the Siskina (supra) with such guidance in mind:-

"The sub-rule speaks of 'the action' in which a particular kind of relief, 'an injunction' is sought. This pre-supposes the existence of a cause of action on which to found 'the action.' A right to obtain an interlocutory injunction is not a cause of action. It cannot stand on its own. It is dependent upon there being a pre-existing cause of action against the defendant arising out of an invasion, actual or threatened by him, of a legal or equitable right of the plaintiff for the enforcement of which the defendant is amenable to the jurisdiction of the court. The right to obtain an interlocutory injunction, is merely ancillary and incidental to the pre- existing cause of action. It is granted to preserve the status quo pending the ascertainment by the court of the rights of the parties and the grant to the plaintiff of the relief to which his cause of action entitles him, which may or may not include a final injunction."

69. There are two words - one from Lord Mustill's speech as quoted earlier on and the other from Lord Diplock's speech as just quoted - which Mr Thomas emphasises. The first is the word "underlying" used by Lord Mustill when he speaks of the plaintiff's "underlying right itself". And the second is the word "enforcement" used by Lord Diplock when he speaks of "a legal or equitable right of the plaintiff for the enforcement of which the defendant is amenable to the jurisdiction of the court."

70. Reading the Siskina (supra) and the Channel Tunnel case (supra) together, it seems to me useful in each case of this kind to begin by identifying what the plaintiff puts forward as the underlying right itself which he seeks to enforce by his local proceedings.

71. In the present case, the underlying right which Mercedes-Benz so puts forward is that of recovery here (where there are assets) on promissory notes on which it sues abroad (where Mr Leiduck is but where there are no assets and no power in the courts there to make an order in respect of the assets here). Once judgment is obtained in the foreign court, that underlying right would take the shape of a cause of action, namely, a right to sue here on the foreign judgment.

Before that, it does not take that shape. But, as Lord Mustill has pointed out, something does not have to take the shape of a cause of action before it can be an underlying right for the enforcement of which an interlocutory injunction may be granted.

72. The promissory notes have matured. Proceedings abroad on them have been commenced. There are assets for recovery here. Unlike at the time of the Siskina (supra) when item (m) was not in existence, it can no longer be said, on any view of that item's scope, that process can never be served out of the jurisdiction solely on the basis of a foreign judgment. And in the present case, again unlike the situation in the Siskina (supra), there is no exclusive jurisdiction clause in favour of any foreign court. As one sees from p.255E of the report in that case, there the contracts of carriage for breach of which the cargo owners claimed damages contained an exclusive jurisdiction clause in favour of the Genoa court.

73. In my judgment, a Mareva injunction here is an injunction for the enforcement of Mercedes-Benz's underlying right. Accordingly, the leave granted to them to serve Mr Leiduck out of the jurisdiction is warranted under item (b), whatever view is taken of item (m).

74. It comes down to a question of construction. And construction should be purposive.

75. Order 11, like the rest of the Rules of the Supreme Court, was made under the rule-making power contained in section 54 of the Supreme Court Ordinance, Cap.4. That power is to make rules regulating and prescribing the procedure and practice to be followed in the Supreme Court.

76. So Order 11 is subsidiary legislation. And, like all legislation, it must be taken to be "remedial" and given "such fair, large and liberal construction as will best ensure the attainment of [its] object according to its true intent, meaning and spirit." Section 19 of the Interpretation and General Clauses Ordinance, Cap.1, so provides. And what that calls for is, in short, a purposive construction.

77. Turning from subsidiary legislation to primary legislation and from rules of procedure to substantive law, one comes to the source of the High Court's power to grant injunctions. That is section 21L of the Supreme Court Ordinance, Cap.4, which provides that the High Court "may by order (whether interlocutory or final) grant an injunction ... in all cases in which it appears to the High Court to be just or convenient to do so." That power is a wide one.

78. I proceed on the basis of Order 11, rule 1(1) as it now stands and in the light of the correct appreciation of the Siskina doctrine provided in the Channel Tunnel case (supra). Doing so, it seems to me that construing item (b) to be incapable of covering a case like the present one would be putting too narrow a construction on that item. Such a construction would unjustifiably curtail the power of the High Court to grant an injunction whenever it is just or convenient to do so.

Forum non conveniens

79. I see no basis on which forum non conveniens considerations can operate against Mercedes-Benz. For the proceedings commenced here, Hong Kong provides not only the most convenient forum but, in reality, the only possible one. There are no assets in Monaco. And the courts of Monaco, we have been informed, do not regard themselves as having jurisdiction to make any order in respect of the Hong Kong assets.

The form of the writ

80. I have considered the form of the writ. It says enough to cover Mercedes-Benz's position. But it does not say it clearly. Has that want of clarity misled Mr Leiduck to his prejudice? I am satisfied that it has not.

81. If Mr Leiduck had said, for example, that express reference in the writ to items (b) and (m) of Order 11, rule 1(1), would have led to his defending on the merits, then things would stand very differently. There would still remain the problem of his non-compliance with the order for discovery. But any court would have been - and would rightly have been-strongly disposed to setting aside the default judgment and letting him in to defend on the merits.

82. But having regard to the stance which Mr Leiduck has in fact adopted, I am satisfied that deciding against Mercedes-Benz on the basis of the form of their writ would be wrong. It would be putting formalism ahead of practical justice.

Waiver

83. I do not propose to deal with the point taken by Mr Thomas as to waiver. It cannot affect my view of what the result of this appeal ought to be. And in all the circumstances, I prefer to say nothing about it.

MR LEIDUCK'S CROSS-APPEAL

84. Taking the view as I do that Mercedes-Benz's appeal ought to be allowed, I would of course dismiss Mr Leiduck's cross-appeal as to costs.

Nazareth, V.-P.:

85. I agree that, for the reasons given by Litton J.A., the appeal must be dismissed and the cross-appeal allowed. Since Bokhary J.A. does not agree in essential respects I add the following.

"The reality of this case"

86. Mr Thomas submitted that the issues in this appeal had to be approached in the light of what appeared to be the fraudulent obtaining by D1 of the US$16.5m sought to be recovered. Bokhary J. in a similar vein, has listed six factors, including the foregoing as non-assertion of merits, and failure to comply with an order for discovery. Whether or not a serious view can be taken of the latter, it seems plain to me that such matters cannot somehow impart jurisdiction, a fortiori, jurisdiction that has to be characterised as exorbitant, where none exists or achieve that effect, by barring resort to the prescribed channel of challenge. To have to rest the submission in part upon the absence of an affidavit of merits, as Mr Thomas has done, notwithstanding the context of a challenge to jurisdiction, only highlights its incongruity. Where the primary issue is whether Hong Kong judicial process has properly reached out to Monaco and imposed its jurisdiction upon D1, the suggestion that D1 is barred from challenging that extended jurisdiction because of non-compliance with internal procedural rules (not concerned with jurisdiction) regulating the review of default judgments, seems to me to be fundamentally flawed. D1, in my judgment, is clearly not debarred from challenging the jurisdiction concerned.

"Sub-paragraph (m)"

87. This, it will have been seen, allows leave to be given if the claim is brought to enforce any judgment or arbitral award. It seems to me quite plain that "judgment" refers to an existing judgment. A judgment that is not final is no less an existing judgment. In that regard, I share Keith J's view of the dictum of Lord Donaldson in Mansour v Mansour [1989] 1 FLR 418 at p.421A; it could not have been intended, nor does it bear upon the question here. True, the word "judgment" can be found to refer to a judgment that will or even might be given in the future, but that is where such a meaning is required by the context. I can find nothing to require such a meaning in the context of sub-paragraph (m) of O.11 r.1 or of the Rules of the Supreme Court. Nor is there any ambiguity or latent absurdity or any other justification for looking beyond the plain meaning of sub-paragraph (m), e.g. to the likes of comity or fairness. There is here quite simply no judgment and therefore there can be no associated jurisdiction under sub-paragraph (m).

Order 11 rule 1(1)(b)

88. This, as Litton J.A. has pointed out, and is equally clear from the judgment of Bokhary J.A., lies at the heart of the appeal, It is helpful to repeat its text:

"... service of a writ out of the jurisdiction is permissible with the leave of this Court if in the action begun by writ ... an injunction is sought ordering the defendant to do or refrain from doing anything within the jurisdiction (whether or not damages are also claimed in respect of a failure to do or the doing of that thing)."

As Litton J.A. says the first point to note is that no injunction is sought in the writ.

89. However, to turn to The Siskina doctrine [1979] AC 210 at 256C-E, it was expressed in the following way by Lord Mustill in Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] AC 334 at 362C-D) (albeit in relation to an interlocutory injunction involving provisions of the Arbitration Act 1950 in circumstances in which the defendant had been properly served within the jurisdiction):

"For present purposes it is sufficient to say that the doctrine of the Siskina, put at its highest, is that the right to an interlocutory injunction cannot exist in isolation, but is always incidental to and dependent on the enforcement of a substantive right, which usually although not invariably takes the shape of a cause of action. If the underlying right itself is not subject to the jurisdiction of the English court, then that court should never exercise its power under section 37(1) by way of interim relief."

90. Bokhary J.A. rightly points out that doctrine has been doubted in the several authorities he has mentioned. Yet nowhere is it suggested that it has ever been overruled generally or held to be wrong. In the Channel Tunnel case, Lord Mustill's statement of the doctrine was formulated in the context of the different purposes he was addressing. He concluded at p.363F that although the commencement of the Channel Tunnel action was a breach of the arbitration agreement there, and that in that sense the respondents were not "properly" before the court, that did not bring into play the limitations on the powers of the court established by the Siskina line of cases. He demonstrated that in the arbitration matter before him, the court did have power to grant an injunction. What is significant for the purposes of this appeal is that he did not say the Siskina doctrine was wrong. On the contrary, it is implicit in that part of his speech that there is such a doctrine and that it survived the judgment. Lord Keith, Lord Goff, Lord Jauncey and Lord Browne-Wilkinson agreed with Lord Mustill's speech. Lord Browne-Wilkinson pointed out at p.343E that in South Carolina Insurance Co v Assurantie Maatschappij "De Zeven Provincien" NV, Lord Goff (with whom Lord Mackay agreed) reserved the question whether the law as laid down by the Siskina (as subsequently modified) was correct in restricting the power to grant injunctions to certain exclusive categories; and Lord Browne-Wilkinson himself did likewise. Plainly, therefore, the Siskina doctrine, notwithstanding the doubts expressed and the modification referred to (which does not affect the position here), continues to be law which binds this Court (De Lasala v De Lasala [1979] HKLR 214).

91. Far from the doubts referred to undermining the application of the Siskina doctrine to the circumstances here, the latter fall squarely within it and sub-paragraph (1)(b) of O.11.

92. Reverting to Mr Thomas' submissions, it has to be acknowledged that there may indeed be considerations that render the jurisdiction contended for desirable, even if it is plainly an exorbitant jurisdiction that would drag defendants to Hong Kong courts from remote corners of the world simply because they may have some assets here, but no other connection whatsoever. Possibly the enforcement of the judgments of the courts of other countries may conduce to comity and to justice rather than their reverse. But that does not mean that the courts of Hong Kong can simply assume that jurisdiction, particularly in the face of binding authority that at least suggests its absence, and likewise in the absence in Hong Kong of statutory provision comparable to English legislation enacted to confer that sort of jurisdiction. Moreover, as Lord Hailsham commented at p.262B-D of the Siskina (with reference to Lord Denning MR's argument that judges need not wait for the authority of the Rules Committee to sanction an extension of jurisdiction in matters of this kind), the jurisdiction of the Rules Committee is statutory, and for the courts to pre-empt that function would be to usurp the function of the legislature and in any event be highly undesirable. Lord Simon and Lord Russel agreed (at p.263C-D) and Bridge L.J., (as he then was) foreshadowed those comments (at p.241-242).

93. If the law is to be changed, that will have to be done by legislation or a court of higher authority. For myself, I am satisfied the appeal must be dismissed and the cross-appeal allowed. I would also concur in the orders proposed by Litton J.A.