XCHRX GOLD METHOD INVESTMENT LTD. v. CHINA UNITED TELECOMMUNICATIONS CORPORATION AND OTHERS

HCA 13338/1997

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 13338 OF 1997

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REASONS FOR DECISION

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1. There are two summonses before me, one by the Plaintiff for leave to enter judgment in default of Defence against the 1st Defendant and one by the 1st Defendant to set aside Yam J's order of the 26 November 1999 which gave the Plaintiff leave to renew its Writ of Summons issued on 8 December 1997 and for leave to serve the Further Re-Amended Statement of Claim outside jurisdiction and that this court has no jurisdiction over the 1st Defendant.

Chronology

Plaintiff's Summons to Enter Judgment

2. Under O.12 r.8(1) a defendant who wishes to dispute the jurisdiction of the court in the proceedings shall give notice of intention to defend and shall within the time limited for service of a defence apply to court for, inter alia, an order setting aside the service of writ on him, discharge any order giving leave to serve writ outside jurisdiction or discharge any order extending the validity of the writ for the purpose of service.

3. The 1st Defendant had by its summons dated 5 April 2000 complied with O.12 r.8(1) and had issued the summons within the time limited for service of the defence. Under O.12 r.8(3) a defendant should not file defence as that may be construed as submission to jurisdiction.

4. O.12 r.8(4) states "The plaintiff should in no circumstances seek to enter judgment in default of defence while the application is pending....".

5. By reason of O.12 r.8(4) the plaintiff's summons to enter judgment in default of defence is misconceived. The summons is therefore dismissed with costs to 1st Defendant.

Defendant's Summons

6. The orders of Yam J were made ex parte without the benefit of hearing argument or representation by 1st Defendant.

7. The writ was issued on 8 December 1997 hence the validity of the writ expired on 7 December 1998. There was no application to have the writ re-newed until the Plaintiff issued a summons on 17 September 1999 more than nine months after the validity of the writ expired.

8. The 1st affirmation of Ho Kai Wai on behalf of the Plaintiff in support of the summons only stated that there was a good arguable case based on the witness statements of the 3rd and 4th Defendants. However there was no explanation as to why the application was not made earlier.

9. On the date of the hearing of the summons Ho filed another affirmation explaining that at the time of the writ there was no official means to serve judicial documents to the 1st Defendant in China. He deposed that on or about 29 March 1999 he learnt from the Law Society through circular that judicial documents could be served on Defendants in China. To extend the writ before its expiry would be meaningless and a waste of costs.

10. Although the Plaintiff knew of the fact that judicial documents could be served on Defendants in China on 29 March 1999 it was only 17 September 1999 the Plaintiff issued summons for extension of the validity of the writ which was some 51/2 months after it learnt of such arrangement or 9 months after the validity of the writ expired.

11. The principles to extend the validity of the writ are neatly set out in O.6 r.8(6) of the White Book namely:-

"1) It is the duty of the plaintiff to serve the writ promptly. He should not dally for the period of its validity; if he does so and gets into difficulties as a result, he will get slant sympathy.

2) Accordingly there must always be a good reason for the grant of an extension..... the later the application is made, the better must be the reason.

3) ....Whether a reason is good or bad depends on the circumstances of the case ....

.......

7) A writ will not normally be renewed so as to deprive the Defendant of the accrued benefit of a limitation period. ...."

12. In Chow Ching Man & others v. Sun Loah Ornament Manufacturing Ltd & others [1996] 2 HKLR 338 the Court of Appeal followed Kleinwort Benson Ltd v. Barbrak Ltd [1987] AC 597 that "(i) O.6 r.8(2) is to be construed so that the discretion to extend the validity of a writ does not arise unless the Plaintiff first establishes matters amounting to good reason for extension or at least capable of so amounting; and that (ii) matters such as the balance of hardship only fall to be considered if the discretion to extend arises in the first place."

13. There was a lapse of nine months after the validity of the writ expired and about six months after the Law Society Circular. There was no explanation as to why the application was not made immediately or shortly after the Law Society Circular. Assuming the reason given that there was no effective method to serve the writ in China before 30 March 1999 is a good reason, not any reason was given for its delay in making the application six months after the Law Society Circular.

14. Accordingly the Plaintiff has not given any good reason or cause for extension of the writ and the Plaintiff had failed to pass the 1st stage of the two stages enquiry.

15. Assuming the circumstances are such that the discretion to extend arises then I have to consider the balance of hardship.

16. The Plaintiff will still be able to go after the other Defendants if the writ was not renewed.

17. Further it is not sufficient or good reason justifying the exercise of discretion to extend the validity of the writ that the Defendant knew of the existence of a claim, nor that he knew that a writ had been issued, nor that he is unable to show that there would be any specific prejudice or detriment to him in conducting his defence. O.6 r.8(7)

18. For reasons above the order granting the extension of writ is discharged.

Service out of Jurisdiction

19. O.11 r.1(12) the applicant must satisfy the court that it is proper to exercise its discretion to grant leave. The court retains an inherent discretion to decline jurisdiction on the ground that the Plaintiff has failed to make out a good arguable case.

20. The supporting affidavit should disclose that the Plaintiff has a good arguable case and set out sufficient facts to show that Hong Kong court is the forum conveniens and which sub-rule of r.1(1) is relied on.

21. Ho had not in any of the three affirmations set out which sub-rule of r.1(1) is relied on nor had Ho stated or set out jurisdictional grounds in any of his affirmations.

22. Ho in his 1st affirmation at para. 5 did not disclose his source of information and belief. It was just a bare allegation. There were no additional facts to support the allegation which if proved would be a sufficient foundation for the alleged cause of action.

23. For those reasons the service of the writ together with the Further Re-amended Statement of Claim on the 1st Defendant should be set aside.

Forum Conveniens

24. The alleged agreement was for the allotment of 5% of the shareholding in 2nd Defendant to the Plaintiff by the 1st Defendant. The claim against 1st Defendant is for specific performance of the agreement. 2nd Defendant is a Hong Kong Company. The transfer of the shares must be governed by the Laws of Hong Kong. The alternative claim is for damages in respect of monies spent by Plaintiff in setting up 2nd Defendant which again involved witnesses in Hong Kong. I cannot say that Hong Kong is not the forum conveniens.

25. In the circumstances there be an order in terms of Para. 1 of the summons. Order nisi that costs of this application be to the 1st Defendant.