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HCA 386/2021
[2024] HKCFI 594
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
ACTION NO 386 OF 2021
_________________________
BETWEEN
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MODIFI B.V. |
Plaintiff |
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and |
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HONG KONG KONKA LIMITED |
1st Defendant |
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XU XIANG (徐祥) |
2nd Defendant |
_________________________
| Before: |
Master James Kwan in Chambers (Open to Public) |
| Date of Hearing: |
24 November 2023 |
| Date of Decision: |
26 February 2024 |
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DECISION
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INTRODUCTION
1. This is the 2nd Defendant’s application by way of summons dated 8 August 2023 (“Summons”) to set aside (a) the Order made by Master Dick Ho dated 11 November 2021 granting leave to (i) issue the Concurrent Amended Writ of Summons (“Concurrent Writ”) indorsed with the Amended Statement of Claim (“ASOC”) and (ii) serve the same on 2nd Defendant out of the jurisdiction (“Service Out Order”); and (b) service of the Concurrent Writ on the 2nd Defendant (“Set Aside Application”).
2. When the Plaintiff obtained the Service Out Order, it filed the Affirmation of Au Man Yiu dated 2 November 2021 (“Au’s Affirmation”).
3. The 2nd Defendant claims that (a) the Plaintiff has failed to provide full and frank disclosure to the Court when applying for leave to serve out of the jurisdiction (“Service Out Application”), including but not limited to, the facts and matters disclosed in the Affirmation of Clermont Adam Paul filed on 8 August 2023 (“Paul’s Affirmation”); and (b) there were irregularities in the process of the Service Out Application, including but not limited to the matters disclosed in Paul’s Affirmation; and (ii) there were irregularities in the service of the Concurrent Amended Writ of Summons on the 2nd Defendant.
4. In support of the Set Aside Application, the 2nd Defendant has filed Paul’s Affirmation, and the Affirmation of Mak Ka Yee dated 11 September 2023 (“Mak’s Affirmation”). The Plaintiff has filed the 2nd Affidavit of Chiu Ka Po in opposition dated 9 October 2023 (“Chiu’s Affidavit”).
PROCEDURAL BACKGROUND
5. On 11 March 2021, the Plaintiff issued the Writ of Summons indorsed with a Statement of Claim (“SOC”) and served the Writ on the 1st Defendant, a Hong Kong company.
6. On 20 May 2021, the 1st Defendant filed and served its Defence.
7. On 14 September 2021, a Consent Summons was filed by the Plaintiff and the 1st Defendant for leave to amend the Writ of Summons and the SOC. The amendments include, among others, the addition of the 2nd Defendant as a party to the proceedings and the Plaintiff’s claim against him for misrepresentation.
8. On 23 September 2021, Master Rita So made an Order whereby leave be given to the Plaintiff to add the 2nd Defendant in this action and to amend the Writ of Summons indorsed with the SOC as per the draft attached to the Consent Summons.
9. On 5 October 2021, the Plaintiff filed and served the Amended Writ of Summons and ASOC on the 1st Defendant.
10. On 27 October 2021, the 1st Defendant filed and served its Amended Defence.
11. On 3 November 2021, the Plaintiff took out the Service Out Application on the 2nd Defendant on an ex-parte basis.
12. On 11 November 2021, the Service Out Order was granted by Master Ho.
13. On 21 July 2023, the Plaintiff’s solicitors received a letter from the 2nd Defendant’s solicitors enclosing a copy of the signed Acknowledgment of Service filed by the 2nd Defendant in the proceedings.
PLAINTIFF’S CLAIMS AGAINST 1ST AND 2ND DEFENDANTS
14. The Plaintiff claims against the 1st and 2nd Defendants as follows. By a framework agreement between the Plaintiff and Aton Electronics Limited (“Aton”), Aton agreed to offer to sell and assign its account receivables to the Plaintiff (“Framework Agreement”). This included account receivables payable by the 1st Defendant to Aton.
15. In August 2020, the Plaintiff was introduced by Aton to the 2nd Defendant as the Sales Director of the 1st Defendant.
16. On 19 August 2020:
(a) The Plaintiff informed the 1st Defendant that Aton would like to use the Plaintiff’s export financing (factoring) service for its trades with the 1st Defendant, and set out certain factoring arrangements (“Factoring Arrangements”).
(b) The 2nd Defendant on behalf of the 1st Defendant countersigned on the letter, confirming the 1st Defendant’s acknowledgment and acceptance of the Factoring Arrangements (“Countersigned Letter”).
17. The Plaintiff claims that:
(a) A purchase agreement dated 28 September 2020 was made between Aton and the 1st Defendant (“Purchase Agreement”). The 1st Defendant ordered to purchase goods from Aton (“Goods”) at US$559,913.20 (“Purchase Price”).
(b) On 28 September 2020, Aton issued an invoice to the 1st Defendant for payment of the Purchase Price (“Invoice”). It was due within 60 days (ie by 27 November 2020 (“Due Date”). Pursuant to the Factoring Arrangements, the Plaintiff’s bank details were set out in the Invoice as the beneficiary of the payment of the Purchase Price.
(c) On 29 September 2020, Aton delivered the Goods to the 1st Defendant pursuant to the Purchase Agreement. The 1st Defendant confirmed delivery via a delivery note (“Delivery Note”), which bore the company chops of Aton and the 1st Defendant (which also contained the signature of the handler and the date of delivery).
(d) On 30 September 2020, the Plaintiff sent an email to the 2nd Defendant requesting the 1st Defendant to confirm (by signing and returning a confirmation letter) the trade under the Purchase Agreement and the payment obligation under the Invoice. The 2nd Defendant for and on behalf of the 1st Defendant signed and issued the confirmation letter (bearing the 1st Defendant’s company chop and the 2nd Defendant’s signature) (“Confirmation Letter”).
(e) On 30 September 2020, the Plaintiff also issued and served by email to the 2nd Defendant a notice of assignment addressed to the 1st Defendant, stating that Aton assigned to the Plaintiff all Aton’s rights and interests in the Purchase Agreement and the Invoice.
18. The 1st Defendant failed to settle the Invoice upon expiry of the Due Date. The Plaintiff claims against the 1st Defendant for the outstanding amount thereunder plus interest.
19. In the alternative to the Plaintiff’s claims based on the arrangements which I have referred to above, the Plaintiff further claims against the 2nd Defendant. If the 2nd Defendant did not or had no authority to act on behalf of the 1st Defendant (which is denied), then the 2nd Defendant is liable to the Plaintiff for misrepresentation.
20. Without prejudice to the Plaintiff’s primary case that (a) the 2nd Defendant had the requisite actual and/or apparent authority to act on the 1st Defendant’s behalf; and (b) the 1st Defendant represented to the Plaintiff to the same effect, the Plaintiff claims that the 2nd Defendant made representations to the Plaintiff which were false and untrue.
21. The Plaintiff claims that the 2nd Defendant is liable for deceit and fraudulent misrepresentation in circumstances where, in essence, the 2nd Defendant misled the Plaintiff to believe that he had authority to and did act on behalf of the 1st Defendant insofar as, inter alia, the 1st Defendant’s obligations under the Invoice to pay the Plaintiff are concerned.
1ST DEFENDANT’S DEFENCE
22. The 1st Defendant filed its Amended Defence dated 27 October 2021. Its defence to the Plaintiff’s claim is based on the following (among others):
(a) The Factoring Arrangements never existed (§5(a));
(b) The Purchase Agreement never existed (§5(b));
(c) The 1st Defendant never authorised the entry into such arrangements or agreements or transactions, and had not received the Goods (§5(c)); and
(d) The 2nd Defendant was not the 1st Defendant’s Sales Director (§8(c)), and had no authority to act on behalf of the 1st Defendant (§8(d)-(h)).
GROUND FOR SERVICE OUT OF JURISDICTION ON 2ND DEFENDANT
23. The Plaintiff relied on Order 11 rule 1(1)(c) of the Rules of the High Court (“Gateway C”), ie “the claim is brought against a person duly served within or out of the jurisdiction and a person out of the jurisdiction is a necessary or proper party thereto” (underlining added).
(a) The 1st Defendant is the person duly served within jurisdiction. There is no dispute about this.
(b) The 2nd Defendant is, on the Plaintiff’s case, the person out of the jurisdiction being a necessary or proper party thereto.
2ND DEFENDANT’S COMPLAINTS REGARDING MATERIAL NON-DISCLOSURE
24. Mr Brown made submissions on behalf of the 2nd Defendant. There are two main grounds relied on by the 2nd Defendant for setting aside service out of the jurisdiction as summarised below.
25. The first ground for setting aside is the 2nd Defendant’s allegation that there has been material non-disclosure regarding forum non-conveniens. While acknowledging that the lis is already pending in Hong Kong, there is a factor already in favour of Hong Kong as the forum conveniens, but the test whether Hong Kong is the forum with which the action has the most real and substantial connection must still be properly conducted: §13-14 of 2nd Defendant’s submissions.
26. Clause 17 of the Framework Agreement purportedly between the Plaintiff and Aton is as follows: “17.1 This Agreement and any non-contractual obligations arising out of or pursuant to it shall be governed by English law. 17.2 Each party irrevocably submits to the exclusive jurisdiction of the English courts.”
27. Clause 3 of the Confirmation Letter from the 1st Defendant with respect to the Purchase Agreement (purportedly signed by the 2nd Defendant) to Aton and the Plaintiff states in similar terms: “This letter and any non-contractual obligations arising out of or pursuant to it shall be governed by English law. Each party irrevocably submits to the exclusive jurisdiction of the English courts.”
28. The 1st Defendant asserts that the misrepresentation claims against the 2nd Defendant based on the Confirmation Letter would fall within the scope of “any non-contractual obligations arising out of or pursuant to the Confirmation Letter” and therefore English jurisdiction arguably applies to this claim.
29. The exclusive jurisdiction clause in the Confirmation Letter was neither mentioned in Au’s Affirmation, nor brought to the attention of Master Dick Ho.
30. According to the 2nd Defendant, the fact that the parties entered into contracts with foreign exclusive jurisdiction clauses (and it is the Plaintiff’s case the Confirmation Letter was signed by the 2nd Defendant with authority for and on behalf of the 1st Defendant) is an extremely weighty factor: Hong Kong Civil Procedure 2024 at §12/8/2 (9).
31. The Plaintiff has not identified where the purported misrepresentation is said to have taken place. The Plaintiff does identify that the 2nd Defendant is resident in the PRC and in the absence of any suggestion by the Plaintiff to the contrary, the Court must proceed as if the purported misrepresentation was made in the PRC. The governing law applicable to the misrepresentation claim is likely then to be PRC law.
32. The second ground for setting aside is alleged material non-disclosure regarding the merits.
33. Mr Brown submits that a defence does not have to be established on the evidence for it to be disclosable. The defence merely needs to have the potential to be fatal to the Plaintiff’s case.
34. Au’s Affirmation only reiterated the Plaintiff’s positive case (at §5-10), before concluding that there are real issues to be tried against the 1st Defendant and good causes of actions against the 2nd Defendant (§11). It entirely failed to note that the 1st Defendant had filed an Amended Defence.
35. The 1st Defendant’s Amended Defence contains defences that may be fatal to the Plaintiff’s case. The 1st Defendant’s case is inter alia that the Plaintiff has been a victim of a fraud, and all the relevant documents the Plaintiff relies on had been forged, having never been executed by the 1st or 2nd Defendants and that the 1st Defendant never received the purported goods. Importantly, this provides a full defence for the 2nd Defendant as well as the 1st Defendant.
36. According to the 2nd Defendant, the fact that the purported misrepresentation seems to have been made on the Plaintiff’s case in the PRC gives rise to a further and fatal merits issue.
37. It is well-established that in order for a plaintiff to rely on a tort committed abroad, the Plaintiff must show that the wrong is actionable under both the law of the place where the tort was committed, and in Hong Kong, under the “double actionability rule.” The double actionability requires the plaintiff to show that the defendant is liable under both legal systems in respect of the same damage by reason of the same conduct: Altrans Fast Cargo Limited at §§28-29.
38. The Plaintiff cannot establish the merits of the claim against the 2nd Defendant without addressing the question of whether the claim is actionable in the PRC, and the Plaintiff has not done so.
PLAINTIFF’S SUBMISSIONS
39. Mr Chiu made submissions on behalf of the Plaintiff.
40. Regarding the alleged material non-disclosure of forum non-conveniens:
(a) Neither the 1st nor 2nd Defendants are parties to the Framework Agreement. The clauses therein do not concern them nor the Plaintiff’s claims against them.
(b) The 2nd Defendant signed the Confirmation Letter on behalf of the 1st Defendant. The 2nd Defendant is not a party to the Confirmation Letter. By the time the Plaintiff applied for the Service Out Order, the 1st Defendant had already filed and served its Amended Defence. There is no dispute between the Plaintiff and the 1st Defendant about the jurisdiction of the Hong Kong courts. In addition to the 1st Defendant (as a Hong Kong company) being properly served within jurisdiction, there is also (separately and in any event) submission by the 1st Defendant to jurisdiction.
41. To the extent that the 2nd Defendant now suggests (and the 2nd Defendant bears the burden of demonstrating) that Hong Kong is not the forum conveniens (on the alleged basis that any such misrepresentation by the 2nd Defendant would have taken place in Mainland China and not Hong Kong), that is wholly misconceived.
42. The Plaintiff’s claims against the 1st and 2nd Defendants respectively evidently arise out of the same transaction. Further, there are plainly likely common issues of facts (eg whether the 2nd Defendant had the requisite authority to act on behalf of the 1st Defendant and whether the 2nd Defendant did sign the relevant documents, etc) which ought to be determined.
43. Any representation made by the 2nd Defendant would be on behalf of the 1st Defendant, a Hong Kong company, and in the purported capacity as the 1st Defendant’s sales director. The relevant representations, if established, plainly have a substantial connection to Hong Kong given the factual matrix of the present case.
44. There is at the very least a serious issue to be tried on forum conveniens, which is all that is required: Hong Kong Civil Procedure 2024 at §11/1/49.
45. The Plaintiff submits that where the Plaintiff’s claim is put in the alternative on the basis that one or other defendant is liable, “[i]n any event, the “alternative” defendant will usually be a necessary or proper party, such that [Gateway C] will be satisfied”: Hong Kong Civil Procedure 2024 at §11/1/48.
46. Regarding the alleged material non-disclosure of the merits, the Plaintiff submits that the 2nd Defendant conflates the duty of full and frank disclosure in respect of an injunction application with that of the Service Out Application: Fong Chak Kwan v Ascentic Ltd [2020] HKCFI 679 at §64.
47. Hong Kong Civil Procedure 2024 at §11/4/24 provides as follows:
“The focus of the duty [of full and frank disclosure] is different from that on the applicant for an injunction. … It is on whether the court should assume jurisdiction, not on the merits. A failure to refer to arguments on the merits which the defendant may raise in answer to the claim should not generally be characterised as a failure to make a full disclosure unless they are of such weight that their omission may mislead the court in exercising its jurisdiction and its discretion to grant leave… The fact that a defendant may be able to raise possible defences including contributory negligence serves only to show a serious issue to be tried on the merits which is all that is required; so failure to refer the ex parte master to such is unlikely to constitute material nondisclosure … The defendant showing at the inter partes stage the existence of disputed issues of fact or potential grounds of defence that were known to the plaintiff but not raised in its ex parte application usually only shows the need for a trial and does not of itself establish material non-disclosure … [W]hether a particular defence is available to the defendant is, unless it is one which shows that the claim is perfectly groundless, quite irrelevant when considering leave to serve out, either ex parte or inter partes…”
48. In addition, the Plaintiff submits if as a matter of fact it is held that the 2nd Defendant did make the relevant representations, then the 2nd Defendant must have made those representations purportedly on behalf of the 1st Defendant, a Hong Kong company. In those circumstances, the misrepresentation would have been made in Hong Kong. The applicable law is Hong Kong law – whether such misrepresentation is actionable is a matter for Hong Kong law. There is no room for the applicability of the double actionability rule.
LEGAL PRINCIPLES
49. In order for the Plaintiff to obtain leave for service out under O 11 r 1 of RHC, the Plaintiff must satisfy the court that:
(a) There is a good arguable case that their pleaded claims fall within one of the gateways under O 11 r 1;
(b) There is a serious issue to be tried on the merits of the case; and
(c) Hong Kong is the appropriate forum under the principle governing forum conveniens for the trial of the action.
See Dynasty Line Ltd v Sukamto Sia [2009] 4 HKLRD 454 at §29 (per Cheung JA).
50. Specifically, in respect of Gateway C, there is a 3-stage test as to whether leave should be granted. The applicant must:
(a) establish that genuine proceedings are properly commenced within the jurisdiction and have been served on an “anchor” defendant;
(b) demonstrate the proposed foreign defendant is a “necessary” or “proper” party thereto; and
(c) demonstrate it is appropriate to permit the claim against the proposed foreign defendant to proceed in Hong Kong in terms of forum non-conveniens but bearing in mind the lis pendens here.
See Fong Chak Kwan v Ascentic Ltd [2020] HKCFI 679 per Marlene Ng J at §78.
51. As to the relevant principles applicable to the “necessary” or “proper” party head of jurisdiction, Marlene Ng J in Fong Chak Kwan at §79 referred to Lord Sumption’s judgment in Nilon Limited v Royal Westminster Investments S.A. [2015] UKPC 2 at §15, which made reference to AK Investment CJSC v Kyrgyz Mobil Tel Ltd that emphasised the following points (at page 527):
“(1) The necessary or proper party head of jurisdiction was anomalous, in that, by contrast with the other heads, it was not founded upon any territorial connection between the claim, the subject matter of the relevant action and the jurisdiction of the English courts.
(2) Caution must always be exercised in bringing foreign defendants within the jurisdiction under that head, and in particular it should never become the practice to bring in foreign defendants as a matter of course, on the ground that the only alternative requires more than one suit in more than one different jurisdiction.
(3) The fact that the defendant within the jurisdiction (D1 or the ‘anchor defendant’) is sued only for the purpose of bringing in the party outside the jurisdiction (D2) is not fatal to the application for permission to serve D2 out of the jurisdiction, but it is a factor in the exercise of the discretion.
(4) The action is not properly brought against D1 if it is bound to fail.
(5) If a question of law arises on the application which goes to the existence of jurisdiction, the court will normally decide it, rather than treating it as a question of whether there is a good arguable case.
(6) The question of the merits of the claim is relevant to the question of whether the claim against D1 is ‘bound to fail’ and to the question whether there is a ‘serious issue to be tried’ in relation to the claim against D2; and there is no practical difference between the two tests, and they in turn are the same as the test for summary judgment.
(7) In considering the merits of the claim, whether the claim against D1 is bound to fail on a question of law should be decided on the application for permission to serve D2 (or to discharge the order), but it would not normally be appropriate to decide a controversial question of law in a developing area, particularly because it is desirable that the facts should be found so that any further development of the law should be on the basis of actual and not hypothetical facts.”
52. In Chen Hongqing, Keith Yeung J at §58 also endorsed the following principles in the context of an application by the defendant to set aside leave for service out:
“(1) An application for leave to issue a writ for service out ought to be made with great care, and be looked at strictly. The court should “scrutinise most jealously” any factor which actually provides jurisdiction (§58).
(2) The need for a strict approach is dictated by at least three considerations (§58, quoting from Ribeiro PJ in Kayden Ltd v SFC (2010) 13 HKCFAR 696 §§36-38):
(a) First, it is grounded on recognition of the need for special care given the extraordinary nature of the long-arm jurisdiction asserted under Order 11, which involves seeking to compel a foreign defendant to submit to adjudication by the court or suffer judgment and execution in default.
(b) Second, the court acts on the faith of the plaintiff’s representations made to it ex parte when granting leave for service of process abroad. Given the extraordinary nature of the jurisdiction which the court would thereby be asserting, it insists on special care on the plaintiff’s part and full disclosure of the basis upon which that jurisdiction is invoked.
(c) Third, it is not only the court which must be apprised of the cause of action alleged. The defendant must know the basis of the claim which he has to meet so that, if so advised, he can challenge the order which asserts the court’s jurisdiction over him.”
53. Since an application for leave under O 11 r 1 is made ex parte, it is incumbent on a plaintiff to comply with the duty to make full and frank disclosure: Chen Hongqing v Persons Whose Name are Set Out in the Second Column of the Schedule to the Re-Amended Writ of Summons [2019] HKCFI 2121 at §§56-57 (per Keith Yeung J), as referred to Altrans Fast Cargo Limited & Anor v Liu Yugang & Ors [2023] HKCFI 1579, per Wilson Chan J at §13. Such duty is said to be one of the utmost or highest good faith, and it is no answer to a complaint of non-disclosure that if the relevant matters had been placed before the court, the decision would have been the same: Fong Chak Kwan at §59.
54. The test as to materiality is an objective one, and materiality is for the court and not for the applicant or his legal advisers. The facts that the applicant must disclose are those which the court should have in the weighing scales, ie those facts “relevant to the weighing operation which the court has to make in deciding whether or not to grant the order”: Fong Chak Kwan at §61.
55. There is a different focus of the inquiry in an application for leave to serve a writ out of jurisdiction from that in an application for grant of an injunction, even though the principle of requiring full and frank disclosure is the same: Fong Chak Kwan at §64. DHCJ Peter Ng SC (as he then was) in Hady v Bazar [2012] 3 HKLRD 29 observed as follows:
“103. In an application for leave to serve a writ outside jurisdiction, the Court is concerned with whether it should assume jurisdiction – it is not concerned with the merits of the case, save that it has to be satisfied that there are serious issues to be tried: Ren Yun Liang v China Merchants Bank Co Ltd (unrep., HCA1456/2005, [2007] HKEC 159) paras.26-27 (Recorder Benjamin Yu SC); Hong Jing Co Ltd v Zhuhai Kwok Yuen Company Ltd (unrep., HCA156/2006, [2006] HKEC 1731) para.17 (Deputy High Court Judge Saunders). In general, a failure to refer to arguments on the merits which the defendant may seek to raise in answer to the plaintiff’s claim would not amount to material non-disclosure, unless they are of such weight that their omission may mislead the Court in exercising its jurisdiction under the rule and its discretion whether or not to grant leave: BP Exploration Co (Libya) v Hunt [1976] 3 All ER 879, 893h-j.”
56. Fong Chak Kwan at §65 referred to Tremendous Success Holdings Ltd v Sinosoft Technology Group Ltd, HCA 2345, 1613 and 2423/2013 (unreported judgment of 11 July 2016), in which DHCJ Anita Yip SC observed that (§§191-192,195):
“(a) It is the applicant’s duty under an Order 11 application to show serious issue to be tried. A defence which is or may be fatal to the applicant’s case or which may go to demolish the applicant’s cause of action and hence no serious issue to be tried, is almost certainly material matter which influences the court’s discretion on granting or refusing leave, and therefore must be disclosed and drawn to the court’s attention.
(b) If the defence shows the claim to be groundless, it follows that there is no serious issue to be tried. The Order 11 applicant must disclose the defence.
(c) In the context of anticipating a defence which may affect the question of serious issue to be tried, it is not necessary, indeed inappropriate, for the applicant to come to their own conclusion on the merits of the defence. The test is if on a fair assessment of the case, the defence is very likely to affect the claim to the extent that there may be no serious issue to be tried, disclosure should be made.”
57. Hong Kong Civil Procedure 2023 at §11/4/24(b) also discusses the non-disclosure of the merits:
“Facts / merits: Facts going to the merits do not necessarily assume the same significance as they would in an application for an injunction unless they are relevant to whether the case falls within a gateway or the forum conveniens decision. A failure to refer to arguments on the merits which the defendant may raise in answer to the claim should not generally be characterised as a failure to make a full disclosure unless they are of such weight that their omission may mislead the court in exercising its jurisdiction and its discretion to grant leave: BP Exploration Co. (Libya) Ltd. v Hunt [1976] 3 All ER 879, MRG (Japan) Ltd. v Engelhard Metals Japan Ltd. [2003] EWHC 3418 and Hady v Bazar [2012] 3 HKLRD 29 at §103.
The fact that a defendant may be able to raise possible defences including contributory negligence serves only to show a serious issue to be tried on the merits which is all that is required; so failure to refer the ex parte master to such is unlikely to constitute material nondisclosure, Chan Hon v Bayer Healthcare Ltd. [2019] HKCFI 2486, [30]. See Mary Kay Inc v Zhejiang TMall Network Co Ltd [2022] HKCA 360 for a case where disclosure of a potential complete defence should have been made to the Master. The defendant showing at the inter partes stage the existence of disputed issues of fact or potential grounds of defence that were known to the plaintiff but not raised in its ex parte application usually only shows the need for a trial and does not of itself establish material non- disclosure, Wo Fung Paper Making Factory Ltd. v Sappi Kraft (Pty.) Ltd. [1988] 2 HKLR 346, applied in Bel Nickel Resources Ltd. v Eastbourne Trading Pte Ltd. (HCA 2042/ 2009, [2010] HKEC 1420).”
58. Finally, in Chan Hon v Bayer Healthcare Ltd. [2019] HKCFI 2486 at §21, Bharwaney J referred to DHCJ Au-Yeung’s (as she then was) decision in Velatel Global Communications Inc & Another v Chinacomm Ltd & Others [2012] HKCFI 1655 as to the principles regarding the need for full and frank disclosure at ex parte applications:
“(a) the duty of the applicant is to make a full, frank and fair disclosure of all the material facts;
(b) in considering what matters should be disclosed to the court, the test is whether the facts are relevant to the exercise of the discretion, regardless of whether they are relevant to the merits of the claim, and irrespective of whether the matters, if disclosed, would have caused the court to refuse to grant the ex parte application. The court was not concerned with whether the matters not disclosed would, if they had been disclosed, have caused it to refuse to grant the ex parte order. The test was whether the court should have these matters in the weighing scales;
(c) materiality is to be decided by the court and not by the assessment of the applicant or his legal advisers;
(d) the applicant must make proper inquiries before making the application. The duty of disclosure therefore applies not only to material facts known to the applicant but also to any additional facts which he would have known if he had made such inquiries;
(e) where there has been material non-disclosure in an ex parte application, the practice of the court is to discharge the order without going into the merits.”
DISCUSSION
(a) Alleged material non-disclosure of the merits
59. The 1st Defendant filed its Amended Defence on 27 October 2021. In its Amended Defence:
(a) The 1st Defendant denies that the 2nd Defendant, Mr Xu Xiang (“Mr Xu”), was or is at any material time the 1st Defendant’s Sales Director. Mr Xu was and is at no material time in any way under the employ of the 1st Defendant: §3A(b) of Amended Defence.
(b) The 1st Defendant denies that Mr Xu had or has any (actual, implied or ostensible) authority to act on behalf of the 1st Defendant: §3A(c) of Amended Defence.
(c) By reason of the forgery pleaded in Section D of the Amended Defence, the alleged Factoring Arrangements never existed at all material times. The 1st Defendant denies the existence of such an arrangement: §5(a) of Amended Defence.
(d) By reason of the forgery pleaded in Section E of the Amended Defence, the alleged Purchase Agreement never existed at all material times. The Plaintiff is put to strict proof on the authenticity and veracity of all the documents relied upon: §5(b) of Amended Defence.
(e) Further or alternatively, even if the alleged Factoring Arrangements and alleged Purchase Agreement are authentic (which is denied), the 1st Defendant at all material times never entered into and/ or authorised the alleged transaction, nor has the 1st Defendant received any of the subject goods. As such, the 1st Defendant is not liable under the alleged transactions: §5(e) of Amended Defence.
(f) At all material times, the 1st Defendant did not know about the Plaintiff or at all. The 1st Defendant only came to know about the Plaintiff on or around 12 December 2020 when one Mr. David Gan of the Plaintiff wrote, by email, to Ms Wan Mengxue of the 1st Defendant: §5(g) of Amended Defence.
(g) To the best of the 1st Defendant’s knowledge, Mr Xu is the Chairman, General Manager, and legal representative of a company known as Shenzhen Jinzhu Industrial Co Ltd (“Jinzhu”): §8(e)(i) of Amended Defence.
(h) The alleged Countersigned Letter purportedly bearing the 1st Defendant’s chop is forged. The true form of the 1st Defendant’s company chop is set out in Schedule 1(1) of the Amended Defence: §10(a) of Amended Defence.
(i) To the best of the 1st Defendant’s knowledge, Mr Xu denies categorically having “countersigned” on the alleged Countersigned Letter. Specifically, to the best of the 1st Defendant’s knowledge, Mr Xu’s true signature is in the form set out in Schedule 2. As can be seen therefrom, the signature is wholly different from the signature of Mr Xu appearing on the alleged Countersigned Letter: §10(e) of Amended Defence.
(j) The 1st Defendant’s primary case is that the alleged Purchase Agreement is not an authentic document and is forged: §11(j)(i) of Amended Defence.
(k) The emails sent by the Plaintiff on 30 September 2020 to Mr Xu requesting the 1st Defendant to confirm, by signing and returning the Confirmation Letter were sent to an email account “13823330555@139.com”. It was not sent to any alleged staff of the 1st Defendant. The email account was and is not an email account within the 1st Defendant’s domain “@konka.com” and the 1st Defendant never received the emails: §13(a),(b) and (c) of Amended Defence.
(l) The alleged Confirmation Letter purportedly bearing the 1st Defendant’s chop is forged. The 1st Defendant did not issue the Confirmation Letter: §13(f) of Amended Defence.
60. Shortly after the 1st Defendant filed its Amended Defence, the Plaintiff filed Au’s Affirmation on 3 November 2021 in support of the Plaintiff’s application for leave to serve proceedings out of the jurisdiction on the 2nd Defendant on the Mainland.
61. In Au’s Affirmation, the Plaintiff states that the Amended Writ has been served on the 1st Defendant on 5 October 2021. The Plaintiff’s claims as set out in the ASOC are briefly mentioned at §§5-10 of the Affirmation. The Plaintiff further affirms that it believes it has good causes of action against the Defendants.
62. In his affirmation, Mr Au gave evidence that:
(a) On 19 August 2020, the Plaintiff issued a letter to the 1st Defendant informing it that Aton would like to use the Factoring Arrangements. On the same day, the 2nd Defendant on behalf of the 1st Defendant countersigned on the Countersigned Letter confirming the 1st Defendant’s acknowledgment and acceptance of the Factoring Arrangements: §6 of Au’s Affirmation.
(b) On 28 September 2020, Aton and the 1st Defendant entered into the Purchase Agreement, pursuant to which the 1st Defendant ordered for purchase of goods from Aton. On about 29 September 2020, Aton delivered the goods to the 1st Defendant pursuant to the Purchase Agreement. The 1st Defendant confirmed delivery of the goods via the Delivery Note bearing the company chops of Aton and the 1st Defendant. Aton issued the Invoice to the 1st Defendant for payment of the Purchase Price on the Due Date: §7 of Au’s Affirmation.
(c) On 30 September 2020, the Plaintiff sent an email to the 2nd Defendant requesting the 1st Defendant to confirm, by signing and returning the Confirmation Letter, the trade under the Purchase Agreement and the payment obligation under the Invoice in accordance with the Factoring Arrangements (at §8). On the same day, the 2nd Defendant, for and on behalf of the 1st Defendant, signed and issued the Confirmation Letter (bearing the company chop of the 1st Defendant and his own signature) to the Plaintiff by email confirming, inter alia, the 1st Defendant’s acceptance of the goods and its obligation to pay the Purchase Price under the Invoice to the Plaintiff: §8 of Au’s Affirmation.
(d) On several occasions and/or via a few instances, the details of which are particularised in §16 of the ASOC, the 2nd Defendant made the following representations to the Plaintiff: (i) the 2nd Defendant was the Sales Director of the 1st Defendant; (ii) the 2nd Defendant was authorised by the 1st Defendant to act on its behalf; (iii) the subject transaction was authentic or genuine; and (iv) the 1st Defendant’s execution of documents related to the subject transaction via the affixation of the 1st Defendant’s company chops, and/or 2nd Defendant’s signature thereto, were authentic or genuine (“the Representations”): §9 of Au’s Affirmation.
(e) The Plaintiff’s alternative case is that if the 2nd Defendant did not, or had no authority to act on behalf of the 1st Defendant (which is denied), the 2nd Defendant is liable to the Plaintiff for deceit, fraudulent misrepresentation and to compensate the Plaintiff for damages to be assessed. Had the Representations not been made, the Plaintiff would not have purchased the purported account receivables relating to the Invoice, and thus would not have paid the initial purchase price in the amount of US$441,375.57 to Aton on 30 September 2020 and suffered loss and damage in at least the same amount: §10 of Au’s Affirmation.
(f) As illustrated in §§6-8 of Au’s Affirmation, the Plaintiff believes that the proceedings involve real issues between the Plaintiff and the 1st Defendant which the Plaintiff may reasonably ask the Court to try. Further, based on §§9-10 above, the Plaintiff believes that it has good causes of actions against the 2nd Defendant, who is a necessary or proper party to the proceedings: §11 of Au’s Affirmation.
63. This case is unusual as the Plaintiff had available a copy of the Amended Defence of the 1st Defendant when applying for leave for service out of the jurisdiction. It is common ground, however, there was no reference at all to any of the 1st Defendant’s defences when the Plaintiff affirmed that real issues between the Plaintiff and the 1st Defendant which the Plaintiff may reasonably ask the Court to try, and the Plaintiff believes that it has good causes of actions against the 2nd Defendant.
64. The Plaintiff submits that the authorities clearly state the failure to refer to a possible defence does not amount to material non-disclosure. However, that is qualified by unless they are of such weight that their omission may mislead the court in exercising its jurisdiction and its discretion to grant leave: see Hong Kong Civil Procedure 2023 at §11/4/24(b) and the references to BP Exploration Co (Libya) Ltd v Hunt [1976] 3 All ER 879, MRG (Japan) Ltd v Engelhard Metals Japan Ltd [2003] EWHC 3418 and Hady v Bazar [2012] 3 HKLRD 29 at §103.
65. The facts that the applicant must disclose are those which the court should have in the weighing scales, ie those facts “relevant to the weighing operation which the court has to make in deciding whether or not to grant the order”: Fong Chak Kwan at §61; Chan Hon v Bayer Healthcare Ltd [2019] HKCFI 2486 at §21. It is no answer to a complaint of non-disclosure that if the relevant matters had been placed before the court, the decision would have been the same: Fong Chak Kwan at §59.
66. In the Court of Appeal judgment in Mary Kay Inc, the plaintiffs applied for leave to appeal against Lok J’s decision on material non-disclosure. Lok J found that there were 6 areas of significant and substantial material non-disclosure by the plaintiffs, and most of them were deliberate and indefensible. The plaintiffs argued there was no material non-disclosure in the plaintiffs not informing the Court that the defendants may have a potential defence of exhaustion of rights, as in an application for leave to serve out of the jurisdiction, there is no obligation on a plaintiff to make full and frank disclosure of possible defences (unless they would render the plaintiff’s claims unarguable).
67. There are 3 conditions for the application of the potential defence of exhaustion of rights: (a) the goods in question have been put on the market anywhere in the world under that trade mark by the owner or with its consent (whether express or implied or conditional or unconditional); (b) the condition of the goods has not been changed or impaired after they have been put on the market; and (c) the use of the registered trade mark in relation to those goods is not detrimental to the distinctive character or repute of the trade mark.
68. Chow JA in Mary Kay Inc. observed that on any view of the matter, the question of whether the goods were genuine products would be relevant to the potential application of the defence under s 20 of the TMO, and the Plaintiffs were plainly put on notice of this potential defence prior to the Service Out Application in a letter sent by Deacons to ATL dated 25 August 2017 prior to the commencement of this action (at §35).
69. Chow JA stated as follows at §§36-39:
“36. It is not necessary to determine finally whether the Judge is correct in his conclusion that the Defendants can successfully rely on the exhaustion of rights defence. The fact that the products in question were genuine products and the potential applicability of this ground of defence are, in our view, of sufficient weight or significance that the Plaintiffs ought to have made full and frank disclosure of those matters in the Service Out Application.”
…
37. In respect of the argument referred to in §30(2) above, Mr Hughes advances the broad proposition that in an application for service out, a failure to refer to potential grounds of defence will not amount to material non-disclosure[3]. In support of this proposition, Mr Hughes relies on the judgment of Deputy High Court Judge Peter Ng (as he then was) in Hady v Bazar [2012] 3 HKLRD 29, at §§102-103 and 116.
38. In our view, the broad proposition advanced by Mr Hughes is wrong in principle, and is not supported by the judgment of Deputy High Court Judge Peter Ng in Hady. Whether materials relevant to a potential ground of defence ought to be disclosed in an application for service out must depend on the circumstances. In Hady, the learned judge, having referred to the principles that (i) an applicant in any ex parte application owes a duty to make full and frank disclosure of all material facts to the court (§99), and (ii) the test of materiality is whether “… the facts … are relevant to the weighing operations which the court has to make in deciding the point before it” (§100)
39. In an application for service out, the plaintiff is required to satisfy the court, inter alia, that (i) there is a good arguable case that the case falls under one of the sub-paragraphs of Order 11, r 1(1) of the Rules of the High Court, and (ii) there is a serious issue to be tried on the merits of the substantive claim(s) advanced in the action. Hence, if the materials concerned are relevant to a potential ground of defence and are of such weight that they bear on the “weighing operations” required to be carried out by the court in deciding whether to grant leave to serve out, the plaintiff ought to disclose such materials fully and frankly to the court.”
(underlining and emphasis added)
70. In Chan Hon, Bharwaney J heard the 2nd and 3rd defendants’ appeal from Master Roy Yu’s order dated 8 November 2018 dismissing the 2nd and 3rd defendants’ summons for an order that the order of Master Leong dated 29 December 2016 giving leave, among others, to issue and serve the concurrent Writ on the 2nd and 3rd defendants out of the jurisdiction (“the Service Out Order”) be discharged. This was an action for damages arising from the death of Poon Lai Ming. The plaintiff, the widower of the deceased, sued all 3 defendants, for alleged negligence and/or breach of statutory duties in manufacturing, distributing and/or causing to be distributed in Hong Kong the contraceptive pills called “Yasmin” (“the Pills”), which the deceased was said to have consumed.
71. An expert report of Professor Tomlinson was exhibited to the affirmation for service out of the jurisdiction. In arriving at the conclusions in his report, Prof Tomlinson omitted to refer to or discuss the caution printed on the outer box which read “While you are receiving this medication, you should see a doctor at least once a year for advice on suitability of continued use” (the “Caution”). Bharwaney J was of the view that the disclosure of the Caution was likely to have led to an enquiry as to what steps, if any, the deceased took to obtain medical advice (at §24).
72. Other than the non-disclosure of the Caution, the Court concluded that there was no material non-disclosure in the present case, as the various non disclosures that were complained of were not material in the sense that, when properly analysed, they were not relevant to the exercise of the court’s discretion to serve out of the jurisdiction. Non-disclosure of the Caution was material, as it was relevant to the exercise of the court’s discretion to serve out of the jurisdiction, even though it is likely that, after due consideration of the same, the court’s decision to grant leave to serve out of the jurisdiction would have been the same (at §§33-34).
73. The fact that triable issues can be raised, that possible negligence on the part of Dr Chik Poon Yin and/or the deceased’s own refusal to be admitted to hospital broke the chain of causation, only goes to confirm that there is a serious question to be tried whether or not there has been a break of causation by reason of these matters (at §30).
74. I am of the view that in circumstances where the Plaintiff is basing its claim on (i) the Countersigned Letter signed by the 2nd Defendant which allegedly acknowledged and accepted the Factoring Arrangements; and (ii) the Confirmation Letter signed by the 2nd Defendant, which allegedly confirmed the trade under the Purchase Agreement and the payment obligation under the Invoice in accordance with the Factoring Arrangements, it is a complete defence to the Plaintiff’s claim against the 1st Defendant in circumstances where by reason of the forgery pleaded in Sections D & E of the Amended Defence, the alleged Factoring Arrangements and Purchase Agreement never existed at all material times.
75. Even if the alleged Factoring Arrangements and alleged Purchase Agreement are authentic, it is also a complete defence that the 1st Defendant never entered into and/ or authorised the alleged transaction, nor has the 1st Defendant received any of the subject goods.
76. On the 1st Defendant’s case, at all material times, the Defendant did not know about the Plaintiff or at all. The 1st Defendant only came to know about the Plaintiff on or around 12 December 2020 when one Mr David Gan of the Plaintiff wrote, by email, to Ms Wan Mengxue of the 1st Defendant. The emails sent by the Plaintiff on 30 September 2020 to Mr Xu requesting the 1st Defendant to confirm, by signing and returning the Confirmation Letter were sent to an email account “13823330555@139.com”. It was not sent to any alleged staff of the 1st Defendant. The email account was and is not an email account within the 1st Defendant’s domain “@konka.com” and the 1st Defendant never received the emails. The alleged Confirmation Letter purportedly bearing the 1st Defendant’s chop is forged, and the 1st Defendant did not issue the Confirmation Letter.
77. These facts are relevant to the weighing operations which the court has to make when deciding the point before it, and should have been disclosed.
78. In this case, the Court granting leave for service out of the jurisdiction has to consider whether the 2nd Defendant, the proposed foreign defendant is a “necessary” or “proper” party: see Fong Chak Kwan at §79; AK Investment CJC v Kyrgyz Mobil Tel Ltd (at page 527). In considering this, the action is not properly brought against the 1st Defendant if it is bound to fail. The question of the merits of the claim is relevant to the question of whether the claim against the 1st Defendant is ‘bound to fail’ and to the question whether there is a ‘serious issue to be tried’ in relation to the claim against the 2nd Defendant. There is no practical difference between the two tests, and they in turn are the same as the test for summary judgment. The 1st Defendant’s defence of third party fraud should have been brought to the attention of the court when seeking leave to serve out of the jurisdiction so the court could conduct its weighing operations as to whether the claim against the 1st Defendant is bound to fail. It is no answer to a complaint of non-disclosure that if the relevant matters had been placed before the court, the decision would have been the same: Fong Chak Kwan at §59.
79. Regarding the 2nd Defendant, I am of the view the Plaintiff should have disclosed to the court that the 2nd Defendant is disputing identity and had not made the representation: the 2nd Defendant’s denial of having “countersigned” on the Countersigned Letter and the sample signature of the 2nd Defendant as set out in Schedule 2 of the Amended Defence, which appears to be different from the signature of the 2nd Defendant appearing on the alleged Countersigned Letter. The Plaintiff should have disclosed to the court that the alleged Countersigned Letter purportedly bearing the 1st Defendant’s chop is forged. The true form of the 1st Defendant’s company chop is set out in Schedule 1(1) of the Amended Defence.
80. These are of significance that they go to the weighing operations which a court has to make in deciding whether there is a serious issue to be tried. It may be a complete defence to the Plaintiff’s claims against the 2nd Defendant for deceit and fraudulent misrepresentation; both require the 2nd Defendant having made a representation which was false to the Plaintiff. In this case, the 1st Defendant has indicated in the Amended Defence that the 2nd Defendant denies countersigning the alleged Countersigned Letter, and the differences in the signatures. It too is an alleged victim of a third party fraudster using his identity. If the 2nd Defendant did not make any representation, then it goes to the serious issue to be tried and the weighing operations required to be carried out by the court in deciding whether to grant leave to serve out. This defence and the differences in signatures, should have been brought to the court’s attention.
81. The 2nd Defendant further submits that the court should have been informed about the potential double actionability defence of the 2nd Defendant. Wilson Chan J in Altrans Fast Cargo Limited & Anor v Liu Yugang & Ors [2023] HKCFI 1579 at §§28-30 refers to the double actionability defence.
“28. Further to the above, it is well-established that in order for the plaintiffs to rely on a tort committed abroad to mount a tortious cause of action within Hong Kong, the plaintiffs must show that the wrong is actionable under both the law of the place where the tort was committed, and in Hong Kong, under the “double actionability rule”: Hong Kong Civil Procedure 2023, Vol 1, Practice Note 11/1/332.
29. In The Conflict of Laws in Hong Kong (3rd edn), it is stated at §5.081 that “double actionability requires the plaintiff to show that the defendant is liable under both legal systems in respect of the same damage by reason of the same conduct. Thus, it is not enough for the plaintiff merely to show that liability of generally the same type is recognized in principle or could be pleaded non-demurrably if, in fact, the claim would fail at trial under one system despite succeeding under the other.
30. Despite the defendants expressly raising this issue in evidence, the plaintiffs have proffered no response to show how their complained conduct (characterised as a “tort” in the plaintiffs’ ex parte application) is also actionable in the Mainland.”
(underlining and emphasis added).
82. There was disagreement as to where the alleged tort, being the misrepresentation, was committed. The 2nd Defendant submits that the tort took place on the Mainland where the 2nd Defendant is located, which must be disclosed and addressed. There is potentially not a serious issue to be tried because there is potentially a fatal failure in the Plaintiff’s claim against the 2nd Defendant. The 2nd Defendant submits the issue is not whether there is double actionability per se, but it is the failure to even raise it as a possible defence to the court which is trying to consider whether there is a serious issue to be tried because it would be a complete defence. The 2nd Defendant submits that the Court is not here to resolve that question but whether the court granting leave to serve out of the jurisdiction should have been told about that. This is a very different question.
83. The Plaintiff submits that it is not where the representation is made that triggers double actionability. It is whether the tort is committed in Hong Kong or in other jurisdictions that potentially triggers this rule. Given that the essence of the misrepresentation claim is reliance on the 2nd Defendant’s representation that he had authority of the 1st Defendant, that being untrue, that is the misrepresentation. So the tort is committed in Hong Kong.
84. The Conflict of Laws in Hong Kong (3rd edn) provides commentary on the place of commission of a tort at § 5.089:
“2. Parties residing in different places: prior relationship. Where the plaintiff is based in X and defendant in Y and they transact business together from their respective bases, then the defendant’s tort causing foreseeable or intentional harm to the plaintiff may well be deemed to have been committed in X, even though the relevant acts of the defendant were done in Y.
3. Parties residing in different places: no prior relationship. In cases where there is no such business relationship between the parties, it may on particular facts be unduly harsh to deem the relevant acts to have taken place anywhere else other than the place in which they were committed. However, some circumstances may justify a different conclusion. To give an extreme example, if the defendant’s conduct is fraudulently directed at a plaintiff in Hong Kong, with the defendant having chosen an off-shore location of convenience in an evident attempt to evade the attention of the financial services authorities in the plaintiff ’s place of residence, it would seem likely that a Hong Kong court will regard the defendant’s relevant acts as having been committed in Hong Kong in relation to the Hong Kong plaintiff.”
85. In my view, based on the above commentary, the double actionability rule is not engaged in this case as the tort is committed in Hong Kong, where the Plaintiff is located. But that is not the question before this Court. It is whether the court in deciding to grant leave for service out should have been informed of a potential defence of double actionability. In my view, the failure to inform the court of this defence does not constitute material non-disclosure. Given the rule of double actionability is not engaged in the first place, it cannot be of such weight that they bear on the weighing operations required to be carried out by the court in deciding whether to grant leave to serve out.
86. Based on the 1st Defendant’s Amended Defence, the 2nd Defendant did not countersign the Countersigned Letter and is relying on the defence that he is also a victim of fraud. Accordingly, there can be no room for double actionability as he would not have made any representation. So even on the 2nd Defendant’s case, it is not a matter of the tort being committed on the Mainland as he did not make any representation.
87. As discussed above, it was material for the Plaintiff to disclose the 2nd Defendant’s defence of having made no representation as he did not countersign the Countersigned Letter due to the alleged forgery and his signature is different from the one that appears in Schedule 2.
(b) Alleged material non-disclosure of forum non-conveniens
88. Although I have ruled there was material non-disclosure as to the merits above, I address the alleged material non-disclosure of forum non-conveniens for completeness. For the reasons provided below, I do not think there has been any material non-disclosure of forum non-conveniens.
89. The starting point is Marlene Ng J’s reference in §54 of Fong Chak Kwan to Dynasty Line Ltd v Sukamto Sia, in which Cheung JA made observations in respect of the appropriate or natural forum with which the action had the most real and substantial connection:
“Real and substantial connection
57. The issue is whether the plaintiff has raised a serious question that Hong Kong is not only the appropriate forum to try the case but that this is clearly so. The burden is on the plaintiff.
58. The ‘appropriate’ or ‘natural’ forum is one ‘with which the action had the most real and substantial connection’. This includes not only factors affecting convenience and expense (such as availability of witness) but also other factors such as the law governing the relevant transaction and the place where the parties respectively reside and carried on business, Spiliada at page 478.”
(underlining and emphasis added).
90. Marlene Ng J in Fong Chak Kwan at §57 listed the following factors for consideration whether a forum is one with which the action has the most real and substantial connection. These include: (a) the convenience and expense (such as availability of witnesses and/or documents); (b) the law governing the transaction; (c) the place where the parties reside or carry on business; (d) the nature of the case and the dispute; (e) the legal and practical issues involved, eg questions of local knowledge, special expertise/experience of a particular forum in dealing with complex disputes; and (f) place of commission of the tort.
91. Where a plaintiff institutes proceedings in Hong Kong not as of right but has to seek leave to serve the defendant out of the jurisdiction under O 11 of RHC, the legal burden is on the plaintiff to demonstrate Hong Kong is clearly the appropriate forum for the trial of the action. Where a stay is sought of proceedings brought in Hong Kong as of right, the burden is the obverse. Unless the plaintiff satisfies the court Hong Kong is clearly the more appropriate forum for the trial of the action than any available alternatives suggested by the defendant, the court’s jurisdiction under O 11 of RHC will not be exercised: Fong Chak Kwan v Ascentic Ltd at §55.
92. The only line addressing forum is the first sentence of §12 of Au’s Affirmation:
“The Plaintiff also submits that as Aton and the 1st Defendant are incorporated in Hong Kong, Hong Kong is the proper forum to hear the proceedings.”
93. The 2nd Defendant submits that factors affecting convenience and expense (such as availability of witnesses), the law governing the relevant transaction, and the place where the parties respectively reside and carried on business are not addressed as identified under Dynasty Line and Fong Chak Kwan. For example, the court is not informed that the Plaintiff and the 2nd Defendant are not in the jurisdiction so there is an issue of convenience because each of those are equally important to the question of the appropriate forum from the perspective of the convenience of the parties. The governing law of the alleged Confirmation Letter from the 1st Defendant with respect to the Purchase Agreement, being English law, is not addressed.
94. The 2nd Defendant submits that the legal and practical issues have not been addressed. These issues should have been before the court in seeking leave to serve out of the jurisdiction.
95. In my view, any alleged material non-disclosure must be viewed in the context of the Plaintiff’s reliance on Gateway C.
96. The Plaintiff referred me to Hong Kong Civil Procedure 2023 at §11/1/288 regarding Gateway C forum non conveniens vis-à-vis the party to be served out:
“Strictly speaking, the court is to carry out a single forum conveniens analysis of the multi-defendant case: (the word in the rule), Vedanta Resources P.l.c. v Lungowe [2019] UKSC 20, [68], [74]. There is no presumption in favour of granting leave in a case falling within r 1(1)(c). However, as the forum may already be a given, the questions that remain are: (1) is the foreign defendant or third party a necessary or proper party; and/ or (2) is it right to bring it here as a party in terms of trying the action against it here: The Eras Eil Actions [1992] 2 All ER 82, [1992] 1 Lloyd’s Rep 570. The question is whether it is right to permit the additional claim to proceed here in terms of forum non conveniens but bearing in mind that by definition the existing proceedings in Hong Kong on related or overlapping issues will be a strong factor in the forum non conveniens determination AK Investment C.J.S.C and Altimo Holdings v Kyrgyz Mobil Tel Ltd. [2011] UKPC 7, [2012] 1 WLR 1804, [73]. Indeed, by virtue of the ability to serve the overseas defendants under gateway (c), Hong Kong may be the only possible forum for a convenient trial of all the claims against all the defendants, The Electric Furnace Co. v Selas Corp of America [1987] RPC 23, 34, Haller AG v Vestey International Group Ltd [2022] HKCFI 652.”
(underlining and emphasis added).
97. The risk of multiple proceedings is also discussed in Hong Kong Civil Procedure 2023 at §11/1/289:
“It is not the practice that foreign defendants should be brought here under this rule solely on the ground that the alternative would require more the claimant to progress than one suit: EI Du Pont de Nemours & Co. v Agnew [1987] 2 Lloyd’s Rep 585, 589, The “Goldean Mariner” [1990] 2 Lloyd’s Rep 215. On the other hand, the existence of the proceedings in the forum “virtually concludes the [forum non conveniens] issue”, Credit Agricole Indosuez v Unicof Ltd. [2004] 1 Lloyd’s Rep 196 at 201, Angola v Perfectbit Ltd [2018] EWHC 965 (Comm), [122], applied Haller AG v Vestey International Group Ltd [2022] HKCFI 652, [49], [66].”
98. In this case, the 1st Defendant had already submitted to the jurisdiction of the Hong Kong courts. It filed a Defence on 20 May 2021 and an Amended Defence on 27 October 2021. The 1st Defendant does not dispute that jurisdiction or exercise any right to go elsewhere, despite Clause 3 of the Confirmation Letter.
99. The 2nd Defendant referred me to ID v LU [2021] 1 WLR 4992 and Judge Pelling QC’s observations at §89:
“If, contrary to my conclusions set out above, the John Russell [1916] 2 AC 298 issue is not a technical basis for refusing jurisdiction under Gateway 3 [the English equivalent of Gateway C] any longer, I would nonetheless have regarded the fact that the only basis on which the court could obtain jurisdiction is by the voluntary submission of another defendant as a powerful reason why permission to serve out should be set aside on forum conveniens grounds. I would have regarded this as a powerful discretionary factor for all the reasons that I refer to above as justifying the continued application of the John Russell principle. In summary Gateway [C] is anomalous for the reasons identified in the authorities cited earlier and its applicability in the circumstances set out above ought to be constrained as a matter of discretion since otherwise its effect would be to permit an individual with no connection to the jurisdiction to be brought into litigation here against his or her will simply by reason of the willingness of another defendant to submit to the jurisdiction for his own reasons.”
100. I do not think ID v LU is applicable here. In ID v LU, the claimant, a Ukrainian national, brought a claim to recover monies under agreements allegedly entered into with the two defendants, also Ukrainian nationals. The 1st defendant, who was domiciled in a member state of the European Union, voluntarily submitted to the jurisdiction of the English court after the claim was issued. The claimant subsequently sought the court’s permission under the Hong Kong equivalent of Gateway C to serve the claim form out of the jurisdiction on the 2nd defendant, who was domiciled in Ukraine. Furthermore the claim had no real connection with the jurisdiction. None of the parties were either domiciled or resident in England or ever have been. The subject matter of the dispute had no connection with the jurisdiction and was exclusively connected to the Ukraine. All the parties were Ukrainian nationals; two of them were resident there as well and the first defendant was domiciled and resident in an EU Member State (§87).
101. In this case, the Hong Kong courts have jurisdiction over the 1st Defendant. The 1st Defendant, being the anchor defendant, is a Hong Kong company. The 1st Defendant did not dispute that jurisdiction or exercised any right to go elsewhere.
102. I agree with the Plaintiff’s submissions that the existence of the proceedings in the forum virtually concludes the forum non conveniens issue. Given the existence of a lis in Hong Kong the test for serious issue to be tried in respect of forum is virtually concluded. The Plaintiff’s rights to relief claimed against the 1st and 2nd Defendants are in respect of, or arise out of, the same transaction or a series of related transactions, with common issues of facts (eg whether the 2nd Defendant had authority to act on behalf of the 1st Defendant, whether the 2nd Defendant had made representations to the Plaintiff, and whether the 2nd Defendant had signed the Confirmation Letter and Countersigned Letter) which need to be determined. Furthermore, where the claim is put in the alternative on the basis that one or other defendant was liable, the court may be entitled to treat Waller LJ’s test as “flexible”, BNP Paribas S A v Anchorage Capital Europe LLP [2013] EWHC 3073 (Comm). In any event, the “alternative” defendant will usually be a necessary or proper party, such that Gateway C will be satisfied: see §11/1/48 of Hong Kong Civil Procedure 2023. The Plaintiff has demonstrated at least a serious issue to be tried on forum conveniens when applying for service out of the jurisdiction. In these circumstances, I do not think there has been any material non-disclosure by the Plaintiff.
2ND DEFENDANT’S OTHER COMPLAINTS
103. For completeness, I have considered the complaints set out in Paul’s Affirmation at §§12, 27, 29-33, and Mak’s Affirmation at §13. I note some of these complaints are post the Service Out Application and occurred after the Service Out Order.
104. These complaints are rejected and dismissed. They are insufficient to set aside the Service Out Order.
PLAINTIFF’S ALTERNATIVE CASE ON THE SUMMONS
105. Although I have ruled there has been material non-disclosure of the merits in the initial Service Out Application, such that the Service Out Order ought to be set aside, it remains open to the Court to make a similar order at the inter partes stage if the making of such order seems just and appropriate in the circumstances”: Fong Chak Kwan at §74.
106. Although in principle the same duty arises in all ex parte applications, in practice oversights may be more likely to be penalised only in costs in the O 11 context because it would not be right to drive a party to an inappropriate jurisdiction to bring its claim: see §11/4/30 of Hong Kong Civil Procedure 2023 and reference to David Shaw Silverware, North America Ltd v Denby Pottery Co Ltd [2013] EWHC 4458 (QB).
107. Where leave is to be discharged on the grounds of material non-disclosure, the discharging court must consider the matters not disclosed on the original application and, if appropriate, re-grant leave on terms that the plaintiff pay all the costs of the discharge application, R Leslie Deak v Deak Perera Far East Ltd [1991] 1 HKLR 551 (CA); Yau Chiu Wah v Gold Chief Investment HCA 807/ 2001, [2001] HKEC 2044, Pacific Electric Wire & Cable Co Ltd v Texan Management Ltd CACV 369, 367 and 371/ 2006, [2007] HKEC 1386, [2007] 4 HKC 372 followed in Tan Kah Heng v Tan Eng Khiam, [2010] 2 HKLRD 526, [2012] 1 HKLRD 329: Hong Kong Civil Procedure 2023 §11/4/32.
108. On whether or not the court should re-grant leave for service out of the jurisdiction, Mr Chiu submits that there is at least a serious issue to be tried on the merits. Furthermore, given the overlapping issues and the connection with the existing lis in Hong Kong, it is appropriate that the proceedings are served out of the jurisdiction on the 2nd Defendant.
109. Mr Brown submits that the Plaintiff’s evidence has not addressed the double actionability point. So the court is in exactly the same situation and cannot be satisfied there is no defence that goes to the serious issue to be tried. Accordingly the Court should not order a re-grant. However, I am of the view that the failure to inform the court of this potential defence does not constitute material non-disclosure.
110. Although the non-disclosure was deliberate, it was not done in bad faith for the purposes of concealment. The non-disclosures stated at §§74-80 do not lead me to conclude that there is no serious issue to be tried between the Plaintiff and the 1st and 2nd Defendants in the present case.
111. I have also taken into account the guidance by Rogers VP in Pacific Electric Wire & Cable Co Ltd v Texan Management Ltd & ors [2007] 4 HKC 372 at §§16-19 that there is no absolute bar to a renewed application for service of a writ outside jurisdiction in cases where there has been material non-disclosure, and that it would be out of proportion and an unwarranted punishment to disallow a party from ever applying for an order for service out for material non-disclosure on a first application.
112. Given the existence of the lis in Hong Kong and the serious issues to be tried against the 1st and 2nd Defendants, I am of the view that it is just and appropriate that the proceedings are served outside the jurisdiction on the 2nd Defendant. I accept the Plaintiff’s submissions for a re-grant for leave for service out of the jurisdiction on the 2nd Defendant.
DISPOSITION
113. I hereby make an order to dismiss the 2nd Defendant’s Summons.
114. The material non-disclosure should be reflected in an appropriate costs order. I make a costs order nisi that the Plaintiff do pay the 2nd Defendant 70% of the costs of the Summons before summary assessment, with certificate for counsel.
115. I am minded to order summary assessment of costs. Any party who seeks any variation or summary assessment should lodge their submissions within 14 days from the date hereof, response within 7 days upon receipt, and reply within 7 days thereafter.
116. I express my gratitude to counsel involved in this case for the assistance that they have rendered to me.
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(James Kwan) |
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Master of the High Court |
Mr Byron Chiu instructed by Messrs Woo, Kwan, Lee & Lo for the Plaintiff
Mr Toby Brown instructed by Messrs Payne Clermont Velasco for the 2nd Defendant
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