CHINA NORTH INDUSTRIES INVESTMENT LTD v. RONALD R.C. CHUM AND OTHERS

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NOS. 10 AND 54 OF 2003

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HCCL 10/2003

BETWEEN

AND

HCCL 54/2003

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J U D G M E N T

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The applications

1. There are two actions, and two applications, before the Court.

2. In HCCL 10 of 2003, which was commenced by generally endorsed writ dated 25 February 2003, as amended on 16 February 20004, the plaintiff therein, China North Industries Investment Limited (“CNII”) sues 3 defendants : Ronald Chum, the 1^st defendant, Simon Murray, the 2^nd defendant, and Anthony Lo, the 3^rd defendant.

3. Of these three defendants, it is Mr Chum who is the target of the plaintiff’s attention; the action against Mr Murray, who subsequently gave evidence in Bermudan proceedings on the plaintiff’s behalf, was settled by consent, and although Mr Lo is named in the writ in HCCL 10 of 2003, it is not clear if he has been served, and in any event the action against him has not proceeded further.

4. On 16 February 2004, on ex parte application, the plaintiff obtained leave to serve the writ out of the jurisdiction pursuant to Order 11, rule 1(1)(f) RHC upon the 1^st defendant, Mr Chum.

5. Mr Chum objects to such service, and by summons dated 27 October 2004, issued pursuant to the provisions of Order 12, rule 8, he seeks relief setting aside the Order giving leave to serve him out of the jurisdiction, and to set aside such purported service.

6. This is the first substantive application with which this court now is seized.

7. The second action is HCCL 54 of 2003.  This was commenced by generally endorsed writ dated 23 October 2003, as amended on 15 December 2003.

8. There are two plaintiffs in this action.  The 1^st plaintiff is Telecom (No. 1) Service Ltd, which is a wholly-owned subsidiary of CNII, the 2^nd plaintiff.

9. Mr Chum is the 1^st defendant to this action, and a Mr Tony Wong is the 2^nd defendant.

10. On 16 February 2004 ex parte Order 11 leave was given to serve the writ in this action out of the jurisdiction upon Mr Chum, and on 13 October 2004 this court granted leave ex parte to the plaintiffs to serve Mr Wong, the 2^nd defendant.

11. As against Mr Chum the plaintiffs placed reliance on the provisions of Order 11, rule 1(1)(f), and as against Mr Wong, leave was granted on the basis of (f) and also sub-rule (c).

12. Both Mr Chum and Mr Wong seek to set aside such Order 11 leave, and the service purportedly effected thereto, pursuant to the provisions of Order 12, rule 8 : Mr Chum by summons dated 28 October 2004, and Mr Wong by summons dated 25 November, 2004.

13. Accordingly, this is the second application which this court now must decide.

The grounds of the applications to set aside

14. Whilst there are minor differences, the thrust of the arguments mounted on behalf of Mr Chum and Mr Wong in these applications are essentially the same.

15. Each applicant asserts that (1) the case against him does not fall within the Order 11 rubric of “good arguable case” in terms of the subhead relied upon in order to obtain leave to serve out; (2) that on the respective merits there is no “serious issue to be tried” in light of the strong defences available, and indeed that the present claims manifestly constitute an abuse of process; (3) a ‘forum conveniens’ issue, namely, that in any event Hong Kong is not the appropriate forum for the trial of these actions; and (4) that there had been material non-disclosure in terms of the evidence adduced in support of the applications to serve out of the jurisdiction.

16. Additionally there is a discrete argument mounted only in respect of Mr Chum in HCCL 10 of 2003.  This is that an ex parte Order of this court, dated 20 February 2004, granting the plaintiffs substituted service on Mr Chum, should be set aside in that on the evidence such order granting substituted service, pursuant to the provisions of Order 65, rule 4, plainly was wrong.

17. This latter argument is relevant only by reason of the fact that although personal service of both writs ultimately was effected upon Mr Chum at Changi Airport in Singapore on 2 July 2004, at the time of such service the writ in HCCL 10 of 2003 had expired, and thus it is said that such personal service was ineffective and that, without prejudice to the other jurisdictional arguments, no lis thereby became engaged between the parties.

Progress and substance of the two actions

18. Although HCCL 10 of 2003 was the first in time, the action has remained at the stage only of service (or purported service) of the generally endorsed writ.

19. However, HCCL 54 of 2003 has progressed to the stage of service (or purported service) of Points of Claim, which are dated 15 October 2004.

20. This document speaks for itself.  The gravamen of the case as pleaded against Messrs Chum and Wong is that as directors of the 1^st and 2^nd plaintiff companies, in breach of their duties and/or fraudulently they failed at two meetings, on 5 July 1997 and 21 July 1997, to disclose the existence of a report – ‘the DS Cheung report’ – which led the 2^nd plaintiff, an investment vehicle, to invest an additional sum of US$9 million in a telecommunications project, ‘the Zhongbei project’, in mainland China, which further investment, which subsequently proved irrecoverable, in fact would not have been made if such disclosure had been made.

21. At face value there is nothing particularly exceptional about these allegations, which in usual course might be expected to proceed to trial.

22. The particular problem, however, and that which overshadows and colours all else in this case, is that this dispute, albeit with different parties thereto, earlier had been extensively canvassed in proceedings in the High Court of Bermuda.

23. At this stage, therefore, I should proffer some detail about this Bermudan litigation.

The Bermudan action

24. The major complaint of the defendants in the present applications before the court is that the plaintiffs’ claims in HCCL 10 and HCCL 54 of 2003 are essentially an attempt at ‘rerunning’ the precise claims now raised in these Hong Kong actions.

25. The background is that CNII was a fund which had been set up to invest in various joint ventures in the PRC.  It was listed on the Irish and Singapore Stock Exchanges, and it made investments through wholly-owned BVI subsidiaries.

26. The 1^st plaintiff in HCCL 54 of 2003, Telecom (No. 1) Service Ltd, is one such subsidiary, and it was used to invest in a paging business in the mainland called the ‘Zhongbei project’.

27. For this project there was an investment manager, China North Industries Investment Management Ltd (which hereafter I will refer to as ‘the Investment Manager’) which was responsible for monitoring the investments in the various joint ventures and reporting to the Investment Committee of the investment vehicle, CNII, in return for which the Investment Manager was entitled to management fees.

28. In 1997 the structure of this CNII fund began to change.  An American fund, the ‘Gabriel Fund’, began to accumulate stock in CNII, and by mid-1998 had acquired a substantial shareholding in that company; ultimately CNII was de-listed from the Irish and Singapore exchanges, and since that time disputes began to arise between CNII and the Investment Manager.  This led to proceedings in the courts of Bermuda.

29. CNII did not fully settle the Manager’s fees for 1998 and 1999, and accordingly the Investment Manager commenced proceedings for such unpaid fees in the Bermudan High Court on 19 April 2000 in Action 124 of 2000.

30. In turn, this suit sparked a counterclaim from CNII, and it is the subject-matter of this counterclaim which has formed the factual matrix underpinning the allegations of abuse of process which now are made by the applicants in the applications presently before this court.

31. At this stage, although the Bermudan proceedings were underway, there were also proceedings in Hong Kong, in HCCL 7 of 2000, which had been commenced by CNII in order to obtain delivery up of documents by the Investment Manager, documents which were said to be (but subsequently were established not to be) in Hong Kong. 

32. As to these proceedings, however, the Manager obtained an anti-suit injunction from the Bermudan court restraining the pursuit by CNII of this action.  The Bermuda High Court, which upheld the ex parte grant of the anti-suit injunction, characterized HCCL 7 of 2000 as an abuse of process; in particular, CNII was criticized for an “egregious oversight” in failing to inform the court in Hong Kong that the Management Agreement contained a non-exclusive jurisdiction clause in favour of Bermuda, as well as a choice of law clause in favour of Bermudan law.

33. But to revert to the narrative.  The Bermudan proceedings in the Supreme Court of Bermuda were conducted in Action No 124 of 2000.  The parties to this action were CNII as plaintiff and the Investment Manager as defendant, and the trial took place before Storr J over the course of 10 days from 30 June 2003 to 14 July 2003.

34. On 24 February 2004 Storr J gave judgment in favour of the Investment Manager against CNII for unpaid management fees, and dismissed CNII’s counterclaim, an integral element of which was for alleged breaches relating to the Zhongbei joint venture; in particular, CNII had alleged that :

“The [Manager] failed to report to the Investment Committee meeting which was held on 5 July 1997 for the purpose, inter alia, of considering and approving an additional investment of US$9 million into the Zhongbei project, the advice which it had received from Messrs D S Cheung & Co dated 14 June 1997, that under the then structure the money provided by [CNII] of US$11 million was exposed to a very high risk and that it would not be desirable for [CNII] to suffer such a risk.”

35. My attention has been drawn to the fact that this plea was added by specific amendment by CNII during the trial on 7 July 2003, and is referred to as such in the judgment of Storr J.

36. In the event, in his judgment Storr J accepted the “uncontroverted evidence” of Mr Tony Wong, the 2^nd defendant in HCCL 54 of 2003, “that he kept the members of the Investment Committee informed as to the progress of the negotiations with D S Cheung & Co”, that “the D S Cheung & Co Memorandum had not previously been produced by [CNII] by way of discovery and Mr Wong had not had the opportunity of considering the document [which] had clearly been in the possession of [CNII’s] and its London lawyers since July 1998”, and that “the Board of Directors of [CNII] had all the necessary information when giving unconditional authority for the payment to be made”.

37. The judgment of Storr J was appealed; in particular the findings of the learned judge in relation to the Zhongbei project and the D S Cheung & Co Report were challenged in that court.

38. On 25 November 2004 the Bermuda Court of Appeal dismissed CNII’s appeal, and upheld the judgment of Storr J. 

39. The appeal court noted that CNII had had a copy of the D S Cheung & Co Memorandum, but only had obtained an English translation at a late stage; it further found that the findings of the judge below were justified, and that he was entitled to make those findings on the evidence before him.

40. In relation to the meeting of the Investment Committee on 5 July 1997 the Court of Appeal took the view that the evidence confirmed that the relevant matters were raised and that “the allegation that Mr Wong failed to raise them must be rejected”; in relation to the Board Meeting on 21 July 1997 the Court of Appeal agreed with the finding below that the Board “had all the necessary information when giving unconditional authority for the payment to be made.”

41. It follows from the foregoing – and indeed it is not seriously disputed in these applications – that the CNII complaint that the Investment Committee had not been informed of the D S Cheung & Co Memorandum at the meeting on 5 July 1997, or at the Board meeting on 21 July 1997, was raised, in specific terms, in the Bermudan proceedings, and that it had also been alleged that such failure had constituted breach of duty on the part of the Manager, causing the loss of the US$9 million additional investment in Zhongbei by CNII.

42. Against this undisputed factual background I now turn, therefore, to the submissions made by the parties upon these applications.

(1)     Order 11, rule 1(1):’ Good arguable case’

43. Mr Ronald Chum is the 1^st defendant in both HCCL 10 and 54 of 2003. As such, leave to serve out was obtained against him in each case pursuant to the provisions of Order 11, rule 1(1)(f), namely if “the claim is founded on a tort and the damage was sustained, or resulted from an act committed, within the jurisdiction”.

44. As for Mr Tony Wong, he is involved, as 2^nd defendant, solely in HCCL 54 of 2003.  As such, leave to serve out was obtained against him on the basis of Order 11, rule 1(1)(f) and also rule 1(1)(c), that is, on the basis that “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”.

45. Both defendants say that a case against each under these heads has not been made out to the requisite standard, that is, of a ‘good arguable case’.

46. As will shortly become evident, this point is not the main point taken by either in this application; in fact, it was referred to somewhat as a forensic afterthought.

47. With regard to the argument under subhead (f), on behalf of Mr Chum Mr Shieh SC submitted that the allegation in the Points of Claim was that the injection of further funds of US$9 million was irrecoverable under PRC law, and thus that the place where the loss was suffered must therefore be where the money could not be recovered, and that there was no basis to suggest that this was Hong Kong.

48. Mr Sussex SC for the plaintiffs argued that the plaintiffs’ case was that they were victims of a fraud committed by Chum and Wong when they actively represented that the investment in the Zhongbei project was one of good or low risk when in fact they well knew that it was highly risky. 

49. The consequent loss, said Mr Sussex, was suffered at the moment the US$9 million in additional funds was paid out of Telecom No 1’s account in Hong Kong, and that this was not a case wherein the plaintiffs are claiming recovery of the money from the recipients; thus, the subsequent irrecoverability of the funds is irrelevant to the issue of where the loss was suffered by the plaintiffs, and there clearly was a good arguable case that the action as now advanced fell within the rubric of sub-rule (f).

50. This is not, as earlier I have observed, the principal point in this case; however for the purpose of this application I am not prepared to hold that there is no good arguable case under sub-rule (f), and do not do so.

51. Accordingly I reject this argument.

52. To this I would add that I am further disinclined to set aside the leave which also was granted to serve Mr Wong out of the jurisdiction pursuant to sub-rule 1(1)(c).  After reflecting on the circumstances, it seems to me that whilst this may not be the clearest of cases the requirements of this sub-rule have been satisfied.

53. In the event, however, this latter conclusion is of little practical significance, given that in HCCL 54 of 2003 Mr Wong also was served pursuant to sub-rule (f), and, as earlier indicated, I am not minded to set aside such service as effected under this head on the basis of no good arguable case.

(2) Order 11, rule 1(1) : “serious issue to be tried”

54. It is common ground that in order to obtain leave to serve out, the perceived merits of the plaintiff’s claim must cross the required threshold, which in this context is that of a ‘serious issue to be tried’ : see Seaconsar Far East Ltd v. Bank Markazi [1994] 1 AC 438.

55. It is under this head that the real dispute arises in these applications, and it is the existence and content of the previous proceedings in Bermuda which provides the factual matrix underpinning this attack.

56. Extensive argument has taken place upon two bases : first, whether the claims in these actions are a ‘collateral challenge’ to the Bermuda action, and thus constitute an abuse of process; and second, whether an issue estoppel arises consequent upon the Bermudan proceedings. 

57. I take each aspect in turn.

         (a) 'Collateral challenge'

58. Given the manner in which the Bermudan proceedings were conducted by the plaintiffs, and the subject matter of that action, it is said with some force by the defendants that these Hong Kong actions are no more than a plain and obvious attempt by these plaintiffs to re-litigate issues which already have been decided by a foreign court of competent jurisdiction.

59. Mr Shieh SC, for Mr Chum, the 1^st defendant in both Hong Kong actions, says that there can be no doubt but that the principal relevant allegation in the Bermudan action was the same as that raised in these Hong Kong actions. 

60. In Bermuda, he notes, it was said that the Investment Manager had failed to disclose the D S Cheung report to the Investment Committee and the Board of the 2^nd plaintiff, CNII; on the plaintiff’s case, the Investment Manager was controlled by Chum, who together with Anthony Lo, the 3^rd defendant in HCCL 10 of 2003, were both members of the Investment Committee, and they both knew about the D S Cheung report.

61. Thus, the argument continued, despite the difference in the ‘target’ of the allegation, the substantive issue which arose was whether the substance of that report had been disclosed.  The allegations in Bermuda, said Mr Shieh, are the same allegations as now are made in these Hong Kong actions, save that first, Chum and Lo are said to have breached their duties to CNII as directors and members of the Investment Committee, and second, that Chum and Wong are said to have breached their duties as directors of Telecom No 1 by failing to disclose the D S Cheung document.

62. It followed, therefore, said Mr Shieh, that the issues that arise have been squarely determined by the Bermuda court at first instance, and such decision had been upheld on appeal.  Since CNII had lost on the specific allegation of non-disclosure as against the Investment Manager, it would now be an abuse of process for CNII, now abetted by its subsidiary Telecom No 1, to seek to re-litigate the very same issues in the courts of Hong Kong against Chum and Wong, and that this not only was an abuse in the ‘collateral challenge’ sense, but also in the Yat Tung/Henderson sense.  In this context, and also in the issue estoppel context, he argued, on well-established principles the Bermudan judgments were entitled to recognition in Hong Kong : see Dicey & Morris (13^th ed.) pp 474-475, Rule 35(2) and 487-488, Rule 36.

63. Mr Bleach SC, for Mr Tony Wong, the 2^nd defendant in HCCL 54 of 2003, echoed this argument.  His position was that in bringing this claim against the 2^nd defendant there was no doubt that the plaintiffs were abusing the process.

64. He submitted that the doctrine of abuse of process arising from ‘collateral attack’ had been developed to deal with situations in which the strict technical requirements for a plea of res judicata could not be met but where, in light of the earlier proceedings, justice and fairness nevertheless require that the current litigation be stopped; this jurisdiction was a function of the inherent power of the court to prevent misuse of its procedure, and, as with res judicata strictly so-called, this doctrine was aimed at prevention of a multiplicity of actions.

65. Mr Bleach observed that it was scandalous to the administration of justice if, the same question having been disposed of by one case, the litigant then were to be permitted to change the form of the proceedings in order to set up the same case again.  He noted that one example of the doctrine against abuse of process was where matters raised in current proceedings ought to have been raised in previous proceedings, but were not so raised, and hence a plea of res judicata could not strictly be made out, citing in this context the well-known observation of Lord Kilbrandon in Yat Tung Investment Co. Ltd v. Dao Heng Bank Ltd [1975] AC 581 at 590A-B that “… it becomes an abuse of process to raise in subsequent proceedings matters which would and therefore should have been litigated in earlier proceedings.”

66. It was very clear, he said, that by counterclaim in the Bermudan civil action CNII had made a claim for breach of duty on the part of the Manager as the result of the latter’s alleged failure to disclose the D S Cheung report.  Moreover, Mr Wong had given evidence on behalf of the Manager at the Bermudan trial, Storr J had found as a fact that CNII’s Investment Committee had been informed by Mr Wong as to the progress of negotiations with D S Cheung at the 5 July 1997 meeting, and that CNII’s Board of Directors had had all the necessary information before it at the 21 July 1997 meeting.

67. In fact, the Bermudan Court of Appeal specifically had concluded that Storr J had been entitled to find as he had in relation to these two meetings, and expressly had agreed with these factual findings.

68. Thus, concluded Mr Bleach, any claim against his client personally for breach of duty should have been raised in the Bermudan proceedings; there was no good reason why the 1^st plaintiff in the present Hong Kong action should not have been a named plaintiff to the counterclaim in Bermuda, nor why his client, the 2^nd defendant, should not have been named as defendant to that counterclaim; it followed, therefore, that the issue of the concurrent writ against Mr Wong amounted to an abusive collateral challenge.

69. For the plaintiffs in these Hong Kong proceedings Mr Sussex SC mounted a robust defence of the criticisms aimed at the institution of these actions.

70. He submitted that it was difficult to see how the present Hong Kong actions could be said to be a challenge to the outcome of the Bermudan proceedings, given that the questions before the court are different and concern different parties. 

71. Thus, he said, a finding by a Bermudan court that there had been no breach of duty by CNII Management did not mean that there could have been no breach of duty and/or fraud by Mr Chum and/or Mr Wong personally to CNII and/or Telecom No 1, and that this was irrespective of whether Chum and/or Wong were directors and/or shareholders of CNII Management.

72. In any event, he argued, even if these actions could be thus categorized as a ‘collateral challenge’, it did not inexorably follow that these actions were an abuse of process; in this context Mr Sussex pointed to an observation of Sir Andrew Morritt V-C in Trade and Industry Secretary v. Bairstow [2004] 1Ch 1, at 17C that :

“…it will only be an abuse of process to challenge the factual findings and conclusions of the judge or jury in the earlier action if (i) it would be manifestly unfair to a party to the later proceedings that the same issues should be relitigated or (ii) to permit such relitigation would bring the administration of justice into disrepute”.

73. In this instance, submitted Mr Sussex, neither benchmark was met.  There was nothing to suggest why either it would be ‘manifestly unjust’ or that it would ‘bring the administration of justice into disrepute’ if this claim was now brought against Messrs Chum and Wong personally; indeed, the remedies sought against Chum and Wong, and against CNII Management, were distinct and cumulative.

74. As to the Yat Tung/Henderson line of argument, the short answer, said Mr Sussex, was that this principle had no application in the present case because the parties were not the same; as Lord Bingham had explained in Johnson v. Gore Wood & Co. (a firm) [2001] 2 WLR 72, at 90A, the policy and rationale of the principle is that “…there should be finality in litigation and that a party should not be twice vexed in the same matter”.

75. The hard fact, he asserted, was that Chum and Wong never were parties to (or vexed by) the Bermuda proceedings, and the fact that Mr Wong had given evidence in those proceedings was of no account.  Whilst it was true that Chum and Wong indeed could have been joined as parties to the Bermuda proceedings as defendants to the CNII counterclaim, this would have been both “cumbersome and unnecessary”.

76. Accordingly, whilst Mr Sussex made no bones whatever about the fact that his clients were very dissatisfied with the manner in which the Bermudan proceedings had been ‘badly managed’, and wished to reventilate the dispute in the present Hong Kong proceedings (and thus collaterally to attack the Bermudan judgments), he contended that in the present circumstances there was no good reason why this should not be permitted.

77. The development of the modern ‘abusive collateral attack’ doctrine stems from the speech of Lord Diplock in Hunter v. Chief Constable of the West Midlands Police [1982] AC 529 at 541B-C :

“The abuse of process which the instant case exemplifies is the initiation of proceedings in a court of justice for the purpose of mounting a collateral attack upon a final decision against the intending plaintiff which has been made by another court of competent jurisdiction in previous proceedings in which the intending plaintiff had a full opportunity of contesting the decision in the court by which it was made.”

Later in the same speech Lord Diplock further observed (at 541H) that “collateral attack upon a final decision of a court of competent jurisdiction may take a variety of forms…”, and thereafter (at 542C) he quoted a passage from the speech of Lord Halsbury in Reichel v. Magrath (1889) 14 App.Cas. 665 at 668 :

“…I think it would be a scandal to the administration of justice if, the same question having been disposed of by one case, the litigant were to be permitted by changing the form of the proceedings to set up the same case again.”

78. This principle has been recognized and applied in widely differing circumstances in Hong Kong : see, for example, Wong Shui Kee Roger v. Gareth Thomas & Herbert Smith, unrep., HCA 2207 of 2003, per Reyes J; Cosby v. Government of the United States of America & Anr [2000] 3 HKC 688 at 695I, per Stock J (as he then was); Tsang Chin Keung v. Employees Compensation Assistance Fund Board [2002] 3 HKC 376 at 388 et seq, per Stone J; Tsang Chin Keung v. Employees Compensation Assistance Fund Board (No. 2), [2003] 1 HKC 499, at 510H-I, per Rogers JA.

79. It also appears to be solidly arguable, at least by analogy, that it is an abuse of process for a party to raise in subsequent Hong Kong proceedings subject-matter that was, or could have been, raised in earlier foreign proceedings: see Desert Sun Loan Corp v. Hill [1996] 2 All ER 847, although it must be recognised that that case was confined to an issue estoppel properly so-called, wherein the Court of Appeal held that where the conditions for the establishment of an issue estoppel are satisfied, a party in subsequent litigation in England is precluded from asserting that an issue of fact or law is otherwise than was decided by the foreign court (in that case, the Superior Court for the State of Arizona) in the earlier proceedings.  See also Dicey & Morris, 13^th ed., at p 467, which reaffirms the principle that an issue of fact or law which necessarily was concluded in favour of one party in foreign proceedings cannot be reopened in further proceedings between the same parties in England.

80. During the course of his interesting argument Mr Sussex also made a strong submission that the existing doctrine of ‘collateral attack’ had been diluted, or otherwise relaxed, by the speech of Lord Hoffmann in Arthur J Hall v. Simons [2002] 1 AC 615. 

81. I do not think that this is correct.  It seems to me that in Arthur J Hall Lord Hoffmann was making his observations (at 705B-707C) as to relaxation of the doctrine within the specific context of claims brought by the losing party in the previous litigation against its own previous legal advisors : “…in civil cases, it will seldom be possible to say that an action for negligence against a legal adviser or representative would bring the administration of justice into disrepute … there is no public interest objection to a subsequent finding that, but for the negligence of his lawyers, the losing party would have won …”, and I do not take Lord Hoffmann’s speech to presage a general erosion or dilution of the abusive collateral attack doctrine. 

82. In any event, as Mr Shieh pointed out, actions against former legal advisers are an “obvious area” in which such doctrine should not be applied with full rigour, and that one readily can understand Lord Hoffmann’s view that in terms of public policy there could be no objection to a subsequent finding that, but for the negligence of his lawyers, a litigant would have succeeded; this however, said Mr Shieh, was very different from the situation of a plaintiff, as here, mounting a collateral challenge to an existing ruling from a court of competent jurisdiction on the plain basis that ‘I did not like the previous result’.

83. The fact situations wherein this doctrine is sought to be applied potentially are so diverse that it is difficult, and in fact undesirable, that there should exist any concept of that which might be termed ‘presumptive abuse’; in considering any fact situation the court has two yardsticks, that of unfairness and of bringing the administration of justice into disrepute, and armed with these benchmarks it simply has to make a judgment in the particular circumstances of each case.

84. As the English Court of Appeal pointed out in Smith v. Linskills [1996] 1 WLR 763, at 773, there can be no doubt but that Lord Diplock’s rule in Hunter, op cit, “rests on considerations of public policy”, which in turn contains within it the idea that it is “an affront to any coherent system of justice … if there subsist two final but inconsistent decisions of courts of competent jurisdiction”, together with “the importance of finality in litigation.”

85. It seems to me, with respect to Mr Sussex’s bold (and disarmingly frank) approach in this application, that “badly managed” litigation, which was his characterization of that which had occurred in the litigation in the Bermudan courts, represents an insufficient reason for this court to uphold his stance that it is open to his clients to have another bite at this particular cherry, that is, the issue of the disclosure of the ‘D S Cheung report’, simply by means of changing the identity of the defendant(s).

86. In my view there is a danger that the administration of justice will be brought into disrepute by permitting a party to continue with a claim which has the effect of relitigating a cause which in substance already has been lost in another court of competent jurisdiction; I bear in mind, also, that in the present cases no extraneous matters of fact are asserted in terms of the ‘abuse issue’ which demand further discovery or inquiry. 

87. As for the ‘unfairness’ rubric, it strikes me, as indeed Mr Shieh suggested during argument, that the potential unfairness is not so much whether Messrs Chum and Wong appeared at the Bermudan trial (in fact, only Mr Wong appears to have attended that proceeding), and whether he is required to go through the like exercise again, but whether the losing party in the Bermudan litigation now should be permitted to reassert the same factual allegations in the guise of a claim against alleged co-wrongdoers, whom it clearly was open to the plaintiffs to have joined to the Bermudan proceedings as defendants to the CNII counterclaim (in my judgment no good reason has been advanced as to why this was not done), and to have raised in those proceedings the very matters now sought to be relitigated in Hong Kong.

88. It follows from the foregoing, therefore, that I have concluded that these applications to set aside Order 11 leave are to succeed on the basis that the present actions constitute an abusive collateral challenge; or, to put the matter within the context of a ‘serious issue to be tried’, there is no such issue by reason of the strong defence of abusive collateral attack.

89. In my judgment there is sufficient material before the court to come to this conclusion at this interlocutory stage; in fact, were this matter be permitted to proceed to trial this would defeat the rationale of the collateral attack doctrine, because, as Mr Shieh pointed out, by the time of such trial the prior losing party thereby would have been permitted collaterally to attack the previous judgment.

90. If this conclusion be correct, the present applications before the court succeed on this basis alone, and strictly there is no necessity further to consider the other points raised by the applicants.

91. However, if and in so far as I be wrong in this determination, I should proceed, albeit more briefly, to indicate my views upon the other arguments which have been raised.

         (b) Issue estoppel

92. It is accepted on all sides that this is not a ‘pure’ issue estoppel case, given that there was no precise identity of parties in the Bermudan action, which was solely between CNII and CNII Management; had there been such identity, there would, of course, have been no need for the applicants to have embarked upon the ‘collateral attack’ line of argument.

93. In terms of issue estoppel, therefore, such argument as has been pursued before this court is whether as between CNII and Telecom No 1 and as between CNII Management and Messrs Wong and Chum there can be said to be a sufficient ‘privity’ or ‘community of interest’ for such an estoppel to arise out of the Bermudan proceedings : in this context I note the discussion of this term by Megarry V-C in Gleeson v. J Wippell & Co., [1977] Ch D 510, at 514, wherein the judge observed :

“One difficulty about this is the protean nature of the word ‘interest’, a term which at times seems almost capable of meaning all things to all men. Another difficulty is that, as Lord Guest pointed out in Zeiss No.2 ([1967] AC 853, at 936), ‘There is a dearth of authority in England upon the question of privies.’  From such authorities as there are, it is by no means easy to distil any principle.”

94. In a bid to demonstrate privity of interest in this context, Mr Shum relies primarily upon the fact that he was a director of CNII Management, and also had an interest in that company by reason of a 45% shareholding in China Industrial Management Limited, which held 85% of the shares in CNII Management.  He also points to the fact that in evidence in support of the application for leave the plaintiffs have taken pains to assert that in reality the Investment Manager represented Mr Shum’s interests; indeed it was asserted by the plaintiffs (of which he also was a director) that he was at all material times “the controlling voice of the Investment Manager”.  Whilst with regard to Mr Wong, he was a director and vice president of CNII Management.

95. Mr Shieh SC submitted that Spencer Bower (1996 ed.) does not lay down any absolute rule that shareholders and directors could never be privies to their companies; in fact, he cited footnoted cases referred to in that work wherein, on the facts of those cases, it appears to have been held that they could be.

96. For present purposes, however, I am unpersuaded by this argument as to privity of interest, and I am unpersuaded that I should hold that Mr Wong and Mr Chum now should be characterized as ‘privies’ in terms of CNII Management – and thus (so this argument runs) that the applicants should succeed on the alternative basis of a ‘true’ issue estoppel argument.

97. It seems to me that in the circumstances of these applications they either they get home on the basis of the abusive collateral attack argument (which I have held that they do), or not at all.

98. Accordingly, and if it be relevant, I am against the applicants in terms of that which generally was referred to during this application as the ‘privies’ submission.

(3)     Forum Conveniens

99. I turn now to the third principal element within the applicants’ submissions, namely that Hong Kong is not the forum conveniens for the trial of these actions.

100. In the majority of instances, of course, wherein ex parte leave to serve out subsequently is disputed, it is this area which constitutes the main battle ground.

101. In this connection I remind myself of certain important points of principle : first, that the burden of proof is on the plaintiffs to show that Hong Kong is the forum conveniens, and clearly so : Spiliada [1987] AC 460, at 480H-481D; second, that in discharging this burden it is insufficient to suggest that there is no appropriate forum elsewhere: see, for example, Daewoo Hong Kong Ltd v. Mana Maritime Inc [1997] HKLRD 1264, and thus that where no particular forum can be identified as the ‘natural forum’ for the trial of the action, the plaintiff in an Order 11 application will fail; and third, I bear specifically in mind the statutory rubric under Order 11, rule 4(2), which provides that leave shall not 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.”

102. The issue of the burden of proof in Order 11 applications is, of course, the obverse of that pertaining in instances in which jurisdiction has been established as of right, but wherein an application for a discretionary stay of proceedings is mounted, for example, on the basis of a foreign jurisdiction clause, and wherein the defendant pursuing a stay will fail if no other forum can be identified as the ‘natural forum’.

103. In connection with the identification of an appropriate forum, it is established that the correct approach is to identify factors tending to show where the trial of the action may most appropriately be conducted : in Rambas Marketing Co. LLC v. Chow Kam Fai David [2001] 3 HKC 250 at 255C, Mr Recorder Ma (as he then was) observed :

“The approach in forum non conveniens applications is not just an exercise in loading up with factors which point to any particular jurisdiction.  The court is required to focus on the appropriateness of a forum from the point of view of the trial of the action.”

104. The submission of Mr Shieh (with which Mr Bleach aligned himself) on behalf of Mr Shum is that when this exercise is conducted the plaintiffs fail “dismally” in purported discharge of the burden upon them to show that Hong Kong is the forum conveniens; to the contrary, said Mr Shieh, a review of the available connecting factors demonstrated that Hong Kong clearly was not the most appropriate forum.

105. He pointed out that CNII is a Bermudan company, and the duties of directors thereof necessarily are governed by Bermudan law as the law of the place of incorporation, that Telecom No 1 is a BVI company and a mere nominee for the interest of China North, and that neither has any business or place of business in Hong Kong.

106. As to witnesses, he said, within the ambit of the plaintiffs’ evidence not one Hong Kong witness can be identified, with Mr Murray resident in London and Mr Mayer in New York, whilst in terms of that which happened at the two meetings the subject of complaint, namely those on 5 July 1997 and 21 July 1997, all the attendants at those meetings, with the exception of Mr Lo, currently reside outside Hong Kong, whilst as to Mr Lo, in his evidence in the Bermudan action Mr Mayer appears to have acknowledged that the writ against Mr Lo merely was protective only and issued on the advice of his lawyers, and that he was “not aware personally of any specific evidence that would cause … Mr Lo ultimate liability under this writ.”

107. Moreover, said Mr Shieh, none of the relevant documentary evidence is in Hong Kong, and although at one time the Manager had a ‘correspondence address’ in Hong Kong, there never was an established place of business here, and certainly by 2000 there was no personnel nor place of business in Hong Kong.

108. In addition, he argued, the duty of his client, Mr Shum, as director of CNII Management was governed by Bermudan law; in fact the Investment Manager had been incorporated in Bermuda precisely for the purpose of providing its directors with such protection under Bermudan law, protection not found in other jurisdictions, including Hong Kong, and whilst the Hong Kong court clearly was capable of dealing with difficult issues of foreign law, nevertheless it clearly was desirable that where possible a ‘home’ jurisdiction deal with this aspect.

109. For the plaintiffs, as to the issue of whether Hong Kong was the forum conveniens Mr Sussex relied in substantial part on the reasons set out in the affirmation of Mr Lamplough dated 16 February 2004.

110. In substance, this evidence relies upon the allegation that the Manager carried on business from premises in Hong Kong, citing the annual report for the years 1994-1997, with a ‘correspondence address’ in Hong Kong thereafter.  He also relied upon the fact that Mr Lo, the 3^rd defendant in HCCL 10 of 2003, lives in Hong Kong, and that Mr Chum used to live in Hong Kong, although he also points out that Mr Chum now lived in Singapore.  It is further said that Mr Chum was at all material times the controlling voice of the Investment Manager and the director of both plaintiffs, and that “while representatives of the Investment Manager travelled to Hong Kong on occasions to visit the plaintiffs’ joint ventures, they, including Mr Chum, were all principally based in Hong Kong.”

111. I have to say that this strikes me as a pretty thin evidential picture when weighed against the overall canvas as now painted by the applicants upon inter partes argument.

112. The plaintiffs advance the further submission that, given that leave to serve out was obtained under Order 11, rule 1(1)(f), which has as it basis the assertion that the damage consequent upon the tort was sustained, or resulted from an act committed within the Hong Kong jurisdiction, it would be a strange state of affairs if, notwithstanding this juridical basis for the grant of such leave, Hong Kong could be said not to be the appropriate forum for trial.

113. Mr Sussex asserted that in all the circumstances Hong Kong represented the ‘centre of gravity’ of this case, and that “considerations of mere practical convenience” would and could not displace Hong Kong as the ‘natural and convenient forum’ or, as he put it, the “natural forum in The Albaforth sense”, citing the observation of Goff LJ in The Albaforth [1984] 2 Lloyd’s Rep 91, at 96 that if the substance of an alleged tort was committed within a certain jurisdiction, it was “not easy to imagine” facts which would displace the conclusion that the courts of that jurisdiction were the natural forum.  In this connection Mr Sussex prayed in aid also the decision in The Kapitan Shvetsov [1997] 1 HKC 485 wherein, he asserted, the Hong Kong Court of Appeal regarded the ‘natural forum’ in terms of the place where a tort occurred (in that case, a collision in the Chao Phraya River in Bangkok).

114. This argument is initially attractive, but upon reflection I am far from sure that it is analytically convincing.

115. In Spiliada Lord Goff stressed the fact that the identity of a ‘natural forum’ depends on the particular facts of any given case, and I do not read the Hong Kong Court of Appeal in The Kapitan Shvetsov as holding that Thailand was the natural forum solely on the basis that the collision occurred there; to the contrary, in that case all the evidential connections were evaluated.

116. For my part I do not accept the contention – which must be implicit within Mr Sussex’s formulation of this particular argument – that in circumstances such as the present the ‘natural forum’ of a dispute irrevocably is fixed at the time of the incident giving rise to the dispute, in the same way as, for example, the proper law of a contract is fixed at the outset, and, as thus fixed, does not change during the life of the contract.

117. Determination of the identity of the ‘natural forum’ for the trial of any action must depend upon the nature of the disputed issues in any particular case, and thus, as Recorder Ma stressed in Rambas, op. cit., at 261G-262B, it is important, for example, that a defendant within a forum non conveniens argument clearly should identify the nature of his defence.

118. Moreover, as Mr Shieh suggested, there is no requirement that that which prima facie represents a ‘natural forum’ never can be susceptible to change by reason of a corresponding change in the underlying Spiliada factors; thus, if at the commencement of a dispute the evidential pointers indicate a particular jurisdiction as constituting the ‘natural’ forum, analytically there is no reason why, as the result of subsequent changes in those factors, such as, for example, relocation/death of witnesses, concessions as to legal or factual issues, that in turn classification of the ‘natural forum’ cannot be responsive to such changes.

119. If this submission is correct, as I think that it is, and that in the present circumstances Hong Kong is not ‘fixed’ as the natural forum, as Mr Sussex has submitted, in my judgment it follows that the plaintiffs signally have failed, in light of the totality of the evidence now before the court, to discharge the burden of showing that Hong Kong is the forum conveniens for the trial of these two actions.

120. I am, therefore (or would be) minded to set aside such service out of the jurisdiction upon this basis also.

(4)     Material non-disclosure

121. The final major head under which the applicants proceed is that of material non-disclosure.

122. Having upheld these applications on the twin bases of abusive collateral challenge and forum conveniens I do not propose to spend a great deal of time upon this element of the case, not least because it seems to me (as with the great majority of material non-disclosure arguments) to be essentially borderline and to depend heavily upon the wisdom of hindsight.

123. Mr Shieh and Mr Bleach both run this line, and indeed the argument overlaps.

124. Mr Shieh suggests that there was material non-disclosure in that the plaintiffs failed to draw attention to the pleadings in the Bermudan proceedings, exhibited only certain extracts from the evidence in chief in those actions, and did not disclose parts of Mr Murray’s cross-examination, which was said to be material modification of the evidence in chief; it is also said that the plaintiffs failed to show the court the judgments of the Bermudan High Court and Court of Appeal in the anti-suit injunction, and that instead Mr Lamplough simply had commented that the Hong Kong action in HCCL 7 of 2000 was “stifled”.

125. Mr Shieh further submitted that when judgment was given by the Bermuda High Court on 24 February 2004, and when this matter was still at the ex parte stage, the plaintiffs failed to draw the attention of this court to that development, or to the implications of that judgment, in particular the fact that the trial judge specifically had found that although the ‘D S Cheung report’ was not tabled at the Investment Committee meeting, its substance had been brought to the attention of those attending, including Mr Murray.  It is also said that although in his evidence Mr Lamplough had asserted that the full significance of the D S Cheung document was not discovered by the plaintiffs until late June 2003, but a few days prior to the date of the Bermuda trial, he had failed to point out that the document had been with the plaintiffs or their lawyers since 1998, and that it was the plaintiffs who had failed to realize its existence.

126. Mr Bleach on behalf of Mr Wong puts forward substantially similar complaints.

127. For the plaintiffs Mr Sussex characterized as “unfounded” the assertions made by the applicants in this context, noting that it is not necessary for an applicant to include every detail in his application, and that the court adopts a balanced or common sense approach in weighing these matters.  Accordingly, although he accepted that “further documents could have been exhibited and greater elaboration” made as to certain matters, in the circumstances the court was presented with a “fair and complete” picture upon which to base its discretion and to grant the order for leave to serve out of the jurisdiction.

128. I do not consider that this aspect of this case is anything but essentially incidental to the main arguments, as to the merits of which I earlier have sounded.

129. Nor do I consider, on balance, that a sufficiently strong case has been made out by the applicants under this head.  With the benefit of hindsight some criticisms have resonance – for example, that which was taking place in Bermuda indeed could have been subject to greater elaboration – but at the end of the day I decline to regard material non-disclosure as a basis for setting aside the ex parte orders, and I do not do so.

Other matters

130. I mention two further incidental matters for the sake of completeness.

131. First, as noted at the outset, there is a discrete application on the part of Mr Chum to set aside an order for substituted service in HCCL 10 of 2003.

132. This is an application made pursuant to Order 65, rule 4.  It is said that the information within the original application for substituted service plainly was wrong, and that factual assertions leading the application were incorrect.

133. I confess that I find it difficult to become exercised about this point in the context of these applications, and not least because, in light of the subsequent personal service on Mr Shum, this argument would have the effect only of knocking out the writ against him in HCCL 10 (which at the date of such personal service had expired), but not that in HCCL 54 of 2003. 

134. In so far as it be relevant, it seems to me that the only question is whether, on the available evidence, the court now is in a position to say that the case for substituted service can be seen to have been clearly untenable and unjustified?

135. Having considered the position, I decline to come to this conclusion, and accordingly I hold that the order for substituted service should stand.

136. The second matter is that, in the course of his submissions Mr Bleach, on behalf of Mr Wong, adverted to a limitation point in the context of the pleading against his client.

137. His point was that, even assuming for the purpose of argument that the plaintiffs have adequately pleaded a case of breach of duty against the 2^nd defendant, such cause of action necessarily would have accrued in July 1997, when the 2^nd defendant allegedly breached his duty by failing to disclose the ‘D S Cheung report’ or its contents.  However, the limitation period in terms of a claim founded in tort is 6 years, as it is for one founded in breach of fiduciary duty; accordingly, he argued, such period would have expired in July 2003, whilst the concurrent writ in this case was not issued until 23 October 2003.

138. Mr Bleach submitted that the only way in which this period could be postponed is where the plaintiffs allege fraud, but although in the Endorsement of Claim this is pleaded against the 2^nd defendant, such is unclear on the face of the Points of Claim, although the term ‘mala fides’ does appear at paragraph 16(1), albeit without particulars.  Accordingly, absent specificity in this regard, Mr Bleach asked the court to consider the plaintiffs’ claim against the 2^nd defendant time barred.

139. I hope that I have understood this submission correctly, but in the event I do not accede to it.

140. Mr Sussex maintains that he has adequately pleaded Derry v. Peak fraud, and I have no intention of deciding this complex application on a mere pleading point.  Nor, in light of my earlier conclusions, is this argument anything but academic.

141. However, were these actions to proceed in Hong Kong – which, on the basis of this judgment they will not – I would have held that this limitation issue should be pleaded out, and the issue decided at trial.

Order

142. It follows from the foregoing that I grant the applications by the 1^st and 2^nd defendants in HCCL 54 of 2003 to set aside the Orders respectively dated 16 February 2004 and 13 October 2004 giving leave to issue a concurrent writ and to serve the same on the 1^st and 2^nd defendants out of the jurisdiction, and to set aside such service effected pursuant thereto.

143. I also grant the like application by the 1^st defendant in HCCL 10 of 2003 to set aside the Order dated 16 February 2004 giving leave to issue a concurrent amended writ and to serve the same on the 1^st defendant out of the jurisdiction, and to set aside such service effected pursuant thereto.

144. I can see no reason why costs should not follow the event of each application, and I make an order nisi to that effect, such costs to be taxed if not agreed.

145. I should be grateful if in light of this judgment that junior counsel would agree a suitable form of Order to be engrossed.