MAN ON KNITTING FACTORY v. BAYSWATER MARINE LTD.

CACV1/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 1 OF 1998

(ON APPEAL FROM HCA 3879 OF 1997)

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J U D G M E N T

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Chan, CJHC :

1. The appellant who is the plaintiff in this action is the sole proprietress of Man On Knitting Factory. The defendant is a limited company in New Zealand. For the sake of clarity, I shall refer to the plaintiff as "Man On" and the defendant as "Bayswater".

2. On 15 April 1997, Man On issued a writ of summons against Bayswater. On 18 April 1997, upon Man On's ex parte application made under O.11 r.1(1)(d)(i) of the Rules of the High Court, the Master granted leave to serve a concurrent writ out of jurisdiction. On 1 August 1997, upon Bayswater's application, Master Cannon set aside the writ and the service of the writ on Bayswater; discharged the order granting leave to serve the writ out of jurisdiction; declared that the court had no jurisdiction over Bayswater and stayed the action with costs against Man On.

3. On 5 December 1997, on Man On's appeal, Deputy Judge Gill dismissed the appeal and confirmed Master Cannon's decision discharging the order granting leave to serve the writ out of jurisdiction and setting aside the service of the writ. Man On now appeals against the Deputy Judge's decision.

4. I should perhaps mention that what happened before Master Cannon was unusual. Bayswater's summons was issued on 30 July 1997 but returnable on 1 August 1997. That clearly was not in compliance with the rules. However, at the hearing before the Master which was set down for 3 minutes only, Man On did not appear. Her solicitors had apparently overlooked the hearing date. Nevertheless, the Master was somehow persuaded to make the orders which she did without making an order abridging the time for the service of the summons. In any event, the appeal before Deputy Judge Gill was by way of rehearing and the material issues were fully argued by the parties.

5. In her Statement of Claim which was amended on a minor matter which does not concern this appeal, Man On claims against Bayswater for the balance of the purchase price of a Hatteras 65 convertible Motor Launch Hull Serial No.342 ("the launch") which was sold by Man On to Bayswater at US$500,000. The Statement of Claim pleads, among other things, the agreement made in Hong Kong on 9 October 1996 between Mr Tung on behalf of Man On and Bayswater, the payment by Bayswater of a deposit of US$50,000, the delivery of the launch by safely loading it onto a ship nominated by Bayswater which was called the Pineseas Venture and the payment of a further sum of US$300,000. It claims for the balance of the price in the sum of US$150,000. It was on this basis that Man On sought and obtained leave from Master Chung to serve the writ on Bayswater out of jurisdiction.

6. What transpired is this. After the agreement was made and the deposit was paid, the launch was lashed on a specially constructed cradle which was then loaded onto the ship Pineseas Venture. While the ship was on its way to New Zealand and was about 70 nautical miles south of Hong Kong, the launch broke from the cradle lashings, slid to the starboard and was damaged. The ship returned to Hong Kong. A local surveyor was instructed to look into the matter and a report was made. The launch was then re-lashed. The ship later sailed to New Zealand. Bayswater now alleges that it was discovered on arrival of the ship in New Zealand that the launch also suffered from osmosis and the cradle was of inferior quality and not reusable. Subsequent to these events, Bayswater indicated that it would hold Man On liable for damages.

7. It appears that there was some correspondence between the parties which clearly showed that Man On was aware of these events. However, as the Deputy Judge pointed out, none of these factors and allegations were made known to Master Chung in Man On's ex parte application for leave to serve the writ out of jurisdiction. The Deputy Judge found and I entirely agree that there was a failure by Man On's lawyers to make a full and frank disclosure of the material facts. In my view the events which occurred are clearly material matters which are necessary for the Master to exercise his discretion when considering whether or not to grant leave to serve the writ out of jurisdiction. They should have been drawn to the Master's attention. The Deputy Judge was correct, in my view, to hold that the order granted ex parte should be discharged on this ground alone. I do not see Man On to be arguing or seeking to argue to the contrary. The question is whether the court, faced with the facts and materials it now has, should still grant leave to serve the writ out of jurisdiction. It is not disputed that the principle to be applied, as applied by the Deputy Judge, is that stated in the Spiliada case [1987] 1 AC 460 HL. That is: which is the forum in which the case could most suitably be tried for the interest of all the parties and for the ends of justice?

8. The Deputy Judge found in favour of the New Zealand court. Man On says he was wrong. There are a number of grounds of appeal. With respect to counsel for Man On, I do not think I quite understand the first ground. It says :

"That the learned Deputy Judge erred in equating the Defendant's application to stay these proceedings on the ground of forum non convenience with an application to stay the execution of judgment pending its counterclaim."

9. Counsel refers to page 202 O-S of the Appeal bundle. However, I do not read this part of the judgment or indeed any other part as having the meaning as suggested by counsel. What Bayswater in this case is alleging, as the Deputy Judge understood it, is that a balance of the price is outstanding but because of what happened, Man On is not entitled to payment and is further liable to pay damages to Bayswater for breach of contract and negligence. The alleged cause of action against Man On in the New Zealand proceedings which were instituted by Bayswater against Man On and many other parties is based on breach of contract which relates not only to the contract for the sale of the launch since it is alleged that Man On had failed in its obligation to prepare the launch for export (which is Clause 4 of the agreement). Bayswater also asserts that Man On was in breach of apparently a collateral contract for the construction of a cradle. What Bayswater does in this case is far from saying that Man On is entitled to judgment and that there should be a stay of execution pending its counterclaim. Nor, in my view, did the Deputy Judge say so. In any event, all the issues are linked together and it is not correct to say that the Deputy Judge had equated the application before him with an application to stay execution of a judgment pending a counterclaim.

10. Counsel also relies on other grounds. In grounds 2, 3 and 4, Man On claims that the Deputy Judge had assumed that the New Zealand proceedings would and could proceed. In ground No. 5, it is said that the present action was commenced before the New Zealand proceedings and that it was Bayswater which chose to commence separate proceedings in New Zealand and not Man On.

11. The fact that there is another set of proceedings in another jurisdiction is clearly a relevant factor which the court should consider. I also take note of the intended appeal to set aside the decision of Mr Justice Giles in the New Zealand court which allowed the New Zealand proceedings to proceed against Man On. Nevertheless, the prospect, in my view, of additional legal costs and inconsistent findings would be a very relevant consideration. But whoever started proceedings in one jurisdiction before the other party did in another is not too important. That is clearly what Mr Justice Hirst said in Cleveland Museum of Art v. Capricorn Art [1990] 2 Ll 166 (C.A.) at 173. The question is which is the more appropriate and natural forum for the decision of the issues in question.

12. As far as I can understand, the Deputy Judge did not assume anything. He did not assume that the case would proceed against Man On in New Zealand. Nor did he predict anything let alone the outcome of the application by Man On to protest jurisdiction in New Zealand. The Deputy Judge was simply saying that he was alive to the New Zealand proceedings as he should be and that is all.

13. The Deputy Judge was aware of all the circumstances of this dispute, including the issues involved, the parties which may have to be joined, the potential witnesses to be called and the existence of the parallel proceedings in New Zealand. This is clearly a case which involved a contract made in Hong Kong which was to be performed in Hong Kong. But the failure to pay the balance of the purchase price is not the only issue in the dispute between the parties. There were others, such as: what the effect of Clause 4 was, what the obligation of Man On under that agreement regarding the delivery of the launch was, whether there was any breach of that obligation, what the agreement regarding the construction of the cradle was, whether there was any breach of that agreement, what the condition of the cradle and the launch before the ship set sail to New Zealand was, what the final condition of the cradle and the launch was and if Man On would be liable to Bayswater, what the quantum of damages would be. This is also a case which involves not only Man On and Bayswater but some other parties such as the ship owner which is now before the New Zealand court. There is an allegation by Man On that it was the fault of the master and the crew of the ship which resulted in the breaking away of the lashing. Some of the witnesses particularly those for Man On would be in Hong Kong whilst others would be in New Zealand.

14. Having considered all these relevant factors and circumstances, the Deputy Judge, while admitting that there are strong arguments in favour of the Hong Kong court, held that Man On had failed to discharge the burden that the Hong Kong court is a more appropriate and natural forum. He exercised his discretion in favour of New Zealand. I have no reason to doubt that he had taken into consideration irrelevant factors or had overlooked relevant factors. It was an exercise of judicial discretion. An appellate court will be slow to interfere with such a discretion. I also do not think that it is a wrong exercise of discretion. In fact if I were in his position, I would have exercised my discretion in the same way.

15. For these reasons, I would dismiss the appeal.

Mortimer, V.-P. :

16. For the reasons advanced by the Chief Judge, I also would dismiss this appeal and I cannot usefully add anything.

Liu, J.A. :

17. I agree.