CIRCUITRONIX, LLC v. KINGBOARD CHEMICAL HOLDINGS LTD AND OTHERS

HCA 1506/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1506 OF 2014

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J U D G M E N T

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A.  Introduction

1.  On 26 March 2015, the plaintiff (“Circuitronix”) applied for and was granted ex parte leave (the “Service Out Order”) to serve its Amended Statement of Claim out of jurisdiction on the 5^th defendant (“Techwise Macao”) in Macau. 

2.  Circuitronix relied on the following 3 “gateways” under Order 11, rule 1(1) of the Rules of High Court, Cap. 4A(“RHC”):

(1) RHC O 11, r1(1)(c) – Techwise Macao is a necessary or proper party to proceedings already duly served on the 1^st to 4^th defendants (respectively, “D1” to “D4);

(2) RHC O 11, r 1(1)(d)(iii) – The claim is brought to enforce and otherwise affects a contract, or to recover damages/obtain other relief in respect of a breach of contract, governed by Hong Kong law; and

(3) RHC O 11, r 1(1)(f) – The claim against Techwise Macao is founded on the tort of inducement and/or procurement of a breach of contract, and the damage sustained by Circuitronix resulted from acts committed by Techwise Macao within the jurisdiction.

3.  On 16 November 2015, Techwise Macao applied by summons under RHC O 12, r 8(1)(a), (c) and (h) to:

(1) set aside the service of the Amended Statement of Claim on it;

(2) discharge the Service Out Order;

(3) dismiss the action against Techwise Macao; and

(4) seek such other relief as may be appropriate.

4.  In support of its application (the “Application”), Techwise Macao submits that:

(1) Circuitronix has failed to show a “good arguable case” that it falls within any of the abovementioned RHC O 11, r 1(1)gateways;

(2) Further or alternatively, Circuitronix has not complied with its obligations of full and frank disclosure.

5.  Techwise Macao further submits that on either ground, the leave to serve outside jurisdiction should be set aside.

6.  Under paragraph 4 of the Application, Techwise Macao had sought a temporary stay to file its Defence, subject to the outcome of the Application.  However, by way of the Order of L Chan J dated 19 May 2016, Techwise Macao was ordered (with the caveat that it has not submitted to jurisdiction) to file its Defence, and this was done on 2 June 2016. 

B.  Circuitronix’s claims

B1.  Overview of claims

7.  Two sets of claims are made by Circuitronix:

(1) the alleged breaches by the 3^rd defendant (“Glory Faith”) of a Manufacturer’s Agreement dated 1 August 2005 (the “MA”), and/or a Separation Agreement dated 6 March 2012 (the “SA”); and

(2) alleged tortious acts committed by inter alios D1, D2, D4, and/or Techwise Macao (the “Tort Defendants”) in connection to Glory Faith’s alleged breaches of the MA and/or SA.

8.  The chief distinction between Glory Faith and the Tort Defendants is that Glory Faith is a party with whom Circuitronix has concluded contracts (i.e. the MA and SA).  In contrast, Circuitronix is and was never in any contractual relationship with any of the Tort Defendants, in particular Techwise Macao.

9.  Glory Faith and Techwise Macao were directly owned by D2 (and indirectly by D1, which holds 100% of D2) for a short period of time between July 2010 and December 2010.  After December 2010, Glory Faith is and was no longer owned by either D1 or D2. 

B2.  The key terms of the MA and the SA

10.  As noted above, Techwise Macao is not a party to the MA and/or SA, which forms the foundation of Circuitronix’s claims.  The only parties who signed those documents are Circuitronix and Glory Faith.

11.  Insofar as relevant, Glory Faith’s obligations under the MA are as follows:

(1) As manufacturer, it is to grant Circuitronix an exclusive right to promote/sell its printed circuit board (“PCB”) products (“Product(s)”) to a specific list of customers (clause 1.2) (the “Identified Customers”); and

(2) It will not directly/indirectly enter into any contract with an Identified Customer, or otherwise promote/solicit orders for the sale of a Product; and should any Identified Customer communicate with Glory Faith or its affiliates directly with the intent to enter into business, Glory Faith would immediately refer such Identified Customer to Circuitronix (clause 4; the “Non-Solicitation Covenant”).

12.  Similarly, under the SA:

(1) The co-operation between Circuitronix and Glory Faith under the MA would end on 31 October 2012 (clause A); and

(2) Glory Faith would not contact any of the Identified Customers directly/indirectly for a period of 2 years from the latter of the date of the last purchase order, or by 31 October 2014 (clause D).

B3.  The claims against the Tort Defendants

13.  There are various claims in contract in the Amended Statement of Claim which are specific to Glory Faith.  These claims have nothing to do with the Tort Defendants.

14.  Insofar as the Tort Defendants are concerned, at paragraph 18 of the Amended Statement of Claim, Circuitronix claims that:

“In or about August 2010, with knowledge that [Circuitronix] and [Glory Faith] had entered into the [MA and/or SA],the [Tort Defendants] knowingly and with intent to injure and/or to cause loss or damage to [Circuitronix], induced and/or procured [Glory Faith] to breach the [MA and/or SA] by undermining [Circuitronix’s] exclusive sales and marketing account with Marquardt Switches and by solicitation of their direct business, thereby causing [Circuitronix] to lose its exclusive sales and marketing account with Marquardt Switches.” (the “Alleged Tortious Acts”)

15.  It is later pleaded paragraph 22 of the Amended Statement of Claim that:

“In or about August 2010, during a meeting with Mr Ng at [Glory Faith’s Factory], Mr Ng advised [Circuitronix’s] Mr Kukreja [(“Rishi”)], that Ms Stephanie Cheung [(“Ms Cheung”)], acting for and on behalf of the [Tort Defendants], had instructed him not to support [Circuitronix] for the Marquardt Switches account [(the “Alleged Instructions”)].  Shortly after that discussion, [Glory Faith] issued a letter addressed to [Circuitronix] cancelling their support on [Circuitronix’s] Marquardt Switches account with the following stipulations: -

(1) [Glory Faith] would support production of all existing part numbers until the completion of the projects for which they were required.

(2) In future, [Glory Faith] would only do business with Marquardt Switches through the Plaintiff.”

16.  The Alleged Instructions are the only pleaded basis of procurement against the Tort Defendants (including Techwise Macao). It would be immediately noted that this procurement could not be a knowing or intentional procurement of any breach of the SA, because the Alleged Instructions are alleged to have been given in August 2010, whilst the SA was concluded much later in March 2012.

17.  Circuitronix further avers the following:

(1) A meeting held in or about July 2012 which Glory Faith, Marquardt Switches representatives, and the Tort Defendants’ sales personnel and/or officers attended (the “July 2012 Meeting”): paragraph 24 of the Amended Statement of Claim.  There is no plea, however, as to what took place at the July 2012 Meeting.

(2) Cancellation of line visits by Marquardt Switches in July 2012 and in October 2012 by Glory Faith: paragraphs 23 and 25 of the Amended Statement of Claim.

18.  In light of the alleged procurement of breach of the MA and/or SA by the Tort Defendants in or about August 2010, and the events thereafter, Circuitronix is said to have suffered the following losses in respect of Marquardt Switches:

(1) That Glory Faith, the 4^th defendant (“Techwise Circuits”) or Techwise Macao subsequently replaced Circuitronix as PCB suppliers to Marquardt Switches; and

(2) Circuitronix lost a long-term 5-year supply contract with Marquardt Switches (which was awarded to it in around August 2012) to Glory Faith, Techwise Circuits and/or Techwise Macao (the “Chrysler Switch Program”).

19.  Further, Circuitronix alleges that it lost a supply contract with Marquardt Switches in relation to 3 specific part numbers, due to Techwise Circuits’ and Techwise Macao’s collaboration with Glory Faith in making Products directly or indirectly for that customer in or about 2013 (the “3 Marquardt Part #’s”). 

20.  However, the loss of the 3 Marquardt Part #’s is pleaded as damages of the breach of contract by Glory Faith, and it is not pleaded as part of the particulars of damage claimed against the Tort Defendants.

21.  There is also a claim for account of profits against Techwise Macao.  It is, however, unclear why it is said that an account of profit is available in a claim in tort.

22.  In any event, as can be seen from the above, the claim against Techwise Macao heavily hinges on the Alleged Instructions.  That is the only pleaded “procurement” by Techwise Macao.

23.  Techwise Macao’s position vis-à-vis the Application is as follows:

(1) Circuitronix can show no “good arguable case” in relation to the alleged procurement of a breach of contract;

(2) There is no good arguable case that Circuitronix has any claim against Techwise Macao in respect of loss of business from Marquardt Switches.  As agreed on 19 November 2009 between Circuitronix and Glory Faith, the exclusivity arrangement with Marquardt Switches would be cancelled if no business came through Circuitronix within 6 months thereafter.  The exclusivity arrangement with Marquardt Switches was accordingly cancelled from 19 May 2010 (i.e. before the alleged procurement in August 2010), as no business came through in that period, this cancellation was confirmed in writing on 6 August 2010.  As all the claims by Circuitronix in relation to the Tort Defendants concern acts allegedly done after 19 May 2010, they are plainly misconceived.

(3) There is no good arguable case that Circuitronix has suffered any loss, even if the alleged procurement and breach of contract is made out.

C. The RHC O 11, r 1(1) Gateways: General Principles

C1.  Justifying leave to serve out

24.  Circuitronix bears the onus of showing that it has a “good arguable case” that its claims fall within one of the gateways provided for in RHC O 11, r 1(1).  That is a question of jurisdiction.  Once that is established, Circuitronix will further have to show a serious issue to be tried on the merits: Deyi Investment Limited v Macjin Info-com Tek Limited, CACV 253/2015 (Judgment of the Court of Appeal dated 15.09.2016) (“Deyi Appeal”) at paragraphs 3.3 to 3.5 per Cheung JA.

25.  However, as pointed out by counsel for Techwise Macao, Mr Bernard Man SC, issues going to whether a gateway is established and issues going to whether the claim has merits may overlap.  They are not always totally separate and distinct.  If an issue goes to both whether a gateway is established, and also whether there is merit in the claim, then the plaintiff would still have to satisfy the higher “good arguable case” standard in obtaining leave to serve out.

26.  In Deyi Investment Limited v Macjin Info-com Tek Limited, HCA 587 of 2014 (Decision dated 9.10.2015) (“Deyi CFI”), the 2^nd defendant sought to set aside the ex parte leave to serve out (such leave having been obtained under RHC O 11, r 1(1)(d)(iii) or (iv)).

27.  The contract in that case was between the plaintiff and the 1^st defendant for the sale of certain products. The plaintiff claimed damages in contract for non-delivery of the products. The 2^nd defendant (the overseas defendant), however, was not a party to the contract. 

28.  In justifying service on the 2^nd defendant, it was argued that the 1^st defendant was the 2^nd defendant’s agent (paragraph 7 of Deyi CFI).  That was the basis upon which it was said that the 2^nd defendant was a party to a contract governed by Hong Kong law or with a Hong Kong jurisdiction clause (so as to come under the gateways of (d)(iii) or (iv)). 

29.  The 2^nd defendant’s case, however, was that the 1^st defendant was never its agent, and the 2^nd defendant was therefore not a party to the contract. 

30.  If the 2^nd defendant were right, therefore, (i) the claim was not within any of the O 11, r 1(1)gateways; and (ii) the claim had no merit at all.  In other words, whether the 1^st defendant was the agent of the 2^nd defendant was an issue going to both whether a gateway was made out, and whether the claim had merit.

31.  At paragraph 16, Madam Recorder Lisa Wong SC (as she then was) stated:

“In the instant case, in view of the nature of the specific Order 11, rule 1(1) gateways prayed in aid by Deyi [the plaintiff] and of the challenge thereto mounted by LGD [the 2^nd defendant], these 2 requirements actually converge into a single burden on Deyi to show, on the higher “good arguable case” threshold, that Macjin did make the Contract as agent for and on behalf of LGD, which would be the case only if Macjin did have authority from LGD to do so.”

32.  On appeal, Cheung JA accepted that this is the correct approach supported by a string of authorities: Deyi Appeal, paragraphs 6.9 to 6.14.

33.  At paragraphs 38 and 39 of Deyi CFI, the “good arguable case” standard is described by the learned Recorder as follows:

“38. The application of the “good arguable case” standard would necessarily require the Court to scrutinise merits.  It is a high standard, demanding something better than a serious issue to be tried, a triable issue, a prima facie case, an arguable case and reasonable/real prospect of success, to name a few tests adopted in other interlocutory contexts.  Although the Court will not require proof to its satisfaction as at trial on the balance of probabilities, in the context of an application for leave to serve out, it requires an argument on jurisdiction with a good prospect of success.  The plaintiff has to show that its argument that there is jurisdiction must be better than the competing argument that there is no jurisdiction.  The plaintiff is required to make out a “cogent analytical case”.  Reliance on “isolated strands of evidence” and the hope that more will turn up on discovery is not enough.  See Hong Kong Civil Procedure 2016, Volume 1, §11/1/8A.

39. Where there are disputes of fact going to the question whether there is a good arguable case that the case falls within one of the Order 11, rule 1(1) gateways, even where they cannot be properly resolved on the papers, the Court must reach a provisional conclusion, which necessarily involves analysis of the weight of the evidence based on the inherent probabilities of the claim, the detail and precision of the claim, the consistency of the claim and the evidence in respect of it and whether it is bare claim or one supported by independent evidence. And it is open to the defendant to seek to show that the evidence of the plaintiff is incomplete or plainly wrong.  See Hong Kong Civil Procedure 2016, Volume 1, §11/1/8B.” (emphasis added)

34.  Further, the party justifying leave to serve out must also show that it has complied with its duty of full and frank disclosure in obtaining leave ex parte; though, limited to the question on whether the Court should assume jurisdiction, not necessarily on the merits: Hong Kong Civil Procedure 2017,Volume 1(“HKCP”), Practice Note 11/4/3C-3D. 

D.RHC O 11, r 1(1)(c) – Whether Techwise Macao is a necessary or proper party thereto

D1. Legal principles

35.  This gateway requires a 3-stage enquiry (see: HKCP, Practice Note 11/1/17):

(1) that genuine proceedings are properly commenced within the jurisdiction and served on an ‘anchor’ defendant;

(2) whether Techwise Macao is a ‘necessary’ or ‘proper’ party thereto; and

(3) whether it is appropriate to permit the claim against Techwise Macao in terms of forum non conveniens.

36.  Insofar as the first stage is concerned, Circuitronix needs to show (in conjunction with RHC O 11, r 4(1)(d)) that there is at least one ‘real issue’ which it may reasonably ask the Court to try, between itself and an anchor defendant other than Techwise Macao: HKCP, Practice Note 11/1/17A.  Glory Faith and the Tort Defendants (bar Techwise Macao) are described by Circuitronix as such ‘anchor’ defendants.

37.  It has been said that the applicant would first need to show there is a good arguable case against the ‘anchor’ defendant.  I agree that this is consistent with principle since the applicant bears the burden of showing, to that standard, that the case falls within a particular gateway.  [see: Man Won Co Ltd v Tay Vi Bing, CACV 32/1990 (Judgment dated 27.09.1991), p 19 per Clough JA].

38.  As to the second stage, the description ‘necessary or proper party’ includes persons who can be described in general terms by looking at RHC O 15, r 6(2)(b): GDH Ltd v Creditor Co Ltd[2008] 5 HKLRD 895, paragraph 28.

39.  Further, the applicant must also show a good arguable case against the foreign defendant, “no matter how intimately the foreign defendant is involved in the subject matters of the Plaintiff’s claim against some existing and properly served defendants, it could hardly be said that the foreign defendant is a necessary or proper party unless the Plaintiff is able to show that he has a proper cause of action against the foreign defendant.  In the context of an application for service of a specially endorsed writ out of jurisdiction, this would mean that if the Plaintiff could not show a good arguable case on his causes of action endorsed in the Statement of Claim, there should not be any leave to serve out of jurisdiction on this ground.”: Queenston LLC v Serlen Ltd & Ors, HCA 7585/2000 (Decision dated 27.04.2001), at p 50 per Mr Recorder Edward Chan SC (emphasis supplied).

40.  Counsel for Circuitronix, Mr Barrie Barlow SC, on the other hand submitted that whether Techwise Macao is a ‘necessary’ or ‘proper’ party is purely a “status” question, just like whether a person is domiciled in Hong Kong.  The test at the second stage is satisfied if the person can be so described in general terms by looking at RHC O 15, r 6(2)(b).

41.  I disagree.  In my view, whether Techwise Macao is a necessary or proper party depends on whether Circuitronix is able to show that it has a proper cause of action against the foreign defendant.  In summary, under both the first and second stages of RHC O 11, r 1(1)(c), Circuitronix will need to show that it has a ‘good arguable case’ against both a Hong Kong-based defendant, and against Techwise Macao. Otherwise it obviously cannot be said that Techwise Macao is a necessary or proper party to the present proceedings.

42.  As regards the third stage of the enquiry, the court ought to consider the existing proceedings in Hong Kong and whether there are related or overlapping issues: HKCP Practice Note 11/1/18B. 

43.  Finally, I agree that the court should also bear in mind that, in assessing the strength of the evidence adduced by Circuitronix, conspicuously the person who controls Circuitronix and was involved in the material events, i.e. Rishi, has never made any affirmation. The main ex parte affirmation was made by a trainee solicitor, who had qualified when he came to make the affirmation in opposition to the present application.  Obviously he has no personal knowledge of the material matters. This is something the court will take into account: Queenston, Ibid,at p 8 per Mr Recorder Edward Chan SC.

D2. Circuitronix cannot show a good arguable case that Techwise Macao is a necessary or proper party to the proceedings

44.  As pointed out in paragraph 33 above, this court must reach a provisional conclusion as to the inherent probabilities of Circuitronix’s claim.  In this regard, I agree with Mr Man that Circuitronix has had to rely on isolated strands of unreliable evidence and thus fails to even make a cogent analytical case.

The Alleged Instructions do not show a procurement of a breach of contract by Techwise Macao

45.  As set out above, the gravamen of Circuitronix’s case against the Tort Defendants (forming the nexus between Techwise Macao and the Hong Kong ‘anchor’ Defendants) is the alleged procurement of a breach of the MA and/or SA in or around August 2010.

46.  To show a procurement of a breach of contract, Circuitronix is required to prove the following:

(1) That the Tort Defendants intentionally invaded Circuitronix’s contractual rights, and not merely that the breach was a natural consequence of such conduct: OBG Ltd v Allan[2008] AC 1 at paragraphs 42 and 43 per Lord Hoffman;

(2) Properly pleaded and/or particularized facts in support of a party’s alleged intention or knowledge: HKCP,Practice Notes 18/12/18, 18/12/21; and

(3) Circuitronix must prove that the Alleged Instructions caused the claimed losses. 

47.  I agree with the submissions of Mr Man that Circuitronix’s evidence falls far short of proving a good arguable case in respect of the aforesaid elements:

(1) The evidence put forward by Circuitronix only alleges that Andy Ng, the former Vice President of Sales and former Representative President of Glory Faith (“Andy”) told Rishithat the decision not to support the Marquardt Switches business came from Ms Cheung.  Andy has pointedly failed to say that any such instruction indeed came from Ms Cheung.  In other words, Andy’s undated “witness statement” (“Andy’s Purported W/S”) contains no evidence that the instruction actually came from Ms Cheung.

(2) Further, at most Andy has only said that the Alleged Instructions were issued by Ms Cheung in her capacity as the “sister of the Chairman of Kingboard” (Andy’s Purported W/S, paragraph 6).  That is no evidence that Ms Cheung did so on behalf of Techwise Macao.

(3) Circuitronix’s own case is that Glory Faith was under the control and management of D1 or D2 and that Ms Cheung is a director of D1.  Hence, on Circuitronix’s own case, Ms Cheung was in control of Glory Faith.  Thus, even if Ms Cheung did give the Alleged Instructions for Glory Faith to withdraw its support of Circuitronix’s Marquardt business, it is difficult to see why she would be giving such instruction on behalf of Techwise Macao.

(4) Finally, even if the Alleged Instructions were issued as described in Andy’s Purported W/S, that would not be inconsistent with any contract between Glory Faith and Circuitronix:

(a) Exhibit A to the MA dated 1 September 2009, on which Circuitronix relies as setting out the customers in respect of whom Glory Faith has granted exclusivity to Circuitronix, expressly states that a customer would be removed from the list if no order has been received for half a year and if the list is not “re-signed”.  

(b) On 19 November 2009, Andy had further indicated in writing that Glory Faith and Circuitronix came to an agreement where exclusive handling of Marquardt Switches would be cancelled “if no business within half an [sic] year from Marquardt!” (signed by Andy).

(c) There is no evidence of any business coming through Circuitronix within 6 months from 19 November 2009.

(d) On 6 August 2010, Amy Wen (VP of Glory Faith) sent to Circuitronix the “Marquardt Cancellation Terms” by stating that Glory Faith “will not support any new parts for Marquardt globally in all locations, considering the smooth transaction of the change, we are only supporting the current parts (Circuitronix P/N 233.661.011-01 GF P/N: 2110277) and continuous the limited service till the products EOL or Marquardt stop the orders from us.”

(e) There are further email exchanges on 6 August 2010 where Circuitronix sought to impose a term that should Glory Faith change its mind, then Glory Faith should only do business with Marquardt Switches through Circuitronix.  This was conspicuously not agreed to in Glory Faith’s email later on the same day.

(f) Further, and importantly, on no view could it be said that there was any agreement evidenced by these emails that Techwise Macao was precluded from doing business with Marquardt Switches, or that it would be a breach of contract for Glory Faith to cease supporting the Marquardt business via Circuitronix.

(g) Circuitronix has argued that the Marquardt Cancellation Terms are not effective by reason of waiver or acquiescence.  I agree with Mr Man that that is wholly misconceived.

(h) As there were no orders within 6 months after 19 November 2009, the Marquardt Cancellation Terms were issued to confirm the cancellation of exclusivity in relation to Marquardt Switches.  However, Glory Faith indicated that it would nevertheless complete the “current parts” that were in the process of being manufactured for Marquardt Switches via Circuitronix.

(i) Circuitronix argues that the 81 Purchase Orders from Marquardt Switches (allegedly starting from 6 July 2010) indicate the alleged waiver / acquiescence. 

(j) However, even assuming these purchase orders were made from 6 July 2010 onwards, according to the terms of the cancellation, that would have already been after the six months from 19 November 2009 (i.e. 19 May 2010).

(k) Thus, any orders via Circuitronix in relation to Marquardt Switches after 19 May 2010 would not have been governed by any exclusivity arrangement. 

(l) In any event, I agree that doing business with Marquardt Switches after 19 May 2010 would be consistent both with exclusivity and non-exclusivity.  There is no logic in saying that if Glory Faith had done business through Circuitronix, that amounted to any representation (unequivocal or otherwise) that it was to be exclusive.

(m) Further, the 81 Purchase Orders were in fact in relation to the same ‘current parts’ and ‘project’ indicated in the Marquardt Cancellation Terms issued in August 2010. Circuitronix has not even attempted to refute this evidence.

48.  As for the alleged ‘loss’ arising from such tort, Techwise Macao’s factual clarifications show that Circuitronix has suffered no loss, as it did not inherit any businesses which was otherwise exclusively Circuitronix’s. 

49.  It is not clear at all why it is said that the procurement of Glory Faith ceasing to support the Marquardt business would cause any loss to Circuitronix.

50.  It appears to be Circuitronix’s complaint that Techwise Macao has, since, done business with Marquardt Switches.  But it is not immediately clear why this is a breach of contract by Glory Faith.  The only term of the MA which might be said to be a breach would appear to be the Non-Solicitation Covenant (i.e. clause 4 of the MA, which purports to cover Glory Faith’s “affiliates”). 

51.  Clause 4 only provides that if an affiliate is in communication with a customer, that customer should be referred to Circuitronix.  It does not say that the affiliate must not do business with the customer.  In the present circumstances, it is difficult to see how any failure to refer Marquardt Switches to Circuitronix could cause any loss.  Marquardt Switches obviously knew that Circuitronix existed.  Circuitronix’s own case is that Marquardt Switches had always been in a business relationship with it.  It is clear that even if Glory Faith had “referred” Marquardt Switches to Circuitronix, it would not have made any difference.

E. RHC O 11, r 1(1)(d)(iii) – The claim against Techwise Macao is not brought “in respect of the breach of” the MA and/or SA

52.  Circuitronix’s claim under RHC O 11, r 1(d)(iii) proceeds on the basis that the ‘contract’ (i.e. the MA and/or SA) is breached by Glory Faith due to the Tort Defendants’ procurement/inducement. 

53.  It is seriously doubted whether a claim for procurement of a breach of contract falls under this gateway: see HKCP, Practice Notes 11/1/21 and 11/1/21D-21DA. 

54.  However, there is no need for this court to determine this question, given that, for reasons set out above, there is no good arguable case that there was any procurement by Techwise Macao of any breach of the MA or the SA.

F. RHC O 11, r 1(1)(f) – There is no damage sustained or resulted from an act committed within the jurisdiction

55.  Despite the various permutations of what it means to have sustained damage within Hong Kong, or that acts were committed within Hong Kong (sampled at HKCP,Practice Notes 11/1/28C-F), as explained above, there is no good arguable case that there is any damage sustained by Circuitronix by virtue of any wrong committed by Techwise Macao. 

56.  In any event, Techwise Macao has not inherited any business that would otherwise exclusively belong to Circuitronix.  The 3 Marquardt Part #’s never appeared in Techwise Macao’s records, save for isolated quotations and one urgent support production subsequent to the termination of the MA.

57.  Further, regarding the Chrysler Switch Program, Techwise Macao was asked to provide a quote for such business as early as 3 May 2012 when Marquardt Switches contacted Techwise Macao directly.  This preceded the purported letter of intent, which itself was not a confirmation of order, sent by Marquardt Switches to Circuitronix on 7 June 2012. 

58.  Furthermore, even if any damage is sustained (which is neither pleaded, nor shown in the evidence):

(1) Techwise Macao’s operations are primarily either in Macau, or Huizhou;

(2) Circuitronix’s own plea (admitted by Glory Faith) is that the principal place of business of Glory Faith is in Jiangmen;

(3) There is no evidence that the Alleged Instructions were issued in Hong Kong; and

(4) There is no evidence the July 2012 Meeting (if any alleged misconduct is said to have taken place there) happened in Hong Kong.

59.  Instead, Circuitronix relies wholly on the directors’ place of residence in Hong Kong.  There is no allegation of wrongdoing that involves any of these directors, except for Mr Paul Cheung (but simply in his capacity as the alleged ultimate owner of Glory Faith) and Ms Cheung (as the issuer of the Alleged Instructions).  But I agree it is self-evident that their residence could not, of itself, be indicative as to the location of where the alleged torts were committed, in particular where, as noted above, the principal place of business of Glory Faith (the contracting party) is in Jiangmen.

G. Full and Frank Disclosure

G1. Legal principles

60.  It is well established that a mere inclusion of relevant material in an exhibit, without drawing attention to its significance in the supporting affidavit, could potentially amount to material non-disclosure: The Islamic Republic of Pakistan v Zardari[2006] 2 CLC 667 at paragraph 140 per Lawrence Collins J; HKCP, PracticeNote 11/4/3F. 

61.  A failure to refer to arguments on the merits which the defendant may raise in answer to the claim should not generally be characterized as material non-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 (Libya) Ltd v Hunt[1976] 3 All ER 879, 893h-j, per Kerr J.

62.  Mr Man submits, and I agree, that these are precisely the types of material non-disclosures committed by Circuitronix.

G2. Marquardt Cancellation Terms

63.  As discussed in Section D2 above, the Marquardt Cancellation Terms would be an obvious complete answer to the proposed claims against Techwise Macao.  This however received precious little treatment in the ex parte affirmation.  There is no mention of the fact that (i) the 81 Purchase Orders were also consistent with non-exclusive dealings with Circuitronix, and that (ii) they concerned existing products as mentioned in Glory Faith’s letter of 6 August 2010.

G3. The lack of evidence regarding the Alleged Instructions

64.  This point is addressed under paragraph 47 above.  It is clear that the alleged procurement of breach of contract is unsupported by Andy’s Purported W/S.  Andy’s Purported W/S does not even say that Ms Cheung gave him the Alleged Instructions.  It only said that Andy told Rishi that such instructions were given.  All this was not pointed out in the ex parte affirmation.  Andy’s Purported W/S was the only basis for Circuitronix’s ex parte claim that there was procurement. 

65.  Circuitronix attempts to distance itself from Andy’s evidence by saying that he is “simply a witness”.  But he is not simply a witness.  He is Circuitronix’s only witness on this critical issue of procurement.  Without proof of procurement, there could be no case against Techwise Macao.

66.  It is also material that, whilst Circuitronix still relies on Andy’s Purported W/S, it refers to new evidence that there were discussions which purportedly show Ms Cheung’s knowledge of the MA.  In this regard, I agree that:

(1) The matter of Ms Cheung’s knowledge of the MA was never properly pleaded in the Amended Statement of Claim or properly discussed in the ex parte affirmation, that itself should have been pointed out in the ex parte affirmation; and

(2) In any event, even if Ms Cheung had asked Andy regarding the pricing terms Glory Faith was giving to Circuitronix for parts being supplied to Marquardt Switches, this does not itself indicate knowledge regarding the terms of the MA.

G3. Letters of intent

67.  Circuitronix has also failed to notify the court regarding the industry practice of using letters of intent to confirm business with end customers, particularly with a reputable customer in the automotive industry such as Marquardt Switches.

68.  Instead, Circuitronix has said that such long-term business could be confirmed merely by way of telephone conversation and the communication with Marquardt Switches evidenced by e-mail. 

69.  At best, the e-mail communication only shows an indication of potential business being granted by Marquardt Switches.  What would follow, to confirm such business, would be the issuance of formal letters of intent. 

70.  Circuitronix’s best response to this contention is that it is a ‘letter of intent by way of e-mail’, and that subsequent circumstantial evidence suggests that such business was secured. 

71.  However, such circumstantial evidence merely suggests that Marquardt Switches was prepared to grant it some of the Chrysler Switch Program business – there is no indication that Marquardt Switches, itself, could not contact other suppliers for the same project.  It has to be remembered that the Chrysler Switch Program was, based on Marquardt Switches’ estimation, valued at US$8.2 million which would be unlikely to be secured by the rather casual email produced by Circuitronix.

H.Conclusion

72.  For the reasons set out above, I conclude that leave to serve out of the jurisdiction on Techwise Macao was not properly given in this case, with the result that the Application must succeed.  Accordingly, I grant an order in terms of paragraphs 1 a. and b.; 2 a. to d.; and 3 of Techwise Macao’s summons dated 16 November 2015.

73.  I see no reason why costs should not follow the event.  I further order that the costs of this action and of the Application (with certificate for 2 counsel) be paid by the plaintiff to the 5^th defendant, such costs are to be taxed if not agreed.

74.  The above order as to costs is nisi and shall become absolute in the absence of any application within 14 days to vary the same.

75.  Lastly, I express my gratitude to counsel on both sides for their helpful assistance in this matter.