Balram Chainrai v. Kushnir Family (Holdings) Ltd and Others

HCA 1462/2014

[2019] HKCFI 234

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1462 OF 2014

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D E C I S I O N

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APPLICATION

1.On 13^th September 2018, I heard the application by the 3rd defendant by Inter Partes Summons dated 31^st January 2018 under Order 11 and Order 12 Rule 8(1) and (2) of the Rules of the High Court and Order of Master Lai dated 15^th March 2016 and inherent jurisdiction of the Court for orders that:-

(1)  The ex parte Order of Master K. Lo dated 16^th November 2015 giving leave to the Plaintiff to serve the concurrent Writ of Summons out of jurisdiction on the 3^rd Defendant be set aside;

(2)  A declaration that in the circumstances of the case, the Court has no jurisdiction over the 3^rd Defendant in respect of the subject matter of the claim or the relief or remedy sought in this action;

(3)  Alternatively, all further proceedings in this action be stayed on the ground of forum non conveniens;

(4)  The Plaintiff do pay to the 3rd Defendant the costs of and occasioned by these proceedings and/or the application be set out in paragraphs 1, 2 and 3 above to be paid forthwith and taxed if not agreed;

(5)  Without prejudice to the above applications, the time for filing and serving of the 3^rd Defendant’s Defence be extended to after the determination of the above applications; and

(6)  Without prejudice to the above applications, should the above applications be declined by the Court, the 3^rd Defendant do have leave to file and serve his Defence within 56 days from the date of the Order to be made herein.

2.In the said Summons, it is stated that the grounds of the applications are that:-

(1)  The Plaintiff has committed material non-disclosure;

(2)  Hong Kong is not clearly or distinctly the most appropriate forum of the trial of this action; and

(3)  The Plaintiff cannot rely on any of the jurisdictional gateways under Order 11 rule 1 of the Rules of the High Court.

RELEVANT BACKGROUND

3.The Plaintiff is a Hong Kong businessman. The 3rd Defendant is an ethnic Hebrew resident in Israel. They were business partners since the 1990s. Since 2004, the 3^rd Defendant started to introduce to the Plaintiff business ventures in Israel that were transacted in Hebrew.

4.In 2005 and 2006, upon the 3rd Defendant's introduction and investment advice, the Plaintiff extended a loan of NIS29,500,000 ("Loan") to the 1^st Defendant, a company owned and controlled by the 2^nd Defendant to finance the 1^st Defendant's purchase of 35% of the shareholding ("Shares") in Nechushtan Investment Company Limited ("Nechushtan"), a company registered under the laws of Israel and then listed on the Tel Aviv Stock Exchange. The transaction was negotiated, and the loan documentation executed in Israel, for the Plaintiff by the 3^rd Defendant as the Plaintiff's authorised agent ("Nechushtan Transaction").

5.The Loan was repayable with interest with an agreed sum of NIS3,000,000 on 20^th June 2008. It was secured by a pledge of the Shares by the 1^st Defendant to the Plaintiff ("Share Pledge").

6.The relationship between the Plaintiff and the 3^rd Defendant broke down in about mid-2007 over another transaction in which they were involved. The Plaintiff and the 3^rd Defendant ceased to have any direct communication with each other from November 2007 onwards. On 30^th October 2007, the Plaintiff assigned all the rights under the Loan and the Share Pledge to his brother-in-law ("Assignment") without the consent of the 3^rd Defendant.

7.In response, the 3^rd Defendant commenced proceedings in Israel in December 2007 against inter alia the Plaintiff for various relief premised upon the 3^rd Defendant being entitled to half of the creditor’s interest in the Loan and the security of the Shares. On 17^th May 2011, these proceedings were converted into an arbitration in Israel ("Israeli Arbitration"). After the commencement of proceedings, the Assignment was cancelled.

8.On 20^th June 2008, during the pendency of the Israeli Arbitration, the Loan matured. Upon the 2nd Defendant's requests, the Plaintiff twice extended the term of the Loan without requiring further interest, initially to 20^th June 2009 and then to an indefinite date which was linked to the conclusion of certain legal proceedings in which the 2^nd Defendant was involved. Such extensions were given without reference to the 3^rd Defendant.

9.The hearing of the Israeli Arbitration took place in August and December 2012. On 31^st October 2013, the Award was delivered, upholding the 3^rd Defendant’s claims against the Plaintiff and dismissing the Plaintiff’s counterclaims against the 3^rd Defendant regarding other joint ventures between them. Its main findings were as follows:

(1)  The Loan was a joint investment by the Plaintiff and the 3^rd Defendant. Although the Plaintiff was registered as the sole lender of the Loan, the Plaintiff was the 3^rd Defendant's trustee in respect of one half of the Loan.

(2)  The Plaintiff had twice extended the date of repayment by the 1^st Defendant without the 3^rd Defendant’s knowledge or consent. By reason of such extensions, repayment of the Loan was deferred for long years without any additional interest and no real steps whatsoever for repayment of the Loan had been taken by the Plaintiff.

(3)  The Plaintiff not only failed to preserve the trust property in the sense of striving to enforce the repayment of the Loan, the Plaintiff used the rights of the Loan as he wished, unrecognizably modified them and severely harmed the 3^rd Defendant's rights in the Loan. The Plaintiff had breached the duty of good faith owed to the 3^rd Defendant.

(4)  The 3^rd Defendant could not have demanded repayment of one half of the Loan directly from the 1^st Defendant for want of privity as a result of the Plaintiff's denial of the 3^rd Defendant's half interest.

(5)  The 3^rd Defendant was entitled to receive from the Plaintiff his share of the Loan together with interest in light of the facts that:

(a)  the Plaintiff had treated the Loan as if it were his own and gave many extensions for years without interest;

(b)  the Plaintiff had denied 3^rd Defendant's rights in the Loan throughout the whole time;

(c)  a long period of time had elapsed since the maturity date of the Loan without any steps being taken by the Plaintiff for repayment of the Loan.

10.Nechushtan was eventually subject to liquidation proceedings and wound up on 7^th January 2013.

11.The Plaintiff lodged successive challenges to the Award in the Israeli Court. The Tel Aviv-Jaffa District Court finally made a decree approving the Award on 20^th September 2015.

12.The Writ in these proceedings were issued on 31^st July 2014 and the Statement of Claim was filed on 11^th February 2016. The Plaintiff now claims against the 3^rd Defendant in negligence and/or breach of fiduciary duties, in the 3^rd Defendant inter alia withheld or concealed from the Plaintiff the fact that the Nechushtan group of companies were having financial difficulties, which the 3^rd Defendant knew or should have known, both when the Loan was originally made and when the extensions were granted, thereby preventing the Plaintiff from minimising his damage or exposure. The Plaintiff also claims that the 3^rd Defendant was in reality the person in effective control of Nechushtan and its companies by reason of the Share Pledge (and its incidental rights) and the power of attorney given by the Plaintiff to the 3^rd Defendant, and was negligent in failing to safeguard the ongoing concerns and financial well-being of the same. Thus, the 3^rd Defendant had failed to assess and/or suppress the possible risk of loss of the Plaintiff's investment in the Nechushtan Transaction. The Plaintiff seeks NIS29,500,000 plus interest, in addition to any damage, costs or other relief that the court deems fit in these proceedings. 

13.The 3^rd Defendant has not yet filed any Defence in these proceedings. According to the affirmations filed by the 3^rd Defendant and the submission made by the 3^rd Defendant’s Counsel, the 3^rd Defendant's denies the Plaintiff's claims. In gist, the 3^rd Defendant denies owing any duty to advise the Plaintiff in relation to the Loan and denies any negligence in failing to safeguard the ongoing concerns and financial well-being of Nechushtan and its companies.

PROCEDURAL HISTORY

14.It is necessary to set out the procedural history in order to understand the 3^rd Defendant’s present application and the parties’ contentions.

15.I set out the procedural chronology as follows:-

Date	Event
Aug & Dec 2012	Hearing of the Israeli Arbitration
31 Oct 2013	The Arbitrator delivered the Award in the Israeli Arbitration.
18 May 2014	Plaintiff's application before the Tel Aviv-Jaffa District Court sitting as a Court of Appeal for leave to appeal against the Award and to set aside the same was dismissed.
31 July 2014	The Writ was issued.
13 July 2015	Plaintiff’s application before the Supreme Court of Israel for leave to appeal against the Tel Aviv-Jaffa Court's decision dated 18 May 2014 was dismissed.
15 July 2015	Plaintiff's solicitors received instructions from Plaintiff that "various attempts of alternative means of resolution and the legal proceedings in Tel Aviv did not assist"
17 July 2015	Plaintiff's Ex-Parte Summons for leave to issue a concurrent writ and serve the same out of jurisdiction on Defendants.
24 July 2015	HK Court Order renewing the Writ for 12 months from the date of its expiry
26 Aug 2015	Plaintiff's application before the Supreme Court to hold a further hearing before the Supreme Court was dismissed
20 Sept 2015	Decree rendered by the Tel Aviv-Jaffa District Court approving the Award
2 Nov 2015	Plaintiff served the Writ on D2's solicitors in HK
16 Nov 2015	Plaintiff obtained leave to serve out of jurisdiction.
15 Jan  2016	The concurrent Writ was served on the 3rd Defendant on 15th January 2016 and the 3rd Defendant filed his Acknowledgment of Service on 15th January 2016.
11 Feb 2016	D3 applied for P to file his SOC within 7 days on an unless basis.
11 Feb 2016	Plaintiff filed the SOC
18 Feb 2016	Consent Summons between Plaintiff and D3 allowing Plaintiff to file his SOC on 11 Feb 2016 and for D3's 11 Feb 2016 Summons to be withdrawn.
9 Mar 2016	D3 applied for an Order that the time for filing and service of its D&CC and/or to make an application under O.12r.8 be extended for 56 days
15 Mar 2016	Time for D3 to file and serve his D&CC was extended for 28 days. D3’s application for extension of time to apply under O.12r.8 be adjourned sine dine with liberty to restore.
12 Apr 2016	D3 applied for leave to file and serve its D&CC within 28 days.
18 Apr 2016	Hearing of the 12 Apr 2016 Summons be adjourned to 9 May 2016 (1st adjournment)
3 May 2016	D3's Summons to strike out Plaintiff's claim for abuse of process.
9 May 2016	Hearing of the 12 April 2016 Summons be adjourned to 20 May 2016 (2nd Adjournment)
20 May 2016	D3 to have leave to file and serve his D&CC within 28 days from the date of disposal of D3's application to strike out P's claim.
1 Sept 2016	Consent Order between P and D4 staying all further proceedings between them.
1 Sept 2016	Plaintiff's Notice of Discontinuance against D4
12 Sept 2016	Hearing of D3 's application to strike out Plaintiff's claim
5 Oct 2016	D3's Summons to adduce additional evidence for the purposes of the Strike-Out Summons
22 Feb 2017	Hearing of D3's application to adduce further evidence in support of its application to strike out P's claim.
4 Jan 2018	Delivery of the Strike-Out Judgment
31 Jan 2018	D3's application to set aside Plaintiff's Order for service out and declaration for forum non conveniens.

THE 3^RD DEFENDANT’S APPLICATION AND CONTENTIONS

16.Firstly, the 3^rd Defendant contends that there was material non-disclosure in the Plaintiff’s Order 11 application for service out. The Plaintiff has failed to disclose the Israeli Arbitration and his attempted appeals and that all Nechushtan documents are in Hebrew. The Plaintiff has failed to disclose the breakdown of the relationship in mid-2007. The Plaintiff’s solicitor’s first affirmation in support of such application was vague and not full and frank and failed to show that the materials events in relation to the Nechushtan Transaction took place in Israel. The 3^rd Defendant contends that the Plaintiff’s material non-disclosure of these matters has affected the court’s judgement as to whether the present claim is a proper one for service out of the jurisdiction. Given the extent of the Plaintiff’s material non-disclosure, the Order for service out ought to be discharged.

17.Secondly, the 3^rd Defendant contends that the action against the 2^nd Defendant, the Anchor Defendant, is not properly brought and is susceptible to being stayed on ground of forum non conveniens and that the Plaintiff’s action against the 2^nd Defendant has not been progressed. The Plaintiff bears the burden of proof under Order 11 of demonstrating clearly or distinctly that Hong Kong is the natural forum and has failed to meet such burden. All the Defendants reside and carry on business in Israel and the subject matter and material events all took place in Israel. Save the Plaintiff, most if not all the witnesses are from Israel and this raised severe complications to the trial and the 3^rd Defendant would be prejudiced. All the documents are in Hebrew and they are located in Israel and such documents must be translated for use in Hong Kong courts and the discovery process is complicated by the language barrier. Thus the various factors all point to suggest that Israel is the natural forum.

18.Further, the 3^rd Defendant contends that the 3^rd Defendant has not submitted to the jurisdiction of the Hong Kong Courts and there has been no unequivocal indication by the 3^rd Defendant to have the case tried in Hong Kong.

19.In short, the 3^rd Defendant submits that there was material non-disclosure and the Order for service out ought to be set aside. Further, the Court's discretion should not be exercised to re-grant leave to serve the Writ out of the jurisdiction as the appropriate forum for the trial is in Israel. Even if Court is minded to re-grant leave to serve out, in light of the Plaintiff's material non-disclosure, the Plaintiff must bear the costs of the present application.

THE PLAINTIFF’S CONTENTIONS

20.The Plaintiff opposes the 3^rd Defendant’s application and all contentions. In gist, the Plaintiff’s oppositions are that:-

(a)  this Court has no jurisdiction to entertain the 3^rd Defendant’s application for the 3^rd Defendant has failed to comply with Order 12 Rule 8 of the Rules of the High Court to take out application to challenge the jurisdiction issue within the prescribed deadline, namely within the time limited for service of a defence;

(b)  the 3^rd Defendant has taken multiple steps in the proceedings whereby he has invoked or engaged this Court’s jurisdiction independently of his belated and invalid Order 12 rule 8 Summons;

(c)  Hong Kong is forum conveniens and the 3^rd Defendant has failed to make out a stay on the forum non conveniens ground;

(d)  The Plaintiff has demonstrated that he has a good arguable case that his claims come within Order 11 rule 1(1)(c) and (d) gateways and the Plaintiff’s case raises serious substantive issues to be tried;

(e)  There was no material non-disclosure in the Plaintiff’s Order 11 application in the first place.

THE ISSUES IN THIS APPLICATION

21.Having gone through the parties’ documents filed herein and having heard the submissions made by the parties’ Counsel, there are four major issues in this application, namely:-

(1)  whether this Court has jurisdiction to entertain the 3^rd Defendant’s present application in views of the contentions made by the Plaintiff that the 3^rd Defendant has failed to comply with Order 12 Rule 8 of the Rules of the High Court to take out the application to challenge the jurisdiction issue within the prescribed deadline, namely within the time limited for service of a defence;

(2)  whether the 3^rd Defendant has taken multiple steps in these proceedings whereby he has invoked or engaged this Court’s jurisdiction and thereby he has submitted to the jurisdiction to the Court of Hong Kong;

(3)  if there was no submission to the jurisdiction to the Court of Hong Kong by the 3^rd Defendant, whether there was material non-disclosure by the Plaintiff in his Order 11 ex-parte application for service out;

(4)  whether Hong Kong is the forum conveniens and that the 3^rd Defendant has failed to make out a stay on the forum non conveniens ground. 

ORDER 12 RULE 8 –PRESCRIBED TIME FOR MAKING APPLICATION TO CHALLENGE THE JURISDICTION ISSUE

22.The concurrent Writ was served on the 3^rd Defendant on 15^th January 2016 and the 3^rd Defendant filed his Acknowledgment of Service on 15^th January 2016. The Plaintiff filed his statement of claim and served it on the 3^rd Defendant on 11^th February 2016.

The Plaintiff’s contentions

23.The Plaintiff’s Counsel contends that pursuant to RHC Order 12 Rule 8, the 3^rd Defendant, if he wishes to contest the jurisdiction and service issue, he was entitled and obliged to file and serve a Summons with supporting affirmation challenging the jurisdiction of this Court and/or the service upon him within 28 days  from 12^th February 2016 and failing which RHC O.12 R.8(7) would deem the 3^rd Defendant’s Acknowledgment of Service to be the 3^rd Defendant’s irrevocable submission to the jurisdiction of this Court.

24.However after taking multiple steps in this action, on 31^st January 2018, the 3^rd Defendant filed and served the present Summons without any supporting affirmation (as so required by RHC O.12 R.8(4)) purportedly pursuant to RHC O.12 R.8, asserting challenges to the jurisdiction of this Court and the service upon him. The reference in his Summons was misdirected, since the extended time within which the 3^rd Defendant was required to file and serve his Defence had expired almost 2 years earlier, in mid March 2016, whereupon RHC O.12 R.8(7) took effect.

25.Thus, since mid-March 2016, RHC O.12 R.8(7) deemed that the 3^rd Defendant had filed his notice of intention to defend and submitted to the jurisdiction of this Court and the 3^rd Defendant had lost his previous entitlements to challenge this Court's jurisdiction and/or the service upon him and/or this forum (RHC O.12 R.8(2A)) and the 3^rd Defendant's Defence was due.

26.In gist, the Plaintiff’s Counsel contends that RHC O.12 R.8 is a code defining the Court's statutory jurisdiction which binds the Court and the parties. There was no application being made under Order 12, Rule 8 within the prescribed time and there has been no agreement or a valid court order to extend the time limit for the 3^rd Defendant to file his Defence and as such there was no jurisdiction for the court to revive the time limit. It is because the day after the time limit has expired, the 3^rd Defendant is deemed to have accepted the jurisdiction because of the deeming provisions at paragraphs 6 and 7 of O.12 R.8.  In other words, because of the interregnum (the period between the expiry of 28 days and the time of filing of the O.12 R.8 Summons), during which there was no agreement and no order extending time, the deeming provisions took effect.

27.As such, if the 3^rd Defendant allowed the 28 day period within which he was required to file his defence to expire, without filing a Order 12 Rule 8 summons, then he was deemed by paragraphs 6 and 7 to have submitted to the jurisdiction of this Court.

28.Consequently, the Plaintiff submits that both the 3^rd Defendant's summons and his applications therefore are invalid and cannot proceed.

29.I do not agree with the contentions put forward by the Plaintiff’s Counsel on this point.

30.It is trite that the rule relating to the timeline within which one is able to make an Order 12 rule 8 challenges to jurisdiction is within the time for filing the defence. The rule as it applies in this case, is that the time within which to file any challenge to jurisdiction is the time within which one may file his defence.

31.In this case there were various extensions of time to the Defence made by the 3^rd Defendant. Reading from the chronology and timeline, I accept that clearly throughout the process, the 3^rd Defendant was delaying the time for filing a defence and getting the extension of time until after the Strike-Out application.  The Order of Master K Lo dated 20^th May 2016 extended the time within which the 3rd defendant could file his defence and counterclaim, if any, to 28 days after the disposal of the Strike-Out application. Ultimately the order for filing the Defence was 28 days after the striking out application was disposed of.  The striking out Summons was disposed of by the order made by Madam Lisa Wong J on 4^th January 2018, and within the 28 day period, the present Summons was taken out on 31^st January 2018 by the 3^rd Defendant.  I consider that if one applies to extend time for the Defence, then one should get the time within which to make an Order 12 rule 8 challenges, and the 3^rd Defendant has done that.

32.The time for the filing of the Defence for the 3^rd Defendant in this case had not yet expired. The expiry of the time for filing the defence is the cut‑off point for any Order 12 rule 8 out of time challenge. Under Order 12 rule 8, as long as the Defence time is extended, the Order 12 rule 8time is extended.  Here, the 3^rd Defendant is within time when his took out the present application.  As such, I rule that there is no out of time issue and the contentions put forward by the Plaintiff regarding this particular threshold jurisdictional out of time ground are not accepted. I rule that the Court has jurisdiction to deal with the 3^rd Defendant’s present application.

WHETHER THERE WAS SUBMISSION TO THE JURISDICTION OF THIS COURT BY THE 3^RD DEFENDANT

33.The Plaintiff contends that the 3^rd Defendant has taken multiple steps in the proceedings whereby he has invoked or engaged this Court’s jurisdiction independently of his belated and invalid Order 12 Rule 8 Summons.

Legal Principles Applicable to Submission to Jurisdiction

34.The proper test is set out in the judgment in Global Multimedia International Ltd v Ara Media Services and another (Abu-Aljadail and others, Part 20 defendants) [2007] 1 All ER (Comm) 1160, at paragraphs 27 and 28:-

“[27] The test to be applied in determining whether any particular conduct amounts to a submission to the jurisdiction was considered by Colman J in Spargos Mining NL v Atlantic Capital Corp reported only in (1995) Times, 11 December, but quoted in full by Patten J in SMAY Investments Ltd v Sachdev [2003] EWHC 474 (Ch) at [41], [2003] 1 WLR 1973 at [41]. I reproduce the whole of the quote as set out in that para [41] from the judgment of Patten J:-

‘In approaching the question of submission, I have in mind the following authorities. In Astro Exito Navagacion SA v WT Hsu, otherwise know, more pronounceably, as The Messiniaki Tolmi [1984] 1 Lloyds Reports, 266, Goff LJ said at p 270, “Now a person voluntarily submits to the jurisdiction of the court if he voluntarily recognises, or has voluntarily recognised, that the court has jurisdiction to hear and determine the claim which is the subject matter of the relevant proceedings. In particular, he makes a voluntary submission to the jurisdiction if he takes a step in the proceedings which in all the circumstances amounts to a recognition of the court’s jurisdiction in respect of the claim which is the subject matter of those proceedings. The effect of a party’s submission to the jurisdiction is that he is precluded thereafter from objecting to the court exercising its jurisdiction in respect of such claim. Whether any particular matter, for example an application to the court, amounts to a voluntary submission to the jurisdiction must depend upon the circumstances of the particular case.” In [Sage v Double A Hydraulics Ltd [1992] The Times, 2 April 1992, TLR 165], Farquharson LJ said (and this is a report of the judgment which is not reported in oratio recta): “A useful test was whether a disinterested bystander with knowledge of the case would have regarded the acts of the defendant, or his solicitors, as inconsistent with the making and maintaining of his challenge”. In arriving at the view to be imputed to the disinterested bystander, it seems to me that one has to bear in mind that there will be an effective waiver, or a submission to the jurisdiction, only where the step relied upon as a waiver, or a submission to the jurisdiction, cannot be explained, except on the assumption that the party in question accepts that the court should be given jurisdiction. If the step relied upon, although consistent with the acceptance of jurisdiction, is a step which can be explained also because it was necessary or useful for some purpose other than acceptance of the jurisdiction, there will, on the authorities, be no submission ... If the well-informed bystander had been left in doubt because what the defendants had done was equivocal, in the sense that it was explicable on other grounds in addition to agreement to accept the jurisdiction of the court, then the conclusion must be, on the authorities, that there would have been no submission to the jurisdiction. The representation derived from the conduct of the party said to have submitted must be capable of only one meaning.’

[28] Thus the test to be applied is an objective one and what must be determined is whether the only possible explanation for the conduct relied on is an intention on the part of the defendant to have the case tried in England.”

35.The same test was applied by the Court of Appeal in Miruvor Ltd v Panama-Globe Steamer Lines SA [2007] 1 HKLDR 804 where it was held that there was no submission to the jurisdiction of the court by the third defendant. In that case the defendant made plain in the defences which commenced with a first paragraph which read:-

“For the avoidance of doubt, this defence is made strictly without prejudice to be third defendant’s applications (i) to have the writ served against it set aside; and/or (ii) to have the plaintiff’s claim dismissed for want of prosecution.”

After citing the relevant authorities, Rogers VP said at page 809:-

The question which appears to me to be relevant, therefore, is whether looked at fairly and sensibly has what the defendant has done constituted a submission to jurisdiction.  In my view, when the defences are considered it is abundantly clear from the first paragraph that the third defendant intended to challenge the jurisdiction and was to make an application to that effect.”

36.It was held by Sakhrani J in ABN Amro Bank NV v Fortgang [2008] 2 HKLRD 349 that if a step, although consistent with the acceptance of jurisdiction, could also be explained as necessary or useful for some purpose other than acceptance of jurisdiction, then there would not be an effective waiver or a submission to the jurisdiction.  In that case, the defendant’s service of the unqualified defence was held to be an unequivocal act of his submission to the jurisdiction of the Hong Kong court.  The step of service of the unqualified defence could not be explained as necessary or useful or for some purpose other than acceptance of the jurisdiction.  Contrary to the defendant’s submission, there was no evidence that the defence was filed and served purely as a precaution to protect its rights, but with no intention to submit to the jurisdiction.

37.On the same principles, it was held by the Court of Appeal in SJH v RJH (CACV 280/2011) that the husband’s stay summons on the grounds of, inter alia, forum non-conveniens was justifiably refused in the court below for reasons that he had filed an answer to the petition and an answer (by way of Form E) to the ancillary relief application. The Court of Appeal found that the husband having filed his answer, was clearly too late to challenge the jurisdiction of the Hong Kong court. The time limitation provision in respect of jurisdictional challenge provided under Order 12 rule 8(2) alone clearly justified dismissal of his stay summons without the need to deal with the submission to jurisdiction point raised by the wife, though the filing of the answer must be construed as a submission to jurisdiction.

38.The applicable objective test in ABN Amro Bank NV v. Fortgang [2008] 2 HKLRD to determine whether any particular conduct amounts to a submission to the jurisdiction of the court is as follows:-

"Whether a disinterested bystander with knowledge of the case would have regarded the acts of the defendant, or his solicitors, as inconsistent with the making and maintaining his challenge."

39.Submission to jurisdiction must depend on the circumstances of the particular case and so it is case-specific and fact-specific.

40.What must be determined is whether the only possible explanation for the conduct relied on is an intention on the part of the defendant to have the case tried in Hong Kong :-

(1)  There will be a submission to the jurisdiction only where the step relied upon as constituting the submission to jurisdiction cannot be explained except on the assumption that the party in question accepts the court's jurisdiction.

(2)  Where the step relied upon is consistent with the acceptance of jurisdiction but can be explained also because it was necessary or useful for some purpose other than acceptance of the jurisdiction, there will be no submission.

(3)  Where the well-informed bystander is left in doubt, there would have been no submission to the jurisdiction of the court.

41.As the conduct must demonstrate an intention on the part of the defendant to have the case tried in Hong Kong, such conduct must relate to the merits/substance of the proceedings and engage the Court on this basis. This is shown from the following passages cited in ABN Amro Bank:

(1)  "First, it seems to me clear beyond argument that the service of a defence is inconsistent with objecting the court continuing to have jurisdiction over the merits....But the unqualified service of a defence seems to me almost a paradigm example of conduct which indicates a willingness that the court should consider the merits of the matter" at§ 46, citing Evans UJ in Ngcobo v Thor Chemicals Holdings Ltd.

(2)  ‘If [the solicitor] genuinely wishes to preserve his client 's ability to contest the jurisdiction of the court he will refrain from entering on the merits of the claim or at least only do so on a clear and express without prejudice basis" at§ 47, citing Sir Andrew Morrit t C in Global Multimedia International Ltd v. ARA Media Services.

42.In ABN Amro Bank, the Court noted the following matters in coming to the conclusion that the defendant had submitted to its jurisdiction:

(1)  The defendant had applied under O.12 r.8 after the Plaintiff had effected service of the concurrent writ on him for the first time. Thereafter, the Plaintiff effected service of the concurrent writ on the defendant for the second time:§ 29-32, 41.

(2)  The stance taken by the defendant in the correspondence showed that subject to costs, the defendant was prepared to consent to the withdrawal of its O.12 r.8 summons:§ 44.

(3)  Following the above, the defence was filed and served without any cover letter indicating that it was made without prejudice to the defendant's pending application under O.12 r.8:§ 34.

CONDUCTS OF THE 3^rd DEFENDANT

43.On this material point, I need to examine if the 3^rd Defendant had done anything by which he waived the ability to challenge the jurisdiction.

Summons issued on 11^th February 2016 compelling the Plaintiff to file Statement of Claim on an unless basis

44.The 3^rd Defendant filed a Summons on 11^th February 2016 and it invoked Order 3, Rule 5 for an unless order that the Plaintiff do file and serve his Statement of Claim within 7 days otherwise the Plaintiff’s claim be dismissed.

45.The 3^rd Defendant’s Counsel submits that the 3^rd Defendant has not submitted to the jurisdiction of the Hong Kong courts. The 3^rd Defendant’s application by Summons dated 11^th February 2016 requiring the Plaintiff to file and serve the Statement of Claim would not be seen by a bystander as an act of submission to the jurisdiction of the Court because the same is explicable as necessary or useful for a purpose other than acceptance of the jurisdiction, namely to ascertain the basis of Plaintiff's claims against him.  Moreover, the nature of a Plaintiff's claim is clearly a relevant consideration in whether an application under O.12 r.8 could and should be made. O.12 r.8 specifically allows an application to be made within the time for service of a defence.  The Summons issued on 11^th February 2016 could not be said to be an unequivocal intention on the 3^rd Defendant’s part to have the case tried in Hong Kong, when the basis for the Plaintiff’s claim is yet to be ascertained. It is clear there are other explanations.

46.With greatest respect to the submission and explanations put forward by the 3^rd Defendant’s Counsel, I hold a different view. The 3^rd Defendant must consistently avoid waiving his challenges by invoking the jurisdiction that he challenges, i.e. by taking a step that is not part of his Order 12 r 8 challenges. I take the view that the 3^rd Defendant has taken steps which made him submitted to the jurisdiction to this Court.

47.In respect of the Summons issued on 11^th February 2016, it made no reference to Order 12, Rule 8 and it did not seek any relief for the purposes of Order 12, Rule 8.  The Plaintiff’s Counsel submitted that such Summons was invoking the general jurisdiction of this court under Order 3, Rule 5 which I agreed. What was sought was the court’s general jurisdiction under Order 3, Rule 5, and the relief that was sought was an order that the Plaintiff file and serve a Statement of Claim within 7 days and unless he filed and served within 7 days, the Plaintiff’s claim be dismissed.  In other words, the 3^rd Defendant was asking for these proceedings be terminated in reliance upon this court’s general jurisdiction if the Plaintiff failed to comply with the rules of court to file the Statement of Claim within the prescribed time. The 3^rd Defendant had invoked the court’s power to dismiss the Plaintiff’s action.  The 3^rd Defendant took out a Consent Summons to deal with that said 11^th February 2016 Summons by allowing the Plaintiff to file his Statement of Claim on 11^th February 2016 and the Summons was withdrawn with costs.

48.The 3^rd Defendant tries to contend that he had expressly reserved his right under O.12. r. 8 in respect of this Summons. However, I am not aware of any parallel letter issued by the 3^rd Defendant preserving his right to challenge the jurisdiction of the Court under Order 12 r 8 or otherwise before or at the time of issuance of the Summons dated 11^th February 2016. In the letter dated 14^th March 2016 issued by WMC Partners to Messrs. Hoosenally & Neo, in response to the 3^rd Defendant’s Summons dated 9^th March 2016, the Plaintiff contended that the 3^rd Defendant’s submission to jurisdiction was eminent because the 3^rd Defendant had already issued the Summons on 11^th February 2016 to compel the Plaintiff to file his Statement of Claim or to have the Plaintiff’s claim dismissed and the 3^rd Defendant further took out a Consent Summons on 18^th February 2016 to deal with that Summons. As far as I can discern from the available documents, in a letter issued by  Messrs. Hoosenally & Neo to WMC Partners dated 14^th March 2016, it was the first time that the 3^rd Defendant wrote to the Plaintiff denying the proposition that he had submitted to the jurisdiction but at such point of time, the Summons dated 11^th February 2016 and the Consent Summons dated 18^th February 2016 were already issued and dealt with without any prior express reservation to preserve the Order 12 rule 8 challenge.

49.Insofar as the Summons dated 11^th February 2016 is concerned, I am not aware of any effective indication or parallel letter from the 3^rd Defendant to indicate the reservation of his right to contend the jurisdiction point before or at the time when he issued that Summons and the subsequent Consent Summons.  Clearly, the 3^rd Defendant had taken steps to invoke the Court’s jurisdiction without reservation or any intention to challenge the jurisdiction and those conducts taken by the 3^rd Defendant could be viewed as an unequivocal indication or intention by the 3^rd Defendant to have the case tried in Hong Kong. 

Strike-Out Summons issued on 3^rd May 2016

50.On 3^rd May 2016, the 3^rd Defendant took out an Inter-Partes Summons based on Order 18, Rule 19 of the Rules of the High Court and the inherent jurisdiction of the Court which was heard with full argument for one day before Hon. Lisa Wong J on 12^th September 2016. This has nothing to do with Order 12, Rule 8. The 3^rd Defendant sought an order that the Plaintiff’s claims in these proceedings against the 3rd defendant be dismissed or struck out on the grounds that:-

(a)  It is an abuse of process of the Court, or res judicata, for the Plaintiff to re-litigate the same issues and subject matter which has been adjudicated in an arbitration between the parties in Israeli, and the ensued appeals to the Israeli courts; or

(b)  It is scandalous, frivolous or vexatious; or

(c)  It may prejudice, embarrass or delay the fair trial of the action.

51.Again, I consider that there is no clear and sufficient evidence to show that the 3^rd Defendant had taken steps to reserve his right to contend the jurisdiction point before or at the time when the 3^rd Defendant issued the Strike-Out Summons for the following reasons:-

(a)  I am not aware of any indication or parallel letter from the 3^rd Defendant to indicate specifically that he would reserve his right to contend the jurisdiction point before or at the time when he issued the Strike-Out Summons on 3^rd May 2016. There was also no indication in the Strike-Out Summons that the Strike-Out application was taken out by the 3^rd Defendant without prejudice to his right to contend the jurisdiction point;

(b)  As far as I can discern from the documents, it was only until 17^th May 2019, that the 3^rd Defendant through Messrs Hoosenally & Neo wrote to the Plaintiff to say that: “given that our client had taken out a striking out application against yours, we would reserve our client’s right to make such application under Order 12 rule 8 if our striking out application is dismissed by the Court.” Obviously I can see that such indication of stance in respect of the Order 12 rule 8 application was not expressed before or at the time of issuance of Strike-Out Summons. This letter was only sent 2 weeks after the Strike-Out Summons was issued.

(c)  Further, from my reading of these wordings, the 3rd Defendant was not stating clearly that the Strike-Out Summons was made without prejudice to the Order 12 Rule 8 application. The 3rd Defendant only indicated that he would make an application under Order 12 Rule 8 if the Strike-Out Summons is dismissed by the Court.

(d)  After the Plaintiff filed his Statement of Claim on 11th February 2016, the 3rd Defendant took out a Summons dated 9th March 20l6 for an Order that "The time for filing and service of the 3rd Defendant’s Defence and Counterclaim, if any, and/or to make such application as may be appropriate pursuant to Order 12, rule 8 …be extended….” The 3rd Defendant tries to contend that by applying for further time to apply under O.12 r.8 RHC, the 3rd Defendant’s intention to challenge the jurisdiction of the court was made clear. With greatest respect, I do not agree with such contention. I do not agree that the 3rd Defendant’s application for an extension of time under Order 12 rule 8 itself would exonerate the 3rd Defendant’s need to expressly and clearly reserving the right to challenge the court jurisdiction and to clearly indicate that the Strike-Out Summons was made without prejudice to the 3^rd Defendant’s stance under Order 12 rule 8. I consider that such reservation has to be expressly spelt out clearly before or at the time of the issuance of the Strike-Out Summons not after its issuance.

(e)  Accordingly, I do not accept that the 3rd Defendant had expressly reserved his rights to take out application pursuant to Order 12 Rule 8 of the Rules of the High Court before or at the time his striking out application was taken out.

52.Further, I accept the submission from the Plaintiff’s Counsel that the Strike-Out application in this case was an application under the general jurisdiction of the court to have the action conclusively determined by dismissal. Order 18, Rule 19 expressly provides that the Court’s power on an application at any stage of the proceedings ordered to be struck out or amended any pleading or endorsement upon the grounds which it sets out. The Court may order the action to be stayed or dismissed or judgment to be entered accordingly, as the case may be.  In the present Strike-Out Summons, what was sought by the 3^rd Defendant was an order for dismissal. When it comes to the question of challenging the merits of the case, I take the view that in the Strike-Out Summons, the 3^rd Defendant was invoking the court’s general jurisdiction in the present case.

53.The 3^rd Defendant submits that the Strike-Out Summons was based on the ground of abuse of process and it did not touch upon the merits and/or substance of the Plaintiff's claim in the Statement of Claim, which can be contrasted with the filing of a defence.  The Strike-Out Summons did not engage in a consideration of the merits and/or the substance of the Plaintiff's claims at all.  The 3^rd Defendant explains that the Strike-Out Summons was purely procedural in nature, grounded primarily on the doctrine of Res Judicata in the wider sense, i.e. that it was an abuse of the Hong Kong court process for the Plaintiff to raise the present claims against the 3^rd Defendant when the Plaintiff could and should have been raised the same in the Israeli Arbitration.  As such, it did not evince any intention or willingness on the 3^rd Defendant’s part for the Plaintiff’s claim tobe tried in Hong Kong. 

54.With respect, I do not agree with the submissions put forward by the 3^rd Defendant. One of the crucial questions in the Strike-Out Summons was whether the Plaintiff, against the background of the Israeli Arbitration, was misusing or abusing the process of the court. It is however clear from reading the Strike-Out Judgement that the court was not only engaged at a procedural level to rule on the Res Judicata point, the Court was also required to consider, inter alia, the Plaintiff’s pleaded claim, evidence and substance of the Plaintiff’s claims or its merits. It is clear from reading the said Judgment that the 3^rd Defendant did not just confine his submission and contentions on the Res Judicata point, see paragraphs 72 -75 of the said Judgement. The 3^rd Defendant gave specific reasons as to why the Statement of Claim in its then present form should be struck off and a number of other reasons on top of the  Res Judicata issues were contended.

55.Judge Liza Wong had dealt with and set out her views regarding the contentions put forward by the 3^rd Defendant in respect of the Plaintiff’s causes of action in negligence and breach of fiduciary duties. As such, I do not agree that the Strike-Out Summons was purely procedural without touching on the substance or merits of the Plaintiff’s claim. The 3^rd Defendant had seen fit to proceed with the Striking out Summons before the Order 12 rule 8 application and without effective or proper reservation as to his right to challenge the jurisdiction. I consider that it did evince an unequivocal intention or willingness on the 3^rd Defendant’s part for the Plaintiff’s claim to be tried in Hong Kong in the Striking out Summons and hearing. 

56.In relation to Order 18, Rule 19, where jurisdiction is successfully invoked by a defendant and an action is dismissed, the outcome is the same as if there had been a full trial of the action, after discovery and exchange of witness statements and cross-examination. It is the jurisdiction of the court to finally determine, on its merits, the proceedings.  The term “merits” embraces everything that goes into the question of how proceedings should be finally determined.  Whether by summary determination under Order 18, Rule 19, or by determination following trial. It is the same jurisdiction that is being invoked. And then in the present proceedings, having failed in his attempts to invoke the general jurisdiction of the court under the Strike-Out Summons, the 3^rd Defendant proceeded to bring on a summons seeking to claim that the court has no general jurisdiction. This is not the right approach. One should either make his challenge at the threshold of the proceedings or he gets on with defending them. I consider that the steps relied upon by the 3^rd Defendant is consistent with the acceptance of jurisdiction.

Conclusion

57.As for the submission to jurisdiction, by applying the objective test, I consider that a disinterested bystander with knowledge of the case would not be left in doubt but would have regarded the acts of the 3^rd Defendant as inconsistent with the making and maintaining of his challenge of the jurisdiction of this court.

58.In respect of the Summons issued on 11^th February 2016,I consider that there has been an effective waiver and voluntary submission to the jurisdiction of this Court. I consider that by invoking this Court’s general jurisdiction to order the Plaintiff to file the Statement of Claim on “unless” basis could not be explained as necessary or useful for some purposes other than acceptance of jurisdiction. The effect of a party’s submission to the jurisdiction is that the 3^rd Defendant is precluded thereafter from objecting to the court exercising its jurisdiction in respect of such claim.

59.In respect of the Strike-out Summons, I consider that there is no evidence that such steps taken in striking out the Plaintiff’s claim in these proceedings could be explained as necessary or useful for some purposes other than acceptance of jurisdiction. Again, the effect of a party’s submission to the jurisdiction is that the 3^rd Defendant is precluded thereafter from objecting to the court exercising its jurisdiction in respect of such claim.

60.Since February 2016, the 3^rd Defendant has taken multiple steps in the action whereby he has invoked this Court’s jurisdiction independently of his O.12 R.8 Summons.

61.I find in the circumstances that there is an effective waiver on the part of the 3^rd defendant and a voluntary submission to the jurisdiction of this Court. The 3^rd Defendant hasthereby waived any entitlement he might have had to invoke this Court's RHC O.12 R.8 jurisdiction. My decision on Issue (2) alone is sufficient to dispose of the matter. Issues (3) and (4) do not arise.It is not necessary for me to deal with Issues (3) and (4) as set out in paragraph 22 above. For the reasons stated above, I dismiss the 3^rd Defendant’s Summons dated 31^st January 2018.

62.I order that the 3^rd Defendant do have leave to file and serve his Defence within 56 days from the date of this Decision.

63.I also make an order nisi that the 3^rd Defendant should pay the Plaintiff’s costs of and occasioned by the 3^rd Defendant’s Summons dated 31^st January 2018 (including all costs reserved and the hearing on 13^th September 2018), to be taxed on a party and party basis if not agreed, with certificate for Senior Counsel for the hearing on 13^th September 2018.

64.I am most grateful to Mr Russell Coleman, SC and Mr Barrie Barlow, SC for their very able and helpful assistance.

Mr Barrie Barlow, SC, instructed by WMC Partners, for the Plaintiff

Mr Russell Coleman, SC, Mr Lawrence Cheung and Mr Albert Chan, instructed by Hoosenally & Neo, for the 3rd Defendant