Shanghai Gopher Asset Management Co Ltd v. China Base Group Ltd and Another

HCA 1299/2019 &
HCA 1300/2019

[2021] HKCFI 3216

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NOS. 1299 & 1300 OF 2019

____________

BETWEEN

_____________

(Consolidated by the Order of Mr Registrar S Kwang dated 18 November 2019)

Before: Deputy High Court Judge Le Pichon in Chambers

Date of Hearing: 11 October 2021

Date of Decision: 28 October 2021

______________________

DECISION

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1.This is an appeal by Shanghai Gopher Asset Management Company Ltd (“the plaintiff”) from the decision of Master Jonathan Wong dated 29 January 2021 (“the Decision”) granting leave to China Base Group Limited (“D1”) and Lo Ching (“D2”) (collectively “the defendants”) to amend §1 of their summons dated 6 May 2020 (“the stay summons”) pursuant to their summons dated 25 January 2021 (“the January summons”) and staying the consolidated action in favour of the People’s Court in Pudong New District, Shanghai.

2.These proceedings were brought by the plaintiff to enforce an Equity Pledge Agreement and Guarantee (“the EPA”) signed by D2 in Shanghai on behalf of the defendants on 19 June 2019.

Background

3.The plaintiff, a company incorporated in the Mainland, is a subsidiary of Noah Holdings Limited (“Noah”) which is listed on the New York Stock Exchange. Its chairman and CEO is Wang Jingbo (“Ms Wang”).

4.D1 is a BVI company with wholly-owned subsidiaries, namely Guangdong Zhongcheng Industrial Holding Company Ltd (“GZ”) and Guangdong Chengxing Holding Group Company Limited (“GC”), Mainland trading companies that regularly supply goods to Beijing Jingdong Century Trading Company Limited (“JD”), with JD being the procurement entity affiliated with JD.com, a business-to consumer online retailer.

5.GZ and GC entered into a factoring agreement on 16 January 2018 with the plaintiff (“the factoring agreement[1]”) to finance this trading business under which the plaintiff would purchase and obtain an assignment of the account receivables due from JD to GZ and GC at a discount.

6.D1 holds approximately 62.8%[2] of the issued shares (“the shares”) in Camsing International Holding Limited (“Camsing”) a Cayman Islands’ company listed on the Hong Kong stock exchange. D2 is the ultimate beneficial owner of D1.

7.Disputes arose between the plaintiff and GZ and GC in early June 2019 when JD failed to meet its payment obligations.

8.On or about 17 June 2019, Ms Wang invited D2 to Noah’s office in Shanghai to discuss JD’s various payment defaults and on 18 June 2019 D2 travelled to Shanghai to meet Ms Wang.

9.It is D2’s case that she was subjected to duress and coerced by Ms Wang into signing the EPA on behalf of the defendants. The parties to the EPA are (1) D1, (2) the plaintiff, (3) GZ and GC and (4) D2.

10.D2 was arrested by the Shanghai police the following day for allegedly forging sale and purchase contracts with JD to obtain funding from the plaintiff and has been remanded in custody ever since.

11.The plaintiff commenced an action in the Shanghai Financial Court against JD, GC, Suzhou Chengjun Marketing Co Ltd and D2 in respect of the account receivables due from JD in connection with the factoring agreement (“the Shanghai proceedings”).

12.On 19 July 2019 the plaintiff issued two writs in similar terms (respectively, HCA 1299 and HCA 1300/2019), one against each defendant. No orders for service out were obtained by the plaintiff.

13.The procedural history thereafter is particularly relevant to one of the issues arising, (namely, whether the defendants have submitted to the jurisdiction) and it will be set out in greater detail in that section.

14.For present purposes, suffice it to say that

(i) the two actions were consolidated by consent on 18 November 2019;

(ii) on 6 April 2020, the defendants’ solicitors (“TNC”) served the stay summons (which sought an order staying the action based on §11.2 of the EPA being an exclusive jurisdiction clause for all disputes to be referred to Shanghai) on the plaintiff’s solicitors (“ZL”), pending re-opening of the Registry due to Covid-19 closures;

(iii) the stay summons was filed on 6 May 2020 when the Registry reopened;

(iv) on 25 January 2021, the defendants took out an amendment summons to replace the word “Shanghai” in the stay summons with the words “the People’s Court of Pudong New District, Shanghai” (“the Pudong court”); and

(v) Master Jonathan Wong allowed the amendment on 29 January 2021 and stayed the action, culminating in the present appeal.

The issues

(A) whether §11.2 of the EPA is an exclusive jurisdiction clause

15.§11.2 of the EPA (“the jurisdiction clause”) provides as follows:

“Any dispute, controversy or claim arising out of or in connection with this Agreement, including the validity, invalidity, breach or termination of this Agreement shall be settled by both parties through negotiation. If the negotiation fails, both parties shall submit such dispute, controversy or claim to the people’s court with competent jurisdiction for trial in the place where this Agreement is signed, …” (emphasis added)

16.The expert evidence before the court consists of (i) the report dated 15 September 2020 of Lin Ling (“Mr Lin”), the defendants’ expert; (ii) the report dated 19 November 2020 of Yang Junxiao (“Mr Yang”), the plaintiff’s expert; and (iii) Mr Lin’s supplemental report dated 23 December 2020.

17.The experts differ as to the proper construction of Article 34 of the Civil Procedure Law (“CPL”).

18.Article 34[3] reads as follows:

“Parties to a dispute over a contract or other right or interest in property may, by a written agreement, choose the People’s Court at the place of domicile of the defendant, at the place where the defendant where the contract is performed or signed, at the place where the subject matter is located or at any other place actually connected to the dispute to have jurisdiction over the dispute, but the provisions of this Law regarding hierarchical jurisdiction and exclusive jurisdiction shall not be violated.”

19.The place where the EPA was signed (Pudong New District, Shanghai) is stated in the opening paragraph of the EPA itself. The stay summons (as amended by the January summons) seeks a stay of the action in favour of the Pudong court.

20.The plaintiff’s PRC law expert Yang Junxiao (“Mr Yang”) takes the view that while the place of signing is one of the places specified in Article 34, there is an additional requirement which is that the court selected by the parties must have actual connection with the matter in dispute. In other words, falling within one of the specified categories of itself is not sufficient.

21.According to Mr Yang, the jurisdiction chosen has no actual connection with the parties’ disputes under the EPA. In his view, the disputes are based on the rights of pledge under the EPA and the obligations that the guarantor (D2) should undertake which, it was said, have no connection with the jurisdiction selected: see Yang report §§28-31.

22.§35 of the Yang report cites Articles 266 and 33[4] of the CPL and makes the point that the disputes in the present case do not fall within the cases provided for by those Articles which confer exclusive jurisdiction on the Mainland courts. He then concluded that the Mainland courts do not have exclusive jurisdiction because the present case does not fall within those provisions.

23.Mr Lin’s view is that the jurisdiction clause falls within the categories of places allowed by Article 34 and is a valid choice of court agreement[5].

24.Mr Yang’s interpretation of Article 34 is addressed in Mr Lin’s supplemental report. In Mr Lin’s opinion, the places specifically mentioned in Article 34 are “statutorily categorised as places having actual connection with the dispute”. In other words, places within those categories are, without more, accepted as having the necessary connection. There is no requirement of the place having some additional connection with the subject matter of dispute[6].

25.Mr Lin considered that Article 265[7] of the CPL supports that interpretation in that it shows that the place where the contract is signed is not only a place which is deemed to have actual connection with the dispute, but it is also a place where the court has express jurisdiction to determine a contractual dispute[8]. It is relevant to note that Mr Yang accepts[9] that the People’s Court of Shanghai would have jurisdiction to determine the matter pursuant to Article 265.

26.Further, unless the parties expressly stipulate that the jurisdiction agreement is non-exclusive, the chosen court shall be deemed to have exclusive jurisdiction. In support of his conclusions, Mr Lin cited two decisions of the Supreme People’s Court in (2018) Case No. 28 and (2015) Case No. 471.

27.In Mr Lin’s view, the use of the word “shall” rather than “may” in the jurisdiction clause confers the right and imposes the obligation on the parties to refer the case to the court of the chosen forum. Unless the chosen forum is invalid (because it violates hierarchical jurisdiction and exclusive jurisdiction[10]), it should take precedence over other forums where the People’s Courts may have statutory jurisdiction to adjudicate the dispute and the parties have no right to commence proceedings in any other forum.

28.Looking at the language of Article 34 and having read the expert reports, Mr Lin’s interpretation is the most natural and common sense reading of that provision. It is also logical. “Any other place” that is not within a specified category but actually connected with the dispute could also come within the ambit of Article 34. On Mr Yang’s interpretation, the categories specifically mentioned are otiose since any place that has an actual connection with the dispute suffices.

29.Further, one should not lose sight of the fact that the defendants’ liability under the EPA is secondary to the liability of the defendants under the factoring agreement which is the primary contract[11] in the Shanghai proceedings to which D2 is also a defendant.

30.Mr Lam submitted that everything revolves around mainland China and it could not have been the intention of the parties to have envisaged that proceedings could be brought in Hong Kong: the plaintiff is a mainland Chinese company. While D1 is a BVI company, it is the vehicle of D2 is a mainland Chinese individual, albeit that she also holds a HK identity card. Her address as shown in the Shanghai proceedings is a mainland Chinese address. D1’s subsidiaries ZC and GC are Mainland Chinese companies.

31.The EPA is to be governed by mainland Chinese law and the pledge acts as a security for the principal creditors rights which are the rights enjoyed by the pledgee against the debtors in relation to the underlying creditor’s right in the main agreement. Its purpose was essentially to have D2 guarantee the liabilities of ZC and GC under the factoring agreement by pledging her shares in D1 to secure the liabilities of those subsidiaries.

32.In the circumstances, I have no hesitation in preferring Mr Lin’s evidence. Accordingly, I accept that the jurisdiction clause is valid and conferred exclusive jurisdiction to the Pudong court.

(B) Whether the action should be stayed

33.Mr William Wong SC, leading counsel for the plaintiff, submitted that even if there is an exclusive jurisdiction clause, the rule is not absolute but strong reasons must be demonstrated if the court is to free the parties from their contractual bargain, citing the legal test approved by the Court of Appeal in Joseph Ghossoub v Team Y&R Holdings Hong Kong Limited, 21 July 2017, CACV 6/2017 at §43.

34.In that case, there was no effective remedy available to the petitioner were he to bring his complaints against the respondents in England and there were public policy considerations arising from the fact that the exclusive jurisdiction clause fettered the petitioner’s statutory right to present an unfair prejudice petition. Those factors constituted strong reasons for the court not to hold the parties to their contractual bargain.

35.The plaintiff submitted that in the present case the action should not be stayed on the basis that the exclusive jurisdiction clause is only engaged when there is a subsisting dispute between the parties. Where the defendants have not put forward a credible defence, there is simply no dispute that requires adjudication. In other words, the lack of a credible defence per se constitutes a strong reason.

36.In support of the defendants’ stay application are two affidavits of Tang Chong Jun (“Mr Tang”) of Messrs Tang & Co solicitors for the defendants dated 6 April 2020 and 23 December 2020 (respectively “Tang 2^nd” and “Tang 3^rd”).

37.Tang 2^nd contains a fairly detailed narrative of the events of 18 and 19 June 2019. In outline, Mr Tang relates that D2 was illegally detained in Noah’s Shanghai office after arriving there to meet with Ms Wang on 18 June 2019: her passport was confiscated and D2 was not allowed to leave the plaintiff’s office or seek legal advice until the EPA was signed which took place in the afternoon of the following day when, after the long period of detention and induced by the prospect of being released, D2 signed the EPA without it having been fully explained to her.

38.Upon her release, D2 was arrested by the local Shanghai police and she has been in police detention/custody ever since. The certificate of detention is dated 20 June 2019. It is D2’s case that the arrest had been arranged by Ms Wang. D2’s detention in Shanghai was widely reported, with Camsing making a public announcement on 5 July 2019.

39.The affirmation of Zhou Ligao, the Chief Risk Officer of Noah, who was present at the meeting disputed D2’s allegations and gave a different account of what took place at the meeting culminating in the signing of the EPA. For present purposes, it is unnecessary to delve further into his evidence save to say that the conflicting accounts is a matter for resolution at trial.

40.The plaintiff’s criticisms of the defendants’ evidence are the following: (i) there is no evidence from D2 herself, not even any draft affirmation; (ii) Mr Tang has no first-hand or direct knowledge of the matters deposed to; (iii) D2 does not condescend to particulars but rely on bare assertions; (iv) D2’s allegations are said to be double-degree hearsay and the plaintiff would not be able to test the veracity of the statements relating to the duress allegations through cross examination.

41.It was said that the fact that D2 took no steps immediately after signing the EPA to protest (such as retaining and instructing lawyers to do so) was telling. But this ignores/overlooks the fact that her arrest and detention followed hot on the heels of the signing of the EPA and it is not disputed that she has been in custody ever since.

42.Tang 3^rd explained that neither Mr Tang nor any members of his firm had direct access to D2. The matters deposed to were received from the defendants through Ms Du Yumeng (“Ms Du”) of Shanghai Shanfa Law Firm (the defendants’ mainland Chinese lawyers) and Ms Liu Hui a former vice president of the Camsing Group.

43.Ms Du is one of only 2 persons authorised to meet directly with D2 in person detention. After each visit Ms Du would provide TNC with D2’s instructions. Under the Mainland rules of detention, D2 does not have access to a Chinese notary public for the purpose of finding an affirmation.

44.Mr Tang further explained that Ms Du’s law firm would not allow her to swear an affirmation due to that firm’s risk management policy. However, Ms Du has confirmed the evidence as to duress and coercion set out in Tang 2^nd.

45.Much was made of the fact that Ms Du was able to obtain D2’s signature for a one-page letter of engagement dated 25 September 2019 instructing TNC to act on her behalf. But Tang 3^rd related Ms Du’s explanation as to why she would not be able to get an affirmation signed by her client. The plaintiff’s retort was that Ms Du never even tried.

46.Mr Douglas Lam SC, leading counsel for the defendants, readily acknowledged that in most circumstances the court could justifiably deprecate the kind of evidence filed in support. However, the circumstances of the present case are “extraordinary”: D2 is detained in prison on the Mainland and one cannot simply apply Hong Kong standards as to the conditions of detention and equate her circumstances with a defendant detained in prison in Hong Kong.

47.Further, second-hand hearsay evidence could be introduced under Order 41, rule 5 provided the chain of information[12] was given: Hong Kong Civil Procedure 2022 (“2022 HKCP”) §41/5/3. Mr Tang stated on oath that the evidence in Tang 2^nd setting out D2’s evidence as to duress and coercion was confirmed by Ms Du[13] as to what she was told by her client and also explaining that she would not be able to get an affirmation signed by D2.

48.Given the highly unusual circumstances of the present case with D2 being detained in Shanghai on the day after the EPA was signed until the present, it would not be right to approach the matter on the basis of a readily available defendant (albeit abroad), free to give instructions to her legal representatives directly and provide them with the necessary affirmations in draft.

49.In his oral submissions Mr Wong went further than his written submissions[14] in that he submitted that there is “a line of cases to say that if there is no credible defence, then there is to be no stay”, citing, inter alia, Standard Chartered Bank v Pakistan National Shipping Corporation [1995] 2 Lloyd’s Rep 365, P378 (“the SCB case”). This suggests that a stay would automatically follow.

50.The court was invited not to follow the decision of Master Benny Lo in Deltatre SPA v Hong Kong Sports Industrial Development Limited [2018] 4 HKLRD 478 which followed an alternative line of authorities stemming from Euromark Ltd v Smash Enterprises Pty Ltd [2013] EWHC 1627.

51.In Euromark, Coulson J held at [19] that the phrase in the “interest of justice”.

“in the context of an exclusive jurisdiction clause, does not require a broad consideration of the merits of the parties competing positions, but is instead designed to deal with those rare cases where, although there is an exclusive jurisdiction clause, the courts to which such jurisdiction has been given may not afford a fair trial, or may, in some other way, be potentially unreliable or unjust.”

52.After carrying out a painstaking analysis of the relevant case law, Master Lo followed the Euromark line of authorities for the following reasons:

(a) the main reason for Clark J’s refusal to stay the proceedings in the SCB case was not the defendants’ lack of an arguable defence but to avoid a multiplicity of proceedings; in so far as the SCB case is authority for the proposition that the lack of credible defence per se is a sufficiently “strong cause” for overriding an exclusive jurisdiction clause, that resulted from an extension of Clark J’s decision in Adria Services YU v Grey Shipping Co Limited (unreported) 30 July 1994 (which did not concern an exclusive jurisdiction clause) and it is unclear why such an extension was justified;

(b) the proposition is at odds with more recent appellate decisions such as Donohue v Armco Inc [2001] UKHL 64 (which emphasised the parties’ contractual bargain) and Noble Power Investments Limited v Nissei Stomach Tokyo Co Limited [2008] 5 HKLRD 631 (in which it was held that “strong cause” does not include foreseeable matters);

(c) the lack of a credible defence per se is not an unforeseeable, exceptional matter such that it would constitute a “strong cause”. The parties must or must be taken to have foreseen situations where one party could have no defence to a straightforward claim, hence the agreement of a jurisdiction clause in the first place[15];

(d) there is a strong policy in favour of upholding contractual bargains, including jurisdictional agreements. It is one thing for the court to hold that a defenceless claim should not be stayed in favour of a foreign jurisdiction when the plaintiff has not committed any breach of contract or wrong. It is wholly another for the courts to hold that a plaintiff may breach an exclusive jurisdiction agreement voluntarily concluded simply because it has a defenceless claim: see Deltatre SPA at §§81-86.

53.I respectfully agree with the Master’s view that the Euromark line of authorities strikes the correct balance between the policy of upholding the parties’ own jurisdiction agreements while retaining a discretion only for the truly exceptional cases.

54.In the present context, “strong cause” must encompass something unforeseeable at the time of the contract[16] or something so exceptional that goes to the interests of justice. As earlier noted, the lack of a credible defence per se cannot be said to be an unforeseeable factor at the time of the contract[17].

55.Effectively, the court was invited to shut D2 out of court completely on the basis that there is no “proper” evidence. In my view, it would not be in the interests of justice to disregard the defendants’ evidence altogether and to summarily dismiss the allegations of duress and coercion. In deciding whether the defendant has shown a credible defence, the defendant does not have the same burden to discharge as a defendant who seeks leave to defend in an Order 14 application[18]

56.For those reasons, I do not accept that there is no subsisting dispute between the parties and that the court should ignore all the evidence filed by the defendants.

(C) Submission to jurisdiction

57.The relevant procedural history may be summarised as follows:

(a) on 13 August 2019, when searching for news reports relating to Camsing Mr Tang discovered that writs had been filed against the defendants. When that became known to the defendants, TNC was instructed to file the acknowledgement of service on their behalf;

(b) on 21 August 2019, TNC requested inspection of the EPA, the main contracts and guarantee referred to in the writ, reserving the defendants’ rights;

(c) on 3 September, in response to ZL’s letter of 2 September 2019 enclosing a statement of claim in HCA 1299, TNC gave notice under Order 24 rule 10 for production of the original of all the documents mentioned therein for inspection, reserving the defendants’ rights;

(d) on 5 September 2019, ZL agreed to provide copies of the requested documents;

(e) on 13 September 2019, TNC reiterated its demand for production of original documents for inspection, specifically reserving the defendants’ right to challenge the jurisdiction of the Hong Kong courts;

(f) the demand was repeated 30 September 2019 “without prejudice to any jurisdictional challenge”;

(g) on 4 October 2019

(i) ZL filed notices to enter judgment in both actions; and

(ii) TNC took out a summons for extension of time to file a defence and for the action to be dismissed with costs unless the plaintiff produced for inspection the originals of the requested documents requested, without prejudice to the defendants’ right to apply for a stay of the action and/or challenge of the court’s jurisdiction (“the inspection summons”);

(h) at the call over hearings on 11 and 18 October 2019, the Registrar expressed the view that the 2 actions should be consolidated and further adjourned the defendants’ disclosure and time extension applications pending the plaintiff’s production of the EPA;

(i) on 5 November 2019, in line with the Registrar’s directions to move matters forward TNC agreed to ZL’s proposal that the 2 actions be consolidated but expressly stating that “it is strictly without prejudice to the defendants’ right inter alia to challenge the jurisdiction of the Hong Kong courts and/or to apply for a stay of the consolidated action on grounds of forum non-conveniens”;

(j) on 8 November 2019 (after ZL’s agreement to the terms of the consent summonses), TNC filed and served the consent summons for a joint application of, inter alia, consolidation of the 2 actions, disclosure documents and subsequent directions (“the consolidation summons”);

(k) on 11 November 2019, the court made an order by consent that the plaintiff would provide copies of the requested documents to the defendant within 21 days;

(l) on 18 November 2019, the actions were consolidated by consent;

(m) on 16 January 2020, ZL finally produced copies of the requested documents.

58.The applicable legal principles are not controversial. A useful summary appears in the Court of Appeal’s judgment in Chan Hon v Bayer Healthcare Limited & Ors [2021] 3 HKC 39 at §4.3 where after citing a number of authorities Cheung JA concluded that whether a party submits to the jurisdiction is to be gathered from the circumstances of the case and a useful guide is whether a 3^rd party with knowledge of the case would have regarded the acts of the defendant or his lawyers as inconsistent with his challenge to the jurisdiction. The acts of the defendant in order to constitute sufficient jurisdiction must be wholly unequivocal.

59.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 that there would have been no submission to the jurisdiction: Spargos Mining NL v Atlantic Capital Corp (unrep, The Times, 11 December 1995, set out in Chan Hon at §4.6).

60.The issue is whether in taking out the inspection summons and the consolidation summons, the defendants waived the option to challenge jurisdiction.

(i) the inspection summons

61.The initial request for inspection of the EPA, the main contracts and guarantee referred to in the writ was made on 21 August 2019. Upon sight of the statement of claim on 2 September 2019, the request for inspection was expanded to cover all documents mentioned in the statement of claim (“the requested documents”) on 3 September 2019.

62.Despite a promise made on 5 September 2019 to provide copies of the requested documents, they were not forthcoming notwithstanding further requests and even by the time the plaintiff served notices of its intention to enter judgment, which was a month later. It was in those circumstances that the inspection summons was taken out.

63.Pausing here, as noted in China Medical Technologies Inc (In Liq) v Bank of East Asia Limited [2019] HKCFI 2143 at §14, it is well-established that seeking a time extension for filing a defence does not amount to a submission to jurisdiction or a waiver and nothing turns on that part of the inspection summons seeking a time extension.

64.In relation to the inspection summons, the plaintiff highlighted 2 matters: (1) the defendants’ inspection summons was issued pursuant to Order 24, rule 16 and not under rule 10; and (2) the defendants’ motivation in seeking production of the requested documents was not to find out whether the EPA contained a jurisdiction clause enabling them to challenge jurisdiction but as was made clear in TNC’s letter dated 28 October 2019, to help them resolve the disputes in the proceedings and to challenge the authenticity of the requested documents.

65.The relevance of singling out those 2 matters was directed at distinguishing the present case from the Singaporean case Amoe PTE Ltd v Otto Marine Limited [2013] SGHC 240 the Master relied on below.

66.In Amoe, it was held that filing and serving a notice to produce certain documents (equivalent to an application under RHC Order 24 rule 10) was not a step taken in the proceedings. In that case, the court was satisfied on the balance of probabilities that the defendant was genuinely seeking to investigate the nature of the contractual arrangements under which the plaintiff was making its claim in court. While the notice to produce sought other documents, they were relevant for the purposes of considering whether the dispute fell within the arbitration clause.

67.Amoe (at §14) is authority for the proposition that serving a notice to produce under rule 10 for inspection of documents referenced in pleadings so as to ascertain the nature of the claim to see if arbitration was an option by itself is not a step in the proceedings even without an express reservation of the right to seek a stay.

68.In reaching that conclusion, the judge cited The Londonderry Port and Harbour Commissioners v W S Atkins Consultants Limited [2011] NIQB 74 which held that such a notice to investigate the nature and terms of the contractual arrangements between the parties, requesting discovery relating to matters referred to in the statement of claim did not amount to an unequivocal representation that the matter would proceed in court and was not an election to waive any right to proceed by way of arbitration.

69.In my view, the fact that the present case concerns a jurisdiction clause rather than an arbitration clause makes no difference. The discovery was directed at investigating the nature and terms of the contractual arrangements between the parties and the requested documents were documents referred to in the statement of claim. The further question is whether an application under rule 16 rather than rule 10 makes a difference.

70.The plaintiff referred to the annotation in 2022 HKCP at §24/16/1 stating that unless orders go to the merits of the action as they are appropriate where there is a real risk that the default will render the fair trial of the action impossible.

71.It was submitted that the inspection summons seeking a dismissal of the present action unless the requested documents are produced is a recognition of the court’s jurisdiction and satisfies the disinterested bystander test. The plaintiff brushed aside statements in the correspondence reserving rights and not submitting to jurisdiction, submitting that what matters is actual conduct rather than what is said in correspondence.

72.Had the defendants simply made a request under rule 10, applying Amoe, they would not have taken a step in the proceedings or submitted to the jurisdiction as such as the act would have been equivocal. In the case of any doubt, the party proposing to challenge forum should probably be given the benefit of doubt: see Hwoo Huang Linda v Fu Being San [2013] 1 HKLRD 259 at §26 (6).

73.In my view, the fact that an unless order is sought does not, of itself, amount to a submission to jurisdiction. It has been held that an application by defendant, even on an unless order basis, that the plaintiff serve a statement of claim was not a submission to the jurisdiction because the defendant merely wished to see how the claim was pleaded before contesting jurisdiction: Balram Chainrai v Kushnir Family (Holdings) Limited [2019] HKCFI 2866 at §§62-64; 2022 HKCP §11/4/50.

74.The context is highly material. The defendants’ request for a copy of the EPA (that being the key document in the dispute) was made as early as 21 August 2019. More than 6 weeks later, not only had the plaintiff reneged on its promise on 5 September to provide a copy, it chose to serve a notice to enter judgment in default of defence: see §§58-59 above.

75.Mr Lam submitted that the unless order sought in those circumstances is a purely procedural order for non-compliance with an order to produce documents. Plainly, it could not have been on the basis of the merits of plaintiff’s claim. I respectfully agree.

(ii) the consolidation summons

76.The consolidation summons came about at the prompting of the Registrar at the 2 call-over hearings in October 2019 at which hearings Mr Tang specifically reserved the defendants’ rights to challenge jurisdiction and/or to stay the action. Thereafter, correspondence ensued between the parties’ solicitors with TNC informing ZL that the defendants were unable to assess the proposed consolidation without sight of the EPA as none of the requested documents had yet been provided to the defendants.

77.When draft consent summonses were provided for the defendants’ consideration on 31 October 2019, while in principle agreeing to a consolidation, the defendants (through TNC’s letter of 5 November 2019) expressly reserved inter alia their right to challenge the jurisdiction of the Hong Kong courts and/or to apply for a stay of the consolidated action on grounds of forum non-conveniens.

78.TNC filed and served the consent summonses for consolidation of the 2 actions, disclosure of documents and subsequent directions consolidation 3 days later on 8 November 2019.

79.In those circumstances I do not accept the plaintiff’s submission that there was no reservation of rights made in relation to the filing of the consolidation summons. A party may be able to preserve an option to challenge forum, despite having engaged in conduct which might be regarded as submission to the jurisdiction, if before or at the time of such conduct he makes it clear that his action is without prejudice to the bringing of a challenge to forum: see the Hwoo Huang Linda case at §26(5).

80.In fact, in their letter dated 10 October 2019, ZL noted that TNC was reserving the defendants’ right to challenge the jurisdiction of Hong Kong courts. After remarking that whether the defendants have submitted to jurisdiction is a matter of fact and law, (ZL’s position being that the defendants have submitted to jurisdiction), ZL observed that “the positions of our respective clients are clear”.

81.It is thus clear beyond peradventure that the plaintiff was well aware from 10 October 2019 onwards that in filing the November 2019 consent summonses, the defendants had done so with express reservation of their right to challenge of the Hong Kong courts.

Conclusion

82.For the reasons set out above, the plaintiff’s appeal is dismissed. There is to be an order nisi of costs of this appeal with certificate for 2 counsel in favour of the defendants, such costs to be summarily assessed and payable forthwith.

Mr William Wong SC leading Mr Keith Lam, instructed by Zhong Lun Law Firm LLP, for the Plaintiff

Mr Douglas Lam SC leading Ms Tinny Chan, instructed by Tang & Co (in association with Helmsman LLC), for the 1^st and 2^nd Defendants