Altrans Fast Cargo Ltd (As Assignee of Lifestyle Logistics Ltd) and Another v. Liu Yugang and Others

HCA 1873/2020

[2023] HKCFI 1579

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1873 OF 2020

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J U D G M E N T

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A.  INTRODUCTION

1.Before the court is the summons issued by the 1^st, 3^rd and 4^th defendants dated 29 July 2022 (the “Summons”)for the following relief:

(1)  The ex parte order made by Master Phoebe Man dated 4 October 2021 granting the plaintiffs leave to issue and serve the Concurrent Writ of Summons on the 1^st, 3^rd and 4^th defendants out of the jurisdiction be set aside;

(2)  In the alternative:

(a)  The 2^nd plaintiff’s claims against the 3^rd and 4^th defendants be mandatorily stayed for arbitration pursuant to the arbitration clause contained in their labour contracts with the 2^nd plaintiff, and the plaintiffs’ remaining claims be stayed on case management grounds; and

(b)  In any event, the plaintiffs’ claims against the 1^st, 3^rd and 4^th defendants be stayed on the ground of forum non conveniens.

B.  MATERIAL BACKGROUND FACTS

2.The following background facts as set out in the defendants’ Skeleton Submissions are not disputed by the plaintiffs.

3.The crux of the plaintiffs’ claim is that the 1^st, 3^rd and 4^th defendants (and also the 2^nd defendant, who has not been served with the Concurrent Writ and takes no part in the present application), as directors and employees of Lifestyle Logistics Limited (“Assignor”) and the 2^nd plaintiff, wrongfully diverted the 2^nd plaintiff’s business and assets to a company called Tolead Logistics (Shanghai) Co Ltd (“Tolead Shanghai”).

4.For present purposes, the plaintiffs’ claim, as extracted from the Statement of Claim, may be summarised as follows:

(1)  The Assignor is a Hong Kong investment holding company and at the material times wholly owned the 2^nd plaintiff.

(2)  The 2^nd plaintiff is a Mainland company and its principal business was and is to provide cargo warehousing and logistical services within the Mainland.  Both the principal administrative office and principal warehouse of the 2^nd plaintiff are situated in Shanghai.  The 2^nd plaintiff also leased, occupied and/or operated various warehouses in different parts of China.

(3)  By a Deed of Assignment and a Shares Sale and Purchase Agreement both dated 23 July 2020, the Assignor: (a) sold its 100% shareholding in the 2^nd plaintiff to the 1^st plaintiff; (b) assigned to the 1^st plaintiff all of the Assignor’s rights and interest in any legal action to be commenced against any former directors of the Assignor and/or any former employees of the 2^nd plaintiff with respect to any alleged misfeasance claim or misappropriation which occurred prior to 1 July 2020 with respect to the business of the 2^nd plaintiff by any such persons.

(4)  The 1^st defendant was: (a) a director of the Assignor until May 2020; (b) in charge of the Assignor’s business in Shanghai as operated by the 2^nd plaintiff; (c) a shadow/de facto director of the 2^nd plaintiff; (d) an indirect beneficial shareholder of the Assignor; and (e) a majority beneficial shareholder of Tolead Shanghai.

(5)  The 3^rd defendant was at the material times the Deputy General Manager of the 2^nd plaintiff, who was subsequently promoted to the position of General Manager in around January 2019.

(6)  The 4^th defendant was at the material times the Finance Manager of the 2^nd plaintiff.

(7)  It is said that the 1^st defendant, as director of the Assignor and/or de facto/shadow director of the 2^nd plaintiff, owed fiduciary, statutory and tortious duties to the Assignor and the 2^nd plaintiff.

(8)  It is also said that the 3^rd and 4^th defendants, as officers employed by the 2^nd plaintiff, owed fiduciary, tortious and contractual duties to the 2^nd plaintiff.  On this note, the plaintiffs made express reference to the “Labour Contracts” executed between each of the 3^rd/4^th defendant and the 2^nd plaintiff (“Labour Contracts”) which govern their employment relationship.

(9)  The plaintiffs’ main complaint is that starting from around April 2019, the defendants“commenced activities to strip the business carried on by the 2^nd Plaintiff by diverting the customers to Tolead Shanghai” (Emphasis added) (the “Alleged Theft of Business”).

(10)  It is said that the Alleged Theft of Business was carried out by the defendants making false statements to the 2^nd plaintiff’s customers and employees, and by the defendants making improper directions to the 2^nd plaintiff’s customers, banks, landlords and employees.

(11)  The plaintiffs says that as a result of the Alleged Theft of Business, (a) the 2^nd plaintiff’s customers terminated their service agreements with the 2^nd plaintiff and entered into new agreements with Tolead Shanghai and/or its subsidiaries; (b) the 2^nd plaintiff’s funds were misappropriated and paid into bank accounts of Tolead Shanghai; (c) some of the Assignor’s assets and articles (such as laptop computers and office stationery) were misappropriated by Tolead Shanghai; (d) certain confidential information (comprising customer and client lists) were misappropriated by Tolead Shanghai; (e) the “Lifestyle” internet domain name was transferred away; (f) a Shanghai warehouse originally leased by the 2^nd plaintiff was transferred to Tolead Shanghai; and (g) certain employees of the 2^nd plaintiff were offered employment with Tolead Shanghai.

(12)  A number of causes of action, based on the aforesaid factual premise, were advanced against the defendants, including:

(a)  Breach of fiduciary duties and trust;

(b)  Breach of statutory duties under the Companies Ordinance, Cap 622;

(c)  Breach of tortious duties (being the duty to exercise reasonable care and skill);

(d)  Breach of contractual duties arising under the Labour Contracts (as against the 3^rd and 4^th defendants);

(e)  Conspiracy to injure the Assignor and the 2^nd plaintiff by unlawful means; and

(f)  Knowing receipt and dishonest assistance.

(13)  It is averred that as a result of the breaches of duties by the defendants, the Assignor and/or the 2^nd plaintiff had suffered loss and damage, being the value of the business allegedly lost and the assets allegedly misappropriated.

C.  PROCEDURAL BACKGROUND

5.The plaintiffs commenced this action by a Writ of Summons (with a Statement of Claim endorsed) dated 4 November 2020.

6.By an ex parte application made by the plaintiffs (by way of affidavit) dated 15 June 2021, the plaintiffs applied for leave to issue a Concurrent Writ of Summons and for leave to serve the same out of jurisdiction on the defendants in Mainland China.  The only jurisdictional gateway relied upon was Order 11, rule 1(1)(f) of the Rules of the High Court (“RHC”) (ie the “tort” gateway).

7.It is noteworthy that in such ex parte application, whilst recognising that the defendants are all “based in the PRC”, a bare assertion was made to the Master that Hong Kong was the forum conveniens as “all the documentation relating to [the Assignor] was maintained in Hong Kong and it has proven to be very difficult to obtain any meaningful documentation regarding the 2^nd plaintiff”.

8.Faced with such an ex parte application, Master Rita So raised certain requisitions.  In particular, the Master asked the plaintiffs to:

(1)  Elaborate on how the jurisdictional gateway (Order 11, rule 1(1)(f)) relied upon is applicable;

(2)  Demonstrate how they have a good arguable case on jurisdiction on the facts, how the gateway invoked is satisfied, and how there is a serious issue to be tried for the relief claimed.

9.The plaintiffs’ solicitor Mr Andrew Hart purported to answer such requisitions by an affidavit dated 21 September 2021:

(1)  Mr Hart’s affidavit confirms that: (a) the only gateway which the plaintiffs are relying upon is the “tort” gateway under Order 11, r 1(1)(f); and (b) the plaintiffs are only suggesting that the “tort” gateway is satisfied by reason of the fact that, allegedly, “the damage was sustained within the jurisdiction”.

(2)  However, Mr Hart’s affidavit is silent on the factual basis for the plaintiffs to contend that any of the “damage” suffered by the plaintiffs were sustained within Hong Kong.  While Mr Hart cross-refers to paragraph 7 of the Affidavit of Mr James David Kilpatrick^[1], Mr Kilpatrick was similarly unable to provide any factual elaboration apart from a bare assertion that the relief claimed by the plaintiffs fall within Order 11, rule 1(1)(f).

10.Notwithstanding the extensive affirmation filed by the defendants, the plaintiffs’ affirmation in opposition (being the 3^rd Affidavit of Mr Kilpatrick) is extremely light on the relevant factual background.  In particular, apart from rehearsing the legal advice rendered by the plaintiffs’ solicitors that the plaintiffs’ claim fall within the “tort” gateway, no explanation is given as to how it can be said that: (a) the plaintiffs’ claimed damage was sustained within the jurisdiction; or (b) the plaintiffs’ claim resulted from any act of the defendants committed within the jurisdiction.

11.The defendants submit before me that, even taking the plaintiffs’ case to its highest, it is plain that the alleged damage was wholly sustained (if at all) within the Mainland, and that there is no justification for the plaintiffs to invoke Order 11, r 1(1)(f) RHC. In any event, since all of the material events pleaded occurred within the Mainland, there is no basis for the plaintiffs to assert that Hong Kong is the appropriate forum to resolve their pleaded claim.

D.   SETTING ASIDE APPLICATION

D1.  General legal principles

12.The relevant legal principles are not disputed by the plaintiffs.  In order for the plaintiffs to obtain leave for service out under Order 11, rule 1 RHC, the plaintiffs must satisfy the court that:

(1)  There is a good arguable case that their pleaded claims fall within one of the gateways under Order 11, rule 1;

(2)  There is a serious issue to be tried on the merits of the case; and

(3)  Hong Kong is the appropriate forum under the principle governing forum conveniens for the trial of the action.

See: Dynasty Line Ltd v Sukamto Sia [2009] 4 HKLRD 454 at §29 (per Cheung JA).

13.The onus to establish the above elements is on the plaintiffs.  Further, since an application for leave under Order 11, rule 1 is made ex parte, it is incumbent on the plaintiffs to comply with the duty to make full and frank disclosure: Chen Hongqing v Persons Whose Name are Set Out in the Second Column of the Schedule to the Re-Amended Writ of Summons [2019] HKCFI 2121 at §§56-57 (per Keith Yeung J).

14.In Chen Hongqing (Ibid), Keith Yeung J also endorsed the following principles (in the context of an application by the defendant to set aside leave for service out):

(1)  An application for leave to issue a writ for service out ought to be made with great care, and be looked at strictly.  The court should “scrutinise most jealously”any factor which actually provides jurisdiction (§58).

(2)  The need for a strict approach is dictated by at least three considerations (§58, quoting from Ribeiro PJ in Kayden Ltd v SFC (2010) 13 HKCFAR 696 §§36-38):

(a)  First, it is grounded on recognition of the need for special care given the extraordinary nature of the long-arm jurisdiction asserted under Order 11, which involves seeking to compel a foreign defendant to submit to adjudication by the court or suffer judgment and execution in default.

(b)  Second, the court acts on the faith of the plaintiff’s representations made to it ex parte when granting leave for service of process abroad.  Given the extraordinary nature of the jurisdiction which the court would thereby be asserting, it insists on special care on the plaintiff’s part and full disclosure of the basis upon which that jurisdiction is invoked.

(c)  Third, it is not only the court which must be apprised of the cause of action alleged.  The defendant must know the basis of the claim which he has to meet so that, if so advised, he can challenge the order which asserts the court’s jurisdiction over him.

(3)  The threshold test of “good arguable case” requires “something better [than] a mere prima facie case.  This is a high threshold.  The court has no discretion to exercise any jurisdiction if this threshold is not achieved” (§63(b)).  It has also been interpreted to mean that “there is a good prospect of success at trial [that the plaintiffs’ case falls within one of the jurisdictional gateways]” (§63(c)).

(4)  Whilst there should be no trial on affirmations, a provisional or tentative conclusion on the evidence has to be reached.  The court “must necessarily reach a provisional or tentative conclusion that the plaintiff is probably right, before allowing service outside the jurisdiction to stand” (§63(d)).

D2.  Principles relating to the “tort” gateway

15.As noted above, the plaintiffs have only relied upon the “tort” gateway under O 11, rule 1(1)(f), which reads as follows:

“Provided that the writ is not a writ to which paragraph (2) of this rule applies, service of a writ out of the jurisdiction is permissible with the leave of the Court if in the action begun by the writ –

…

(f)   the claim is founded on a tort and the damage was sustained, or resulted from an act committed, within the jurisdiction;”

16.In order for the plaintiffs to successfully rely on the “tort” gateway, and in particular by reliance on the limb that the damage was allegedly sustained within the jurisdiction, the plaintiffs must show that “some significant damage has been sustained [within the jurisdiction]”: Dynasty Line Ltd (Supra) at §33; Metall und Rohstoff AG v Donaldson Lufkin & Jenrette Inc [1990] 1 QB 391 at 437C-E (per Slade LJ).

17.More recently, the UK Supreme Court in Brownlie v FS Cairo (Nile Plaza) LLC [2022] AC 995 confirmed that the word “damage” under the gateway is not confined to direct damage constituting the tortious cause of action, but can extend to physical and financial damage caused by the wrongdoing.  Yet, there must be still some linkage of the damage to the local jurisdiction.  At §51, Lord Reed PSC held that:

“51. Thirdly, damage is likely to be relevant to the identification of an appropriate jurisdiction for the adjudication of a claim in tort not because it may complete a cause of action but, more generally, because the damage actually suffered by the victim may, depending on all the circumstances of the case, serve to link the wrongdoing to a particular jurisdiction. In my view, therefore, there is no reason to read “damage” in para 3.1(9)(a) as limited to the damage which violates the claimant’s right and which completes the cause of action. On the contrary, the word in its ordinary and natural meaning and when considered in the light of the purpose of the provision extends to the physical and financial damage caused by the wrongdoing, considerations which are apt to link a tort to the jurisdiction where such damage is suffered. Moreover, this reading is supported by the omission of the definite article in the current article of the rule, an amendment which was intended to reflect the decision in Metall und Rohstoff [1990] 1 QB 391 that it is sufficient that some significant damage has been sustained in the jurisdiction. …” (emphasis added)

18.The above principles were endorsed by the Court of Final Appeal in Fong Chak Kwan v Ascentic Ltd (2022) 25 HKCFAR 135 at §§101-107 (per Lord Collins NPJ).

19.For completeness, while the plaintiffs have not alleged that the damage “resulted from an act committed within the jurisdiction”, case law confirms that the court must “look at the tort alleged in a common sense way and ask whether damage has resulted from substantial and efficacious acts committed within the jurisdiction”: Metall und Rohstoff AG (Supra) at 437D-G; Fong Chak Kwan (Supra) at §102.

D3.   No damage sustained and no act committed within the jurisdiction

20.At submitted by the defendants, there is a conspicuous absence of any reference in the Statement of Claim to any wrongful acts committed, or any loss sustained, within Hong Kong.

21.The plaintiffs’ entire case is based on the Alleged Theft of Business belonging to the 2^nd plaintiff to Tolead Shanghai.  Based on the plaintiffs’ own pleading:

(1)  The 2^nd plaintiff is a Mainland company, with its principal administrative office and principal warehouse situated in Shanghai;

(2)  The 2^nd plaintiff operated various warehouses, all located within the Mainland (and none within Hong Kong);

(3)  The 2^nd plaintiff’s principal business is and was at all material times “to provide cargo warehousing and logistic services within the PRC” (Emphasis added).

(4)  The pleaded particulars of the Alleged Theft of Business all relate to acts which purportedly took place in the Mainland.  As regard the items allegedly misappropriated said to be owned by the Assignor (see: paragraph 4(11)(c) above), there is no suggestion or evidence that they were taken in Hong Kong.

22.The plaintiffs’ affidavits filed add nothing to what is already pleaded in the Statement of Claim.  On the other hand, as per the defendants’ deponent (which evidence remains uncontradicted):

(1)  The 2^nd plaintiff’s warehouses are all located in Mainland China;

(2)  Most of the 2^nd plaintiff’s customers are based in the Mainland.  The 2^nd plaintiff’s services are all provided to its customers in the Mainland, and payments are received in the Mainland in Renminbi;

(3)  The 2^nd plaintiff has no assets in Hong Kong.  It does not have a registered office, staff employed or bank accounts in Hong Kong; and

(4)  The 2^nd plaintiff’s assets, which are said to have been misappropriated, are all located in Shanghai.

23.In light of the defendants’ uncontradicted evidence and the plaintiffs’ conspicuous failure to adduce evidence (or even raise any contrary contention or plea), it is plain that the plaintiffs have failed to discharge their burden in satisfying the “good arguable case” threshold that the “tort” gateway is engaged, and accordingly the leave granted by the Master to the plaintiffs for service out of the Concurrent Writ based on the “tort” gateway must be set aside.

24.In answer to the defendants’ argument, the plaintiffs pointed out that the 1^st and 2^nd defendants were directors of the Assignor (a Hong Kong company).  Given the liquidation of the Assignor, it is intended that the liquidators will conduct examinations of the defendants pursuant to their wide powers under Cap 32 in relation to the affairs of the Assignor.

25.The plaintiffs submit that, from the intended examination of the defendants, “further documentation and evidence will come to light which will sustain the case against them”.  As is likely the case, much can potentially be obtained from the examination exercise which would shed light on the defendants’ activities and the consequences (including damage sustained) of the same.  It is disputed by the plaintiffs that losses arising from the breaches by the defendants are “limited to Shanghai”.

26.Further, given that the 3^rd and 4^th defendants had held senior roles within the 2^nd plaintiff, whether the 3^rd and 4^th defendants’ tortious activities have led to damage to the Assignor, both via the 1^st and 2^nd defendants and/or independently, should be left open for enquiry by the liquidators at the intended public examination.

27.In my view, the plaintiffs’ submissions based on the “intended public examination” by the liquidators amount to no more than a fishing expedition.  As submitted by Mr Chang SC on behalf of the 1^st, 3^rd and 4^th defendants, if such examination produces results showing loss caused to the Assignor which is not reflective loss sustained within Hong Kong, the plaintiffs can always come back.

D4.  Double actionability of the plaintiffs’ claims

28.Further to the above, it is well-established that in order for the plaintiffs to rely on a tort committed abroad to mount a tortious cause of action within Hong Kong, the plaintiffs must show that the wrong is actionable under both the law of the place where the tort was committed, and in Hong Kong, under the “double actionability rule”: Hong Kong Civil Procedure 2023, Vol 1, Practice Note 11/1/332.

29.In The Conflict of Laws in Hong Kong (3^rd edn), it is stated at §5.081 that “double actionability requires the plaintiff to show that the defendant is liable under both legal systems in respect of the same damage by reason of the same conduct.  Thus, it is not enough for the plaintiff merely to show that liability of generally the same type is recognized in principle or could be pleaded non-demurrably if, in fact, the claim would fail at trial under one system despite succeeding under the other” (Emphasis added).

30.Despite the defendants expressly raising this issue in evidence, the plaintiffs have proffered no response to show how their complained conduct (characterised as a “tort” in the plaintiffs’ ex parte application) is also actionable in the Mainland.

31.At the very least, according to established authorities, Mainland law does not recognise “conspiracy” as a cause of action: see Xiamen Xinjingdi Group Co Ltd v Eton Properties Ltd (2020) 23 HKCFAR 348 at §72; see also 廈門市鑫新景地房地產有限公司 v Eton Properties Ltd, HCCL 13/2011 (unrep, 14/06/2012) at §§259-262.  Pursuant to Order 38, rule 7 RHC, the defendants have already given express notice to the plaintiffs of their intention to rely on the Eton case for the proposition that Mainland law does not recognise “conspiracy” as a cause of action.  The defendants may hence rely on the judicial determination in the Eton case as evidence of Mainland law, under section 59(2) of the Evidence Ordinance, Cap 8.  In fact, the plaintiffs do not dispute that “there is no corresponding right to bring a claim in conspiracy in the PRC” (see: paragraph 13(4) of the plaintiffs’ Skeleton Submissions).

D5.   No serious issue to be tried as regards the 1^st plaintiff’s claims

32.A further fundamental objection is that the 1^st plaintiff has no recognised and permissible cause of action against the defendants as disclosed in the Statement of Claim.  This is because the 1^st plaintiff (as assignee of the Assignor) has no independent cause of action against the defendants, in circumstances where the plaintiffs’ complaint is that the defendants have committed the Alleged Theft of Business belonging to the 2^nd plaintiff.

33.Instead, any purported loss allegedly suffered by the 1^st plaintiff (which is parasitical on the loss suffered by the Assignor) is based on the diminution of shareholding value it enjoys in respect of its 100% shareholding over the 2^nd plaintiff. This is squarely caught by the principle against reflective loss. Indeed, the plaintiffs accept that “pure” reflective loss is not recoverable by the Assignor/1^st plaintiff against the defendants (see: paragraph 13(3) of the plaintiffs’ Skeleton Submissions).

34.A recent and succinct summary of the state of the law on reflective loss can be found in Dingway Investment Ltd v China City Construction & Development Co (Hong Kong) Ltd [2022] 4 HKLRD 67 at §94 (per Anthony Chan J).  In summary:

(1)  A shareholder cannot bring a claim in respect of a diminution in the value of his shareholding, or a reduction in the distributions which he receives by virtue of his shareholding, which is merely the result of a loss suffered by the company in consequence of a wrong done to it by the defendant, even if the defendant’s conduct also involved the commission of a wrong against the shareholder, and even if no proceedings have been brought by the company.

(2)  Where a company suffers a loss as a result of wrongdoing and that loss is reflected to some extent in a fall in the value of its shares or in its distributions, the shareholder’s economic loss is not a loss which the law recognises as being separate and distinct from the loss sustained by the company.

(3)  As a matter of principle, the applicability of the rule against reflective loss should be assessed when the claim is made, at a time when the loss claimed has crystallised.

(4)  The rationale of the rule is based on the shareholder’s right of participation in the company.  There is a unity of economic interest of the shareholder and the company.  The shareholder’s loss is not recognised in law as having an existence distinct from the company’s loss, and a claim by the shareholder is barred by the principle of company law known as the rule in Foss v Harbottle (1843) 2 Hare 461: the only person who can seek relief for an injury done to a company, where the company has a cause of action, is the company itself.

(5)  The no reflective loss principle does not apply to a claim by a party who was an ex-shareholder in the company at the time of the claim.  Such a claim was a separate and distinct claim from that of the company.

35.In the present case, the Statement of Claim expressly acknowledges that the Alleged Theft of Business was in respect of business of the 2^nd plaintiff.  It has not been alleged that there was any independent business of the 1^st plaintiff (or that of the Assignor) that was misappropriated or diverted by the defendants.  There is no independent “loss” suffered by the 1^st plaintiff which is recognised by the law.  At the highest, and for the sake of argument without accepting the plaintiffs’ case, the only “loss” of the 1^st plaintiff is the diminution of the value of its shareholding in the 2^nd plaintiff (or that of the Assignor prior to the Deed of Assignment being executed), which loss is unrecoverable under Hong Kong law.  In the circumstances, it is clear that there is no serious issue to be tried between the 1^st plaintiff and the defendants.

36.The only possible exception is the alleged misappropriation of items said to be “owned by the Assignor” (see: paragraph 4(11)(c) above).  But “tort” in the form of “conversion” is not the cause of action pleaded or relied upon by the plaintiffs (see: paragraph 37 of the Statement of Claim, where the tortious duties are said to be breached by “participating in the Theft of Business” against the 2^nd plaintiff).

D6.   Forum conveniens/appropriate forum

37.Quite apart from: (a) the lack of an applicable jurisdictional gateway; (b) the fact that the plaintiffs have not demonstrated that the double actionability rule is satisfied; and (c) there is no serious issue to be tried between the 1^st plaintiff and the defendants, the plaintiffs have also not demonstrated how Hong Kong is the appropriate forum (or the forum conveniens) for the resolution of its pleaded claims against the defendants.

38.As the Court of Appeal noted in Dynasty Line (Supra) §§57-59, in order for the plaintiffs to obtain leave for service out:

(1)  The burden is on the plaintiffs to demonstrate that Hong Kong is not only the appropriate forum to try the case but that this is “clearly so” (§57);

(2)  The “appropriate” or “natural” forum is one “with which the action had the most real and substantial connection”.  This includes not only factors affecting convenience and expense (such as availability of witness), but also other factors such as the law governing the relevant transaction and the place where the parties respectively reside and carried on business (§58);

(3)  Ultimately one has to consider the forum where the action could most suitably be tried for the interests of all the parties and for the ends of justice.  The court is not simply to load up factors which point to any particular jurisdiction but to focus on the appropriateness of a forum from the point of view of the trial of the action (§59).

39.In the present case, there is a conspicuous absence of connecting factors which point to Hong Kong being an appropriate forum (let alone “clearly” so).  The plaintiffs are unable to point to any factors which link the intended claims with Hong Kong, apart from suggesting that the documentation relating to the Assignor (which has no recognised cause of action in the first place due to the operation of the no reflective loss principle) was “maintained in Hong Kong” and that it has allegedly “proved to be very difficult to obtain any meaningful documentation regarding the 2^nd plaintiff”.

40.But it is plain and obvious that these are not good reasons rendering Hong Kong the appropriate forum to try the claim, taking into account the fact that:

(1)  The defendants all reside in the Mainland, as recognised by the plaintiffs;

(2)  The complained acts (ie the Alleged Theft of Business) all took place in the Mainland, in respect of the Mainland operations of the 2^nd plaintiff (which is in itself a Mainland entity based in Shanghai);

(3)  There is no suggestion that any of the alleged wrongful acts occurred or loss was sustained in Hong Kong; and

(4)  The Labour Contracts (on which the plaintiffs’ contractual claim is based) are expressly governed by Mainland law.

41.The Mainland legal opinion adduced by the defendants show that under Mainland law, the plaintiffs’ complaints ought to be resolved by the People’s Courts where the defendants reside.

42.I agree with the defendants’ submissions set out above that this is yet another reason why leave to serve out must be set aside.

D7.   Material non-disclosure

43.Further still, the ex parte leave for service out obtained by the plaintiffs must also be set aside for material non-disclosure.

44.As submitted by the defendants in their Skeleton Submissions, it is trite that an applicant for ex parte relief is under a very onerous duty to give full and fair disclosure to the court of all material facts which are necessary for the proper disposal of the application.  Materiality is to be decided by the court and not by the assessment of the applicant or his legal advisors.  The applicant must identify any defences, which although not yet taken, would be available to be taken by the defendant.  Hence, the applicant must make all proper inquiries before making the application: Falcon Private Bank Ltd v Borry Bernard Edouard Charles Ltd, HCA 1934/2011 (unrep, 9/07/2012) at §§52-55; Universal Exports Group Ltd v Zechin Technology Co Ltd, HCA 2613/2016 (unrep, 24/10/2016) at §§11-13.  Such duty extends to matters of both fact and law: Memory Corp plc v Sidhu [2000] 1 WLR 1443 at 1454C-G (per Robert Walker LJ).  A relevant matter must be disclosed even if the court’s decision may have been the same: Citibank N A v Express Ship Management Services Ltd [1987] HKLR 1184 at 1190 (per Fuad JA).

45.In the present case, from the foregoing discussion, the plaintiffs have failed to outline the following factual and legal points in their ex parte application:

(1)  That there is an absence of connecting factors between the plaintiffs’ pleaded claims and Hong Kong;

(2)  That it is plain that the appropriate forum to try the plaintiffs’ claims would be in the Mainland;

(3)  That no damage is sustained within Hong Kong and that no alleged wrongful act was committed in Hong Kong, such that the plaintiffs cannot invoke the “tort” gateway under Order 11, rule 1(1)(f) RHC;

(4)  That the 1^st plaintiff’s intended claim against the defendants is barred by the principle against reflective loss;

(5)  That the double actionability rule is applicable, and that the plaintiffs have not overcome the same; in particular, their conspiracy claim as pleaded has been expressly held by the Hong Kong court to be a cause of action not recognised under Mainland law.

46.Where there has been material non-disclosures in an ex parte application, the general (“golden”) rule is for the court to discharge the ex parte order and refuse a re-grant: Excel Courage Holdings Limited v Wong Sin Lai [2014] 3 HKLRD 642 at §§56-58 (per Kwan JA as she then was).  This is because a court will not normally assist a party to retain an advantage to which he was not entitled, and the jurisdiction to set aside an ex parte order for material non-disclosure is a disciplinary, indeed penal, jurisdiction, quite irrespective of the merits of the application: Re Wang Huimin [2021] HKCFI 3472 at §75 (per Ng J).  Since the plaintiffs do not accept that there has been any material non-disclosure in the ex parte application, there will be no room for the plaintiffs to claim that any such non-disclosure is in any way innocently made as may justify a re-grant.

E.  CONCLUSION AND DISPOSITION

47.For the reasons set out above, I order that the ex parte order made by Master Phoebe Man dated 4 October 2021 granting the plaintiffs leave to issue and serve the Concurrent Writ of Summons on the 1^st, 3^rd and 4^th defendants out of the jurisdiction be set aside.

48.As the relief set out under paragraph 1(2)(a) and (b) above are sought by the 1^st, 3^rd and 4^th defendants in the alternative, I make no order on paragraph 2 of the Summons.

49.Parties at the hearing agreed that costs should follow the event, to be summarily assessed with directions for paper disposal.  Accordingly, I order that:

(1)  The costs of and occasioned by the Summons be paid by the plaintiffs to the 1^st, 3^rd and 4^th defendants forthwith, with a certificate for two counsel; and

(2)  The costs shall be summarily assessed on the papers.  The 1^st, 3^rd and 4^th defendants shall lodge and serve their statement of costs within 14 days.  The plaintiffs shall lodge and serve their grounds of opposition within 14 days thereafter.

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

Mr Sanjay A Sakhrani, instructed by Messrs Hart Giles, for the 1^st and 2^nd plaintiffs

Mr Jonathan Chang, SC, leading Mr Martin Ho, instructed by Messrs Stevenson, Wong & Co, for the 1^st, 3^rd and 4^th defendants