Anna Dorothea Erna Lungershausen and Another v. Thomas Joseph Dillon, Jr
Read the full judgment text of HCMP 1751/2002 on BabelCite. This High Court CFI judgment was delivered on 24 July 2003.
1. By an Originating Summons dated 4 May 2002, the applicants seek declarations and orders of the court that :
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HCMP001751/2002 HCMP1751/2002 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE MISCELLANEOUS PROCEEDINGS NO.1751 OF 2002 ---------------------------
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------------------------ Coram: Deputy High Court Judge Muttrie in Chambers Dates of Hearing: 30 June, 2 to 4 and 7 July 2003 Date of Judgment: 24 July 2003 ----------------------- J U D G M E N T ----------------------- 1.By an Originating Summons dated 4 May 2002, the applicants seek declarations and orders of the court that :
2.The applicants on 6 May 2002 obtained from Master Ho an ex parte order granting leave to serve the respondent out of the jurisdiction with a sealed copy of the Originating Summons. Service was effected, ultimately by way of substituted service on 26 July 2002, pursuant to another order of the same Master dated 18 July 2002. 3.On 24 September 2002, the respondent applied under Order 12, rule 8 of the Rules of the High Court and under the court's inherent jurisdiction for a declaration that the court has no jurisdiction; for dismissal of the Originating Summons, and that the orders of the Master be set aside or discharged; or in the alternative that the proceedings be stayed pursuant to Order 12, rule 8. The summons was later amended. By the amended summons the respondent seeks an order pursuant to Order 12, rule 8 of the Rules of High Court and/or its inherent jurisdiction, declaring that :
BACKGROUND 4.The respondent, Dr Dillon, is a bilingual US citizen with US and German law degrees. He is admitted to practice in Georgia and Washington DC, USA, and was, but says that he is not now, admitted to practice in Germany. From 1995, he was employed in-house by Daimler-Benz AG ("DBAG"), and was based in Stuttgart, Germany where he was in charge of co-ordination of DBAG's world-wide product liability defence strategy. In late 1997, it was agreed that he would leave that employment but continue to provide the same service to DBAG. To this end he would set up his own law firm, Dr Dillon Law Offices P.C., a professional corporation in Georgia, USA which would provide the service under a contract with DBAG's attorneys, Caroll, Burdick and McDonough LLP of California, USA. In late 1998, DBAG merged with the Chrysler Corporation and became Daimler-Chrysler AG ("DCAG"). 5.The 1st applicant, Dr Lungershausen, is a German lawyer with German and American law degrees, who was employed in Hong Kong from 1995 to 1999, and has been registered here as a foreign lawyer under the Legal Practitioners' Ordinance since 1995. 6.It is not in dispute that Dr Dillon and Dr Lungershausen formed the partnership Dillon & Lungershausen ("D&L"), though the date when it came into being is in dispute; he says that she was originally an employee, and he says that she was an equity partner from the start. In any event, the business started operating some time in August 1999, in Hong Kong. It was first registered with the Law Society of Hong Kong as a registered foreign law firm on 25 July 2000. 7.In December 1999, Dr Lungershausen established two Hong Kong companies, Product Safety Co-ordination Hong Kong Ltd ("PSCHKL") and Product Safety Co-ordination International Ltd ("PSCIL") which were used for the invoicing of the work done by D&L for its sole client. I will refer to them collectively as the invoicing companies. 8.The 3rd respondent, Dr Smith is a US attorney admitted to practice in California and Washington DC who is now registered as a foreign lawyer in Hong Kong, and as the German equivalent of a registered foreign lawyer in Germany. It is not in dispute that he started working with D&L in mid-2000 and he says, though this is in dispute, that he became an equity partner in the firm on 1 August 2001. 9.On 19 January 2001, by a letter of agreement signed by Dr Dillon and Mr James E. Hall, another US attorney, the latter joined the firm as a salaried partner, i.e. an employee held out as a partner, and shortly thereafter the firm name was changed to Dillon, Hall & Lungershausen ("DHL"). This firm was first registered with the Law Society of Hong Kong as a registered foreign law firm on 11 April 2001. 10.By letters dated 14 November 2001, Dr Lungershausen and Dr Smith gave notice of dissolution of the partnership to Dr Dillon and Mr Hall and on 15 November 2001, they established the firm of Lungershausen & Smith ("L&S"). That firm was shortly thereafter appointed as international case co-ordination counsel by DCAG. About the same time, Dr Dillon wrote to L&S taking issue with the dissolution and other matters. He instructed Hong Kong solicitors, Messrs Haldanes. There was correspondence between solicitors for the parties in later 2001 and early 2002 and attempts to agree on the winding-up of DHL's affairs, but to no avail. As has been noted, the Originating Summons was issued on 4 May 2002. There were some problems with service, which seem to have been caused by Dr Dillon's departure from his German address, to go and live somewhere (for a time the location was not clear) in Italy. 11.In the meantime, on 15 May 2002, Dr Dillon issued proceedings ("the German proceedings") in the Stuttgart Regional Court against Dr Lungershausen and Dr Smith, but these were later withdrawn. In April 2003, he issued proceedings in the U.S. District Court for the District of Columbia ("the US proceedings") against Dr Lungershausen and Dr Smith, DCAG and various other corporations and individuals. THE ORDER 11 APPLICATION 12.In support of the Order 11 application which was filed along with the Originating Summons on 4 May 2002, the applicants relied on two affidavits by Dr Lungershausen. In the first, which was made in support of the Originating Summons, she set out her case which is that Dr Dillon has disputed whether the dissolution of DHL was effective as a matter of law, and has also taken the position that L&S is responsible for obligations and liabilities incurred by DHL and D&L on the one hand and himself on the other. This she and Dr Smith dispute. She says that the dispute affects L&S's ability to do business efficiently, as well as the efficient winding up of the affairs of DHL; therefore declarations are sought to determine these issues. 13.In the 2nd affidavit, in support of the Order 11 application, Dr Lungershausen set out the contentions above, and also that, referred to at greater length in the 1st affidavit, that D&L and DHL were governed by Hong Kong law. She said that there was a good arguable case by reference to Order 11, rule 1(1)(d)(iii) that the partnership agreement was by its terms or by implication governed by Hong Kong law; that there was a serious issue to be tried as to the matters arising under the Originating Summons; and that Hong Kong is the natural and appropriate forum for the trial of these issues. 14.The order was made ex parte on the strength of these two affidavits to which were exhibited 21 exhibits running to 60 pages. Subsequently, further affidavits or affirmations have been filed by Dr Lungershausen, and well as the other parties and other persons involved in these matters. THE RESPONDENT'S APPLICATION 15.Dr Dillon's application is based on four grounds :
16.The Order 11 requirements are that :
17.It is now not in dispute, although it originally was, that the claim is brought to "affect" the contract of partnership. The issue is now whether the partnership is by its terms or by implication governed by Hong Kong law. 18.There is some dispute as to the standard which the applicants must reach in order to satisfy the court that the case is a proper one for service out of the jurisdiction. The applicants rely on the case of Seaconsar Far East Ltd v. Bank Markazi Iran [1994] 1 AC 438 as affirming the "good arguable case" test laid down in Vitkovice Horni a Hutni Tezirstvo v. Korner [1951] AC 86 where "a good arguable case" was taken as meaning (per Lord Tucker) "a strong argument" or "a strong case for argument". In Seaconsar, Lord Goff distinguished between the existence of a contract governed by English law, as to which a good arguable case had to be shown, and the question of liability under that contract, to which the lower standard of "serious issue to be tried" applied. 19.Mr Whitehead SC says that this test is applicable in Hong Kong. In Bonus Garment Co. v. Karl Rieker GmbH [1995] 3 HKC 721, the Court of Appeal appears simply to have assumed that Seaconsar is applicable; and in Anheuser-Busch Inc. v. Budejovicky Budvar [2001] HKEC 757, Deputy Judge Kwan (as she then was) concluded that it was applicable and that Seaconsar must be regarded as prevailing over an inconsistent earlier decision of the Hong Kong Court of Appeal. 20.Mr Barlow relies on a dictum of Staughton LJ in Attock Cement v. Romanian Bank for Foreign Trade [1989] 1 WLR 1147, at 1155 :
21.It appears that this formulation is taken to mean that the applicants must satisfy the court on the civil standard of proof both that the contract is governed by Hong Kong law and as to the merits of the case. Mr Barlow says that this formulation was followed in the Hong Kong cases of Deak v. Deak Perera Far East Ltd [1991] HKLR 551 and various other cases and argues that I am therefore bound to apply it. In fact, in Deak, Kempster JA explained the formulation thus at page 554E :
22.Mr Whitehead SC also relies on Agrafax Public Relations Ltd v. United Scottish Society Inc. [1995] CLC 862 in which the English Court of Appeal held that in order to show a good arguable case, it was not necessary for the plaintiff to satisfy the civil standard of proof but the lower standard of establishing that the case was a proper one for service out of the jurisdiction, and did not follow Attock. 23.All the authorities are clear that at this stage, the court is not concerned to hold a trial on the affidavits. If this matter goes to trial in Hong Kong it will be necessary for the trial court to decide whether the contract is governed by Hong Kong law or not, before it can decide the merits of the two issues framed in the Originating Summons, either according to Hong Kong partnership law or the partnership law (on which it would have to receive expert evidence) of some other jurisdiction. The most that I can do is to make a provisional or tentative conclusion on the existence of the fact essential to the application of Order 11, to use the words of Staughton LJ. That essential fact is the agreement which the applicants say was reached. I do not take that as meaning that I have also to be satisfied to the civil standard that no liability attaches to L&S under that contract. That would be premature at this stage, which is no doubt why Lord Goff drew the distinction which he did. THE EVIDENCE 24.The applicants' case as presented in Dr Lungershausen's 1st affidavit was that she and Dr Dillon signed a Memorandum of Understanding dated 15 June 1999, which contemplated various possibilities for their intended business relationship, one of which was the establishment of a partnership with limited or unlimited liability an a jurisdictions other than the US. After that, they entered into an oral agreement to practise as an unlimited partnership based in Hong Kong and to be governed by Hong Kong law, i.e. D&L. They were to have a partnership deed drawn up, and indeed such a deed was drafted by Messrs Lea and White, solicitors, though it never went further than the draft stage. This document however specifically provided for the agreement to be governed by Hong Kong law. 25.Dr Lungershausen relies on this document and various other documents which tend to show that both parties contemplated a Hong Kong partnership, governed by Hong Kong law. I do not propose to set all these out here but they include a reference in the Letter Agreement by which Mr Hall was appointed a salaried partner to D&L as "an international law firm based in Hong Kong". 26.Dr Lungershausen then went on to deal with difficulties which arose in 2001 between DCAG and Dr Dillon. She said that because of these difficulties it was feared that Dr Smith, who was then providing services to DCAG through DHL might terminate his relationship with DHL, and at the same time DCAG might terminate its relationship with DHL. So they decided to offer to make Dr Smith a 10% equity partner in DHL. In discussions with him on 10 July 2001, it was agreed that what he was offered was a partnership in the Hong Kong partnership, DHL. They all agreed orally that Dr Smith would take up this partnership with effect from 1 August 2001. 27.As evidence of the status of Dr Smith, Dr Dillon relied on a document entitled "Division of Separation Payments" dated 3 September 2001 by which it was agreed that in the event of a termination of the firm's relationship with DCAG, any separation or settlement payment would be shared out in the ratio 50:25:25 (Dillon:Lungershausen:Smith) rather than in the former prevailing ratio of 70:20:10. 28.There is now before me an affidavit by Dr Smith which confirms that he joined the partnership in this way, and in particular confirms his understanding that what he was joining was a partnership governed by Hong Kong law. There are also various further affidavits by Dr Lungershausen and Dr Dillon and by other witnesses; more than 200 pages in all. 29.Mr Whitehead SC argues that for the purposes of deciding whether the parties agreed that their partnership should be governed by Hong Kong law, the legal focus should be on the period around 1 August 2001 when Dr Smith is said to have joined. As a matter of Hong Kong law the effect of the agreement for him to join was to extinguish the former 2-person partnership, and replace it with a new 3-person partnership on the same date. See Firth v. Amslake [1964] SJ 198. So, what is important is the agreement with respect to the 3-person partnership, because the issues raised in the Originating Summons depend on the nature of the partnership as at the date on which notice of termination was given. 30.Mr Barlow contends that this is wrong. The cause of action on which Dr Lungershausen relied, for the purpose of obtaining the Master's order, was the oral agreement in respect of the 2-person partnership which she says came into being in 1999. There is no deposition to any agreement that Hong Kong law would be adopted to govern the DHL partnership including Dr Smith. The applicants are now relying on a different cause of action; and they cannot do that; see paragraphs 11/1/7 and 11/4/8 of the Hong Kong Civil Procedure. In particular the latter paragraph says :
31.With respect, I prefer the argument of Mr Whitehead SC on this point. Dr Lungershausen's 1st affidavit deposes to how both the 2-person and the 3-person partnerships came into being. She says in connection with the latter :
32.That seems to me, read in context with the rest of the affirmation, to be saying precisely that what Dr Smith was joining was the existing partnership governed by Hong Kong law. It is certainly my understanding that in Hong Kong law a change of partners gives rise to a new partnership agreement. I cannot see that any new cause of action is being relied on here. Also, it seems to me that what is important for the decision on the issues raised in the Originating Summons must necessarily be the position at the date of purported termination. 33.There is certainly before me, at this stage, ample evidence from the applicants' side to support the existence of a 2-person partnership superseded by a 3-person partnership, both of which are governed by Hong Kong law. So far as the first partnership is concerned, it is clear that Dr Dillon held it out to others as being a Hong Kong partnership, governed by Hong Kong law. 34.In particular, in this connection, I refer to the affirmation of Dr Schwung, the general counsel of the Legal Affairs - Product Department of DCAG. He says that on 9 September 2001, at a meeting at which Dr Smith was also present, he asked Dr Dillon why VAT was not being charged for the services of DHL and previously D&L. He goes on :
35.In support of what he told Dr Schwung, Dr Dillon later sent him a copy of a letter from the tax advisor, Grant Thornton GmbH, dated 29 August 2000, confirming that tax position :
36.As indicated, there are various other documents on which the applicants rely, and relied before the Master. In the hope of keeping this judgment to a manageable length I will not visit them all. The same applies to the various accusations of forgery made by both sides, especially since both counsel seem to agree that they are not entirely relevant to the issues before me. I will however now turn to Dr Dillon's explanation as it appears in his 2nd affidavit. After giving reasons why the draft partnership deed provides for the agreement to be governed by Hong Kong law, and raising the issue of whether the partnership could be governed by Hong Kong law when neither partner was admitted to practise law there, he goes on to say this :
I think that the bank document referred to, which is simply a pro-forma counts for nothing very much. 37.Dr Lungershausen's evidence is that there was an oral agreement that D&L would be governed by Hong Kong law, and that it was agreed when Dr Smith joined that the same would apply. Dr Dillon is saying that he told third parties that it was a Hong Kong partnership because that is what he hoped to achieve. On Dr Schwung's evidence, he was saying that the day before Dr Smith agreed to join. There is an obvious inference that not only did Dr Dillon hope to achieve a partnership governed by Hong Kong law, but that he had all along agreed to this. It would certainly be open to a trial court to hold this, unless Dr Dillon were, in evidence, to come up with some more convincing explanation. For this reason, in particular, it seems to me that the applicants have a good prospect of success at trial. 38.The issues to be tried are whether the partnerships have been legally terminated and whether L&S is liable to them. If the original partnership or partnerships are governed by Hong Kong law, they are partnerships at will; D&L was dissolved on the formation of DHL and DHL could legally be terminated by notice. Whether L&S has any responsibility for their liabilities or those of Dr Dillon must be a serious issue to be tried. However I would have thought that the responsibility for the liabilities of a dissolved firm would attach to its partners personally rather than to a new firm constituted by some of them, at any rate at common law. On this basis it seems that to the extent that the applicants have a good prospect of success at trial on the existence of the contract which they allege they must also have a good prospect of success on the question whether their new firm bears any liability. Mis-disclosure and non-disclosure 39.The points which the Master had to decide were whether there was a good arguable case that the partnership agreement was governed by Hong Kong law and whether Hong Kong is the appropriate forum for the trial of the dispute. 40.The principle as defined by Browne-Wilkinson J in Thermax Ltd v. Schott Industrial Glass Ltd [1981] FSR 289 and followed in various Hong Kong authorities including Citibank v. Express Ship Management Service [1987] HKLR 1184 and Wo Fung Paper Making Factory Ltd v. Sappi Kraft (Pty) Ltd [1899] 2 HKLR 346 is that what are material are :
41.Paragraph 1A of the summons specifies two matters which it is said should have been disclosed to the Master, namely the profit-sharing terms and the whereabouts of the partnership's principal places of practice, namely, Stuttgart and Sindelfingen, both in Germany. In argument, Mr Barlow also relied on a number of other matters. Mr Whitehead SC objects to this and says that they should be rejected in limine, as being the kind of "counter-abuse" deprecated in Wo Fung but that in any event they, as well as the two original matters raised are lacking in merit. 42.In fact it seems that the basis of the attack on the applicants' lack of disclosure has broadened from the two points originally raised, not just to include the other seven points which Mr Whitehead SC has enumerated from Mr Barlow's submissions, but also three allegations of abuse of process. The first is that despite their knowledge that there were substantial disputes of fact, the applicants chose to proceed by way of Originating Summons which is inappropriate where there are disputes of fact. The second is that the application for a negative declaration, in circumstances where foreign litigation is in contemplation by the other party is itself and abuse of process; and the third is that there are various monetary claims which will have to be litigated in due course (with Dr Dillon as plaintiff seeking recovery of what is owed to him by the partnership(s) from which he has been ousted) and to mount partial litigation which raises only part of the matters in dispute is also an abuse of process. 43.The latter arguments are no doubt raised in response to the reliance placed by Mr Whitehead SC on dicta of Slade LJ in The Electric Furnace Co. v. Selas Corporation of America [1987] RPC 23 to the effect that it is unreasonable to expect a plaintiff preparing his evidence in support of an application under Order 11, rule 1 to anticipate all the arguments or all the points which may be raised against his case. Where there is no deliberate intention to mislead failure to do so should not be characterised as failure to make full and fair disclosure unless the arguments are such weight that their omission may mislead the court. 44.So far as the points raised in paragraph 1A of the summons are concerned, it seems to me that the question of the share of profits is not directly relevant to the question of whether the parties agreed that the partnership agreement should be subject to the jurisdiction of the Hong Kong courts. The fact that the major partner is resident out of the jurisdiction and the minor partner within it would not necessarily affect that. The same applies to the question of the whereabouts of the partnership's principal places of practice. The applicants made it clear at the ex parte stage that it is their case that the principal offices were and, in the case of L&S still are in Hong Kong. It is strongly argued that most of the work was done in Germany and indeed this may be so. There are all kinds of companies which have their head offices in one jurisdiction but do most of their work in another or a series of others. In fact, this case is about the business structures and the business relationships between the partners, and it appears from the evidence now before me that these were focused on Hong Kong. Dr Dillon's aim and object in setting up the Hong Kong partnership seems from his own evidence to have been largely intended to suit his own and his firm's tax situation. He was trying to structure his affairs so as to avoid the world-wide tax liability which normally falls on a US citizen. 45.Turning to the seven new grounds raised in argument, I think that to raise such grounds is to be deprecated. Otherwise, the inter partes hearing may tend to become an open-ended post mortem on the ex parte hearing, and this is not to the object of the exercise. Also, if it is to be argued that a plaintiff has not made full and fair disclosure, the plaintiff at least ought to know what charges it is that he has to face in this connection. I think these points ought properly to be rejected in limine but in case I am wrong I will consider them. 46.The first point is that the applicants should have informed the court of the respondent's threats to sue them in Germany and the USA. In fact, there is no evidence of any such threat being made by Dr Dillon prior to the ex parte application. The only threat seems to have been to litigate against DCAG. Apart from that, litigation was threatened through Messrs Haldanes, but in Hong Kong. 47.It is true that there was a meeting for the purposes of settlement in Germany between the parties' lawyers on 15 April 2002. It is argued that the Master should have been told about this. What seems to have happened at this meeting is that both parties found that they had different versions of the Memorandum of Understanding. In that relied on by Dr Dillon, there is a clause 6.3 which appears to show that Dr Lungershausen covenanted to pay him US$2.5 million in the event of his retirement. The parties to that Memorandum each say that the other's version is forged. Again, I do not think that this has any particular relevance to the questions raised in the Originating Summons. In a sense, it might have been helpful if the Master had information about this matter. It would have perhaps given him some inkling as to why Dr Lungershausen seeks to obtain a declaration concerning her possible liabilities to Dr Dillon, when she is not herself being sued. But this would be to the benefit the applicants rather than the respondent. 48.The next point is that the applicants should have ventilated possible alternative fora at the ex parte stage. The applicants rely on dicta of Lord Goff of Chieveley in Spiliada Maritime Corporation v. Cansulex Ltd [1987] AC 460. In fact, at that stage, no foreign proceedings had been issued. It seems that those which were issued in Germany have been withdrawn, and counsel for the respondent says that he is no longer contending that Germany is an appropriate alternative forum. So it is difficult to know what alternative forum should have been selected, if any. 49.It is also said that the attention of the Master should have been drawn to the fact that in the appointment letter of Mr Hall, there is a governing law clause providing for it to be governed by the law of Washington DC. However, Mr Hall is not an equity partner and his position is irrelevant to the relationship between the equity partners. The same, I think, applies to the argument based on the arbitration clauses in the contract between the Hong Kong invoicing companies and the American attorneys Carrol Burdick & McDounough LLP. In fact, these documents were exhibited to Dr Langershausen's affirmation at the ex parte stage. It has been argued that it is not sufficient simply to exhibit documents, but that the court's attention should be specifically drawn to particular points in the affirmation. That, I think, may be right where the points are particularly relevant but I do not think that they are relevant here. 50.Lastly, there is Dr Langershausen's indemnity agreement. It appears to be argued that she should have exhibited it, because on her case, it has a Hong Kong governing law clause. Again, this is a document of which there are two different versions, which have given rise to allegations of forgery. It will ultimately have to be decided which one is the true version but at this stage, it seems to me quite difficult to imagine that a party's failure to put forward something which is consistent with his own case rather than consistent with that of his opponent should be relied on as a failure to make full and frank disclosure. 51.As with all the other points, the arguments are lengthy and the evidence was covered in consideration detail by both counsel. I have considered the arguments and it seems to me that the applicants cannot properly be regarded as having failed to make full and fair disclosure at the ex parte stage. Forum conveniens/forum non conveniens 52.The fundamental principle for consideration where there is a plea of forum non conveniens was set out by Lord Goff of Chieveley in Spiliada, at 476:
53.His Lordship went on to consider at p.480 how this principle is to be applied in Order 11 cases and concluded that it is the same, subject to three distinctions. These are that in Order 11 cases, the burden of proof of forum conveniens lies on the plaintiff; that in such cases the plaintiff is seeking to persuade the court to exercise a discretionary power to commit service outside the jurisdiction, and must satisfy the court that the case is a proper one for service out of the jurisdiction; and that because the jurisdiction is exorbitant the court must consider the serious question of whether it ought to put a foreigner who owes no allegiance in this country to the inconvenience and annoyance of being made to contest his rights there. For this latter reason, the court should be exceedingly careful before it allows a writ to be served out of the jurisdiction. In the present case, of course, the onus was on the applicants at the ex parte stage, and remains on the applicants now, to satisfy me that Hong Kong is forum conveniens. At the same time, the respondent is applying in the alternative for a stay, and to that extent the onus is on him to satisfy me that Hong Kong is forum non conveniens. It is convenient to consider the two matters together. 54.The relevant principles as they apply in applications for stay were discussed by the Court of Appeal in Adhiguna Meranti (Cargo Owners) v. Adhiguna Harapan (Owners) [1987] HKLR 904, at 907-908 and can be summarized as a three-stage process as follows :
55.It is argued for the applicants that there is a palpable lack of merit in the respondent's case and this should weigh very heavily towards rejecting his attempt to send the case to a foreign forum. It is argued for the respondent that this is an inappropriately brazen argument and is misconceived. I am inclined to agree to some extent with this. While I have no doubt that there is a serious issue to be tried and probably a good arguable case on the merits, it is by no means so easy to say that there is no real defence. 56.The real question is whether Hong Kong is clearly the natural and appropriate forum for trial. Obviously, if, as the applicants contend, Hong Kong law governs the relevant issues, it is natural and appropriate for the issues raised in the Originating Summons to be tried by a Hong Kong court which is deemed to know Hong Kong law. It would be less appropriate, if Hong Kong law is the governing law, for these matters to be tried in Washington DC where the court would necessarily have to hear expert evidence as to the relevant Hong Kong law. There is strong evidence that D&L and DHL were themselves based in Hong Kong. In particular, as I have indicated, the whole arrangement seems to have been intended to suit Dr Dillon's tax position. The invoicing companies connected with the partnerships are incorporated in Hong Kong and various written contracts such as have given rise to dispute between the parties are, at any rate on Dr Langershausen's evidence, governed by Hong Kong law. There is one exception, namely the indemnity agreement which the respondent says is governed by German law, and this is a matter which will require to be proved, because it is another document which is claimed to be a forgery. Dr Langershausen says that Dr Dillon's version is a forgery. 57.It is argued for the respondent, and I think that these arguments are more appropriately addressed on the question of forum conveniens than anywhere else, that the bringing of this action by Originating Summons is inappropriate because there are serious questions of fact to be tried, and also because Dr Dillon is the natural plaintiff in this matter. On his case, the partnerships from which he has been ousted owe him a lot of money. All that the applicants are seeking in this case is a set of declarations. Mr Whitehead SC says that it will be open to the court, if this matter proceeds, to order the action to be tried as if begun by writ, and to order pleadings to be filed. I think there is considerable force in this, because such procedure is common enough in originating summons cases. There is also, I think, nothing to stop Dr Dillon, if this case carries on in Hong Kong, from filing a counterclaim which will enable the Hong Kong court to dispose of his monetary claims. 58.The fact that Dr Dillon originally instructed Hong Kong solicitors and threatened proceedings in Hong Kong rather tends to undermine his claim that Hong Kong is an inappropriate jurisdiction. 59.As I have indicated, it is not now argued that Germany is the more appropriate jurisdiction, but rather that it is Washington DC. It is to be noted that the partnerships with which we are here concerned have no particular connections with Washington DC. It is true that DHL is the tenant of an office there, but this was leased for the use of the related American entity, Dillon & Langershausen LLC. Money was borrowed from the Hong Kong invoicing companies to finance operations including paying the rent. Only Mr Hall, who is not an equity partner, was working in Washington DC. 60.I return to the matter of exorbitant jurisdiction already touched on above in connection with the approach to be made to the question of forum conveniens in Order 11 cases. I think that regard has to be had in this case to the fact that while the respondent is a foreigner and owes no allegiance in Hong Kong, because of the background and history of the partners, this is not a factor which should loom large in the decision. The point is that all of the partners in this matter are persons who have long since left their own nations to live abroad as expatriates, and to practise intellectual property law in a completely international setting. The Memorandum of Understanding, or at least those parts of it which are not in dispute by either side as having been forged, leaves open the question of the governing law of the partnership to be entered into, and indeed the jurisdiction whether partnership is to be formed. Dr Dillon himself chose to institute proceedings in Germany, where, although he may be at home, he is not a national. Now he has instituted proceedings in a part of the USA where he has no particular connection. The position is rather different from that where a party in one country makes a contract with a party in another country and there is a clear-cut division between them. Here, there is a completely international business. The parties have a choice of the jurisdiction whose law is to govern their relationship. 61.There are other factors which perhaps apply more appropriately to the second and third stages of the three-stage process mentioned above. These relate to the personal convenience of the parties, the location of witnesses, the location of documents and the like. So far as the personal convenience of the parties goes, that of both of the applicants appears to favour Hong Kong because Dr Lungershausen resides here and Dr Smith is prepared to travel here. Dr Dillon, as I have indicated, may be an American citizen but he is normally resident out of that jurisdiction. He would have to travel either to Hong Kong or to Washington. So far as the witnesses go, of those who have filed affirmations or otherwise been identified, four are resident in Hong Kong, four are resident in Germany, three in Hong Kong and four in the USA. Wherever the matter is tried, it will be necessary for some witnesses to travel or appear by video linkage. 62.The three parties are fluent in English. The documents are overwhelmingly in English. The matter could be dealt with easily enough either in Hong Kong or Washington DC. 63.It is argued for the respondent that the context between the Originating Summons in Hong Kong and the action in Washington DC is an unequal one. The respondent is the only natural or true plaintiff, and the US proceedings raise all the money claims that he has threatened to bring. It is argued that the bringing of this Originating Summons in Hong Kong is a contrivance resorted to in order to permit the applicants to try to steal from the natural plaintiff his choice of forum. In other words, the respondent accuses the applicants of "forum-shopping". By the same token, of course, the applicants accuse the respondent of "forum-shopping" because he has already raised and withdrawn proceedings in Germany, after having originally threatened them in Hong Kong. 64.It is argued for the respondent that trial by jury with the lengthy US pre-trial procedures for discovery, depositions and so forth, and the USA's benign costs regime under which the respondent expects to pay a restricted amount, and the applicants, as defendants, to have no order made for costs against them, amount to juridical advantages. 65.So far as the jury trial is concerned, while the respondent may see this as a juridical advantage, I am not persuaded that in this kind of matter it will suit the interests of all the parties and the ends of justice. If the trial goes on before a jury in Washington DC, the applicants will be required, as defendants, to take their place among a whole host of other defendants, against whom claims have been brought on all kinds of different causes of action. In a criminal jury trial, it is well-known that the indictment should not be overloaded, because that is likely to confuse the jury. I can well see that the action as mounted by Dr Dillon in the USA, unless arrangements are made for severance, would be likely to confuse a jury. Confusion may be to his advantage, but it does not suit the ends of justice. 66.The underlying principle requires that regard must be had to the interests of all the parties and the ends of justice. Looking at the question of whether Hong Kong is forum conveniens for the purposes of the Order 11 cases, it seems to me that it is. Looking from the other side at the question of whether Hong Kong is forum non conveniens, i.e. that Washington DC is the appropriate forum, it seems to me that it is not. 67.Accordingly, the respondent's summons is dismissed with costs to the applicants in any event.
Representation: Mr Robert Whitehead, SC, instructed by Messrs Herbert Smith, for the 1st and 2nd Applicants Mr Barrie Barlow, instructed by Messrs Robertsons, for the Respondent Remarks: Appeal by the Respondent to Court of Appeal. Appeal dismissed. Please refer to the appeal judgment of CACV000226/2003. |
Further hearings and rulings under HCMP 1751/2002