Inverness Corporation and Others v. Magic Dreams Cosmetica Infantil., S.L. and Others

1996, No. A9363

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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Coram: The Hon. Mr. Justice Yeung in Chambers

Dates of hearing: 21 and 25 February 1997 and 20 March 1997

Date of handing down reasons for decision: 26 March 1997

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D E C I S I O N

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1. The First Plaintiff, Inverness Corporation ( Inverness) is a US corporation. It claims to be the owner of the trade mark, goodwill and copyright of the mark "One Touch" (the said mark) in connection with certain hair-removal products for ladies.

2. The First Defendant, Magic Dreams Cosmetica Infantil., S.L (Magic Dreams) and the Second Defendant, Impulsora de Comercio Exterior, S.A (Impulsora) are both Spanish companies. According to Inverness, Magic Dreams and Impulsora were its exclusive distributors of the products bearing the said mark in Spain until Inverness terminated the distributorship in or about January 1995. It is not in dispute that the Third Defendant, Guillermo Cuervo (Cuervo) was one of the persons in charge of Magic Dreams and Impulsora at all material times.

3. It was the allegation of Inverness against the defendants that subsequent to the termination of the distributorship of Impulsora, the defendants offered to sell to two Hong Kong companies, the Second Plaintiff, Gold River Cosmetics Co. Ltd (Gold River) and the Third Plaintiff, Jade Peninsula Ltd. (Jade Peninsula) imitation "One Touch" products. In particular, under an invoice dated 14.12.1995, the defendants sold to Gold River and Jade Peninsula 100,000.00 bottles of lotions bearing the said mark. Almost the entire 100,000.00 bottles of the said lotions were imported into Hong Kong in the months of May and June of 1996.

4. Inverness also alleged that Impulsora wrongfully registered in its name the said mark and seek to extend such registration to other countries. It was suggested that Magic Dreams and Impulsora had wrongfully applied to register the said mark in Hong Kong with the Trade Marks Registry.

5. The plaintiffs alleged that the defendants persuaded Gold River and Jade Peninsula to act as a distributor of their imitation "One Touch" products for Hong Kong and China by falsely representing to them that they were the owners of the said mark.

6. Inverness also alleged that the defendants, jointly with Gold River and Jade Peninsula infringed its right as the owner of the said mark and hence the claim for various relieves as set out in the statement of claim, including the claim for injunctions.

7. Gold River and Jade Peninsula claimed against the defendants that they had misrepresented themselves to be the only rightful owners of the said mark.

8. The present action commenced by way of an application for an interlocutory injunction. As the defendants are all companies or individual in Spain, an ex-parte application for service out of jurisdiction under Order 11 Rule 1 was made.

9. On the 22nd of August 1996, Mr. Recorder R. Tang Q.C. made an order in the following terms:-

"Upon the application of the plaintiffs and upon reading the affidavit of Thomas William Hope sworn on 16 August 1996. It is ordered that the plaintiffs do have leave to issue and serve a concurrent Writ of Summons out of the jurisdiction upon each of the Defendants herein, it is proposed to effect service of the Concurrent Writ of Summons on the 1st and 2nd Defendants by personal service on the president, secretary or other officer of the 2nd Defendants and the 3rd Defendant by personal service. Personal service on each Defendant is expected to be made at the registered offices of the 1st or 2nd Defendants in Madrid. We also propose to request service by the Spanish Court pursuant to the Hague Convention in case the service methods mentioned above are not successful."

10. At a hearing before Leonard J. in the presence of the solicitors for the defendants, attending as an observer only, Leonard J. granted an interlocutory injunction order coupled with an order of discovery against the defendants.

11. The solicitors for the defendants had also taken some steps in connection with the proceeding although such steps were taken under protest and without prejudice to the defendants' application to challenge the jurisdiction of the court.

12. The defendants, in the present application were confined to their application of seeking to set aside the order for service out of jurisdiction granted by Mr. Recorder R. Tang and/or the actual service of the Writ of Summons.

13. The defendants suggested that the ex-parte order for service out of jurisdiction had been improperly obtained in that Hong Kong was not the appropriate forum for the disputes between the parties and that there had been material non-disclosure.

14. It was suggested that the order for service out of jurisdiction was obtained on the basis of Order 11 Rule 1(1)(b), namely that it was a claim for injunction when the claims by Gold River and Jade Peninsula against the defendants arose out of a contract concluded in Spain and/or a tortious act. The order was therefore too broad and bad in form.

15. The defendants further suggested that Inverness did not have good arguable case in Hong Kong against the defendants for an injunction when they only sold some alleged infringing goods in Spain under a F.O.B. contract concluded in Spain.

16. In any event, the defendants suggested that the order of Mr. Recorder R. Tang Q.C. on the mode of service had not been complied with and the service ought to be set aside.

17. Order 11 Rule 5 specifies the manner in which service abroad can be effected. It is true to say that the rules recognise that service abroad can give rise to various difficulties and to that extent, the mode of service under Order 11 Rule 5 can be described as flexible.

18. In my view, an order under Order 11 for service out of jurisdiction needs not specify the particular mode of service at all. The important thing is that the mode of service required under Order 11 Rule 5 must be complied with. To that extent, the suggested mode of service as contained in the order of Mr. Recorder Tang Q.C. was superfluous.

19. In Mattel Inc. v. Tonka Corp [1991] 2 HKC 411, the plaintiff obtained an ex-parte order to serve on the defendant at a specified address in Minnesota. The service was effected on the defendant's agent in California. In deciding that the service was good and valid, Deputy Judge Andrew Li QC stated the following at P. 419:

"In essence, the order grants leave to the plaintiff to issue the writ and to serve it out of the jurisdiction. The reference to the address was, in my judgment, a reference to where the defendant may be served, not where he must be served. Although the words 'or elsewhere' were not present, my interpretation of the order is that it permitted service in the USA on an address other than the one specified."

20. If an order for service out of jurisdiction should include a specified mode of service and Mr. Recorder Tang's order was so intended, then it is true to say that his order was vague and somewhat imprecise. On the other hand, it was fair to say that it clearly intended to be so in order to avoid perhaps the necessity of having to come back to the court for further directions should a particular mode of service could not be effected.

21. There were good reasons for taking such a step and it should not be the subject matter of any valid attack even if a particular mode of service is required to be included in an order for service out of jurisdiction. The suggested mode of service in the order of Mr. Recorder Tang QC was a reference as to how the defendant might be served and not how they must be served.

22. There was indication that difficulties were encountered when attempts to serve personally on the defendants were made, particularly Cuervo when there was suggested attempts on his part to avoid service.

23. It was however not disputed that the plaintiffs had effected service of the Writ on the defendants in Spain by the Spanish authorities. The defendants confirmed that service of the Writ was effected on each of them by a Madrid Magistrates Court on 16 December 1996. The defendants also confirmed that they had all been served by registered mail and that such service was recognised as valid and effective service under Spanish Law and hence a valid service under Order 11 Rule 5.

24. There was no dispute at all that the defendants had each received copies of the Writ and the Statement of Claim together with their Spanish translations on or about 18 September 1996.

25. On the undisputed evidence before the court, the defendants could not have any valid complaint about the mode of the service abroad when the requirement of Order 11 Rule 5 had in fact been complied with.

26. On the question of whether the order for service out of jurisdiction under Order 11 had been properly obtained, Mr. Hughes suggested on behalf of the plaintiffs that to fall under Order 11, it was not necessary for each of the plaintiffs in an action begun by the Writ to show that the relieves they seek against the defendants all fell within Order 11 Rule 1.

27. The suggestion was that as long as one of the plaintiffs had a claim against a defendant for a relief which fell within such rule and if there was good reason to join in the other plaintiff's claim, an order for service out of jurisdiction in respect of the claims of all the plaintiffs would have been properly obtained.

28. I found myself unable to subscribe to such a view.

29. Mr. Hughes's suggestion has the effect of conferring jurisdiction on the court on defendants over whom the court would not otherwise have jurisdiction.

30. In my view, in an action involving more than one plaintiff against defendants who are out of the jurisdiction, each of the plaintiffs must show that their claims against their respective defendants fall within the ambit of Order 11 Rule 1(1) (a) to (u) before an order for service out of jurisdiction in respect of the action can be properly obtained.

31. If an order for service out of jurisdiction is obtained in respect of an action involving plaintiffs whose claims against the defendants do not fall within Order 11, Rule 1(1), then at least the claims of such plaintiffs should be struck out.

32. In the present action, Inverness claims for an injunction against the defendants based on an action of infringement of copyright and passing off. There is also the allegation of a concerted effort to damage Inverness' right in Hong Kong over the said mark. Gold River's and Jade Peninsula's claim against the defendants arose out of a contract that the plaintiffs claim to have been made in Hong Kong or to be governed by Hong Kong Law.

33. Prima facie, such claims fall within Order 11 Rule 1(b) and/or (d) and/or (e) and the writ can be properly ordered to be served out of the jurisdiction.

34. Mr. Kat complained that in the affidavit of Mr. Thomas William Hope dated 16 August 1996 filed by the plaintiffs in support of the application for an order of service out of jurisdiction, mention was made only of the claim by Inverness for an injunction against the defendants and the claims by Gold River and Jade Peninsula were not mentioned at all. The leave for service out of jurisdiction should therefore be confined to Inverness' claim for injunctions and should not include the claims by Gold River and Jade Peninsula.

35. Mr. Kat suggested that where leave to serve out of the jurisdiction is based on one cause of action, it cannot be treated as leave based on some other cause of action and if a claim has been put forward on one legal basis, the plaintiff cannot subsequently justify leave on another legal basis unless such other legal basis has been referred to in the affidavit in support of the application. Mr. Kat relied on the authorities such as Parker v. Schuller (1901) 17 T.L.R 299, The Siskina v. Distos Compania Naviera S.A. [1979] A.C. 210, Waterhouse v. Reid [1938] 1 K.B. 743 and Metall und Rohstoff A.G. v. Donaldson Lufkin & Jenrette Inc. [1909] 1 Q.B. 391.

36. No one can argue with the principles as laid down in the aforesaid authorities. But with respect, we are not dealing with a situation where the plaintiffs seek to change the cause of action or the legal basis upon which the claims by the plaintiffs have been put forward.

37. The cause of action and the legal basis for the claims have been set out in the statement of claim and they remain the same.

38. Unfortunately in the supporting affidavit of Mr. Hope, he mentioned that "the first plaintiff claims an injunction against each of the defendants ordering each of them to refrain from.........." He also stated that "by reference to these claims for injunctions, I respectively submit that the action that is proposed to be begun includes claims that fall within the terms of order 11 Rule 1(1)(b).

39. Mr. Hope did not mention in his affidavit that the claims of Gold River and Jade Peninsula were based on a contract made within the jurisdiction or governed by the Hong Kong law.

40. There is no doubt that it would have been better if Mr. Hope had mentioned expressly the nature of the claims by Gold River and Jade Peninsula and that such claims fall within the terms of Order 11 Rule 1(1)(d). But I am not of the view that the failure to do so is fatal.

41. Mr. Hope in his affidavit had made reference to the statement of claim which was also before Mr. Recorder Tang Q.C. prior to the order granting leave to serve out of jurisdiction was made. In deciding whether an order to serve out of the jurisdiction should be made, the court must refer to the statement of claim to decide the nature of the claim. The affidavit in support of the application should of course make reference to the nature of the plaintiff's claim but to insist that the affidavit should include details of matters already set out in the statement of claim may not be necessary. Having said this, it must not be taken that the requirement under Order 11 Rule 4 needs not be complied with. But "What is required, to comply with the rule, is not some ritual incantation of the wording of O 11 r 4(1)(b) of the Rules of the Supreme Court." Century Yachts Ltd. v. Xiamen Celestial Yacht Ltd [1994] 1 HKC 331 per Litton JA.

42. The court must decide upon the application on the basis of the cause or causes of action expressly mentioned in the writ or statement of claim and not just on matters referred to in the supporting affidavit.

43. I am of the view that on the matters disclosed in the statement of claim and the affidavit of Mr. Hope, there was basis upon which an order for service out of jurisdiction in respect of the claims by all the plaintiffs could be properly made. It had been made sufficiently to appear to the Court that the case was a proper one for service out of the jurisdiction. The complaints by the defendants on this issue also fail.

44. If I am wrong in this regard, the proper order to make is to sever the claims of Inverness and those of Gold River and Jade Peninsula so that the order for service out of jurisdiction in respect of the claims of Gold River and Jade Peninsula only should be set aside. It is, in my view, not fair to set aside the order concerning Inverness' claims as well on the basis of the defect in the application for service out of jurisdiction in respect of the claims by Gold River and Jade Peninsula.

45. One of the issues is whether the plaintiffs had shown a good arguable case against the defendants. It was pointed out that the defendants were resident and domiciled in Spain and all the acts of Magic Dreams and Impulsora complained of by the plaintiffs took place in Spain. The contract with Gold River and Jade Peninsula was also concluded in Spain when a signed contract was faxed to the defendants in Spain.

46. It was further suggested that there was no basis for the suggestion of an action based on the allegation of joint-tortfeasors as the other alleged joint-tortfeasors had been injuncted from infringing Inverness' right over the said mark.

47. Mr. Kat, on behalf of the defendants relied on the case of Badische Anilin und Soda Fabrik v. The Basle Chemical Works, Bindschedler [1898] A.C. 201. to support the contention that in the absence of an infringing act in Hong Kong, the court has not jurisdiction over a foreign party outside the territories.

48. Mr. Kat also relied on the case of Def Lepp Music and others v. Stuart-Brown and others. [1986] R.P.C. 273 to support his contention that a successful action cannot be brought in England for alleged infringement of the United Kingdom copyright by acts done outside the United Kingdom.

49. Mr. Kat's perception of the facts and the background of the case is somewhat simplistic.

50. It may not be necessary nor desirable for the court to set out in details the allegation by the plaintiffs against the defendants. It is however important to point out that when Impulsora was the appointed distributor of Inverness in respect of the "One Touch" products, it was alleged to have obtained from Inverness the artworks for the production of the packaging of the "One Touch" products and the customers' lists on certain false pretence.

51. The defendants then approached Gold River and Jade Peninsula who were the customers of Inverness and offered to sell to them at a cheaper price imitation "One Touch" products with the name "INVERNESS" on such products. Such imitation products are almost identical to the products of Inverness.

52. The defendants even attempted to enter into an agreement appointing Gold River as the exclusive distributor in Hong Kong and China for their imitation "One Touch" products. When questioned about their entitlement to use the said mark, the defendants denied that they had previous distribution relationship with Inverness and claimed to have the legal right to the said mark in Hong Kong and China by producing a trade mark application form relating to the said mark.

53. There had been many discussions between the defendants and Gold River and Jade Peninsula in connection with the supply of the imitation "One Touch" products to them by the defendants. The defendants had supplied 10 samples of the imitation "One Touch" products to Gold River and Jade Peninsula. The samples produced by the defendants had identical appearance as those of Inverness.

54. There had been many exchanges of letters and fax messages between them in connection with the supply of the imitation "One Touch" products by the defendants and the appointment of Gold River and Jade Peninsula as the sole distributors of such products in Hong Kong and China.

55. Cuervo had visited the office of Gold River and Jade Peninsula to discuss with them about the supply of the imitation "One Touch" products. Eventually, there was the sale of the 100,000.00 units of "One Touch" products by the defendants to Gold River and Jade Peninsula in December 1995. Of course almost the entire 100,000.00 units were imported into Hong Kong in the months of May and June 1996.

56. Clearly it is not proper for me at this stage to make any specific finding on the question of liability. But having considered all the evidence presented both by the plaintiffs and the defendants and having heard counsel for both parties, I am firmly of the view that the Inverness has a good arguable case against the defendants on an action of copyright infringement and passing off. There is also a good arguable case on the basis of a common desire between the defendants and Gold River and Jade Peninsula to infringe Inverness' right over the said mark in accordance with the principle laid down in the case C.B.S. Songs Ltd. v. Amstrad Plc. [1988] 1 AC 1013.

57. On the plaintiffs' assertion, the defendants had infringed their rights over the said mark in Hong Kong. They are certainly entitled to institute proceeding for an injunction to stop such alleged infringement and/or to prevent possible future infringement.

58. I am also of the view that Gold River and Jade Peninsula also have a good arguable case against the defendants for misrepresentation and breach of a contract which was made in Hong Kong and/or which contract is governed by Hong Kong law.

59. The defendants' contention that the plaintiffs have failed to show a good arguable case also fails.

60. On the issue of forum non conveniens, it is important to bear in mind that in order to oust the jurisdiction of the court, the defendants must show that in order to best decide the issues for the interests of all the parties and for the ends of justice, the foreign courts would be clearly or distinctly more appropriate than that of Hong Kong.

"The plea can never be sustained unless the court is satisfied that there is some other tribunal, having competent jurisdiction, in which the case may be tried more suitably for the interest of all the parties." That was the classic statement by Lord Kinnear in Sim v. Rainbow (1892) 19 R 665, approved by Lord Goff in Spiliada Maritime Corporation v. Consulex Ltd. [1987] AC 460 at 474.

61. Two of the plaintiffs are companies based in Hong Kong. It is not disputed that the defendants supplied goods to them to be shipped into Hong Kong under contracts that the plaintiffs claim to be made in Hong Kong or governed by Hong Kong law.

62. More importantly, Inverness commenced the present action against the defendants to protect its intellectual property rights in Hong Kong and China, including a claim for a declaration that the defendants are not entitled to the proprietorship of the said mark by applying to register it with the Hong Kong Trade Marks Registry and an order that the defendants should withdraw such application.

63. It is true that Inverness had also commenced proceeding against the defendants in Spain. But according to the plaintiffs, the purpose of the Spanish proceedings is to protect Inverness' intellectual property rights in Spain and such proceedings have no bearing on the entitlement of the defendants to use the said mark in Hong Kong.

64. According to the lawyer conducting the Spanish proceedings on behalf of Inverness, the Court of Madrid would not accept jurisdiction which include relief in connection with Inverness' right over the said mark in Hong Kong as the Court of Madrid will only assume jurisdiction in relation to claims alleging the infringement of Spanish intellectual property rights, a suggestion not challenged by the defendants.

65. On the evidence before me, I am firmly of the view that Hong Kong is the appropriate and the most convenient forum in the interests of the parties and for the end of justice. There is no merit on the attack on the order of Mr. Recorder Tang Q.C. granting leave to serve out of jurisdiction on the basis that Hong Kong court is not the appropriate forum.

66. The defendants finally complained that in obtaining the order for service out of jurisdiction, the plaintiffs had not given a full and frank disclosure of the previous Hong Kong proceeding brought by Inverness against Gold River and Jade Peninsula and the Spanish proceedings against the defendants.

67. Apparently in connection with the import of the 100,000.00 bottles of lotions bearing the "One Touch" mark, Inverness brought an action in the High Court of Hong Kong against Gold River and Jade Peninsula for copyright infringement and passing off. The action was compromised and Gold River and Jade Peninsula had agreed to co-operate with Inverness and the present action was brought against the defendant in pursuant to such co-operation.

68. Inverness had instituted proceedings No. 469/95 in the First instance Court No. 33 of Madrid against Impulsora seeking certain provisional measures against Impulsora in connection with the products under the "One Touch" mark and another marks. All of the provisional measures requested by Inverness, except one was refused by the Spanish court.

69. Inverness also commenced a concurrent action in Proceedings No. 2505/95 in the First Instance Court No. 4 of Madrid on 1.6.1995 against Impulsora in connection with the registration and the extension of the "One Touch" trade mark in Spain.

70. The two actions were consolidated and are being defended.

71. It is perhaps worth mentioning that the aforesaid matters had been mentioned in some of the documents presented by the plaintiffs when the order for service out of jurisdiction was obtained.

72. In the affidavit of Mr. Hope, reference was made to the Statement of Claim as well as affidavits of Mr. Vlahides, Mr. Mann and Mr. Cheung.

73. In paragraph 25 of the statement of claim, it was stated, "By an action commenced in the High Court of Hong Kong on 4.6.1996 (HCA No. A6308 of 1996) Inverness claimed against Gold River and Jade for relief against copyright infringement and passing off in respect of the importation of the infringing "One Touch" depilatory lotion from Magic Dreams/ Impulsora. The goods delivered in Hong Kong on 6.6.1996 have been delivered up into the custody of the solicitors of the plaintiff in the aforesaid High Court Action."

74. In paragraph 22 of Mr. Vlahides' affidavit, it was mentioned that, after learning Impulsora was procuring the manufacture and marketing of products imitating those of Inverness, Inverness "filed in about June 1995 an action against Impulsora and Magic Dreams in the Court of First Instance in Madrid, Spain seeking an interlocutory order restraining Impulsora, Magic Dreams and any other related persons from using Inverness' "One touch" and other trade marks in connection with the manufacture and sale of products which imitate Inverness' products."

75. There is no dispute that the plaintiffs in obtaining the ex-parte order for service out of jurisdiction must make a full, frank and fair disclosure of material facts and materials facts are "all facts that are relevant to the weighing operation which the court has to make in deciding the point before it." Thermax Ltd. v. Schott Industrial Glass Ltd. [1981] FRS 289.

76. One of Mr. Hughes's arguments on behalf of the plaintiffs was that the Spanish proceedings were not materials at all as the relieves prayed for in those actions were different from those in the present proceedings. It was further pointed out that the Spanish court would decline jurisdiction when Inverness' claim against the defendants was to prevent them from infringing its rights over the said mark in Hong Kong.

77. Materiality is of course to be decided by the court and not by parties to the proceedings. This was laid down in the classic case of R. v. Kensington Income Tax Commissioners [1917] 1KB 484 and confirmed in Brink's-MAT Ltd v. Elcombe [1988] All ER 188.

78. The proceedings in Spain was between Inverness and Impulsora over the dispute they had in connection with the said mark and products bearing such mark. In my view, the Spanish proceedings should be disclosed. If Inverness contended that it could not obtain the relief in Spain preventing the defendants from infringing its right over the said mark in Hong Kong as the Spanish court would not entertain such a claim, such matters should have been set out so that the court can act accordingly.

79. In my view, the plaintiffs had not made sufficient disclosure of the Spanish proceedings. The issue fall upon me to decide is whether such non-disclosure is fatal to the plaintiffs.

80. There can be do dispute that "the duty of full and frank disclosure on ex parte applications is a most important principle. The court's power to discharge where this has not been observed is salutary and necessary for the court's protection. Although in a case where the misstatement was not deliberate, the court has a discretion not to discharge, it is a discretion which has to be exercised with great caution." per Deputy Judge Andrew Li QC in Mattel Inc v. Tonka Corp. [1991] 2 HKC 411.

81. I accept that the non-disclosure of the details in the Spanish proceedings was not deliberate. I also bear in mind the observation of Bokhary JA in Pacific Base Services Ltd. & Anor. v. Silver Gain Development Ltd. and Ors. [1996] 1 HKC 610 when he stated at P. 620;

"When a matter comes before a judge ex parte, he must do his best to protect both sides. To protect the absent party against whom his order is sought, the judge relies on his own experience and on what he is told by the party appearing before him to seek such order. The duty on an ex parte applicant is necessarily, therefore, to exercise a high degree of care in putting the picture before the ex parte judge fully and accurately. It is vital to our system of justice that that duty be maintained at as high a level as is practicable. Thus, the court recognise that the urgency inherent to ex parte applications can sometimes lead to things being left unsaid or even wrongly said. And trawling for minor matters on which to set aside ex parte orders is not looked upon at all favourably by the courts."

82. It is important in my view to bear in mind that according to the plaintiffs, the Spanish court would not entertain any claim by Inverness against the defendants in respect of alleged infringement of their right over the said mark in Hong Kong, a matter not challenged by the defendants. That being the case, the only appropriate forum to resolve the dispute between Inverness and the defendants is the Hong Kong court.

83. I am of the view that had Mr. Recorder Tang Q.C. been fully informed of the background of the case, including the details of the Spanish proceedings, he would have granted the order for service out of jurisdiction. In my view, in the light of the background and the nature of the case, it would not be appropriate to set aside the order for service out of jurisdiction because of the inadvertent non-disclosure aforesaid. I can do no better than repeating the words of Mance. J. in Grupo Torras S.A. v. Al-Sabah [1995] 1 Lloyd's L.R. 374 when he stated at p. 440;

"The importance of full and fair disclosure is obvious, but the present case is one of considerable complexity, the matters complained of represent at worst innocent failures in analysis or evaluation, and I would not be over-ready to set aside the proceeding unless satisfied either that the Court had been significantly misled or that setting aside was necessary to ensure proper standards of disclosure. Setting aside the proceedings as against the O.11 defendants would leave the proceedings against the defendants served within the jurisdiction and in other Convention States unaffected. It would cause a very considerable waste of money if I were satisfied that the proceeding could and would simply be reconstituted, and it would delay the whole of the proceedings even more than they have already been delayed. Now that the whole matter has been investigated in the course of the present application, I am confident that setting aside for any misstatement or non- disclosure which may have crept into the affidavit would not be required or serve any useful purpose."

84. I have considered carefully the arguments advanced from both sides and the significant number of authorities that they had referred to. I am of the view that the defendants' summons to set aside the order for service out of jurisdiction and the actual service out of jurisdiction should be dismissed and I so order. I also make an order nisi that the cost of the application is to be borne by the defendants in any event to be taxed if not agreed. The order nisi on cost will be made absolute 21 days after the handing down of this decision.

85. There are two further matters. One is the summons taken out by the Plaintiffs dated 24.1.1997 asking for the dispensation of the service of the order of Leonard J. or the alternative mode of service of such order. The other is the application by the defendants to discharge the injunction order of Leonard J. dated 8.11.1996.

86. I order that both such matters are to be adjourned sine dine with liberty to restore with costs reserved.

87. The only outstanding matter is the question of the cost of the hearing before Master Chan in connection with the plaintiffs' application to inspect an exhibit in a sealed envelope which exhibit was filed with the court pursuant to the order of Leonard J.

88. The order of Master Chan dated 29.1.1997 had not been perfected. From the hand-written record, the learned master appeared to have made the following orders;

1. Costs in relation to the application be reserved to the Judge hearing the defendants' summons of 18.11.96;

2. Costs of to-day be to the defendants in any event.

89. The order of Leonard J. dated 8.11.1996 required each of the defendants to make and file an affidavit or affirmation setting out certain particulars.

90. Instead of complying with the order aforesaid, the 3rd defendant sworn an affidavit and exhibited it in a sealed envelope to the affirmation of his solicitor. It was suggested that the affidavit was made under protest and was without prejudice to the defendants' application to challenge the jurisdiction of the court.

91. The plaintiffs considered that the order of Leonard J. had not been complied with and hence the application to inspect the affidavit of the 3rd defendant.

92. There was no legal basis for the assertion that the filing of the affidavit of the 3rd defendant in compliance of the order of the court would constitute a submission to the jurisdiction of the Hong Kong court and there was therefore no justification for the 3rd defendant not to comply with the order of Leonard J.

93. The application by the plaintiffs to inspect the affidavit of the 3rd defendant was properly made and they should be entitled to the costs of such application.

94. I therefore order that the costs relating to the plaintiffs' summons dated 18.12.96 are to be borne by the 3rd defendant in any event. This order may well be in conflict with the second limb of Master Chan's order when

she ordered that costs of to-day be to the defendants in any event. This is a matter that needs to be sorted out by the parties.

Representation:

Mr. Hughes of Messrs. Linklaters and Paines, for the Plaintiffs.

Mr. Nigel Kat, instructed by Messrs. Baker and Mckenzie, for the Defendants.