Komala Deccof & Co. S.A. and Others v. Perusahaan Pertambangan Minyik Dan Gas Bumi Negara (Pertamina)

HCA000960A/1980

"Exorbitant jurisdiction" under 0.11 for service abroad considered in relation to alleged breaches within jurisdiction of a contractual obligation to pay in Hong Kong - Intended plaintiffs' standard of proof under 0.11 r.4(2) as concisely restated in the unreported recent decision of the English Court of Appeal in Brinkinbon Ltd. v. Stahag Stah1 Und Stahlwarenhandelsgesellschaft MBH followed.

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Coram: Liu, J.

Date of Judgment: 20 January 1981

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JUDGMENT

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1. I acceded to part of the defendant's application at issue with an intimation that reasons were to follow. I now give my reasons.

2. By an ex-parte application, pursuant to Order 11 the 1st, 2nd and 3rd plaintiffs sought and obtained leave from a Registrar of the Supreme Court for issuing a writ against and serving a notice thereof on the defendant out of jurisdiction in Indonesia. Thereupon, the present writ was issued, and a notice thereof was accordingly served on the defendant. Objecting to the court's jurisdiction, the defendant applied under protest by summons to reverse the order of the learned Registrar and for consequential relief which entailed setting aside the writ and the service of the notice thereof on the defendant.

3. Further affidavits were received at the hearing. In substance, the defendant mounted its attack at the whole of the 1st and 3rd plaintiffs' respective claims but only part of the 2nd plaintiff's claims. All these claims objected to, arose from alleged oral contracts: The 1st plaintiff's claims against the defendant can be conveniently divided into claims for goods sold and delivered under the oral contracts and claims for insurance premium paid thereunder on behalf of the defendant in the usual course of dealings: the 3rd plaintiff's claims against the defendant are of a similar nature and also under alleged oral contracts; the 2nd plaintiff's claims against the defendant under alleged oral contracts are for damages for non-acceptance of shipments to Indonesia and the demurrage charges therein incurred.

4. At the hearing, the defendant no longer maintained that the 2nd plaintiff had failed to establish its right under Order 11 in respect to: (1) Outstanding charter hire under two charter-parties made in Hong Kong on the 31st July, 1972, (2) Damages on a sale contract in writing dated the 1st July, 1971 for failure to take delivery of two tugboats "NUTI" and "NITA" and (3) Disbursements incurred by the 2nd plaintiff on behalf of the defendant for two other tugboats sold under another contract in writing also dated the 1st July, 1971.

5. Whilst it was claimed that offers in telephonic communications were accepted by the plaintiffs in Hong Kong, it was conceded that the materials before the court were insufficient then to establish these alleged oral contracts as having been made or having to be implemented in Hong Kong. However, the plaintiffs argued that payment under these alleged oral contracts was intended by the parties thereto to be effected in Hong Kong; thus the alleged failure to pay on the part of the defendant constituted breaches committed within jurisdiction. The plaintiffs therefore relied exclusively on Order 11 rule 1(1)(g) whereby leave might be obtained for service of notice of a writ on the defendant out of jurisdiction in respect of breaches of contract said to have been committed in Hong Kong.

6. It is provided by Order 11 rule 4(2) that leave for issuance of a writ and service of a notice thereof out of jurisdiction shall not be granted "unless it shall be made sufficiently to appear to the court that the case is a proper case for service out of the jurisdiction under this Order." It was therefore incumbent upon the plaintiffs to first establish that the court had jurisdiction under Order 11 rule 1(1)(g) by reason of the alleged breaches said to have been committed within jurisdiction and thereafter, to satisfy the court that the case did call for an exercise of discretion favourable to the plaintiffs. There was no suggestion, however, that if the plaintiffs' claims against the defendant had fallen within Order 11 rule 1(1)(g) on account of non-payment, judicial discretion should not have been exercised in aid of the plaintiffs. The central issue was therefore whether the plaintiffs had "made it sufficiently to appear" that the defendant's alleged failure to pay the 1st, 2nd and 3rd plaintiffs under the oral contracts constituted breaches committed within jurisdiction.

7. The plaintiffs'ouns in these interlocutory proceedings was agreed to be correctly restated in the latest unreported decision of the English Court of Appeal by the name of Brinkibon Ltd. v. Stahag Stahl Und Stahlwarenhandelsgesellschaft MBH⁽¹⁾, the judgment of which was given in the Commercial Court on the 12th June, 1980. The speeches in their Lordships' House in Vitkovice Horni A Hunti Tezirstvo v. Korner⁽²⁾ were accepted by counsel on both sides to have been accurately condensed at p.6 of the copy judgment supplied to me:

"We have been taken, as I think Mr. Justice Mocatta was, through the speeches of their Lordships in Vitkovice Horni A Hunti Tezirstvo v. Korner 1951 AC 869 and to a sentence which Mr. Justice Mocatta quoted from the judgment of Mr. Justice Lloyd in Atlantic Underwriting Agencies Limited v. Milano 1979 2 LLR 240, 245. For my part I would not if I could draw distinctions between what is necessary to make sufficient merits appear and what is necessary to make the place where a contract is made or broken sufficiently appear. Nor between the 'good arguable case' which Lord Simonds and Normand accepted in Korner's case, the 'strong case for argument' or 'good case for argument' which Lord Radcliffe there adopted, and 'cogent' evidence pointing to a strong probability which Lord Tucker there preferred. All those four Lords of Appeal were putting in different language a requirement somewhere between a prima facie case resting on an assertion or little more than an assertion in an affidavit and a case which satisfied the court that it would be proved at the trial."

To that, perhaps should be added Lord Denning's approval of the term "a good arguable case" in Rasu Maritima v. Pertambangan⁽³⁾, a Mareva injunction application:

"So I would hold that an order restraining removal of assets can be made whenever the plaintiff can show that he has a 'good arguable case'. That is a test applied for service on a defendant out of the jurisdiction: see Vitkovice Horni A Hutni Tezirstvo v. Korner 1951 A.C. 869; and it is a good test in this procedure which is appropriate when defendants are out of the jurisdiction."

8. That there was no stipulation in the alleged oral contracts for payment to be made in Hong Kong by the defendant was not contraverted, but the plaintiffs contended that in the absence of an express agreement as to the place of payment, the defendant must seek out the plaintiffs in their base of operation for settlement. Thompson v. Palmer⁽⁴⁾ was cited in support of the proposition, but the case like so many others really turned on true construction of the contract having regard to the position of the parties and the prevailing circumstances. The clear implication in Thompson's case was that payment was to be made in the plaintiff's permanent place of business where "the means of ascertaining the correctness or otherwise of the amount tendered" was readily available to the plaintiff engineer. See p.84, per Lord Esher, M.R. and Lopes, L.J. In the absence of an express provision, in every case it is the parties' true intention as to the place of payment, to be drawn from all the surrounding circumstances. Rein v. Stein⁽⁵⁾. Naturally, course of dealings is a major factor to be taken into consideration. See Charles Duval & Co. Ltd. v. Gans^(6).

9. Ultimately, the dispute was whether the plaintiffs had made it sufficiently to appear to the court as the intention of the parties to these alleged oral contracts that the defendant would have no option but was contractually bound to effect payment in Hong Kong. See also The Eider⁽⁷⁾. The crux of the matter may be put succinctly: "Where is the obligation to pay to be performed?" per Lindley, L.J. at p.134.

10. We were concerned with a standard of proof over and above what has been described as "a little more than an assertion in an affidavit", but there was not even a direct averment on affidavits that the intention of the parties to the alleged oral contracts was to have payment effected exclusively in Hong Kong, though it is too often said that when proper foundation has been laid, no inferential deduction need be explicitly spelt out. Nevertheless, we were deprived of the benefit of any categorical assertion from either Mr. Tang, the alleged resident shareholder/director of the 1st and the 2nd plaintiffs, who and whose employees were said to have had the conduct. of all the transactions of the there plaintiffs in Hong Kong or Mr. LIANG Shu-chieh, the assistant manager of all the three plaintiffs or Miss Catherine Wong, the sub-manager of the 2nd plaintiff. All responsible staff involved had chosen to play no active role in these proceedings. Nor had in fact any of the plaintiffs' employees come forward with any assistance. The claims of each of the plaintiffs were sought to be substantiated by the affirmation of an articled clerk to the plaintiffs' solicitors who had "gleaned from the records of the plaintiffs". The facts disclosed gave an appearance of being generally scanty, selective and incomplete. It was on such indirect and unenthusiastic allegations that counsel for the plaintiffs fell to rely.

11. The 1st and the 2nd plaintiffs never did have a registered place of business within jurisdiction. Counsel for the plaintiffs was at pains to emphasize that local registration under the Companies Ordinance was inconclusive as to whether the 1st and the 2nd plaintiffs were in fact trading in Hong Kong. Failure to register a place of business according to law must, at least, reflect some lack of interest in permanency or known permanency. As for the 3rd plaintiff, it ceased to be registered with the Business Registration Department in June, 1977. It might be inferred that prior to June, 1977 the 3rd plaintiff was duly so registered in Hong Kong.

12. The articled clerk to the plaintiffs' solicitors affirmed that she found her source of information in the records of the plaintiffs. We knew not the nature of these records or the method of their compilation; nor were we in a position to say if she had a comprehensive set of records at her disposal. The plaintiffs could have with ease, if able and willing, put an end to all speculation through Mr. Tang, Mr. Liang, Miss Wong or other employees. For reasons best known to the plaintiffs, that course was not taken, and the court had to be content with no more than mere allegations on information at least once removed. Moreover, the plaintiffs had chosen to offer no further information to refute or explain the recently discovered absence of signboards or business activities of any of the plaintiffs on the 10th floor of Wing Lung Bank Building in Central. The plaintiffs sought instead to rest primarily on their criticisms directed at the alleged inadequate enquiry made by Mr. William Wong on the 30th October, 1980.

13. The 1st and the 2nd plaintiffs are Liberian companies. From "MF-1", the running accounts between the 1st and 2nd plaintiffs and the defendant up to 1973, there is no indication that any of the letters of credit was to be payable in Hong Kong, whilst some entries show part of the letters of credit as payable elsewhere. From the charter-parties "MF-4" and "MF-5" for which the running account for charter hire is "MF-2", there is ample evidence for a set practice of payment to the 2nd plaintiff in New York. I could derive little real assistance from the extensive international correspondence addresses, shipments at various ports, supply of goods of multiple origins, wide-ranging destinations for delivery and payment in US dollars. These are the usual indicia a for the world-wide operation of international shipping establishments. For these alleged oral contracts, it was not pressed before the court at this stage that they were made or to be executed in Hong Kong. The sole issue was whether the plaintiffs had made it sufficiently to appear that they were to be paid in Hong Kong. In this connection, I was unimpressed by the occasional contracts of the 2nd plaintiff made with Hong Kong ties, such as (1) the tugboat contract "MF-3" between the 2nd plaintiff and the defendant which was stamped in Hong Kong with letter of credit issued from Hong Kong, specified the tugboats to be built in Hong Kong for a price ex Hong Kong, and stipulated sea trial to be conducted in Hong Kong and arbitration to be submitted to authority in Hong Kong, (2) the charter-parties "MF-4" and "MF-5" and (3) the sale contract "MF-6" for two further tugboats between the 2nd plaintiff and the defendant. No uniform practice of contract formation had been sufficiently shown to emerge; nor in fact was any expressly claimed on affidavits.

14. There was no stipulation for the place of payment in any of the alleged oral contracts. The 1st and 2nd plaintiffs had failed to satisfy me, on such intervening standard of proof, that they were carrying on business in Hong Kong at the material time. Unlike the 1st and the 2nd plaintiffs which were Liberian companies, the 3rd plaintiff was a firm registered in Hong Kong. According to the articled clerk to the plaintiffs' solicitors, in paragraph 5 of her first affirmation, the defendant had running accounts with all the plaintiffs. It was almost common ground that the plaintiffs were associated and under one collective management. Granted that the 3rd plaintiff had a base in Hong Kong at the material time, but there was no evidence to suggest that the 3rd plaintiff had an accounting system different from that adopted by the 1st and the 2nd plaintiffs. More probably than not, the 3rd plaintiff's accounting system also fell in line. The 3rd plaintiff had elected not to have this impression dispalled, and there was no known justification for suspence the court in keeping . Service of a court process out of the Colony under 0.11 is, after all, an "exorbitant jurisdiction" which must be exercised with great caution. Siskina (Cargo Owners) v. Distos S.A. (Q.B.D.)⁽⁸⁾.

15. As for settlements by the defendant with the 1st and the 2nd plaintiffs, evidence was one way that payments were wholly or mainly outside Hong Kong. In the letter of the 1st plaintiff to the defendant dated the 8th October, 1980 and disclosed in the last affidavit of Mr. Clarke, the position was put beyond doubt that all past payments had been effected in New York:

As late as October, 1980, there was understandably no assertion from the 1st plaintiff that the defendant was in any way bound by contract to pay only in Hong Kong. In all the circumstances, there was no conceivable reason why the 3rd defendant should have departed from the common accounting system. The plaintiffs had not succeeded in showing the 3rd defendant as an exception.

16. In conclusion, the plaintiffs had not made it sufficiently to appear that the defendant was under any contractual obligation to pay for any of the alleged oral contracts within jurisdiction. Thus, I was constrained to hold that this court had no jurisdiction to entertain the plaintiffs' respective claims against the defendant on these alleged oral contracts. So much of the defendant's application as supported at the hearing was therefore allowed, and the proper order to be made was consequently left in the hands of counsel.

Representation:

Mr. Robert Alexander, Q.C. with Mr. Andrew Li instructed by Denton, Hall & Burgin for Plaintiffs.

Mr. Charles Ching, Q.C. with Mr. Kotewall instructed by Yung, Yu, Yuen & Co. for Defendant.

(1) Appeal No. B 5997 of 1979, unreported

(2) (1951) A.C. 869

(3) (1977) 3 A.E.R. 362 at 3340

(4) (1893) 2 Q.B. 80

(5) [1892] 1 Q.B. 753

(6) (1904) 2 K.B. 685 at 689 per Stirling, L.J.

(7) (1893) p 119 at p.p.127 & 129 per Sir Francis H. Jeune, p.132 per Lord Esher, M.R. & p.136 per Bowen, L.J.

(8) [1979] A.C. 210 at p.p.2546 & H per Lord Diplock