Dynasty Line Ltd (Provisional Liquidators Appointed) v. Sukamto Sia and Another

HCA 2057/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2057 OF 2007

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BETWEEN

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Before: Deputy High Court Judge Carlson in Chambers

Dates of Hearing: 20–22 February 2008

Date of Judgment (Handed Down): 13 June 2008

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J U D G M E N T

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Introduction

1.I have before me a number of summonses which between them raise a multiplicity of issues, each of which will require an answer.

2.Before I identify the summonses and the issues that call for a decision, it will be helpful to begin by describing the nature of the action and the parties to it. 

3.The Plaintiff sues the Defendants for their alleged breach of fiduciary duty as directors of the Plaintiff and/or for alleged conspiracy to defraud, for which the Plaintiff is seeking damages from the Defendants and an order for an account as alleged constructive trustees of the Plaintiff.  The matters giving rise to the action have occurred some 11years ago in 1996 and 1997.

4.The Plaintiff is a BVI company incorporated there in January 1994.  It sues through its provisional liquidators, who were appointed ex parte by Barma J on 23 August 2007 in winding up proceedings started by a petition that had been presented on the same day.

5.It will be helpful if I provide a brief outline of the nature of the action against these two Defendants which I take substantially from the statement of claim [1/3-15]. 

(i)        The Defendants had been the Plaintiff’s shareholders with the 1^st Defendant holding 80% of the shares and the 2^nd Defendant the remainder. 

(ii)       Prior to 23 August 2007, they were also its directors.  As such they owed the Plaintiff fiduciary duties inter alia to act honestly and in its best interests.

(iii)      The Plaintiff’s only trade or business was series of investments that it entered into at the direction of the Defendants in 1996 which was the purchase of blocks of shares in a publicly-listed company in Hong Kong known as Sun Cheong International Limited, which in 1997 changed its name to China Development Corporation Limited (“CDC”).  These shares were the Plaintiff’s only assets subject to its corresponding liabilities to its two shareholders who had lent the money for the purchase of the shares.

(iv)      On 5 February 1996, the Defendants caused the Plaintiff to enter into seven identical written contracts to purchase a total of 29,811,016 shares from seven individuals at a unit price of $7.80 per share which was at a 50% premium on CDC’s last closing price of $5.75.  Under the contract of sale, the Plaintiff was required to pay for its purchase of the shares from the individual vendors by instalments prior to the date of completion on 2 May 1996, on which date the balance of the purchase price was to be paid and the share certificates and other documents of title would be exchanged.

(v)       Notwithstanding these contractual provisions, the Defendants were able to persuade all seven vendors to hand over to them CDC’s share certificates before full payment by the Plaintiff of the purchase price for the shares.

(vi)      It is alleged that to the knowledge of both Defendants, the Plaintiff was, in 1996 and 1997, insolvent or, at least likely to be insolvent, because the realisable value of its only assets, the CDC shares, was substantially less than the debt owed by the Plaintiff to its creditors, in particular, the vendors of the CDC shares.

(vii)     Knowing this and in breach of their fiduciary duties, it is alleged that the Defendants misappropriated or recklessly endangered the Plaintiff’s only assets (the partly-paid CDC shares) by charging or pledging the CDC shares to financial institutions as security for loans made to third parties or by failing to ensure that the CDC share certificates remained, unencumbered, in safe custody, in circumstances where the Plaintiff remained a trustee of the CDC share certificates for the unpaid vendors of the shares to it.

(viii)     In due course, between 1996 and 2000 the financial institutions to whom the shares had been pledged, and who had possession of the relevant share certificates, exercised their rights under the various agreements that the Plaintiff had entered into with them in pledging the shares and sold the CDC shares in diminution of the indebtedness owed to them by the third parties on whose behalf the Plaintiff had pledged the shares at the Defendants direction.

(ix)      In due course the unpaid vendors of the CDC shares sued the Plaintiff for the unpaid price of the shares in this court [HCA 9505/1999] and on 6 April 2001 obtained judgment against it in the sum of $254,480,424.88.

(x)       Against this factual background the claim, brought for breach of fiduciary duty by the Defendants, is also pleaded as a conspiracy by them to defraud the Plaintiff and its creditors, out of the Plaintiff’s only assets being the partly-paid CDC shares.

(xi)      On 23 August 2007 Barma J, on a creditor’s winding up petition, based on the unsatisfied judgment in HCA 9505/1999 supra., appointed provisional liquidators with power to commence such actions in the Plaintiff’s name to recover monies belonging to or due to the Plaintiff as they saw fit.  Consequent to that order the liquidators, funded I am told by Dato Low, one of the Plaintiff’s principal creditors under the judgment in HCA 9505/1999, have brought this action by the Plaintiff against these two Defendants.

6.On 27 September 2007, the writ was issued and on the same day an ex parte application was made to Beeson J for a worldwide Mareva injunction which she granted [Bundle 1/25-33].  Its effect was to prevent the Defendants from removing or disposing of their assets up to the value of $276,973,619.06.  The injunction identified a number of assets including interests in various companies and in real property both here in Hong Kong and overseas.  The judge also made disclosure orders against each Defendant and gave leave for the service of a concurrent writ on each of them at specified addresses in Singapore.

7.The inter partes summons for the injunction was heard by Chu J on 12 October 2007.  Previously, on 6 October, purported service of the writ had been effected on the 1^st Defendant at Hong Kong International Airport, this giving rise to the first of the issues that I will need to rule on in due course.

8.At the inter partes hearing on 12 October, the 1^st Defendant did not appear and was not represented, he having taken the view that he had not been served with the writ.  The 2^nd Defendant was represented by counsel.  Chu J continued the injunction against both Defendants.  As against the 1^st Defendant, she continued it until trial or further order.  In the case of the 2^nd Defendant, she adjourned it for argument, pending the 2^nd Defendant’s application to set it aside or have it varied.

9.On 3 December 2007, the 2^nd Defendant issued his summons [1/47-49] for a declaration that the court has no jurisdiction over him, and that the order giving leave to issue the concurrent writ against him out of the jurisdiction, as well as the concurrent writ itself, and the proceedings started under that writ, should be set aside.  Consequentially, the summons also sought for a discharge of the Mareva injunction.

10.On 13 December 2007, the 1^st Defendant issued a summons [1/50-53] which is to the same effect, save for the additional relief which it claims which is for a declaration that neither the writ nor the order for the injunction granted by Beeson J on 27 September had been duly served on him.

11.At a brief hearing on 2 January this year, I directed that the summonses of 3 and 13 December 2007 by the 2^nd and 1^st Defendants respectively and the Plaintiff’s adjourned inter partes summons of 28 September 2007 [1/41-46] for the continuation of the Mareva injunction should be heard together.  It is upon these summonses that I am now required to rule.  I propose to take them in the order in which they were argued before me which followed the most logical sequence.  Firstly, the 1^st Defendant’s summons dated 13 December, then that of the 2^nd Defendant dated 3 December and, finally the Plaintiff’s to continue the Mareva against both Defendants until trial.

The 1^st Defendant’s Summons — 13 December 2007 [1/50-53]

12.This summons raises the fundamental issue that the 1^st Defendant has not been served which will need resolution one way or the other at the outset.  But before this I ought to deal with the point taken by Mr Barlow SC, for the Plaintiff, that because the 1^st Defendant is seeking a declaration that the order granting the Mareva injunction against him has not been served on him, this in addition to the declaration that the writ has not been served on him, the 1^st Defendant must be taken to have submitted to the jurisdiction of the court.  Mr Burns SC, for the 1^st Defendant, submits that this cannot be right, for which proposition he relies on the 4^th and not, the latest 5th Edition of Gee, this edition pre-dating the introduction of the CPR in England and Wales and which is therefore based on the RSC which are consonant with our RHC.  At 4^th Edition, p.371-372 [Chapter 18(5)], the learned author suggests that a Defendant outside the jurisdiction who has been made subject to a Mareva injunction in which leave has been granted to the Plaintiff to effect service on the Defendant under Order 11 may combine an application for discharge of the injunction with an application to set aside the leave granted under Order 11.  See O.12 r.8(1)(f).  But it is not essential for the Defendant to adopt that course.  If a Defendant applies to discharge a Mareva injunction, this will not in itself amount to a submission to the jurisdiction so as to prevent him from challenging the jurisdiction under the procedure laid down in O.12 r.8(1).  Gee suggests that in principle, the Defendant must also be entitled to seek a variation of the injunction, pending the determination of his application challenging the jurisdiction, without being taken to have submitted to the jurisdiction.  At p.373 the learned author says this:

“It is prudent for a defendant to make it clear that he is seeking only a variation of the injunction, pending the determination of his application to challenge the jurisdiction of the court and to discharge the injunction.  In such circumstances the application for variation does not involve the court in making any assumption that it has jurisdiction to determine the merits of the plaintiff’s claim in the action: William & Glyn’s Bank plc v Astro Dinamico Compania Naviera SA.  On such an application the defendant should invite the court to maintain the varied injunction until after the determination of his application under RSC Order 12, r 8(1) or further order (the injunction can then be extended).  If the defendant does not make the position clear and invites the court to maintain the varied injunction until trial or further order, he may thereby submit to the jurisdiction.  Thus, in Esal (Commodities) Ltd v Pujara, prior to service of the statement of claim, the defendant consented to Mareva relief in ‘far reaching terms’ expressed to be ‘until after judgment in this action or further order’, and which provided for the opening of a deposit account in which moneys were ‘to abide the outcome of these proceedings’ and reserved the costs of the motion ‘to the trial’.  There was an express liberty to apply to discharge or vary the order on 24 hours’ notice.  On these facts, the Court of Appeal held that the defendant had unequivocally submitted to the jurisdiction.”

It seems to me that the 1^st Defendant’s position here is quite clear.  None of the procedural steps taken on his behalf could possibly amount to a submission to the jurisdiction and any suggestion made to the contrary cannot be right.  From this I can now turn to the issue of whether he has been validly served.

Service on the 1^st Defendant at Hong Kong International Airport

13.If I hold that the 1^st Defendant was validly served by personal service at the airport on 6 October 2007 then the Plaintiff does not have to face the argument that the order granting it leave to serve the 1^st Defendant out of the jurisdiction under O.11 r.(1) should be set aside, personal service on the 1^st Defendant within Hong Kong being sufficient.

14.On this occasion, I have the advantage of a video, recording part of the process of purported service on the 1^st Defendant by the Plaintiff’s process server Mr Sze, a former police inspector in the Hong Kong Police Force.  Unhappily, at the crucial moment, the person filming the event was either accidentally bumped or somehow lost control of his video equipment with the result that he has failed to capture what might have been the conclusive moments of the procedure of service.

15.Personal service is regulated by RHC O.65 r.2 which provides that:

“Personal service of a document is effected by leaving a copy of the document with the person to be served.”

The Note at 65/2/3 [page 1026 Hong Kong Civil Procedure] is to this effect:

“Manner of effecting personal service — to effect personal service the clerk or other person entrusted with the task should first satisfy himself that he has found the correct person.  He should then hand to or leave with the person to be served a copy of the writ.  If the person served will not take the copy, he should tell him what it contains and leave it as nearly in his possession or control as he can.

If the defendant refuses to take the copy writ it is not necessary to leave it in his actual corporeal possession, but it is sufficient to inform him of its nature and throw it down in his presence (per Patteson J. in Thomson v. Pheney (1832) 1 Dowl. 441); yet this must be done under such circumstances as to bring the case within the above rule.  It is not sufficient to hand the defendant the copy writ enclosed in an envelope without informing him that it is a copy writ (Banque Russe v. Clark [1894] W.N. 203).”

This Note and the rule itself, in identical form in England, have been further considered by the House of Lords in Kenneth Allison Ltd v A.E. Limehouse & Co. (1992) AC 105 and subsequently by the English Court of Appeal in Nottingham Building Society v Peter Bennett & Co. (a firm) unreported 14 February 1997.  In the latter case, Waite LJ considered the meaning of the expression (the transitive verb as he described it) “to leave”.  Having referred to the Oxford English Dictionary, and found the definition to be “to cause or let remain” as well as “to depart without taking”, which introduces the element of departure without removal, he decided that on the authorities the term should be understood as meaning “to cause or let remain”.  At page 4 of the judgment, he therefore concluded that:

“Once the intended recipient (assuming him to have the required knowledge of its nature), has been given a sufficient degree of possession of the document to enable him to exercise dominion over it for any period of time, however brief, the document has been “left with him” in the sense intended by the Rule”. 

As the evidence on this occasion indicates, and so much appears from the video, that the 1^st Defendant was not a willing recipient, then the Rule requires that the process server also has the duty of telling the person to be served what the package or envelope containing the documents has in it and this explains the reference in Waite LJ’s judgment supra. to the person being served having “the required knowledge of its nature” (i.e. the envelope or package).

16.I have first of all had regard to the video which shows that the exchange between the 1^st defendant and Mr Sze was a brief one.  The defendant was not disposed to stop and chat, if I can put it in this way.  The film clip also shows that Mr Sze said something to the Defendant but, of course, one is not able to hear what was said.  Mr Sze then attempted to handover the package but the Defendant refused to accept it and proceeded to walk away.  Mr Sze then appears to have placed the package on the top of the Defendant’s small suitcase, of the type that has an extendable handle, which can be wheeled behind the person.  As the Defendant walked away with his suitcase, I accept that the package fell off his suitcase very soon after it had been placed there by Mr Sze.  Mr Sze says that he told the Defendant that he wanted to give him “court documents” although he did not, and in any event would not have had time to enumerate what these documents were.  The Defendant insists that at no time had Mr Sze said anything to him as to the nature or content of the documents and so there is this unresolved conflict on affidavit.

17.And so one has an experienced process server, a former police officer, anxious to make contact with the 1^st Defendant at the airport and to effect good service on him.  Plainly, careful planning had gone into the whole process, so much that another person was sent along to secretly film the whole exercise.  The contrary aspect is of the Defendant, who is clearly shown as being in no mood to engage with the process server and who hurries away at the earliest opportunity.

18.Whilst the mechanics of service were by no means executed with the precision that Mr Sze had no doubt hoped for, I am able to conclude that there had been valid service on the 1^st Defendant.  There is no doubt that Mr Sze spoke to the Defendant, so much is clear from the film.  Given the fact that he wished to effect service, the inherent probabilities are that Mr Sze did say, at the earliest opportunity, that he had court documents for the 1^st Defendant.  What is also clear from the film is that the Defendant was an unwilling recipient.  The question then is whether, by dropping the package onto the top of his suitcase from where it fell off very soon after it had been dropped there, it can be said that the package was left with the Defendant.  I am satisfied that in the circumstances, the Defendant had been sufficiently informed of the contents of the package — there was no need for Mr Sze to describe them further, and that he was put into possession of the package, albeit very briefly, this of his own making because he decided to walk away quickly in order to avoid service and that, being put into possession by having the package dropped onto his suitcase, this enabled him to exercise sufficient dominion over it.  Accordingly, for these reasons I hold that good personal service was effected on the 1^st Defendant by Mr Sze.

19.This being so Mr Burns’ point under O.11 r.1 must fall away but, it seems to me that in the event of an appeal on my finding that the 1^st Defendant was served personally, I should indicate how I would have decided the O.11 r.1 issue had I been put to it to do so.

Should Service of the Writ on the 1^st Defendant out of the Jurisdiction be Set Aside

20.Given the close relationship between O.11 r.1 and O.12 r.8, which governs applications for disputing the court’s jurisdiction, it is convenient to consider Mr Burns’ challenge to the correctness of the order allowing the Plaintiff to serve a concurrent writ on the 1^st Defendant in Singapore, together with his fall-back challenge to the jurisdiction on the basis that Hong Kong is forum non conveniens, which is also part of the exercise that needs to be gone through in deciding whether it is proper to serve a proposed defendant in Hong Kong proceedings out of the jurisdiction.

21.O.11 r.1(1) is clear that service out is permissible with the court’s leave if the case falls within one or other of the sub-paragraph’s of r.1(1).  It is for the applicant to select which of the sub-paragraphs to rely on in making the application and he must then satisfy the court that there is a good arguable case for contending that his case comes within the spirit as well as the letter of the sub-paragraphs that he has decided to rely on.  That is the first hurdle that needs to be cleared.

22.If the court is persuaded that it has jurisdiction because the applicant has demonstrated that he has a good arguable case for saying that he comes within the selected sub-paragraphs, the court is then required to turn to the merits of the case itself, as a whole, and decide whether there is a serious issue to be tried.  If the applicant carries that burden, the court will then be engaged in deciding whether the applicant can persuade it that the case is a proper one for service out of the jurisdiction [see RHC O.11 r.4(2)].  Pausing here, the court will by now have been satisfied this is a type of case for which leave may be asked for, that the merits pass muster on the basis that there is a serious issue to be tried and now, it must decide whether to exercise its discretion as to whether leave should be granted.

23.It is at this stage that the court will involve itself in deciding the issue as to whether the court is forum conveniens for the determination of the issues in the action.

24.Because the Order 11 procedure for service out is ex parte, Mr Burns submits, quite correctly, that the Plaintiff has a duty to make full and frank disclosure.  In this respect he refers to the fact that the address provided to the court for service on the 1^st Defendant in Singapore was at Balmoral Park and the order for service bears that address nevertheless, the fact is that by 29 September 2007 the Plaintiff knew that this address did not exist.  Mr Burns has referred to the affidavit of Mr David Chu, the Plaintiff’s solicitor, dated 12 October 2007 [2/44-45].  The order giving leave to serve out of the jurisdiction was made by Beeson J on 27 September.  Mr Chu deposes that the address for service at Balmoral Park was that obtained from a report prepared by Baker Tilly Hong Kong as recently as 10 September 2007.  The address was provided to the court in good faith on that basis.  When the process server attended Balmoral Park on 28 September to effect personal service, he discovered that Balmoral Park was now a building site.  Unable to serve him there the Plaintiff was able to trace the 1^st Defendant to Hong Kong through Mr Sze who effected personal service on him at the airport here on 6 October in which circumstances it became unnecessary for the Plaintiff to report back to the court that Balmoral Park was an ineffective address for service.

25.It seems to me that given this sequence of events there has been no lack of full and frank disclosure on this aspect by the Plaintiff.

26.Mr Burns has also complained about matters raised in the 2^nd affirmation of Lauren Lau (one of the two provisional liquidators )[2/119-144] which refers to a number of factors which are said to bear on the Order 11 position, but that few of these factors were disclosed at the ex parte stage.  This is, of course, a very important affirmation by her which is deployed in response to the 1^st and 2^nd Defendants’ affirmations inter alia contesting the sufficiency of Hong Kong’s connection with the subject matter of this action.  Unsurprisingly, where both Defendants had raised matters of detail in their evidence, Miss Lau has been required to respond in kind in terms of detail.  Whilst it is true that Beeson J was not approached, in terms of evidence, with this sort of detail when invited ex parte to give leave for service out of the jurisdiction, it seems to me that she was put in the picture in a sufficiently full and balanced way so as not to do the Defendants an injustice and, in a way that provided the judge with sufficiently full information to enable her to make a properly informed decision as to whether she should give leave to serve out.  And so, on this aspect I am against Mr Burns.

O.11 R.1(1)(f) and (p)

27.Mr Burns contests the applicability of paras. (f) and (p) to the Plaintiff’s claim as pleaded in the statement of claim.  Paragraph (f) relates to a claim:

“… founded on a tort and the damage was sustained or resulted from an act committed within the jurisdiction;”

Paragraph (p) is about a claim:

“… brought for money had and received or for an account or other relief against the defendant as constructive trustee, and the defendant’s alleged liability arises out of acts committed, whether by him or otherwise within the jurisdiction.”

28.In justifying the correctness of the decision to allow service out of the jurisdiction, Mr Barlow, for the Plaintiff, submits that all that I am concerned with at this stage is the arguability of the Plaintiff’s case coming within the two sub-paragraphs.  Now is not the time for deciding disputed issues of fact.  He refers to Deak & Anr v Deak Perera Far East Ltd (in Liquidation) [1991] 1 HKLR 55, CA where at 554E, it was said that what is meant by “a good arguable case” was one with a good prospect of success at trial.  It does not mean that the applicant would probably succeed or obtain judgment under Order 14 and that it may be consistent with the availability of a good arguable defence.

29.In developing his case that the Plaintiff has not been able to show such a case under either or both of the sub-paragraphs, Mr Burns refers to Mr David Chu’s first affidavit in support of the application to serve out [2/3].  Mr Chu has deposed that the Plaintiff’s case against the Defendants was for:

(1)     conspiracy to defraud the Plaintiff (particularly the Plaintiff’s creditors) by allegedly misappropriating or recklessly endangering the Plaintiff’s only assets namely, its shares in CDC causing it substantial loss and damage and, that these actions were primarily committed in Hong Kong; and

(2)     for an account or other relief on the basis of the Defendant’s alleged liability as constructive trustees of the Plaintiff’s property [its CDC shares] which they had misappropriated or recklessly endangered by their actions primarily committed in Hong Kong.

30.Mr Chu has deposed that both Defendants “are the only shareholders” and “until they were displaced by the appointment of the Provisional Liquidators on 23 August 2007, the only directors of the Plaintiff ”.  Mr Burns points out that as a statement, this is incorrect, the 1^st Defendant’s shares having vested in his trustee in bankruptcy in the USA in 1998 and, that the 2^nd Defendant had ceased being a director in July, 2000.

31.I have already summarised the nature of the case from the statement of claim in paragraph 5 of this judgment.  Mr Burns has referred to the specific pleas contained in paragraphs 13, 23, 26 and 27.  He correctly states that the conspiracy claim is pleaded as a further or alternative cause of action to the breaches of the Defendants’ fiduciary duties and based on the same allegations concerning their treatment of the CDC shares.  The loss and damage claimed in the two causes of action is the same.

32.This being the position, Mr Burns submits that the basis of the application to serve the writ out of the jurisdiction is that in each case the cause of action needs to have arisen by virtue of the acts giving rise to the tort in one case and, the Defendants having become constructive trustees in the other, due to acts committed in Hong Kong.  Only then can the Plaintiff bring itself within sub-paragraphs (f) and/or (p).

33.Mr Burns analyses the matter in this way.  As to sub-paragraph (p) dealing with the Defendants being accountable as constructive trustees, the only relevant acts are those of charging or pledging the CDC shares.  Mr Chu, in support of the application, has deposed that the acts were “primarily” committed in Hong Kong although Mr Burns submits that no evidence in support of such an assertion has been adduced.  Against this, the 1^st Defendant has affirmed that all the relevant acts took place outside Hong Kong [2/80] and the 2^nd Defendant in his 3^rd affidavit [2/69] says that all the share charges were executed in Singapore.  This being so, Mr Burns concludes that the Plaintiff must be taken to have failed to show a good arguable case for saying that it has a sub-paragraph (p) case.

34.As to sub-paragraph (f), the cause of action in tort is the alleged conspiracy to defraud by the Defendant.  The overt acts in support of the conspiracy are the persuasion of the vendors of the CDC shares to make early delivery of the shares certificates and then pledging or charging the shares.  In circumstances, where all of the vendors of the shares were not Hong Kong residents, Mr Burns’ submission is that the acts relied on to found the conspiracy must have all taken place outside Hong Kong.  If some acts took place here then it is submitted that these acts were insignificant or insufficient to found a sub-paragraph (f) situation.  The case relied on is Metall und Rohstoff AG v Donaldson Lufkin & Jenrette Inc & Anr [1990] 1 QB 391 at 437D-G.  In construing the effect of this sub-paragraph, Slade LJ said the following:

“The judge rejected this argument and so do we.  It is enough if some significant damage has been sustained in England.  Condition (c) prompts the injury: what if damage has resulted from acts committed partly within and partly without the jurisdiction?  This will often be the case where a series of acts, regarded by English law as tortious, are committed in an international context.  It would not, we think, make sense to require all the acts to have been committed within the jurisdiction, because again there might be no single jurisdiction where that would be so.  But it would certainly contravene the spirit, and also we think the letter, of the rule if jurisdiction were assumed on the strength of some relatively minor or insignificant act having been committed here, perhaps fortuitously.  In our view condition (c) requires the court to 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 (whether or not other substantial and efficacious acts have been committed elsewhere): if the answer is yes, leave may (but of course need not) be given.  But the defendants are, we think, right to insist that the acts to be considered must be those of the putative defendant, because the question at issue is whether the links between him and the English forum are such as to justify his being brought here to answer the plaintiffs’ claim.”

What Mr Burns says is that if relevant acts were committed in Hong Kong, these need to have been “substantial and efficacious acts … (whether or not other substantial and efficacious acts have been committed elsewhere …).”  Mr Burns accepts that the Plaintiff can bring a case within sub-paragraph (f) if, notwithstanding that the acts alleged to have constituted the tort took place outside Hong Kong, the alleged damage was sustained or resulted from an act committed in Hong Kong by the Defendants.  See Metall und Rohstoff AG, supra at 437G.

35.Mr Burns argues that the damage suffered is the loss of the shares certificates and any dividends from the ownership of the shares.  The loss has been caused by the Defendants’ acts in pledging/charging the shares.  In such circumstances, as with sub-paragraph (p) it is the acts of pledging or charging the shares which are the “qualifying” acts which would enable the Plaintiff to bring itself within (f) as well.  As these acts took place outside Hong Kong, it must follow that the Plaintiff has also failed to show an arguable case under this sub-paragraph as well.

36.In response to the applicability of what was said by Slade LJ in Metall und Rohstoff AG, Mr Barlow submits that Mr Burns has failed to note that this case was overruled by House of Lords in Lonhro plc v Fayed [1992] 1 AC 448 insofar as it related to its decision on conspiracy and that the part relating to the approach to O.11 r.1 has also been overruled by later cases such as the decision of the House of Lords in Seaconsar Far East Ltd v Bank Markazi [1994] 1 AC 438 in which Matall und Rohstoff had been referred to in argument by counsel although not in the speech of Lord Goff of Chievely, with whom the other law lords agreed.  It seems to me that the passages in the judgment of Slade LJ which I have previously cited on this aspect of the Order 11 process and on the tests to be applied on O.11 r.1 [see 434G-436F] are not inconsistent with nor have they been overruled on this aspect by Lonhro v Fayed nor by implication or otherwise in Seaconsar.

37.Seaconsar adopts the approach established in the previous decision of House of Lords in Vitkovice Horni a Hutni Tezirstvo v Korner [1951] AC 869.  I need go no further than to repeat the brief holding from the headnote to the report in Seaconsar [page 439 supra.]:

“… that in considering whether the jurisdiction of the court had been sufficiently established under one or more of the paragraphs of R.S.C., Ord. 11, r. 1(1) the standard of proof was that of the good arguable case; but that in respect of the merits of the plaintiff’s claim under rules 1(1) and 4 it was sufficient for the plaintiff to establish that there was a serious issue to be tried in that there was a substantial question of fact or law or both arising on the facts disclosed by the affidavits that the plaintiff bona fide desired to have tried; …

Chemische Fabrik vormals Sandoz v. Badische Anilin und Soda Fabriks (1904) 90 L.T.733, H.L.(E.)and Vitkovice Horni a Hutni Tezirstvo v. Korner [1951] A.C.859, H.K.(E.) applied.

Per curiam.  The assessment of the merits of the plaintiff’s claim and the application of the principle of forum conveniens are separate and distinct elements in the exercise of the court’s discretion under Order 11 (post, pp.446G, 456A-C, 458A-B).”

38.I don’t think there can be any doubt about the court’s approach nor the test that needs to be adopted.  The difficulty arises in applying the pleaded facts to the applicable test.  Mr Burns has argued with great force that when one stands back and considers the facts it is plain that all the acts which can be relied on by the Plaintiff took place outside Hong Kong, overwhelmingly in Singapore and, that on a proper analysis the requirements of sub-paragraphs (f) and (p) have not been satisfied.

39.Mr Barlow, understandably emphasises the relative modesty of the burden at this stage of showing a good arguable case and that his client’s case comes within either or both of the two selected sub-paragraphs.

40.It seems to me that the fact that the Plaintiff held shares in CDC, a Hong Kong-listed company, and that the Plaintiff was represented by Hong Kong solicitors, instructed by the Defendants, is of significance.  Its presence in Hong Kong by virtue of its having solicitors here and of its ownership of CDC’s shares is not a feature that can be overlooked.  Miss Lau, in her second affirmation [2/119-144] has referred to important legal formalities that would need to be observed by a company like the Plaintiff having regard to its ownership of a substantial shareholding in a Hong Kong-listed company like CDC, those formalities being attended to by its Hong Kong solicitors, Wilkinson and Grist.  It strikes me that all the features referred to in paragraph 2(121-127) of Ms Lau’s affirmation are highly relevant to the question of the applicability of sub-paragraphs (f) and (p) to the action.  Of particular significance are the transactions with KGL, one of the financial institutions who took a charge on $48,822,700 CDC shares.  There is no doubt that it is a Hong Kong company and operates and is based in Hong Kong.  The charge, which is at B5/792-795, was executed in Hong Kong and is to be construed according to the laws of Hong Kong.  At this stage of the enquiry, there is sufficient evidence from all of these surrounding circumstances to say that this charge was at least very probably executed in Hong Kong.  The connection with Hong Kong is therefore very plain.

41.The same cannot be said of the other charges.  These were mostly executed in Singapore with Singapore-based financial institutions such as Commerzbank (South East Asia) Limited.  Nevertheless, the fact that the CDC shares were listed in Hong Kong and were being charged and subsequently sold by the various chargees required the record of ownership of the shares as they were being traded to be recorded within the sophisticated systems kept and operated by the Hong Kong Stock Exchange.  Miss Lau has at paragraphs 2.7 to 2.12 [123-124] sets out the detail of how this system operates.  This being so the procedure relating to the charging of the shares and their subsequent sale by the chargees which resulted in the losses for which this action is now brought were processed and recorded in Hong Kong due to the fact that CDC’s shares were listed on the Hong Kong Stock Exchange.  Miss Lau contends in the paragraphs to which I have just referred that these losses were in part caused by these acts which took place in Hong Kong.

42.In the case of Commerzbank, following it having exercised its powers to sell the CDC shares under the terms of the charge, notice of the sale was given to the Plaintiff by facsimile addressed to it care of its solicitors, Wilkinson and Grist, in Hong Kong which, according to Miss Lau’s affirmation [2.14/125] further underlines the Plaintiff’s Hong Kong connections.

43.Where on any view, the KGL transactions appear to have taken place in Hong Kong, in addition to the other general features relating to the charging of the other shares, albeit having taken place outside Hong Kong, their subsequent sale giving rise to the losses suffered by the Plaintiff on those sales being recorded within the Hong Kong Stock Exchange System, together with the other aspects of the Plaintiff company that bind it to Hong Kong including its legal representation by Wilkinson and Grist, I am satisfied that the Plaintiff has made out a good arguable case for saying that the acts giving rise to its losses have come within the requirements of sub-paragraphs (f) and (p).  In saying this, I am also cogniscent of the fact that a number of the acts or activities that have given rise to these losses took place outside Hong Kong principally in Singapore.  In this regard, the words of Slade LJ in Metall und Rohstoff AG at 437D-G are apposite particularly where he observed that:

“… condition (c) [(f) in Hong Kong] requires the court to look at the tort in a common sense way and ask whether damage has resulted from substantial and efficacious acts committed within the jurisdiction (whether or not other substantial and efficacious acts have been committed elsewhere).”

The KGL transaction alone, being so substantial would be sufficient to satisfy the requirements (f) and this transaction, when put together with all the other Hong Kong related considerations that Miss Lau has referred to, amply and in combination satisfy the requirements of sub-paragraphs (f) and (p) to the extent of demonstrating a good arguable case that the conditions in these two sub-paragraphs have been shown to exist.

44.This being my view, Mr Burns must fail at this first hurdle.  From this I turn to the second element of the exercise under O.11 r.1 which requires the Plaintiff to show that its case on its merits, as they presently appear, demonstrate the existence of a serious issue to be tried — in other words that there are reasonable prospects of success at the trial of the action.

A Serious Issue to be Tried

45.At this stage, the evidential burden is less onerous as a pure evaluation of the current state of the evidence on paper.  Nevertheless, Mr  Burns has also addressedthe issue from the aspect of a limitation defence which, quite rightly, had been foreshadowed by Mr Barlow at the ex parte stage in drawing this to the ex parte judge’s attention.

46.Mr Burns’ analysis is the following.  The alleged causes of action arose in 1996 and 1997 (so much being clear from paragraph 13 of the statement of claim).  The action is therefore time-barred unless the Plaintiff can successfully rely on section 26 Limitation Ordinance, Cap.347.  Mr Barlow had drawn to Beeson J’s attention that the section could be successfully invoked by virtue of fraudulent concealment on the part of the Defendants.  Reliance would be placed on the principles for a derivative action brought by a shareholder as an exception to the rule in Foss v Harbottle.  For shareholders in this case, one reads provisional liquidator.  Mr Burns’ response is that a provisional liquidator’s situation is not analogous to a shareholder’s in a derivative action and that even if the attempted analogy were a good one, this would not entitle the liquidators to rely on section 26.  For the purposes of section 26, the issue is whether the Defendants can be said to have concealed their wrongdoings from the Plaintiff company.  In this case, there was no concealment from the company nor from its creditors who now have an interest in the outcome of this action.

47.At the trial of the action by the vendors of the CDC shares brought by them against the Plaintiff in 2000 all had been made known.  The 1^st Defendant himself had made a witness statement on the Plaintiff’s behalf in the action and the course of events leading to the charging and subsequent sale of the shares by the charges was made known.

48.Additionally, Mr Burns argues that the Plaintiff had not been under the control of the 1^st Defendant.  The majority of the shares in the Plaintiff have been in hands of the 1^st Defendant’s trustee in bankruptcy since 1998.  This being so, the analogy with a derivative action could not succeed on that basis in any event and, if directors fail to act when they should have done so, majority shareholders (since 1998 the 1^st Defendant’s trustee in bankruptcy) can appoint other directors.

49.As to the provisional liquidators, they can do no better than the company where there has been no concealment.  In the 1999 action, the 1^st Defendant had given a witness statement on behalf of the company when all was revealed.  Mr Burns also submits that the provisional liquidators can do no better than the petitioning creditor, Dato Low who has obtained their appointment by Barma J in order to bring this action.  Dato Low has inexcusably delayed in having the provisional liquidators appointed to bring this, now time-barred action.  In this regard, Dato Low has sought to explain this delay due to his bad health.  The purported excuses put forward are heavily contested in the 4^th affidavit of the 2^nd Defendant from 2/96-103.  This detailed material, there to be read, is said to show that the delay is inexcusable and therefore liable to defeat any attempt by the Plaintiff to have the limitation period disapplied.

50.Mr Barlow’s response is that the limitation defence will need to be dealt with all in good time and certainly not now.  The Defendants can plead the limitation ordinance in their defence and this can either be disposed of by interlocutory summons in the due process of the action or left over to the trial itself.  Save for this issue, Mr Burns has not suggested that the statement of claim does not raise serious issues to be trial against these two Defendants.

51.Returning to the limitation defence, the order of proceeding, says Mr Barlow, is that the Defendants will plead limitation if they wish and the Plaintiff in reply will raise a plea under section 26 in its Reply.

52.My conclusion is that on this aspect, Mr Barlow’s analysis is the correct one and to raise a plea of limitation at this Order 11 stage is premature.  But, in any event, if I am wrong about that it seems to me that Mr Barlow has, in any event, correctly identified “serious issues” to be tried on limitation.  He has referred to these at paragraph 14.6 of his addendum to his skeleton argument.  What these are directed to are a challenge to the suggestion that there has been no concealment by the two Defendants in addition to Dato Low’s explanation for the delay.  The issues are, it seems to me, sufficiently in place at this stage for me to conclude that on limitation, the Plaintiff can show a serious issue to be tried.  As to the remainder of the issues in the action raised in the statement of claim leading to the commission of the tort of conspiracy to defraud, I do not believe that Mr Burns is able to gainsay, nor has he attempted to do so, that the case against the Defendants raise serious issues to be tried.

53.This being my view, had Mr Burns been able to say that the 1^st Defendant had not been personally served then, as a live issue, he would in my judgment have failed on the question of whether there was a serious issue to be tried.

Forum Conveniens

54.From this I now need to turn to the question of whether Hong Kong is forum conveniens.  Whereas, had Mr Burns succeeded on the two previous issues under O.11 r.1, I would have had no discretion and would have been required to set aside service of the writ out of the jurisdiction; in respect of forum conveniens, the exercise of my jurisdiction under this head becomes a discretionary one as to whether service out should be set aside.  For the avoidance of confusion, and in this regard Mr Burns has made the matter absolutely clear, the question of whether Hong Kong is forum conveniens in an application for service out of the jurisdiction is distinct from the separate and additional application for a stay based on forum non conveniens which Mr Burns has made in the event of his having totally failed in his attempt to set aside service of the writ out of the jurisdiction under O. 11 r.1.

55.The law on this subject is both well-settled and clear.  The onus is on the Plaintiff to show that Hong Kong is clearly and distinctly the forum conveniens in respect of this action.  It is unnecessary to go beyond the speech of Lord Goff of Chievely in Spiliada Maritime Corporation v Consulex Ltd, The Spiliada [1986] AC 460, subsequently adopted in Hong Kong in the judgment of Hunter JA in Louvet v Louvet [1990] 1 HKLR 670 and in the Lanka Muditha [1991] 1 HKLR 741 at 744, where the three stages process which the court is required to follow was summarised in this way:

“(I) Is it shown that Hong Kong is not only not the natural and appropriate forum for the trial, but that there is another available forum which is clearly or distinctly more appropriate than Hong Kong.

(II) If the answer to (I) is yes, will a trial at the other forum deprive the plaintiff of any legitimate personal or juridical advantages.  The evidential burden here lies on the plaintiff.

(III) If the answer to (II) is yes, a court has to balance the advantages of (I) against the disadvantages of (II) … Deprivation of one or more personal or juridical advantages will not necessarily be fatal to the applicant provided that the court is satisfied that notwithstanding such loss substantial justice will be done in the available appropriate forum … Proof of this … rests upon the applicant for the stay.”

Further reference can be made to pages 106-107 of the current edition of the White Book where the principles and the authorities from where the principles are derived are summarised.

56.In the course of his address on this aspect, Mr Burns has drawn addition to the salient features which he says point away from Hong Kong as the appropriate forum, and that the High Court of the British Virgin Islands, where the Plaintiff was incorporated and is registered, or the High Court of Singapore are the appropriate court for the trial of the action.  In this regard, it should be observed that it had originally been suggested that the US Bankruptcy Court was the appropriate forum but this has now been abandoned in favour of the British Virgin Islands or Singapore.

57.The particular features are that:

(i)      Both Defendants are resident outside Hong Kong;

(ii)     Neither of them has any business connection with Hong Kong;

(iii)    The 1^st Defendant has no assets in Hong Kong;

(iv)    The Plaintiff is a BVI company which never carried on a business here and therefore did not need to register under the Companies Ordinance,  its holding of shares in a Hong Kong listed company being immaterial.  The agreements under which it purchased the shares may have been governed by Hong Kong law but the contracts were made in Singapore;

(v)     The Plaintiff has in fact never had a place of business in Hong Kong.  In reality its place of residence has been where its central management and control has been, basically Singapore or Indonesia where the 1^st Defendant has resided;

(vi)    The acts complained of occurred outside Hong Kong;

(vii)   The law governing the duties of the Defendants as the Plaintiff’s directors is that of the BVI;

(viii)  Most of the relevant witnesses reside outside Hong Kong.

58.Mr Barlow’s response as to the BVI High Court as the appropriate court is that there is no question that Hong Kong has a far stronger connection to this dispute than the BVI.  The BVI connection, although fundamental in the sense that this is where the Plaintiff was incorporated and registered, goes no further than that.  It has never traded there.  The Plaintiff’s only business has been conducted in Hong Kong.  He also points to the fact that Barma J has decided that Dato Low, as the petitioning creditor in HCCW 382/2007 has a good prima facie case for petitioning for the winding up of the Plaintiff in Hong Kong based on unsatisfied Hong Kong judgment debts and, for the consequential appointment of the Plaintiff’s provisional liquidators.  In such circumstances vis-à-vis the BVI Hong Kong is the appropriate forum.

59.In relation to Singapore as the appropriate forum, where Mr Burns has additionally referred to the fact that this is the place where the Plaintiff’s central management and control is based, this being where the Defendants reside and do business from, reliance for this consideration being placed on Re Harrods [Buenos Aires] Ltd [1992] Ch 72, and he has also relied on the fact that, on his analysis, Singapore is where most, if not all, the relevant acts in this action took place.

60.Mr Barlow’s reply on Singapore raises a number of factors favouring Hong Kong over Singapore as the natural forum.  None of these are by themselves conclusive but, he says, that taken cumulatively they present an overall picture favouring Hong Kong as the correct venue for the trial of the action.

61.The Plaintiff is being wound up here and the liquidators bring this action on its behalf under Barma J’s mandate “to consider and if thought advisable to commence such actions as may be necessary to protect, recover or obtain assets and/or monies belonging or due to the company”.  As such the liquidators are recognized by this court whereas the courts of Singapore are not required to recognize them there.  Mr Barlow submits that it is not possible for parallel winding-up proceedings to be brought in Singapore because the Plaintiff’s creditors cannot establish a jurisdictional basis to wind-up the Plaintiff in Singapore.

62.In relation to this, he has relied on section 351 and section 366 Companies Act in Singapore to make good this submission.  Section 351 is concerned with the winding-up of unregistered companies which includes a foreign company such as the Plaintiff [see section 350].  Whilst Mr Barlow has contended that these provisions, principally section 351, indicate that winding-up proceedings there would not be possible because the creditors would have no jurisdictional basis to seek a winding-up, I am most reluctant to pronounce on the way that the Companies Court at Singapore would approach such a matter without expert evidence on Singapore law and practice notwithstanding the similarities of the laws of that country with our own and with that of England and Wales from which the legislation both here and in Singapore is derived.  And so on this ground, I do not feel able to say, one way or the other, how the Singaporean court would view any parallel winding-up petition and therefore I propose to place no weight on this part of Mr Barlow’s submission.

63.Additionally, Mr Barlow refers to the fact that both Defendants have had business dealings here and retain business connections in Hong Kong and that the Plaintiff’s only business transaction has been in Hong Kong where it purchased its shareholding in CDC and that most of the acts about which the Plaintiff complains occurred in Hong Kong.  As to the convenience of witnesses, Mr Barlow says that they either live here or prefer to give their evidence here as they did at the trial before Waung J when judgment was entered against the Plaintiff company for the price of the unpaid shares.  Although the Defendants prefer not to give evidence in Hong Kong doing so would cause them very little inconvenience given the relatively short distances involved and their previous attendances here.  Further, in the 1^st Defendant’s case, he was content to allow the trial of the action against the Plaintiff company before Waung J to proceed here and he provided a witness statement for that purpose.

64.It is very plain from the above discussion that there are factors which undoubtedly favour this jurisdiction whilst there are others which favour and make this case more amenable to a trial in Singapore.  Nothing material indicates that the BVI would be the place for trial.

65.The burden at this stage is on the Plaintiff to show that Hong Kong is not only the appropriate forum but clearly and distinctly so. In approaching this, the court does not go through a process of “loading up the factors which point to a particular jurisdiction in an abstract way and then decide which jurisdiction can garner a longer list favouring it.  I should focus on the appropriateness of the competing forums in the light of the factors from the point of view of the matters actually likely to arise in the trial of the action [see New Link Consultants Ltd v Air China & Ors [2004] 366 at para.53].

66.In my judgment, whilst one needs to recognise the strong connections of this dispute with Singapore having regard to the Defendants’ residence there which will result in both of them having to travel here to defend the action and that most of the charges relating to the shares were executed in Singapore, the fact remains that Hong Kong also has strong links to this dispute which I have already had to refer to in considering the various issues under O.11 r.1.  When once stands back and assesses the matter overall, including not only the “HongKongcentric” features, as I have referred to them, it is also highly significant that there have been two previous pieces of litigation concerning the activities of the Plaintiff company when the Defendants were its directors, in Hong Kong.  Firstly, the action before Waung J when the unpaid creditors obtained judgment under the sale by them of their holdings in CDC and, more recently, the presentation of the winding-up petition before Barma J and his appointment of the Plaintiff’s provisional liquidators.  In the case of the action before Waung J, as I have already noted, the 1^st Defendant in particular was content to let the matter proceed here and he participated as witness on behalf of the company.  In the winding-up petition, the judge decided that the connection with Hong Kong were sufficiently firm to justify the presentation of the petition in this court and for the appointment of Hong Kong provisional liquidators.  Given these factors and, on an overall appreciation of the competing features, weighty as some of them are in favour of Singapore, it is still my judgment that Hong Kong is not only the appropriate forum but that it is distinctly so. There has also been much argument as to whether the courts of Singapore will be able to provide a fair trial of the action given the fact that the 2^nd Defendant is a member of the family of Mr Lee Kwan Yu and that this might be a weighty factor in determining the outcome of the trial. For my part, where I have already decided that Hong Kong is forum conveniens it becomes unnecessary for me to express any view on this aspect and I do not propose to.

67.I understood Mr Burns as also raising forum conveniens as a separate ground for a stay of the action which is distinct from the various arguments on Order 11 r. 1. In making such an application the burden goes the other way and it falls on the applicant for the stay to show that Hong Kong is not only not the natural and appropriate forum but that Singapore /BVI is clearly or distinctly more appropriate than Hong Kong. Given that I have already held that when the burden was on the Plaintiff to show that Hong Kong is the appropriate forum it must, as a matter of course, follow that in the face of that assessment by me that Mr. Burns is now not able to carry this onerous burden, now reversed and against him. Accordingly, I decline to stay the action. The action must therefore proceed in this court. From this I now turn to consider whether I should discharge the Mareva Injunction.

The Mareva Injunction

68.In seeking the discharge of this injunction, Mr Burns says that where the essential evidence is that of Dato Low [3/60-113], as adopted by Ms Lau [2/10-38], which he submits has now been shown to be lacking in frankness, the court should exercise its discretion in the 1^st Defendant’s favour and discharge the injunction.  He has referred in particular to Dato Low’s explanation for the delay in bringing the action for which he refers to the 2^nd Defendant’s affirmation [2/85-109].  Mr Burns describes these issues as material and represent, as he puts it, a deliberate policy on the part of Dato Low to omit relevant evidence amounting to a lack of frankness.  These are matters which at the ex parte stage should have appeared in the evidence in support of the injunction and stated fully and truthfully, which they were not, and so at the inter partes stage should be held against the applicant for the injunction and sound in the discretion as a reason for not continuing the order.

69.Mr Burns has made the additional point that, in any event, there are no available assets here or elsewhere to which an injunction could attach.  Certainly, there is nothing in Hong Kong and assets overseas are vested in the 1^st Defendant’s trustee in bankruptcy.

70.Mr Barlow’s response is that Chu J has already made an inter partes order continuing the injunction against the 1^st Defendant until trial and so it is now not open to him to seek its discharge.  His only route, presumably, would be to appeal against Chu J’s order.  Mr Barlow has also referred to the fact that the summons for a discharge is pleaded or the basis that the injunction would have to be discharged “consequentially”, on the success of the previous issues raised as to service of the writ, the O.11 r.1 issues and the application for a stay based on forum non conveniens.  As all of these issues have been resolved against the 1^st Defendant, he is unable to obtain a “consequential” discharge and the injunction should therefore remain in place.

71.As to this latter point, it seems to me that Mr Burns in entitled to have his application for a discharge heard out on its merits, the 1^st Defendant having always taken the attitude that the court had no jurisdiction over him.  Now that it has determined that it has, he is entitled to avail himself of the opportunity to seek a discharge on the merits.

72.As to the merits, I feel able to deal with the matter shortly.  It strikes me that the Plaintiff has amply demonstrated a good arguable case.  All the elements for the grant of such an order are present, as Chu J must have determined when she made the order originally.  The matters raised as to a failure to make full and frank disclosure of the relevant material, including the reasons for the delay in bringing these proceedings, have not been made out by the 1^st Defendant.  What he has raised are essentially matters which cannot be resolved without cross-examination.  They remain as contested live issues on the affidavits which cannot, at this stage, be sufficiently resolved against Dato Low to enable the court to have regard to them in the exercise of its discretion as to whether the injunction should be discharged without recourse to the merits of the application for such an order.

73.This being my view, Chu J’s order on the injunction will remain in place until the trial of the action.

The 2^nd Defendant’s Summonses

74.The ground covered by the 2^nd Defendant’s summonses, that of 3 December 2007, for which an amendment is sought by the summons of 10 January 2008 [1/56-57] is, unsurprisingly, for all intents and purposes, identical to that of the 1^st defendant, where both Defendants are seeking orders to set aside service of the writ on them outside the jurisdiction and for a stay based on forum non conveniens.  Mr Barlow has objected to the terms of the 2^nd Defendant’s amendment summons, but it seems to me that where this is no more than a process designed to comply with the requirements of O.12 r.8 and which will cause the Plaintiff no procedural disadvantage, the basis of the amendments all appearing in the affidavits filed in support of the original defective summons, I should exercise my discretion to make the order applied for under this summons.  These amendments are clearly of the type contemplated by O.20 r.8 and as the note at 20/8/6 shows, the guiding principle is that all amendments ought to be made for the purpose of determining the real question in controversy between the parties or (and this is what this summons is about) correcting any defect or error in any proceedings where the summons as originally drafted has failed to set out the grounds upon which the relief asked for is based.  Where these grounds are clearly referred to and developed in the timeously filed affidavits in support, and the Plaintiff has had ample time to consider the summons and respond to it by affidavit, I am going to allow the amendments asked for.

75.The position of the 2^nd Defendant, which is so strongly advanced by Mr Coleman SC, is perhaps more compelling than that of the 1^st Defendant because, in terms of shareholding and control of the Plaintiff, his part has undoubtedly been less significant.  He only held 20% of the shares and he says that he resigned his directorship, albeit strongly disputed by the Plaintiff, by a letter dated 17 July 2000 addressed to the Plaintiff’s solicitors Wilkinson & Grist in Hong Kong [7/1459].  Additionally, the distinct impression gained from a reading of the affidavits and the other documents is that the 1^st Defendant was the principal participant behind the transactions that have given rise to the action.  This being said, as a matter of analysis, the matter lies only as one of degree, where both of them had together been directors and shareholders.

76.Mr Coleman’s objection to the Plaintiff’s purported compliance with the elements of O.11 r.1 are the same as the those taken by Mr Burns for the 1^st Defendant, with appropriate emphasis on the individual aspects of the 2^nd Defendant’s factual involvement.  I am required to give the 2^nd Defendant’s objections separate treatment although where a joint liability is alleged against them, on what are said to be common facts and participation, I need to examine the evidence to determine whether on any vital issue, the 2^nd Defendant’s case is such that the conclusions that I have already arrived at in the1st Defendant’s case can be said to be inapplicable to him.  I will take each of the O.11 r.1 stages in turn in my examination of the case against him.

O.11 r.1 (f) and (p)

77.Leaving aside the effect of the purported letter of resignation of the 17 January 2000 in determining the time-line of the 2^nd Defendant’s alleged involvement, it seems to me that the conclusions that I have arrived at under this head in the case of the 1^st Defendant must equally apply to the case of the 2^nd Defendant.  If I am correct in concluding that a good arguable case has been shown as against the 1^st Defendant for saying that the facts come within the terms of these two sub-paragraphs then my reasoning must logically also apply to that of the 2^nd Defendant.

78.This being my view, the Plaintiff must succeed on this issue against the 2^nd Defendant as well.  The relevance of the letter of resignation comes into play at the next stage which relates to whether it can be shown, between this Defendant and the Plaintiff, that there is, on the merits, a serious issue to be tried.

A Serious Issue to be Tried

79.At this stage, Mr Coleman rightly accepts that the court will primarily look to the Plaintiff’s case and not attempt to try disputes of fact on the affidavits.  This said, Mr Coleman, I think correctly, submits that it remains open to a Defendant to show, if he can, that the evidence of the Plaintiff is either incomplete or wrong.  In this regard he has referred to the limitation defence that Mr Burns has relied on and which I have already held will not run at this stage, particularly on disputed facts as to its application.  Insofar as Mr Coleman relies on this matter as well he too must also fail.

80.The purported letter of resignation sent by the Defendant in July 2000 is important because it goes to the issue of when and whether the 2^nd Defendant had any control over the Plaintiff’s affairs.  Mr Coleman draws attention to a number of facts.  Firstly, he says that there is only limited evidence that the 2^nd Defendant was a shareholder and, at all events, he was only a minority shareholder.  In this regard, it seems to me that there is ample evidence that he was a 20% shareholder and at this stage, as to shareholding, the Plaintiff need go no further.  Of more importance is the question of his directorship.  The 2^nd Defendant says it was only from 16 May 1996 to 17 July 2000.  As to his resignation, Mr Coleman says that the evidence is really one way, that he did resign in July 2000 and that had there been evidence to contradict this, the Plaintiff would have produced that evidence.  This being so the two Defendants could not have conspired together, at the latest since July 2000.

81.On this issue, Mr Barlow submits that when one considers the fact of the 2^nd Defendant’s signature on the Commerzbank charge over CDC’s shares [5/786-790] and the letter of resignation of July 2000, the authenticity of which is not accepted, the truth of the matter is that the 2^nd Defendant together with the 1^st Defendant remained in control of the Plaintiff during the period covered by the allegations in the statement of claim and amply demonstrates a serious issue to be tried on this important element of the case.  If anything, says Mr Barlow, it shows that they remained directors until their removal from the Board by virtue of Barma J’s order of 27 August 2000.

82.Whilst there is evidence going both ways on the question of control of the company by both Defendants, the facts show that on date well before July 2000 and before the intervention of the 1^st Defendant’s trustee in bankruptcy in 1998, the Plaintiff’s company, whilst both Defendants were its directors, entered into the charging arrangements with the various financial institutions and thereby that these arrangements put the company into a position of insolvency.  At this stage therefore, faced with a relatively modest burden of showing a serious issue to be tried, the Plaintiff must, it seems to me, have done enough to involve the 2^nd Defendant’s participation in all of the matters complained of in the statement of claim and so on this aspect as well, the 2^nd Defendant must be taken to have failed in his challenge on O.11 r.1.

Forum Conveniens

83.As in the case of the 1^st defendant, at this O.11 r.1 stage the plaintiff bears the onus of showing that Hong Kong is the appropriate venue for the trial of the action.  I do not think that it is necessary to repeat here the principles which govern this aspect.  I have already referred to them when considering the case of the 1^st Defendant.

84.As to the factual considerations, in this regard Mr Coleman has proposed nine separate reasons why the Plaintiff cannot establish that Hong Kong is the appropriate venue for the trial of the action, [see para.49 of his skeleton] which he has further developed in the course of the argument.

85.Many are common to both defendants.  Both are not resident in Hong Kong.  The Plaintiff is a BVI company.  It has never traded in Hong Kong.  It had no office in Hong Kong.  The contracts for the purchase of the shares were entered into in Singapore and the pledging of the shares was largely done in Singapore.  The vendors of the shares are not Hong Kong residents.  He therefore submits that most of the witnesses will have to travel here to give evidence.

86.In reply, Mr Barlow’s submissions largely adopt what he has said against the 1^st Defendant.  As to the 2^nd Defendant’s connection with Hong Kong, he points to the fact that he and his wife continued to retain a home here.  Where it has been said that neither Defendant has any assets in Hong Kong which might further cement their connection to this jurisdiction, Mr Barlow invites me to treat that assertion with reserve at this stage where, as yet, they have not made disclosure of their assets which they would have to under the terms of the Mareva injunction.  As to the Plaintiff’s place of business, Mr Barlow submits that, if anything, Hong Kong has been its only place of business where it was set up, albeit incorporated in the BVI, to hold the Hong Kong-listed CDC shares.

87.Again whilst recognising the features that might properly be said to tie the action to Singapore, it seems to me that really, for the reasons that I have already given, Mr Barlow has succeeded in showing that Hong Kong is distinctly the appropriate forum for the trial.  The whole history of this case given the 1999 action which created the judgment debt against the Plaintiff, the winding-up proceedings here and the other features to which I have referred place this matter within this jurisdiction.

88.In an O.11 r.1 enquiry, if I can so describe this procedure, the fact that the case is shown to come within one or other of the sub-paragraph’s to O.11 r.1(1) will, as it were, have got the ball rolling in establishing a connection with this jurisdiction as a justification for serving the writ abroad and bring a defendant out of the jurisdiction to a trial here.  That this is so in this case is plainly highly relevant, added to which are the other Hong Kong features which I have referred to and which Mr Barlow has relied on and which combine to establish this as the proper place for the trial of the action.

89.Having failed on forum within the setting of O.11 r.1, it must follow that Mr Coleman will not be able to carry the day with the forum burden reversed and on him in applying for a stay.  The action against the 2^nd Defendant as well must therefore proceed in this court.

The Mareva Injunction Against the 2^nd Defendant

90.As to this, Mr Coleman starts by correctly laying out the five matters to which the court has regard before it will give a domestic Mareva injunction.  These being a good arguable case, assets within the jurisdiction, the balance of convenience favouring the grant of the injunction, the risk of dissipation and compliance with the duty of full and frank disclosure.  In addition, in order to obtain a world-wide order, there is the requirement of showing that it is likely that the assets in Hong Kong will not be sufficient to satisfy the judgment and that there are assets overseas in addition to those in Hong Kong.

91.In this regard, Mr Coleman submits that the Plaintiff cannot even clear the first hurdle and that even if it can then, as a matter of discretion, where the Plaintiff has delayed from 2001 when Waung J entered judgment, to 2007 when the winding-up petition was presented and this action was started, which delay has not been satisfactorily explained, the court should not now come to, in effect, Dato Low’s aid by affording him, through the liquidators, draconian interlocutory relief in the form of a world-wide Mareva injunction.

92.As to whether a good arguable case has been made out, it seems to me that on the current state of the evidence, which is that the two Defendants were able to charge the Plaintiff’s only assets, its shares in CDC, without any explanation other than to raise money to come to the assistance of third parties, which put the plaintiff into a state of insolvency, it seems to me that the liquidators have, at the very least, been able to make out a good arguable case based on the way that the matter is pleaded in the statement of claim.  As to delay, insofar as it is said Dato Low’s delay should be equated with that of the liquidators, he has provided a reasonable explanation based on his ill-health following the obtaining of the judgment from Waung J.  I am satisfied that all the requirements for obtaining a world-wide injunction are present against this Defendant as well and I propose therefore to allow the injunction to go on its presently adjourned terms from now until trial.

Costs

93.Where the Plaintiff has prevailed on every issue, I had considered whether it should have its costs in any event but, I would have thought that the more correct order should be Plaintiff’s costs in the cause which will be an order nisi.

Barrie Barlow SC, instructed by Messrs Heller Ehrman, for the Plaintiff

Ashley Burns SC, instructed by Messrs Tanner De Witt, for the 1^st Defendant

Russell Coleman SC, instructed by Messrs Deacons, for the 2^nd Defendant