Submitting to the Jurisdiction

CHAN HON V. BAYER HEALTHCARE LIMITED, BAYER DIAGNOSTICS LIMITED AND BAYER WEIMAR GMBH UND CO. KG [2020] HKCA 1090

On 31 December 2020, the Court of Appeal in this case allowed the appeal of the 2nd & 3rd Defendants and found that they had not submitted to the jurisdiction of the Court of Hong Kong SAR (“Hong Kong”).

In this case, the Deceased had consumed pills distributed and manufactured by the 1st & 2nd Defendants respectively. Ingredients of the pills were provided by the 3rd Defendant. The 1st Defendant was a Hong Kong incorporated company. Both the 2nd & 3rd Defendants were German companies. The Plaintiff, being the administrator of the Deceased’s estate, was/is suing the Defendants for damages for committing tortious acts in manufacturing, distributing and/or causing to be distributed those pills in Hong Kong, which in turn caused the death of the Deceased.

In determining the question of whether the 2nd & 3rd Defendants submitted to jurisdiction, the Hon. Peter Cheung JA (giving judgment of the Court) stated that “the crux of the matter was whether the conduct of [solicitors] at the hearing was ‘wholly unequivocal’ that the disinterested third party would conclude that the 2nd & 3rd Defendants were submitting to jurisdiction” (see para. 4.45 of Chan Hon).

The learned Justice of Appeal went on to find that “the conduct was equivocal having regard to what the 2nd and 3rd defendants had actually agreed in respect of the procedural directions that were given by Master Yu” (see also para 4.45 of Chan Hon).

For those reasons, the Court of Appeal held that the Judge, hearing the 2nd & 3rd Defendant’s application de novo, “was wrong on the issue of submission to jurisdiction” (see para 4.46 of Chan Hon).

With the abundance of local judgments involving the challenges of jurisdiction in the last decade or two, it is apparent that foreign litigants still face real risks of submitting to jurisdiction, often times almost unnoticeably, when involved in local litigations. Aspects such as the complexity of the factual matrix of individual cases, the acute time constraints stipulated by Order 12 rule 8 of the Rules of the High/District Court and the rigid perimeters embedded in those rules could well be the non-exhaustive reasons prompting those unnoticeable submissions.

HONG KONG IN THE GREATER BAY AREA, 2021 & BEYOND

Ranked as the world’s freest economy as mentioned in the Hong Kong Trade and Industry Department’s Fact Sheet of June 2021 and being one of the leading international financial centres in the world as per the Global Financial Centres Index Report published on 17 March 2021, Hong Kong would likely to remain a growing city for international trade and commerce.

Being a key trading partner of mainland China, Hong Kong certainly would continue to have a proactive role in the development of the Greater Bay Area through enhancing its economic functions and facilitating the expansion of several industries within the region (see, example, publications on “Greater Bay Area” published by the Constitutional and Mainland Affair Bureau of the Government of Hong Kong). At the same time, the Greater Bay Area would continue to grow as an ideal place for living, working, and travelling, alongside with “the rule of law being a hallmark of civilization’s progress in China”, according to the CPC Central Committee’s Issuance of the Implementation Plan under the Rule of Law of China (2020-2025), published by the Central Government of China.

It would be apparent that civil and commercial disputes touching on provisions of O.12, r.8 would continue to be an inevitable, if not a growing, feature in the Courts of Hong Kong.

CONDUCT AMOUNTING TO SUBMISSION

To help preventing falling for the inherent pitfalls of submitting to the jurisdiction of Hong Kong, often time unnoticeably, foreign litigants (or indeed their solicitors) should be very alert of the conducts that could amount to an acceptance/submission as such.

An application to the Court could be an easy trap. Conducts that could amount to submission include an application for security for costs (Shenzhen CTS International Logistics Co Ltd v Dajiang International Investment Co Ltd [2017] HKEC 858), the service of a defence (Chau Oi Fung [2014] HKEC 1828), accepting service of proceedings in Hong Kong (PT Krakatau Steel (Persero) v Mount Kerinci LLC [2009] 1 HKLRD 264), an application to strike out (B. Chainrai v Kushnir Family (Holdings) & Others [2019] HKCFI 2866 and Winnitex Investment Co Ltd v Oxford Products (International) Ltd [2005] HKEC 44), among others. To prevent such submission, as commented by Judges at different levels of Courts, the Defendant must provide a clear reservation of right, for instance, through a cover letter or in the preamble to the defence (Miruvor Ltd v Panama-Globe Steamer Lines SA & Ors [2007] HKCA 49).

There are circumstances that arise, however, whereby a litigant could have waived his/her right to challenge jurisdiction by filing a procedural application, such as one for an Unless Order. In B. Chainrai v Kushnir Family (Holdings) & Others, [2019] HKCFI 234, Master Eliza Chang held that the 3rd Defendant had submitted to the jurisdiction of the Courts of Hong Kong in his application for an unless order requiring the Plaintiff to file and serve a Statement of Claim within 7 days or otherwise have their claim dismissed. At the hearing before the learned Master, she contended that the 3rd Defendant, by complying or taking out applications regarding to the procedure of the pleadings, it connotes that the 3rd Defendant did indeed want the action to be tried in Hong Kong. Mr. Recorder, Charles Manzoni SC, hearing the 3rd Defendant’s application de novo, ruled that “the application for an unless order, or the consequential consent summons…..are sufficient to demonstrate an acceptance of the jurisdiction of the Hong Kong Courts” (see paragraph 64 of B. Chainrai, the ‘2866’ judgment).

An Unless Order indeed has the effect of being granted as a last attempt following the inability for an opposite party to comply with specific directions. Arguably, a party by issuing an application for Unless Order would be the party to gain relief from the said potential Consequences from the failure of that opposite party to comply with said Unless Order.

For those readers who are more familiar with civil procedures would readily know that among the many, or indeed to many, types of applications any litigants could make in a civil/commercial action, an application for “Unless Order” is only just one of them. So, taking the learned Recorder’s wisdom as expressed in the Chainrai case, foreign litigants and their solicitors must be very careful of not taking any action in the proceedings that would amount to an acceptance of the jurisdiction of the Hong Kong Courts, be those applications being ones for “Unless Orders” or for other relief which could trigger the threshold of acceptance/submission.

The observation of Mr. Recorder Charles Manzoni SC also coincides with the position of the Hon. Robert Goff LJ in Astro Exito Navegacion SA v Hsu [1984] 1 Lloyds Rep 266 in that voluntary submission to jurisdiction arises “if [a party] takes a step in the proceedings which in all the circumstances amounts to a recognition of the court’s jurisdiction in respect of the claim which is the subject matter of those proceedings”. Similarly, the Third Case of Dicey (described as Rule 43 of Dicey & Morris in The Conflict of Laws) stated that “where [a party] does indeed contest the jurisdiction but nevertheless proceeds further to plead to the merits, or agrees to a consent order dismissing the claims and crossclaims, or where he fails to appear in proceedings at first instance but appeals on the merits”. Whilst these are examples from United Kingdom judgments, one can appreciate the similarities of the Courts’ approach when it comes to the waivers of a party’s right to challenge the Court’s jurisdiction.

When Hong Kong will continue to be a pivoting trading and commercial port of the world and that for as long as the submission to jurisdiction would remain a core feature in our legal system, foreign litigants and local legal practitioners alike should pay necessary attention to the mechanics of O.12, r. 8.

IMPLICATIONS AND CONCLUSION

An express reservation allows the Defendant to dispute jurisdiction later on (e.g. New Link Consultants Ltd v Air China [2005] 2 HKC 260). Additionally, the Court of Appeal in Chan Hon specifically requests Judges and Masters responsible in the Personal Injuries List to ask foreign parties to indicate in interlocutory questionnaires whether the challenge to jurisdiction is being contemplated.

One distinct impression reading the various judgments mentioned in this article was that as for foreign litigants (at times local litigants as well) could well have the opportunities to escape being caught in litigating in the Courts of Hong Kong, but for their own conducts inadvertently submitted to or otherwise accepted the jurisdiction.

The authors, have both been involved in litigating the point (and luckily won for the clients involved) and/or also having studied the number of judgments as cited or referred to in this article, would certainly wish to share the judicial wisdom as shown in those judgments to alert fellow practitioners and litigants in similar position to avoid the painful experience being caught by the provisions of O. 12, r. 8 and thereby stuck having to litigate in the Courts of Hong Kong when the jurisdiction could otherwise be avoided. 

Jurisdictions: 

Partner, WMC Partners

Apart from managing the firm founded in 1998, Henry’s practice is mainly in civil and commercial matters, both contentious and non-contentious, oftentimes matters with difficult factual and/or legal issues, and oftentimes coming with a fair bit of urgency. Henry was admitted as a solicitor in New South Wales, Australia (1989), in England and Wales (1992) and in Hong Kong (1992). He is also a Fellow of the CPA, Australia (Associate in 1989, Fellow in 2010), and a keen promoter of mediation in dispute resolution since about 2008.

Paralegal, WMC Partners

Upon completing her LL.B. degree at the University of Warwick, Tanya took the year working as a paralegal at WMC Partners before commencing her PCLL in August 2021. With the firm’s broad range of practice areas mainly in civil and commercial matters, in commercial disputes, Tanya assists partners of the firm in both local and cross-border litigation, acting for a wide range of clients including individuals, educational institutions, private equity funds/partners and multinational companies. Tanya is diligently building up her knowledge and insight of the law in real-life practice.