Defend and submit: Challenging the jurisdiction of the Court
A defendant who wishes to challenge the civil jurisdiction of a Hong Kong court should not file and serve a defence pending the outcome of the challenge.
That will amount to a submission to the court's jurisdiction. Rather, a defendant and its legal advisers should apply to challenge the court's jurisdiction in the time allowed for service of a defence. Cases in Hong Kong in which service of a defence has occasionally not been deemed a submission to jurisdiction are best explained on their facts and do not, in our opinion, reflect normal practice.
Accordingly, if you mean to challenge the court's jurisdiction, do so promptly. Focus effort on that challenge; if it fails, then effort can be concentrated on the preparation of a defence.
In the recent case of 杭州天道實業有限公司 v Chau Oi Fung(1), the defendant applied to challenge the court's jurisdiction, but a day later went ahead and filed and served its defence.(2) The defendant also applied for security for its costs on the basis that the plaintiff was a company based outside the jurisdiction (in Mainland China).
The defendant's application to challenge jurisdiction was dismissed, with costs in favour of the plaintiff. The court held that service of defendant's defence amounted to a voluntary submission to jurisdiction; therefore, the court had jurisdiction to determine the case "as of right", as opposed to an exercise of discretion. The unqualified service of a defence gave the court jurisdiction over the defendant.
In Hong Kong, there is some common law authority for the proposition that the filing (at court) and service (on the plaintiff) of a defence will not be construed as a submission to jurisdiction where it is done in a qualified manner, such that the defendant is clearly reserving its right to challenge jurisdiction. Examples might include: a defence that contains provision that it is filed without prejudice to the defendant's application (already made) to challenge jurisdiction and/or a covering letter that also makes this unequivocally clear.
However, it should be noted that this authority (Miruvor Ltd v Panama-Globe Steamer Lines SA & Ors) is best explained on its facts.(3)
In the Miruvor case, the then Vice-President of the Court of Appeal in Hong Kong had this to say:
"One matter, which is not wholly unimportant, is that Order 12 does not provide that the making of an application to set aside the service of a writ absolves a defendant from serving a defence."
"When the absence of a rule suspending time for service of a defence, such as is contained in the CPR, is borne in mind, it is not wholly incomprehensible that a cautious legal adviser might consider it appropriate to have a defence ready on file whilst at the same time making it clear that jurisdiction was being challenged."(4)
In our opinion, this is not meant to be read as an endorsement of a practice of filing and service of a defence while at the same time challenging the court's jurisdiction. Indeed, the practice as understood in Hong Kong is that a "cautious legal adviser" in these circumstances would do nothing to prejudice a defendant's position.
Service of a defence will normally amount to a voluntary submission to the jurisdiction of the court, such that the court can assume jurisdiction over a defendant as of right and without an exercise of discretion.
Therefore, a defendant who wishes to challenge the jurisdiction of the Hong Kong court should acknowledge service of the writ within time and then, within the time allowed for a defence, take out an application (supported by evidence) to challenge the court's jurisdiction. It is important for a defendant to observe these time periods. An application to challenge the court's jurisdiction prevents the plaintiff in the meantime obtaining judgment by default.
A defendant and its legal advisers should concentrate efforts on the challenge to jurisdiction. Indeed, even if a defendant reserves its right to challenge jurisdiction, it is difficult to see what benefit is obtained by filing and serving a defence in the meantime.
In an application to challenge jurisdiction a defendant can respond to the alleged merits of the plaintiff's claim, although the focus of the application will be more procedural; for example, seeking to have the writ set aide on grounds of procedural irregularity or the proceedings stayed on the basis of the court's discretion.(5)
Furthermore, a defendant and its legal advisers should be careful not to do anything that may affect the court's discretion to accept jurisdiction. For example, in Chau Oi Fung the court noted that the defendant had applied for security for costs against the plaintiff at the same time as challenging the court's jurisdiction.(6) Where grounds exist, an early application by a defendant for security for costs is often good practice, but this can usually wait until the determination of an application to challenge the court's jurisdiction. A defendant who seeks relief from the court pending an application to challenge jurisdiction increases the risk of being taken to have invoked the court's jurisdiction (the very thing a defendant is seeking to avoid).
For further information on this topic please contact Jonathan Cary.
(1) HCA No. 488 of 2014.
(2) Rules of High Court - Order 12 rule 8 ("Dispute as to jurisdiction").
(3) CACV Nos. 225 and 226 of 2006.
(4) At paragraphs 8 and 9. The reference to CPR is to the English Civil Procedure Rules; in particular, Part 11(9).
(5) Setting aside on the basis of procedural irregularity and stays on the basis of a more convenient forum can be complicated and are a subject for another day.
(6)The plaintiff company is stated to be a company established in Mainland China.
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