HONG KONG COURT FINDS THAT DEFENDANT WAIVED RIGHT TO CHALLENGE JURISDICTION

Israel Sorin Shohat, the Third Defendant in proceedings commenced by Mr Balram Chainrai, sought to challenge the jurisdiction of Hong Kong courts to hear a matter related to an Israeli arbitral award issued in 2013. The court held that, while the deadline for challenging jurisdiction had not passed, Shohat had ultimately taken steps which indicated that he had submitted to the jurisdiction of the Hong Kong courts and therefore waived his right to challenge.

Balram Chainrai v Kushnir Family (Holdings) Ltd [2019] HKCFI 234

Background

See our previous discussion of this matter here. In the latest developments, Shohat alleged that he did not submit to the jurisdiction of the Hong Kong courts and was therefore entitled to challenge jurisdiction under Order 12, Rule 8 of the Rules of the High Court, which defines the deadline for challenging jurisdiction as 'the time limited for service of a defence'. In response, the Plaintiff argued that:

1. the court could not hear Shohat's application as he failed to make an application to challenge jurisdiction before the time limit for service of a defence
2. Shohat has taken steps invoking the court's jurisdiction

Questions before the court

While Shohat and the Plaintiff made a number of allegations beyond those listed above, the court only found it necessary to consider the following questions:

1. Whether it had jurisdiction to hear Shohat's application or was precluded from doing so as a result of his alleged failure to comply with the time limits under Order 12, Rule 8 of the Rules of the High Court
2. Whether the steps taken by Shohat invoked the court's jurisdiction, such that he waived the right to challenge

Decision

Regarding the first question, the court held that it had jurisdiction to hear Shohat's application. It found that the deadline for challenging jurisdiction under Order 12, Rule 8 was within the time for filing a defence, however this should take account of any extensions of time. Shohat received numerous extensions and consequently, the deadline for filing was 28 days after the disposal of the Strike-Out application. The court held that, as the Strike-Out application was disposed of on 4 January 2018 and this application was commenced on 31 January, the time had not expired for Shohat's challenge to jurisdiction.

With respect to the second question, the Court held that Shohat had submitted to the Hong Kong court's jurisdiction and therefore waived his right to challenge as a result of the following actions:

1. On 11 February 2016, he made an application under Order 3, Rule 5 of the Rules of the High Court, requiring the Plaintiff to file and serve a Statement of Claim within 7 days or otherwise have their claim dismissed. This was followed by a Consent Summons 7 days later. The court held this had 'invoke[d] the Court's jurisdiction without reservation or any intention to challenge the jurisdiction and those conducts … could be viewed as an unequivocal indication or intention … to have the case tried in Hong Kong.'
2. On 9 March 2016, he requested an extension on the time for filing a 'Defence and Counterclaim, if any, and/or to make such application as may be appropriate pursuant to Order 12, rule 8'. However, he did not 'expressly and clearly reserv[e] the right to challenge the court jurisdiction and … clearly indicate that the Strike-Out Summons was made without prejudice [to any future application under Order 12, Rule 8]'.
3. On 3 May 2016, he commenced Strike-Out proceedings for this matter in Hong Kong, in part based on res judicata issues arising as a result of both the prior arbitration, as well as specific reasons for refuting the Plaintiff's Statement of Claim. Again, the court noted that the right to challenge the court's jurisdiction was not expressly reserved until two weeks after this application was made and when a letter reserving the right was produced, the wording did not clearly indicate 'that the Strike-Out Summons was made without prejudice to the Order 12 Rule 8 application' but only that an Order 12, Rule 8 application would be filed if the Strike-Out application failed. Instead, the Strike-Out application 'was an application under the general jurisdiction of the court to have the action conclusively determined by dismissal.'

Discussion

Importantly, this finding demonstrates that parties seeking to challenge the jurisdiction of a Hong Kong court should expressly and clearly reserve this right from the beginning of proceedings. Where steps are taken, including strike-out applications, these should be expressly stated to be taken without prejudice to any subsequent application to challenge the court's jurisdiction. The court also usefully clarified that the deadline for the submission of a challenge to the court's jurisdiction under Order 12, Rule 8 accounts for extensions to the deadline for filing a defence.