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High Court re-grants leave to bitcoin.com registrant and operator to serve out of the jurisdiction in Mainland China

Andrew Lynn appeared for the Plaintiff, Roger Ver, in Ver, Roger Keith v OKEX Fintech Company (formerly known as Kind Castle Trading Company) and Xu, Ming Xing (徐明星) (HCA 2439/2016), in which the High Court of Hong Kong on 14 May 2020 dismissed an appeal by the 2nd Defendant, Xu Ming Xing (known as “Star Xu”), seeking to set aside leave to serve him out of the jurisdiction in Mainland China.

  

The underlying action relates to an agreement (the “Agreement”) bearing the description “Bitcoin.com Agreement December 15th 2014” made between Mr Ver and a party identified as “OKCoin”/“OK Coin”. Mr Ver’s case is that the 1st Defendant (a Hong Kong company) was trading under the name “OKCoin”/“OK Coin” and that it was the counterparty to the Agreement, which Mr Ver says it breached. On 19 May 2015, however, the 2nd Defendant, Mr Xu, informed Mr Ver that a different version of the Agreement containing Mr Ver’s signature had been found (the “Version 8 Agreement”) which was in identical terms except for an additional clause allowing OKCoin to cancel by giving six months’ notice. Mr Ver claims that the signature on the Version 8 Agreement is a forgery.

Mr Ver relied on two jurisdictional gateways for leave to serve out of the jurisdiction, namely those in RHC Order 11 rules 1(1)(c) and (d)(iii), although the Court’s decision focused on the former. This RHC Order 11 rule 1(1)(c) gateway applies where “the claim is brought against a person duly served within or out of the jurisdiction and a person out of the jurisdiction is a necessary or proper party thereto”.

It was common ground that the 1st Defendant was duly served within the jurisdiction and that there was a real issue between Mr Ver and the anchor defendant, the 1st Defendant, as to whether there was any breach of the Agreement. Mr Ver’s case on jurisdiction was that Mr Xu was therefore a “proper party” in that in determining the breach of contract claim the Court must first determine whether the Agreement has been superseded by the Version 8 Agreement. In order to make that determination, it has to be preceded by a determination on the forgery issue, which directly affects Mr Xu’s rights and interests.

Mr Xu, however, claimed that leave to serve out of the jurisdiction had been granted when in fact there was no live issue between Mr Ver and the 1st Defendant, since default judgment had at that time been entered against it. In addition, the 1st Defendant claimed that it did not rely on the Version 8 Agreement and should be taken to have implicitly abandoned that defence.

The Court considered that the Version 8 Agreement had become a live issue by the time the 1st Defendant was granted conditional leave to defend. As to the 1st Defendant’s contention that it had implicitly abandoned its defence, the Court noted that pleadings are subject to amendment, albeit with leave in certain situations. Further, pleadings should be precise, unambiguous, and clear: “it is not a guessing game and the opponent should not be left to divine whether or not a specific defence set out in affidavits has been impliedly or implicitly abandoned”. Having regard to the underlying objectives of RHC Order 1A rule 1, the Court set aside the ex parte order but immediately re-granted leave to Mr Ver to serve Mr Xu out of the jurisdiction in Mainland China.

The decision will be of interest to practitioners when seeking leave to serve out of the jurisdiction in contexts where (i) there is or has been a default judgment entered against the anchor defendant or (ii) where the pleadings leave open defences which may constitute a nexus between claims against the anchor defendant and the defendant to be served out.

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