By Richard Leung JP, John Hui and Jonathan Chan

The recent case of Taching Petroleum Co Ltd v. Meyer Aluminium Ltd creates a new precedent. This decision is at the vanguard of raising contravention of conduct rules as a defence in civil proceedings.

A shield not a sword It is well-known that “stand-alone” private actions are currently not available under the Competition Ordinance (Cap. 619) (the “CO”), meaning that private parties (as opposed to the Competition Commission) are prohibited from bringing any action based on allegations of contraventions of the conduct rules.

However, as the decision of Taching Petroleum Co Ltd v. Meyer Aluminium Ltd [2018] 2 HKLRD 1284 has demonstrated, the CO does not prevent private litigants from raising allegations of contraventions of the conduct rules as a defence in civil proceedings brought against him/her.

Significantly, this is the first decision of the Hong Kong Court dealing with contravention of a competition conduct rule being raised as a defence to a civil claim, and the Honourable Mr. Justice Godfrey Lam explored and clarified a number of important issues in this respect.


From 1999 onwards, Meyer Aluminium Limited (“Meyer”), a manufacturer of aluminium products, entered into a number of industrial diesel oil supply agreements with Taching Petroleum Company Limited (“Taching”), an authorised dealer for Sinopec (a major fuel oil supplier). This arrangement continued for years. In 2017, however, Meyer refused to settle the price of industrial diesel oil sold and delivered in the period between April to June 2017. Taching then brought proceedings against Meyer for such price, and applied for summary judgment.

There was no dispute that the diesel was sold and delivered and that the invoices were issued in accordance with the agreements between the parties. The defence raised by Meyer was based on an allegation that Taching had been colluding with Shell Hong Kong Limited (“Shell”), Meyer’s other supplier of diesel, to move?

Their prices together, as a result of which Taching had overcharged Meyer for years. Meyer contended that for this reason, Taching acted in breach of the first conduct rule under section 6 of the CO, and Meyer had a valid defence based on illegality. Further, if there was such a contravention, Meyer said it would be entitled to damages for the loss and damage it suffered as a result, which could be set off against the price claimed by Taching.

After the hearing of the summary judgment application, the learned Judge gave conditional leave for Meyer to defend the action.

6 significant clarifications that will shed light

A number of important issues in respect of raising competition law as a defence have been clarified in this decision:

I JURISDICTION: First and foremost, the learned Judge confirmed that pursuant to section 142(1)(d) of the CO, the Competition Tribunal (the “Tribunal”) has jurisdiction to hear and determine “allegations of contraventions, or involvements in contraventions, of the conduct rules raised as a defence”.

II TRANSFERS: The learned Judge laid down the Court’s approach in dealing with a competition law defence raised in a civil action before the Court of First Instance (the “CFI”):

  • Section 113(3) of the CO provides that “if, in any proceedings before the Court of First Instance, a contravention, or involvement in a contravention, of a conduct rule is alleged as a defence, the Court must, in respect of the allegation, transfer to the Tribunal so much of those proceedings that are within the jurisdiction of the Tribunal”. Section 113(3) should be read with section 142(1)(d).
  • Although section 113(3) of the CO mandated a transfer by the CFI to the Tribunal, it may be that there is scope for suggesting that the CFI can examine the quality of the defence so that if it can be summarily seen to be of no substance with the result that it can be struck out or summary judgment can be entered, then no defence remains that calls for a transfer.
  • Even if a transfer is mandatory irrespective of the quality of the defence alleged, the same result may be reached via the alternative route of section 114(3) of the CO, which provides that the Tribunal may transfer back to the CFI so much of those proceedings that the Tribunal considers should, in the interest of justice, be transferred back to the CFI. It is open to the Tribunal to exercise this power where the defence raised is so lacking in substance that it would be liable to be struck out or would not survive an application made by the plaintiff for summary judgment.
  • The above “transfer and transfer back” mechanism would be “very cumbersome”. However, as all judges of the CFI appointed under section 6 of the High Court Ordinance (Cap. 4) are ex officio members of the Tribunal, there seems to be nothing to prevent the same judge, after transferring (mandatorily) part of the proceedings to the Tribunal, from himself constituting the Tribunal (at any rate with the consent of the President of the Tribunal under section 145(1) of the CO) and immediately exercising the discretion to transfer that part back to the CFI.
  • For this reason, it would be conducive to list any application to strike out a competition law defence or for summary judgment or for transfer to the Tribunal before the President of the Tribunal (as a CFI judge) or with any other judge in the CFI in consultation with the President.

III SCRUTINY: The threshold for raising a competition law defence in an application for summary judgment was clarified. In line with English jurisprudence, it was held that competition law defences are not in a special category with a different set of rules. The usual principles apply, save that given the ease with which a defence may be generated on the basis of vague or imprecise allegations, there is a need for careful scrutiny of competition law defences.

IV ILLEGALITY AS A DEFENCE: It was confirmed that a breach of the first conduct rule could give rise to an illegality defence to a civil claim. In the present case, there were triable issues raised that Taching was in breach of the first conduct rule, in the light of

(i) the prima facie evidence of parallel pricing over a prolonged period between Taching and Shell as against Meyer which substantially exceeded the prices charged by the rest of the market,

(ii) the uncontradicted evidence that the relevant price information in the sales to Meyer was confidential, and (iii) the absence of any relevant evidence from Taching to show that Meyer’s express or implied assertions of fact are beyond belief or to set out or explain what had happened.

It was held that there was a triable issue in relation to the illegality defence. However, the learned Judge also took the view that there was sufficient doubt raised to warrant imposing a condition for leave to defend.

V CAUSE OF ACTION: For the defence of set-off, the learned Judge doubted whether Meyer had a cause of action for damages under the CO other than that enforceable by a follow-on action conferred by section 110 of the CO. This issue, however, was not determined.

The learned Judge only mentioned that it seemed a follow-on action can be issued after a judicial finding of contravention has been made not only in the context of an enforcement action brought by the Competition Commission, but also in the context of a defence in an action raising a contravention of a conduct rule.

This may be inferred from section 110(3)(b) of the CO which refers to a decision of the CFI under section 114(3) which in turn refers to section 113(3), which is concerned with a contravention of a conduct rule being raised as a defence

VI POWER TO STAY PROCEEDINGS: With regard to the power of the CFI and the Tribunal to refer an alleged contravention or alleged involvement in a contravention of a conduct rule to the Competition Commission for investigation under section 118(1) of the CO and the power to stay the proceedings pending the Commission’s investigation under section 118(2) of the CO, the learned Judge said that such reference is not to be lightly made, and if no reference is made, the power to stay does not arise.

What you can takeaway from this: 7 key findings

  • This decision has cleared any previous doubt over whether a private litigant may raise allegations of contraventions of the conduct rules as a defence to a civil claim brought against him/her. The range of defences that can be raised, however, has not been fully explored.
  • This decision has confirmed that a defence of illegality may be raised, but the learned Judge has left open the possibility of a defence of set-off which is based on follow-on damages.
  • It is expected that competition law defences will begin to feature more frequently in private litigations, and that Hong Kong competition law will not only be developed in cases initiated by the Competition Commission, but also in private litigations.
  • Competition law defences are thus likely to become a more useful option for practitioners defending a civil claim (especially those involving summary judgment applications). However, practitioners will have to pay attention to the procedure laid down in this decision, and equally importantly, bear in mind that the court will carefully scrutinise any competition law defence to see if it is of any substance.
  • Practitioners should bear in mind that these defences, once raised and accepted by the Court to pass the summary judgment threshold, will be transferred to the Competition Tribunal and will likely be determined before other issues raised in the main action.
  • It is also likely that the party raising the competition law defence will become the claimant in the transferred action before the Tribunal, thus having the burden of proof.
  • Given the nature of competition law issues, practitioners should advise their clients to be prepared to dedicate sufficient resources if proceeding with a defence based on breaches of competition law

John Hui and Jonathan Chan acted for the Defendant.

Richard Leung JP acted for the Plaintiff.

Richard Leung JP, John Hui and Jonathan Chan co-authored this Case Report.



Richard Leung JP | John Hui | Jonathan Chan

For more on competition law in Hong Kong, see John Hui and Jonathan Chan’s videos on
how the competition landscape is unfolding in Hong Kong.

DesVoeuxChambers Newsletter A Word of Counsel 4th Issue 2018. In a newsletter dominated by landscape-changing developments in the insolvency and company law domain, DVC’s contributors share with you key takeaways to keep you up to date as to what to expect going forward.

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