Leung Kin Keung v. Hang Seng Bank Ltd

HCA 959/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 959 OF 2014

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JUDGMENT

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1.This was an appeal pursuant to Order 58, rule 1 of the Rules of the High Court (“RHC”) from the decision of Master Kwang dated 27 January 2017 setting aside the order dated 24 September 2015 of Master M Wong extending the validity of the plaintiff’s writ issued on 30 May 2014.

Background facts

2.The plaintiff has been one of the defendant’s private banking customers for decades.  The defendant has provided banking services and financial advice to the plaintiff in relation to the management of his funds.  It was also the banker for the plaintiff’s various businesses. 

3.In October and November 2007, relying on the representations of the defendant’s employee, the plaintiff entered into two equity-linked investment transactions (“the ELN investments”).  It is alleged that the employee negligently failed to inform the plaintiff of the true extent of his risks involved, that the employee ought to have known that it would only be after 2.5 years that the plaintiff would be given the shares at the “strike price” if at that time the market values of the ELNs were below the “airbag price”.  Those were said to be facts material to the plaintiff’s investment decision to the knowledge of the bank’s employee.  In the event, the plaintiff sustained losses on 19 and 20 May 2010 in excess of HK$34 million.

4.The chronology of events from the issuance of the writ concern is as follows:

(a)   A generally endorsed writ was issued by Messrs CW Chan & Co (“CWC”) (the plaintiff’s former solicitors) on 30 May 2014 but not served.

(b)   On 5 June 2014, the defendant informed the plaintiff that his credit card account would be terminated in accordance with the terms of the credit card agreement because certain basic criteria based upon which the credit facilities were granted had changed. 

(c)   On 6 June 2014 Octopus advised the defendant that the automatic add value service had been cancelled. 

(d)   Almost a year later, on 18 May 2015, Messrs How & Co (“HC”), the plaintiff’s current solicitors, filed a Notice of Change of Solicitors.

(e)   Three days later, on 21 May 2015, the plaintiff filed an ex parte application for extending the validity of the writ supported by his affirmation dated 19 May 2015 (“P’s 1^st affirmation”).

(f)   The validity of the writ expired on 29 May 2015.

(g)   There is a note of the court dated 1 June 2015 to the effect that good reason has to be shown even when the application is made before the time for service has expired.

(h)   It appears to have resulted in the plaintiff filing his 2^nd affirmation 3.5 months later on 15 September 2015 in further support of his application (“P’s 2^nd affirmation”).

(i)   On 24 September 2015, Master M Wong extended the validity of the writ for one year, to 29 May 2016.

(j)   On 2 December 2015, the defendant informed the plaintiff that the 14 banking accounts the plaintiff and his companies maintained with the bank would be closed within 14 days from the date of the letter.

(k)   On 4 December 2015, the plaintiff asked for the reason for closing his accounts and caused his solicitors to issue a pre-action letter on 31 December 2015.

(l)   The defendant’s solicitors sent a detailed reply on 12 February 2016 stating the bank’s reasons. 

(m)   On 25 April 2016 HC enquired of the defendant’s solicitors whether the latter had instructions to accept service.

(n)   On 5 May 2016, HC served the writ on the defendant.

(o)   On the defendant’s application to set aside service and the order granting an extension of validity of the writ, on 27 January 2017, Master Kwang set aside the order of Master M Wong.

The applicable principles

5.Applications for extending the validity of a writ involve a 2-stage process.  First, it needs to be shown that ‘good reason’ exists for the extension sought.  Second, once the threshold test is satisfied, the court’s discretion becomes engaged and at that stage the court weighs all relevant factors: see Pacific Electric Wire & Cable Co Ltd v Hu Hung Chiu [2011] 1 HKLRD 1000 at §17; RHC Order 6, rule 8 at 6/8/3, §11.

Whether good reason shown for the extension sought

6.P’s 1^st affirmation is brief and runs to only two pages.  It was to the effect that after issuing the writ on 30 May 2014, the plaintiff’s intention was to negotiate and the writ would only be served failing settlement.  However, several days after the writ was issued, the plaintiff allegedly received letters from the defendant asking him to close his bank accounts and credit card accounts.

7.It was then said that the termination of his accounts had cost him much time and trouble especially as the defendant was the only bank that has arrangements with the Hong Kong Jockey Club for the settlement of accounts.  Eventually, in the few months prior to making P’s 1^st affirmation (presumably in early 2015) the plaintiff was allowed to keep that account.  The plaintiff reaffirmed his intention to settle the action and that was the reason he did not want to serve the writ at that time. 

8.There was but a single exhibit to P’s 1^st affirmation consisting of a letter from the defendant dated 5 June 2014 and an undated computer generated letter from Octopus: see §4(b) and (c) above.  It will be seen that the exhibit did not provide any evidence of any threatened closure of the banking accounts he and his companies maintained with the defendant.

9.By the time of P’s 2^nd affirmation, the validity of the writ had expired.  That affirmation focused, almost entirely, on the plaintiff’s “reason for having negotiation” before serving the writ.  He recounted the difficulties he had encountered in finding a firm willing and able to take on his case:

(a)   The law firm that had been dealing with the plaintiff’s personal matters (“the first firm”) could not represent the plaintiff in the litigation because there was embarrassment due to business reasons although it seems that the plaintiff did obtain legal advice from the first firm on the prospects of success of an action against the defendant. 

(b)   Despite having conducted a conflicts check, the second firm the plaintiff consulted also declined to act due to commercial reasons when it came to the stage of commencing the action.

(c)   The plaintiff then found a third firm (namely his former solicitors CWC) to represent him.  CWC issued the writ on 30 May 2014. While P’s 1^st affirmation made it quite clear that it was the plaintiff’s own intention (rather than it being at CWC’s behest or instigation) that the plaintiff should first conduct negotiations and only if those failed would the writ be served, P’s 2^nd affirmation gave a different tilt in that it was said that it was CWC’s preference that the plaintiff first conduct negotiations (which the plaintiff accepted).  CWC also informed the plaintiff that if negotiations failed, it might not act on his behalf. 

(d)   According to the plaintiff, shortly after the writ was issued, the defendant “put pressure on [the plaintiff] to close his accounts”.  The plaintiff became concerned that if he commenced the action by serving the writ CWC might cease to act for him for commercial reasons.  He therefore refrained from serving the writ.

(e)   The plaintiff then deposed to the fact that he was introduced to his present solicitors, How & Co (“HC”) in May 2015. 

(f)   On 21 May 2015, the plaintiff made an ex parte application to extend the validity of the writ supported by his 1^st affirmation.  The plaintiff’s ‘excuse’ for the lapse of time between his affirmations was his almost continuous absence from Hong Kong on business trips between 2 July 2015 and 13 September 2015 and the fact that he had been “busy” attending to his personal and business affairs.

10.On the basis of that evidence, Master M Wong extended the validity of the writ but his order was discharged. 

11.The threshold question is whether there was “good reason” for the extension, that being stage one of the two-stage test. 

12.It will have become apparent that part of P’s 2^nd affirmation was devoted to events that preceded the issuance of the writ, namely, the difficulties the plaintiff had encountered in seeking legal representation.  They have little relevance: the critical period for present purposes is the one-year period commencing with the date of the issuance of the writ, namely, 30 May 2014 to 29 May 2015 (“the relevant period”).

13.By the time of this hearing, there were also 2 affirmations of Mr How (respectively “How’s 1^st affirmation” and “How’s 2^nd affirmation”) and the third affirmation of the plaintiff (“P’s 3^rd affirmation”).  P’s 1^st affirmation §§3 – 4, P’s 2^nd affirmation §4 and P’s 3^rd affirmation §5 are the only passages that address the relevant period and they largely concern the ‘pressure’ allegedly exerted by the defendant shortly after issuance of the writ by asking the plaintiff to close his banking and credit card accounts. 

14.As noted in §8, the only documents exhibited to substantiate what would otherwise be bare allegations are the 2 documents that constitute exhibit LKK-1 (that do not relate to the plaintiff’s banking accounts) notwithstanding assertions in P’s 1^st affirmation §3 that he received letters (in 2014) asking him inter alia to close his bank accounts.  Nothing in P’s 3^rd affirmation remedies the absence of that evidence.  The letters of 2 December 2015 exhibited to P’s 3^rd affirmation are not relevant as they were issued 6 months after the expiration of the relevant period.

15.What emerges from the plaintiff’s evidence concerning the relevant period are the following:

(a)   he argued with the defendant to get credit card account re-instated;

(b)   he never started negotiations with the defendant over his claim;

(c)   after issuance of the writ, CWC does not appear to have rendered further services to the plaintiff;

(d)   through friends, the plaintiff was introduced to HC in May 2015 when the writ was about to expire; and

(e)   he also had his own business and private affairs to deal with. 

16.HC came into the picture during the last few weeks of the relevant period:

(a)   The plaintiff’s evidence is that he came to know HC “only in May”, that he had communications with Mr How who gained “some preliminary understanding of the case’s background” so that he could consider whether or not to represent the plaintiff.  “However, at such time, the validity of the writ was about to expire soon.” 

(b)   When HC finally confirmed to accept the case:

“ a decision was made to first apply for renewal of the validity of the Writ so as to allow Mr How sufficient time to understand [the plaintiff’s] claim before serving the Writ and commencing the proceedings.” (See P’s 2^nd affirmation, §5)

17.As the annotation to RHC Order 6, rule 8 (at 6/8/3, §§4 – 6) shows, it is not possible to define or circumscribe what is a good reason.  Two examples were given of reasons which have been held to be good: where there was a clear agreement with the defendant to defer service and impossibility or great difficulty in finding or serving the defendant.

18.But the list of examples of reasons which have been held to be bad is lengthy.  Notably, they include negotiations (including negotiations for settlement); carelessness; the need perceived by the plaintiff’s solicitors of the need to a statement of claim with the writ; incompetence of the claimant’s legal representatives; and that the defendant knew that a writ had been issued or that he is unable to show any specific prejudice or detriment to him in conducting his defence: see 6/8/3, §6(a), (d), (f), (i) and (l). 

19.More importantly, it is salutary to bear in mind that §1 of 6/8/3 states categorically that:

“ [it] is the duty of the plaintiff to serve the writ promptly. He should not dally for the period of its validity; if he does so and gets into difficulties as a result, he will get scant sympathy. …”

20.While the argument with the defendant might have dragged on for a few months, the plaintiff was not forthcoming about the actual date the issue was resolved.  In any case, it is no different from the plaintiff’s pre-occupation with his own affairs.  Neither such pre-occupation nor the fact that HC needed time to understand the plaintiff’s claim before serving the writ could possibly constitute ‘good reason’ for an extension. 

21.The plaintiff was hardly pro-active during the relevant period to progress service of the writ.  There is a glaring lack of “best efforts” or “reasonable endeavours” on his part to secure alternative legal representation.  Litigants should be disabused of the notion that the issuance of a writ is not to be taken seriously.  Just because the court is vested with a discretion to extend the validity of the writ, the discretion is not engaged absent ‘good reason’, even when it does not involve the expiration of any limitation period that would deprive a defendant of a limitation defence.  

22.Two other matters should be mentioned briefly before coming to a conclusion on the merits of the appeal. 

(1)   Unfairness

23.It was said that it would be unfair to the plaintiff should this court differ from Master M Wong as to whether the facts and matters relied on constitute ‘good reason’ because the plaintiff was ‘entitled’ to rely on the master’s decision.  If a different view were to be taken now, the plaintiff would be prejudiced because it would be too late for him to issue a fresh writ. 

24.But the short answer is that the plaintiff and his legal adviser made a conscious and deliberate choice to seek an extension rather than to issue a fresh writ.  He must live with it.

(2)   Limitation

25.Suffice it to mention that while the parties differed as to when the cause of action accrued, the answer is not immediately obvious.  The key distinction is said to be between cases where there is an immediate loss of value of some asset or interest in an asset as a result of the acceptance of the contingent liability and cases in which the claimant has merely become subject to a contingency which may or may not lead to loss in the future: see Jackson & Powell, Professional Liability, 8^th ed, §5-045.  But it is not an issue that requires resolution at this hearing. 

Conclusion

26.In my view, the plaintiff has not met the threshold test.  Accordingly, as the court’s discretion has not been engaged, it is not necessary to consider whether and how that discretion is to be exercised.

27.The plaintiff’s appeal is dismissed and service of the writ is set aside.  There is to be an order nisi of costs in favour of the defendant.

Mr Kevin Leung, instructed by How & Co, for the plaintiff

Ms Janet Ho, instructed by Mayer Brown JSM, for the defendant