Chan Yat Man v. Lam Kam Tong and Another

DCCJ 21118/2001

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 21118 OF 2001

--------------------

--------------------

--------------------

DECISION

--------------------

Introduction

1.This is the hearing of the plaintiff’s application for a charging order against the 2^nd defendant over certain shares in a Hong Kong incorporated company. 

2.At issue is whether the application falls foul of section 4(4) of the Limitation Ordinance, Cap 347. In gist, the 2^nd defendant contends that the plaintiff’s application is out of time and the plaintiff argues that it is just within time.  The dates of the relevant events and the history of these proceedings are therefore of importance and I set them out below.

History of proceedings

3.On 20 December 2004, judgment was given in favour of the plaintiff against the 2^nd defendant for the sum of $428,093.14 together with interests and costs (“the Judgment”). It does appear that some attempt was made with a view to enforcing the Judgment, including an application for examination of the 2^nd defendant under Order 49B, rule 1 of the Rules of the District Court shortly after the Judgment. However, apparently, nothing came out of it.

4.It is convenient at this juncture to set out the common ground between the parties for the purpose of the present application.  It is accepted by both parties that by virtue of section 4(4) of the Limitation Ordinance and on the authority of the Court of Appeal decision in Re Li Man Hoo [2013] 4 HKLRD 247 (see, in particular, paragraph 30), no enforcement proceedings, including any application for a charging order, can be brought after the expiration of 12 years from the date of the Judgment.  This means that the plaintiff is barred from bringing any such application from (and including) 20 December 2016.  I shall refer to this date as “the Deadline” even though, unlike the normal usage of the word, any application is time-barred as from, and not merely after, that date. 

5.Just a week before the Deadline, on 13 December 2016, the plaintiff sought to apply for a charging order nisi against the 2^nd defendant by way of an affidavit sworn by Mr Tai Siu Ching, a partner of the firm of solicitors acting for the plaintiff.  The order sought is with respect to 1,600,000 shares held in the name of the 2^nd defendant in a company called OT Systems Limited (“the Company”).  A copy of the latest annual return filed by the Company with the Companies Registry was exhibited, showing that the 2^nd defendant was the holder of these shares, and Mr Tai deposed to that fact.

6.As is allowed under the rules, namely, Order 50, rule 1(2) and (3), the plaintiff’s application was made ex parte and supported by the affidavit.  No summons was issued for this purpose.  On the face of Mr Tai’s second affidavit was stamped the words “Ex parte application”. 

7.Then on 20 December 2016 (which incidentally falls on the Deadline), the Registrar of the District Court raised a number of requisitions, one of which was that the plaintiff should verify that the interest to be charged is owed beneficially by the 2^nd defendant, the judgment debtor pursuant to Order 50, rule 1(3)(d).

8.In answer to the queries raised, the plaintiff filed the third affidavit of Mr Tai on 29 December 2016 (which was obviously after the Deadline) in which the queries were addressed and the verifying statement made. 

9.On 12 January 2017, a charging order nisi on the shares was made against the 2^nd defendant and in accordance with the usual terms, a hearing was fixed to show cause.  In the meantime, the beneficial interest in the shares stand charged with the payment of (a) the judgment sum, (b) interest from the date of writ of the action, 9 August 2000, to 8 August 2006, and (c) costs of the application.

10.I shall return to item (b) as regards interest later.  For completeness, it should be noted that the costs of the original action have not been taxed, and the plaintiff has confirmed that such costs do not form part of the charging order sought.

11.On the return day, the hearing was adjourned for substantive argument as the 2^nd defendant opposed to the charging order being made absolute. 

Grounds of opposition

12.The 2^nd defendant, who is represented by Mr Ho Sing Wai, solicitor, at today’s hearing, asks for the charging order nisi be set aside or discharged.  He opposes on two grounds, and I quote from his skeleton submissions below:-

“(1) [The plaintiff] had failed to make a valid application for the Charging Order nisi before the statute barred day; or

(2) The Charging Order absolute could not be granted after the statute barred day.”

Ground 1

13.I would venture to summarise Mr Ho’s submissions under this ground as follows:-

(1) He accepted that the plaintiff did make the application for a charging order by means of Mr Tai’s second affidavit.

(2) But that affidavit was deficient in that it was not in compliance with Order 50, rule 1(3)(d) as the prescribed verifying statement concerning beneficial ownership was missing.

(3) Hence the court “refused to grant” the charging order as sought.

(4) It was only after Mr Tai’s third affidavit that the court saw fit to grant the charging order nisi.

(5) It must, however, be noted that the third affidavit was filed after the Deadline.

(6) For present purposes, Mr Ho argued that the “actual application date”, as he put it, is the date of the third affidavit instead of that of the second affidavit.  That makes all the difference in the world since the former was after the Deadline and hence the application was out of time and thus barred.

(7) Mr Ho drew support from section 39 of the Trade Marks Ordinance, Cap 559. Section 39 provides as follows:-

“(1) The filing date of an application for registration of a trade mark is the date on which documents containing everything required by section 38(2)(a) to (d) (application for registration) are filed with the Registrar.

(2) If the documents are filed on different dates, the filing date is the last of those dates.

(3) ...”

(8) Applying the above section, the plaintiff’s application should be the date of the last affidavit filed in support.

14.Mr Matthew Ho, counsel for the plaintiff, submitted that this ground has no merit.  He described the argument as “absurd and fundamentally misconceived”. 

15.I agree with Mr Matthew Ho that this ground has no merit and ought to be rejected.  In order to determine when the application is to be regarded as having been made, the starting point must be the relevant statutory provisions, namely, section 4(4) of the Limitation Ordinance and Order 50, rule 1 of the RDC. 

16.The overall structure of the Limitation Ordinance is that it lays down restrictions against the bringing of an action or proceeding.  In many sections, it starts by saying that an action “shall not be brought after” the expiration period concerned.

17.One therefore then turns to the rules of the court, namely, Order 50, rule 1, to see how an application for a charging order should be “brought”.  Rule 1(2) states that an application may be made ex parte.  Rule 1(3) specifies that an application shall be supported by an affidavit, prescribing a number of content requirements.  As such, it is one of those applications that are taken out by an affidavit without the need to issue any summons, as recognised in the commentary in the Hong Kong Civil Procedure 2017 at 32/6/5.

18.Where a summons is required to be issued for an application, it would be accepted, I believe, that the date of the application is the date of the issue of the summons – see Order 32, rule 2(1) RDC.  Where a summons is not required, I believe that the general position can be stated (with confidence) that the date of the application is the date on which the supporting affidavit is filed.  Applying this, the date of the plaintiff’s application should be the date of Mr Tai’s second affidavit. In other words, the plaintiff is within time.

19.The 2^nd defendant’s reliance on the Trade Marks Ordinance is misconceived as there is no basis to do so.  Section 39 of the Trade Marks Ordinance expressly and specifically deals with trade marks applications.  Nowhere is it stated in the Trade Marks Ordinance that the section is to have any application to other legal proceedings.  Similarly, nowhere in Order 50 or other parts of the RDC does it provide for the Trade Marks Ordinance to have any application to general civil proceedings, including an application for a charging order. 

20.As such, section 39 of the Trade Marks Ordinance is simply irrelevant.  It does not apply directly here, as was accepted by Mr Ho this morning.  Further, there is simply no basis to suggest that it should apply by analogy as submitted by Mr Matthew Ho.  Instead, the general position as stated above should apply.  I reject the first ground put forward by the 2^nd defendant.

21.I would add briefly that the better argument, which could possibly have been put together based on the non-compliance of Order 50, rule 1(3)(d), is that the second affidavit might have been liable to be set aside under Order 2, rule 2.  No such application was made but the issue was discussed at some length at this hearing.  The one thing which stands out from the present case is that the plaintiff’s application was indeed taken out very close to the expiry of the 12-year limitation period.  Only a week before the Deadline. 

22.Although the defect in the supporting affidavit does not render the application itself a nullity by virtue of Order 2, rule 1(1), had an application been made under Order 2, rule 2 to set it aside by reason of the defect, the court would have had to consider how to exercise its discretion.  In the process, it would have had to take into account the prospect that the defendant would be deprived of his defence of limitation.  It might also take into account the fact that the plaintiff had left it so late (the reason not being apparent) and even then did not manage to get it right even though the application was really quite a straightforward one.  No Order 2, rule 2 application was taken out.  The 2^nd defendant has not specifically raised this as a ground of opposition in his written submissions but even if he had, I would not have exercised my discretion to set aside the application. 

23.It is true that one of the fundamental factual premises underlying the court’s power to grant a charging order is that the judgment debtor has a beneficial interest in the property concerned.  And it is also true that the court is to be satisfied on this front evidentially on the strength of a verifying statement as prescribed in Order 50, rule 1(3)(d).

24.In this particular case, however, in his second affidavit, Mr Tai did depose to the fact that the shares were held in the name of the 2^nd defendant, and the relevant annual return of the Company was exhibited to the same affidavit.  In the end, the defendant has raised no dispute as to beneficial ownership in these proceedings.  Therefore, it seems to me that it was an oversight on the part of the plaintiff to have omitted the prescribed statement.  It is an error more of a technical nature than of a substantive one.  If I had been asked to exercise my discretion, I would not have done so to set aside the plaintiff’s application made prior to the Deadline. 

Ground 2

25.Under this ground, which is alternative to the first ground, Mr Ho Sing Wai submitted that no charging order absolute can be granted after the Deadline even if the application itself was made within time.

26.I do not accept this submission that the court is barred from making an order after the expiry of the limitation period regardless of when the action was brought in the first place.  This is not what the statute says.  As seen above, the wording adopted generally by the Limitation Ordinance is to restrict the bringing of an action by a potential party.  Once an action is commenced within time, there is no express restriction imposed by the Ordinance on the court itself to deal with the case and make any order as the merits of the case require.  Neither should such a restriction be implied.  The progress of an action is dependent on many factors, not all of which are within the control of the party who commenced it. 

27.As a matter of common sense, there is no basis to support the 2^nd defendant’s approach to or interpretation of the Limitation Ordinance.  Needless to say, the courts make orders on days when the relevant limitation periods have expired, day in day out, provided that the actions themselves were brought within time.  I reject the 2^nd defendant’s second ground.

Order

28.There being no valid ground of opposition or reason put forward by the 2^nd defendant, I order that the charging order nisi granted on 12 January 2017 be made absolute, save for item (b) on interests. 

29.Section 4(4) provides that no arrears of interest in respect of any judgment debt shall be recovered after the expiration of six years from when the interest became due. It has been made clear by the Court of Appeal in Re Li Man Hoo (at paragraph 33) that where enforcement proceedings are brought more than six but less than 12 years after the judgment, the principal judgment debt may be recovered along with the most recent six years’ of interest, but not interest accruing earlier than six years previously.

30.Accordingly, the interest amounts referred to item (b) of the charging order nisi are not recoverable as any claim over them has become time-barred.  This was pointed out and accepted by Mr Matthew Ho during his oral submissions.  But the plaintiff should be able to claim interest which has accrued since 13 December 2010, being the most recent six years of interest.  The amount is 205,484.71 (ie, 428,093.14 x 8% x 6).  Item (b) of the charging order nisi should be replaced by this amount accordingly.  Pursuant to Order 50, rule 3(1), I so modify the nisi order.

31.I shall now hear parties on costs.

(Discussion re costs)

Order on Costs

32.Costs should follow the event.  I order that the plaintiff do have costs of the application, including any reserved costs.  But I consider that the arguments involved are narrowly confined and straightforward.  I am not prepared to grant certificate for counsel and I summarily assess the costs to be $65,000.

Mr Matthew Ho, instructed by W K To & Co, for the plaintiff

Mr Alex S W Ho of Alex Ho & Co, for the 2^nd defendant