China Medical Technologies, Inc. (in Liquidation) v. Bank of China (Hong Kong) Ltd

HCA 2448/2014

[2018] HKCFI 1395

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2448 OF 2014

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Before: Hon Au-Yeung J in Court

Dates of Hearing: 27 and 28 March 2018

Date of Decision: 20 June 2018

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D E C I S I O N

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A. INTRODUCTION

1.There are 2 summonses before the court made by the Defendant (“BOC”):

(1) To set aside a Master’s order extending the validity of the writ for 12 months; and

(2) To set aside service of the writ.

2.The Plaintiff was wound up in the Cayman Islands in 2012.  An ancillary winding-up order was made in Hong Kong on 1 September 2014.  Mr Borrelli has been one of the Liquidators appointed by the Cayman Islands court and the Hong Kong Court respectively. 

3.The Plaintiff was hopelessly insolvent, with provable claims in excess of US$400 million. Ongoing investigations showed that the Plaintiff’s management perpetrated a fraudulent scheme to misappropriate US$355.5 million of the Plaintiff’s assets by purportedly acquiring worthless medical technology known as the FISH Technology and SPR Technology (collectively “the Technologies”). 

4.There were transfers of funds made between November 2006 and December 2009 (“the Transfers”) from the Plaintiff’s account with BOC to accounts held by one Supreme Well Investments Limited (“Supreme Well”) with BOC and Bank of East Asia.

5.Supreme Well and its bank accounts were controlled by the Plaintiff’s former management.  Supreme Well did not have any business operations and was struck off the Register of Companies in the BVI after receiving US$355.5 million from the Plaintiff.  The Liquidators do not know the ultimate recipients of the Plaintiff’s cash. 

6.The Plaintiff issued a protective writ of summons with a general indorsement of claim on 2 December 2014 (“the Writ”).  The Liquidators asserted that the Transfers were made by the Plaintiff’s management for which BOC was liable for at least US$303.75 million for breach of contract, dishonest assistance, knowing receipt, breaches of duty and of trust, conspiracy, negligence and/or unjust enrichment.

7.The Indorsement of Claim (“the Indorsement”) expressly stated as follows:

“THIS WRIT is issued solely for the purpose of preserving the claims identified above in light of the pending expiry of possible limitation periods” and the Plaintiff “has made no decision as to whether or not it will pursue the claims” which will be subject to “further and on-going investigations” by the Liquidators and the outcome of those investigations.

To the extent that any prima facie limitation periods relating to the claims might have expired, and in circumstances where the Plaintiff only obtained knowledge of the claims in February 2014, the Plaintiff intends to rely on provisions of the Limitation Ordinance (Cap 347) either directly or by analogy to extend the relevant limitation period”

8.On 30 November 2015, ie one day before the expiry date, the Liquidators made an ex parte application to extend the validity of the Writ for 12 months (“the Extension Application”).

9.The reasons advanced by the Liquidators were that despite all reasonable efforts, they required further information before they could make an informed decision as to whether to proceed with any of the potential claims against BOC.  The Liquidators referred, in particular, to its application against BOC (and BEA) for production of documents and oral examination of certain employees of the banks pursuant to s.221 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance, Cap 32 (“the s.221 Application”), for which judgment was then pending.

10.On 7 December 2015, a Master made an order extending the validity of the Writ “for 12 months from the date of its expiry” (“the Extension Order”), ie up to 1 December 2016. 

11.Eight days later, on 15 December 2015, Harris J handed down his decision (“Harris J’s Judgment”) largely dismissing the Plaintiff’s s.221 Application but ordering interrogatories to be served on BOC’s employees and ordering examination.  The material findings were that:

(a) The documents sought, save for one narrow category, were not documents “relating to the company”within the meaning of section 221(3) of Cap 32 and hence the court had no jurisdiction to order their production. (§16)

(b) Whilst Harris J accepted “that the Liquidators would prefer to obtain further information if possible before deciding how to proceed”, he did not consider it necessary. The Liquidators had been provided with considerable information and “had sufficient information to make an informed assessment, sufficient for the purposes of deciding whether or not to proceed, of the prospects of the banks being able to assert credibly that they took reasonable steps to comply with the HKMA Guidelines and their own internal protocols intended to ensure that so far as possible the banks are not used as a conduit for unlawful money transfers … The Liquidators do not need any more information in order to decide whether or not they have a viable claim” and therefore it would be oppressive to order the production and examination sought. (§§29-32).

12.The Plaintiff obtained, from Harris J, leave to appeal on the construction of section 221(3) and his holding thereunder but not on other grounds. 

13.On 3 November 2016, the Court of Appeal declined to give leave on further grounds that failed before Harris J.  The Court of Appeal held (§§16, 17 & 22), amongst others, that

“… The judge gave careful consideration to the material that the liquidators already had, and formed a view as to whether or not such material should suffice to enable them whether or not to pursue their proposed claims against the bank.”

14.On 4 November 2016, BOC’s solicitors informed the Liquidators that BOC’s employees would not be answering the interrogatories served on them pursuant to Harris J’s Judgment. 

15.Shortly before the expiry date, the Plaintiff purported to serve the Writ by leaving and by ordinary post on 29 November 2016. There is dispute as to the date of service.

16.BOC submits that the Extension Order should be set aside because:

(a) There were no good reasons or matters capable of being good reasons advanced for the extension.  What were advanced turned out to be bad reasons, as was subsequently determined, inter partes, by Harris J and the Court of Appeal; and

(b) The Liquidators were guilty of material non-disclosure in failing to inform the Master of Harris J’s Judgment which destroyed the basis for seeking the Extension Order.

(c) The Liquidators were guilty of material non-disclosure in failing to inform the Master that some causes of action have expired before filing of the Writ and that some causes would expire if the Writ was not renewed.

17.BOC also submits that service of the Writ ought to be set aside because:

(a) The Writ was not left at the registered office of BOC on 14^th floor, Bank of China Tower, 1 Garden Road, Hong Kong (“the Registered Office”) but on the ground floor of the BOC Tower and the receptionist was not an employee of BOC; and

(b) The deemed date of service by ordinary post was after expiry of the validity of the Writ.

18.Logically, if the Extension Order is discharged and no re-grant is made, BOC submits that it must follow that the Writ was not served during the period of validity and the action should stand dismissed.

19.The Liquidators oppose both applications.  They say that the grounds for seeking the extension was the Liquidators’ genuine views that they needed investigation.  That extended beyond pursuit of the s.221 Application, including the appeal, to using all reasonable means by which they might obtain information as to BOC’s knowledge (or otherwise) of breaches of duty by the Plaintiff’s management.  They needed to do so before pursuing serious allegations against BOC in costly and risky litigation.

20.Whether there were matters capable of amounting to good reason was to be determined by reference to the circumstances prevailing at the time the Extension Application was made and not by reference to a subsequent event, in this case, a decision by a different court applying a different legal test. 

21.The Liquidators also submit that Harris J’s Judgment was of limited scope.  There is a possibility that the Liquidators might get more information if they are successful in the pending appeal to the Court of Appeal.

22.Further, BOC has been provided with a copy the Writ since March 2015.  BOC relied on it in the s.221 Application as the source of the oppression said to arise if an order for production of documents were made. 

23.The Liquidators deny that failure to bring Harris J’s Judgment to the attention of the Master amounted to material non-disclosure.  If it did, the non-disclosure was innocent.

24.Mr Manzoni SC, counsel for the plaintiff, conceded that Mr Borrelli made a “mistake” in his affidavit about possible limitation defences but BOC was not denied any of its right to run limitation defences.

25.If there was material non-disclosure, the Liquidators request the court to affirm or regrant the Extension Order.

26.As to service of the Writ, the Liquidators contend that service had been validly effected by leaving with the receptionist who received the Writ on behalf of BOC.  Ordinary post was effected 2 clear days after 29 November 2016.  Service was effected by either mode before expiry of the extended validity period. 

27.The issues are therefore:

(1) Whether there were good reasons or matters capable of being good reasons for seeking the Extension Order;

(2) Whether the Liquidators’ failure to inform the Master of Harris J’s Judgment amounted to material non-disclosure;

(3) Whether there was material non-disclosure in failing to inform the Master of the possible defences in limitation;

(4) If there had been material non-disclosure, whether the Extension Order should be affirmed or re-granted;

(5) Was service of the Writ effected by leaving at the reception desk of BOC Tower?

(6) Was service of the Writ by ordinary post effected before expiry of the validity period?

(7) Should any irregularity in service be cured?

B.  LEGAL PRINCIPLES FOR SETTING ASIDE THE EXTENSION ORDER

28.The power to grant extension of validity of a writ involves a two-stage process under Order 6, rule 8(2) of the Rules of the High Court (“RHC”).  In the first stage, the plaintiff must first establish matters amounting to good reason for extension or at least capable of so amounting.  In the second stage, matters such as the balance of hardship will fall to be considered if the discretion to extend arises in the first place.  The two stages are not “watertight” compartments for all purposes and some relevant factors may overlap: Chow Ching Man v Sun Wah Ornament Manufactory Limited [1996] 2 HKLR 338 at 341B-C (Bokhary JA, as he then was); following the English approach in Kleinwort Benson Ltd v Barbrak Ltd [1987] AC 597 and Waddon v Whitecroft Scovell Ltd [1988] 1 WLR 309.

29.Where the failure to serve a writ within its normal validity period is the result of a choice, then it is necessary to decide whether the choice was made for a good reason, meaning one which is at least capable of amounting to a good reason: Chow Ching Man, supra, at 344C.

30.The court does not ordinarily treat a plaintiff’s desire to see through some parallel set of proceedings as a good reason for holding up service of a writ in other proceedings: Pacific Electric Wire & Cable Co Ltd v Hu Hung Chiu [2011] 1 HKLRD 1000, §§28, 31.

31.A wish to obtain further evidence in a case which require pleading of full particulars may be capable of being a good reason.  In Portico Housing Association Ltd v Brian Moorehead & Partners (1986) 6 ConLR 1, at p 8, Stephenson LJ, having referred to Howells v Taylor and Walker decided in 1981, stated as follows:

“I do not read [Waller LJ’s] judgment as attempting to lay down the proposition that insufficient evidence could never be a good reason for renewing a writ alleging professional negligence, and I fully appreciate the importance of not alleging professional negligence until, like fraud, it can be particularized and proved.”

32.Portico Housing was based on the old test of showing exceptional circumstances in an extension application.  However, the principle in the preceding paragraph holds good.  In that case, the court refused to grant the extension application to enable the plaintiff in a negligence claim more time to obtain expert evidence.

33.The saving of unnecessary legal proceedings and costs can be a good reason for extending the validity of a writ and in not requiring a party to prosecute its claim for the time being:  Miruvor Ltd v Panama-Globe Steamer Lines SA [2006] 2 HKC 617 at §27, Stone J; Kleinwort Benson, Lord Brandon at 623H.  However, there is a “world of difference” where a plaintiff delays service in order to save the plaintiff itself from incurring extra expense: Pacific Electric Wire, §31.

34.Any extension of the validity of a writ should not deprive a defendant of a reasonably arguable limitation defence: Ramon L Siy v BPI International Finance Ltd [1987] HKLR 1020 at 1026G-1027C (Liu J).

35.The rationale has been explained in Sealegend Holdings Ltd v China Taiping Insurance (HK) Co Ltd [2013] 4 HKLRD 508 at §29, per Godfrey Lam J:

“The law concerning the validity of a writ and its extension is no mere formal procedural rule. Underlying it is the policy of the law that promotes finality to litigation, the prevention of stale claims, and the protection of a defendant from having a claim hanging over his head indefinitely. Inasmuch as a plaintiff with a reasonable cause of action has a right to bring and serve proceedings within prescribed periods, a (potential) defendant has a right not to be vexed by actions that are time-barred or writs that have expired, unless they are extended by the Court in accordance with the law.”

36.When considering the good reason ground, the court should have regard to what the situation was at the date of the extension order, albeit with the benefit of further evidence at the inter parte stage: National Commercial Bank v Haque [1994] CLC 230 at 241H, per Evans LJ.

C.  ISSUE (1): WHETHER THERE WERE GOOD REASONS OR MATTERS CAPABLE OF BEING GOOD REASONS FOR SEEKING THE EXTENSION ORDER

37.It was only 3 months before the issue of the Writ that Harris J had determined to re-open the petition to wind up the Plaintiff in Hong Kong and to grant the petition in Hong Kong.  At that stage there were good reasons to be suspicious of fraudulent conduct which required investigation.

38.The liquidation was complex but the Liquidators had limited books and records of the Plaintiff available to them.  The Liquidators had to gather documents in the United States and Hong Kong, some through court proceedings.  There were 5 writs issued in Hong Kong and 1 in the Cayman Islands, against a total of 18 defendants.  None had been served pending further investigations by the Liquidators.  The Liquidators’ attempt to seek disclosure of information from the Plaintiff’s former management and other individual or entities have met with opposition.

39.The Liquidators wanted to be responsible in pleading a case of fraud against BOC with proper particulars.  They were aware of their duties to act in the interests of the creditors, their public interest in the proper investigation of the Plaintiff’s affairs and to avoid incurring costs for the pursuit of an unmeritorious claim against BOC. 

40.The Liquidators’ basis for the Extension Application was that there was not enough information to make an informed decision on whether the Plaintiff had a viable claim against BOC which they should pursue.  Borrelli-1^st (placed before the Master) was replete with examples of such concerns of the Liquidators.

41.The Liquidators therefore needed to carry out further investigations, not limited to the s.221 Application.  Borrelli-1^st deposed that the investigations would be greatly assisted by any production or examination orders made pursuant to the s.221 Application.  After these investigations the Liquidators would be in a better position to make an informed decision as to whether or not it was in the best interest of the Plaintiff to serve the Writ.  (§§ 20-24, 56-60, 63-73, 77-81, 82-86)

42.Borrelli-3^rd (§34) added that an important benefit of the extension of the Writ was the possibility that further documents would be obtained through the s.221 Application, bridging large gaps in the Liquidators’ understanding of BOC’s knowledge and conduct.

43.In fact, Mr Manzoni SC acknowledged in his written submission (§§53 & 56) that the only means of obtaining relevant information regarding BOC’s knowledge and conduct in relation to the subject payments stated in the Writ was the s.221 Application. 

44.There was frank disclosure to the Master that judgment on the s.221 Application was pending.  Borrelli-1^st informed the Master that BOC had argued that the documents sought did not relate to the Plaintiff and were not reasonably required by the Liquidators; and had argued that the Liquidators had sufficient information to determine whether the claims under the Writ ought to be pursued (§§22, 71 & 72 of Borrelli-1^st). Mr Borrelli of course disagreed with those arguments.

45.The s.221 Application was not a straightforward application.  The hearing took 3 days and Harris J’s Judgment was handed down 3 months later.  Harris J acknowledged that the Liquidators had a reasonable requirement for documents to carry out their functions (§§13 and 14 of his Judgment).  He also acknowledged that it was reasonable for them to want to ensure that they had obtained, as far as possible, all information concerning the propriety of the acquisition by the Company of the Technologies and to trace the proceeds of the acquisition (§36 of his Judgment).  He permitted interrogatories to be served on BOC’s former employees about these matters. 

46.The question of interpretation of s.221 aside, it was through exercise of discretion that the Liquidators were denied the information sought in Harris J’s Judgment.  There was no suggestion that the Liquidators had launched a vexatious or totally unmeritorious application. 

47.Failure to serve the writ within the first 12 months was a deliberate choice of the Liquidators.  I do find that choice to be supported by matters capable of being good reasons at the time of the Extension Order. However, that is not the end of the Extension Application. Further analyses is necessary as it may have impact on the exercise of the court’s discretion to cure any irregularity.

48.At this inter parte hearing, the court can take into account Borrelli-3^rd and Harris J’s Judgment notwithstanding that they were post-Extension Order.

49.Although Harris J and the Master dealt with different statutory provisions, different tests and different balancing exercises, the subject matter of Harris J’s Judgment substantially overlapped the basis of the Extension Application.  That Judgment (§13) expressly stated that it was not in dispute that some of the documents might contain information concerning the fraud suspected to have been perpetrated on the Plaintiff and that the Liquidators reasonably required the documents to carry out their functions.

50.Both Harris J and the Court of Appeal never lost sight of the fact that one of the Liquidators’ purposes for the s.221 Application was to “assess the viability of potential claims by the Company so as not to waste funds on claims that cannot succeed” (§20 of CA’s decision).

51.Mr Manzoni SC submits that although the Liquidators had enough to decide whether or not to proceed, they did not have enough to plead a case of fraud.  That, in my view, is sophistry.  Harris J did not just mean that there was enough for the Liquidators to decide to proceed but also to decide not to proceed.

52.The Liquidators did not accept Harris J's Judgment until the Court of Appeal’s refusal of leave to appeal (Borrelli-3^rd, §§27 & 59).  They had submitted to the Court of Appeal that they were still not in possession of any requisite information to point to BOC’s knowledge of any fraud or breach of duty by the Plaintiff’s management; that they could not point to any particular facts upon which to base a claim of dishonest assistance against BOC and they felt that they were “in the dark” and was forced by Harris J’s Judgment “to speculate as to the facts, and thus the strength or weakness of the potential claims”.  See the Plaintiff’s submission on its application for leave to appeal before the Court of Appeal at §§10-18. With respect, all of these could not undermine the effect of that Judgment. 

53.Mr Manzoni SC submits that Harris J’s Judgment was of limited scope as it only dealt with internal documents of the BOC to see if there were legal justifications for the Transfers; that Judgment did not remove the entire basis of the Extension Order. 

54.Assuming Mr Manzoni SC is right, what then, were left of the matters capable of being good reasons to support the Extension Application?  According to the Liquidators, there were “other investigations” (eg Borrelli-1^st, §§46, 80).  §82 of Borrelli-1^st stated:

“Whilst the Liquidators have made substantial progress … they still require further information before they will be in a position to determine whether the Plaintiff will proceed with any of those potential claims, including information in regard to (i) the identity of the beneficial owners of the Further Supreme Well Payees; (ii) the true nature of the FISH and SPR Acquisitions; (iii) the ultimate recipients of the Plaintiff’s assets; and (iv) the actions taken by BOC to investigate, monitor and survey the payments of the Plaintiff’s assets and the recipients of the Plaintiff’s assets and whether any misconduct was committed against the Plaintiff.”

55.However, all of these reasons have in fact been put before Harris J.  See the confidential affidavit of Borrelli dated 11 February 2015, §§23 & 87.

56.Borrelli-3^rd, §35 further identified specific acquisitions of further information since the Extension Order.

57.Firstly, there were said to be documents received from Paul Weiss. The Liquidators received the first tranche in November 2015, and further tranches in April, June and August 2016.  Paul Weiss was the law firm which had carried out independent “internal investigation” into the Plaintiff’s business and affairs in 2009 and cleared the management of the very wrongdoing now under investigation by the Liquidators.

58.However, Borrelli-1^st did not mention how the Paul Weiss documents would have let the Liquidators learn more about BOC’s knowledge of the fraud, the information the Liquidators expected to obtain, the volume of documents, how long it would take to review them and why this would justify the grant of a 12‑month extension.  It turned out that the Paul Weiss documents caused the Liquidators to serve proceedings on the partners of Paul Weiss and a valuation firm.

59.Secondly, the Liquidators had made enquiries as to the true market value of the Technologies and that required further work.  However, ascertaining such market value was not mentioned in Borrelli-1^st.  In any case, this only went to proof of the view already formed by the Liquidators that the Technologies were not of commercial value, rather than help them to decide the viability of the case against BOC.  Applying Portico Housing, I do not consider this to be a matter capable of being a good reason.

60.Thirdly, there was investigation as to who controlled the Further Supreme Well Payee Accounts or the ultimate destination of the Plaintiff’s funds.  In my view, whilst this may enable the Liquidators to trace more potential defendants, it could hardly affect the decision of whether or not to proceed against this defendant, BOC.

61.Fourthly, the Liquidators made efforts to gain access to records of the Plaintiff’s former auditor which materially advanced the Liquidators’ understanding of the Plaintiff’s affairs including the true value of the Technologies.

62.The Liquidators also interviewed relevant persons involved in the Plaintiff’s affairs.  The s.221 Application relating to Bank of East Asia reinforced the Liquidators’ suspicions that former management of the Plaintiff were ultimate recipients of the Plaintiff’s assets.  However, the relevance of these investigations to BOC were not mentioned in Borrelli’s affidavits.

63.Fifthly, §28 of Borrelli-3^rd stated that “the Liquidators’ investigations were ongoing not only with respect to the knowledge and conduct of BOC, but also with respect to the nature and consequences of the suspicious transactions themselves, the location of the assets seemingly misappropriated, and the conduct of other persons potentially responsible for the losses incurred by the Company.” 

64.In summary, Harris J’s Judgment answered the purpose of the Liquidators’ investigations – to decide the viability of the claim against BOC.  The “other investigations”, even if genuinely believed in and conducted, could not undermine that answer.  There were thus no good reasons to extend the Writ on the date the Extension Order was made.

D.  ISSUE (2): WHETHER THE LIQUIDATORS’ FAILURE TO INFORM THE MASTER OF HARRIS J’S JUDGMENT AMOUNTED TO MATERIAL NON-DISCLOSURE

D1.  Legal principles concerning disclosure in ex parte applications

65.When applying for an ex parte order, the duty is on the applicant to make full and frank disclosure to the court of all relevant facts which he knows.  Failure to do so may in itself be a ground for setting aside such an order.  Hong Kong Civil Procedure 2018, Vol 1,§§32/6/13.

66.The test as to materiality is an objective one.  It is not for the applicant or his legal advisers to decide the question, hence it is no excuse for the applicant subsequently to say that he was genuinely unaware, or did not believe, that the facts were relevant or important: Gee on Commercial Injunctions, 6^th ed, at §9-003.

67.“Material information” means all matters which are relevant to the court’s assessment of the application in question, and it is no answer to a complaint of non-disclosure that if the relevant matters had been placed before the court, the decision would have been the same: Gee, 6^th ed, at §9‑003; New Asia Energy Limited v Concord Oil (Hong Kong) Limited, unreported, CACV 347/1998, 3 November 1999, at pp.4-5, Keith JA.

68.It will usually not be a sufficient answer to an allegation of non-disclosure for an applicant to say that the relevant information giving rise to the defence was contained in an exhibit though not referred to in the body of the affidavit in the context of a possible defence.  The applicant has the responsibility of ensuring that all relevant points are presented clearly and distinctly: Gee, at §9-005.

69.The duty of disclosure extends to identifying potential defences (such as limitation), which although not yet taken, would have been available to be taken by the defendant had he been present at the application, provided that: (a) the defence is one which can reasonably be expected to be raised in due course by the defendant, and (b) the defence is not one which can be dismissed as without substance or importance.  Gee, at §9-007; New Asia Energy, at p.5.

70.Mr Manzoni SC does not dispute these duties.  However, he reminds the court that it must be vigilant to the possibility of litigants alleging material non-disclosure on slender grounds to seek discharge of an ex parte order where there is little hope of doing so on the substantial merits of the case or on the balance of convenience: Brink’s Mat Ltd v Elcombe [1988] 1 WLR 1350, at 1359B-E, Slade LJ. 

71.In deciding whether to set aside an ex parte order on the ground of material non-disclosure, the court adopts a four-limb test:

(a) Was there non-disclosure of facts?

(b) Were the facts not disclosed material?

(c) Was the non-disclosure innocent?

(d) If there was material non-disclosure, should the court nevertheless exercise its discretion not to discharge the ex parte order? 

Hong Kong Civil Procedure 2018, §32/6/13; citing Yau Chiu Wah v Gold Chief Investment Ltd [2003] 3 HKLRD 553, Recorder Ma SC (as he then was), at pages 22 to 25.

D2.  Application of the law to non-disclosure of Harris J's judgment

72.It is not disputed that the Liquidators had not returned to the Master with news of Harris J’s Judgment; nor had they alerted the Master to any possible defence of BOC arising out of that Judgment.

73.Mr Manzoni SC does not dispute that the continuing duty of disclosure applies, post-ex parte order, to situations where a claimant has obtained an ex parte order on a basis which he knows he could no longer support, or where the court has been misinformed, or has been given materially incomplete information.  The claimant should then apply to discharge the order or to continue the order on a new basis.  

74.However, he submits that the continuing duty requires careful definition.  There are no authorities that apply the continuing duty to an extension application.  In Network Telecom (Europe) Ltd v Telephone Systems Intl Inc [2004] 1 All ER, 418,at §§83 & 85, Burton J held that he would not have set aside the ex parte order on the ground of non-disclosure in the absence of any prior case which had extended the continuing duty to disclose, beyond a ‘nuclear weapons’ case, to service out of the jurisdiction.  He found that the duty in that case was not something that would then have been obvious to a litigation solicitor.

75.Mr Manzoni SC contends that the continuing duty should not apply to an extension application because:

(a) The nature and scope of any such duty must accommodate features of the jurisdiction which distinguish it from, for example, Mareva jurisdictions.

(b) The Court should have regard to whether the duty ought to have been apparent to the litigant or their advisers in the particular circumstances, in considering the appropriate consequences of any transgression.

(c) At the time of the s.221 Application, significant international investigations were on-going.  Each development was potentially relevant to the Liquidators’ understanding of the affairs of the Company, including the availability or merits of the claims available to them. To require the Liquidators to continuously update the Court with every development potentially relevant to the Liquidators’ understanding during the period of extension would be unworkable and unnecessarily wasteful of time, costs and court resources. For example, the Liquidators may have to inform the Master of the s.221 Decision, the intended appeal, give an update on the progress of the Liquidators’ review of documents produced by Paul Weiss, or their pursuit of other investigations, including what new questions those reviews and investigations might have raised. 

(d) A defendant would only suffer limited prejudice by reason of his exposure to claims for a longer period than is ordinarily contemplated by the rules. 

(e) BOC’s situation was mitigated by its knowledge of the Writ back in 2015.  Although BOC could not set aside the Extension Order unless and until it was served, it could invoke Order 12, rule 8A to seek accelerated service.  BOC had not availed itself of its rights under that rule between March 2015 (when it was informed of the Writ) and December 2016 (when it was served with the Writ).

76.The law is not entirely settled.  In Spry on The Principles of Equitable Remedies (2014), 9^th ed, p 518; Gee, at §§9-026–9-027, it is stated that:

“The question has recently been raised whether a special duty of disclosure continues to rest on the plaintiff after an ex parte order has been made. It has been suggested that in these circumstances he must return to the court, not only if he discovers that the court has been misinformed or has been given materially incomplete information, but also if there are any subsequent material changes, while the proceedings remain on an ex parte basis (citing Commercial Bank of the Near East Plc v A, B, C and D [1989] 2 Lloyd’s Rep. 319, per Steyn J). However, when copies of the relevant order and of the affidavit material on which it is based are given to the defendant, it becomes possible for him, as well as for the plaintiff, to approach the court, and in view of this consideration the special duties of disclosure of the plaintiff are diminished. However, it is not yet clear to what extent any special duty continues to rest on the plaintiff. Hence it will be necessary for these questions to be considered further by the courts before the limits in this respect of duties of disclosure will be able to be regarded as settled.”

77.On that basis, Chow J granted leave to appeal in respect of an injunction to seek guidance from the Court of Appeal: Wason Holdings Ltd v BHP International Markets Ltd [2015] HKCU 801. In the end, the Court of Appeal did not address the issue, as the alleged non-disclosures were not of such materiality to justify the discharge of the injunction in question: [2018] HKCA 113, §35, per Barma JA (Yuen JA agreeing).

78.However, with regard to the contention in paragraph 75(a), there was Hong Kong authority which held that the continuing duty applied to all ex parte applications, not just Mareva injunctions or Anton Piller orders: New Asia Energy, at p 5, Keith JA.

79.With regard to the contention in paragraph 75(b), it was not unreasonable for the Liquidators to think that having obtained the Extension Order, the Plaintiff was free to serve the Writ any time before expiry of the extended period: Lee Fai v Chan Kui [1997] HKLRD 1154, at 1157F, per Godfrey JA. 

80.However, whether something fell within the continuing duty of disclosure was to be decided objectively by the court.  Even if something was not apparent to the Liquidators or their litigation solicitors, it would not dis-apply that duty.  At best, it only goes to mitigation and enables the court to re-grant the order.

81.With regard to the contention in paragraph 75(c), the submission is an exaggeration.  The law does not require the Liquidators to continuously update the Master on every development in the investigation.  It is the material changes of circumstances that the Liquidators need to report to the Master.  If the report is cumbersome, it is because the bases of the application for the Extension Order necessitated it.  Since the s.221 Application formed a substantial part of the bases of investigations, plainly the Liquidators were under a duty to report Harris J's Judgment to the Master.

82.With regard to the contention in paragraph 75(d), issue of a writ may itself cause adverse effect to a person or business as it may cause banks to withhold credit facilities.  A defendant is entitled not to be vexed by stale claims.

83.With regard to the contention in paragraph 75(e), a defendant should not be forced to seek accelerated service or to strike out a stale claim.  This was all the more so when BOC’s knowledge of the existence of the Writ was gained in the first 12 months of its validity, in the course of the s.221 Application. There was nothing which pointed to BOC’s knowledge of the Extension Application.  Neither was there anything to show that BOC had waived their rights to oppose the Extension Order. 

84.I see no reason for not applying the continuing duty of disclosure to an extension application.

85.Was non-disclosure of Harris J's Judgment material?  The issue can be tested this way.  (i) Had Harris J's Judgment been available at the time of the Extension Application, should the Plaintiff have produced it for the Master’s consideration?  (ii) Alternatively, but for the fact that Harris J was seized of the s.221 Application, would the Master have to decide if seeking the subject matter of the s.221 Application was capable of being a good reason?  The answers to these 2 questions were plainly “yes”.  The non-disclosure was material.

86.The Extension Order was not sealed until 5 months after its making, ie on 26 May 2017.  There was ample time for the Liquidators to consider the effect of Harris J's Judgment and update the Master on it. 

87.Whilst the Master may be aware that “other investigations” were ongoing, it could not be said with certainty that in the light of Harris J’s Judgment, the Master would have definitely granted the Extension Order or for the full 12 months. 

88.Was the non-disclosure innocent?  Having regard to paragraphs 74 and 79, I am of the view that the non-disclosure was innocent.

89.In my view, to set aside the Extension Order in such circumstances would be wholly disproportionate to the prejudice the Plaintiff would suffer in losing the right to litigate such an enormous claim. Accordingly, but for the fact that the good reasons for extension have been wiped out, I would have set aside the Extension Order on the ground of non-disclosure of Harris J’s Judgment but re-granted the extension for the same period.

E.  ISSUE (3): WHETHER THERE WAS MATERIAL NON-DISCLOSURE IN FAILING TO INFORM THE MASTER OF THE POSSIBLE DEFENCES IN LIMITATION

90.Where a writ was issued before the period of limitation relevant to the causes has expired, Kleinwort Benson (at pp 615G-616C) refers to 3 main categories of cases in which an extension application is made.  See Pacific Electric Wire & Cable, §18:

(1) At a time when the writ is still valid and before the relevant period of limitation has expired;

(2) At a time when the writ is still valid but the relevant period of limitation has expired;

(3) At a time when the writ has ceased to be valid and the relevant period of limitation has expired.

91.In both categories (1) and (2), it is still possible for the plaintiff (subject to any difficulties of service which there may be) to serve the Writ before its validity expires, and, if he does so, the defendant will not be able to rely on a defence of limitation. 

92.In category (1) but not category (2) cases, it is also possible for the plaintiff, before the original writ ceases to be valid, to issue a fresh writ which will remain valid for a further 12 months.

93.In neither category (1) nor category (2) cases, therefore, can it properly be said that, at the time when the extension application is made, a defendant who has not been served has an accrued right of limitation.

94.In category (3) cases, it is not possible for the plaintiff to serve the writ effectively unless its validity is first retrospectively extended.  In this category, therefore, it can properly be said that, at the time when the extension application is made, a defendant on whom the writ has not been served has an accrued right of limitation.

95.I will add a category (4), where a writ was issued after the limitation period of a relevant cause has expired.  The defendant has an accrued right of limitation at the time when the extension application is made.

96.In the present case, there is no dispute that the prima facie limitation period was 6 years for all causes of action. This was how Borrelli-1^st dealt with the limitation issues:

“7. The BOCHK Protective Writ was issued to preserve potential claims in respect of banking services provided by [D] to [P] and/or in respect of its assets between around November 2006 and December 2009. If the BOCHK Protective Writ had not been filed, the potential claims may have become time barred while the Liquidators carry out the necessary investigations before they are in a position to determine whether or not any cause of action lies against [D].” (emphasis added)

“18. To protect against the possible expiration of limitation periods, the Plaintiff filed the BOCHK Protective Writ on 2 December 2014…” (emphasis added)

“62. … mindful that a prima facie limitation period in respect of payments made on 4 December 2008 totalling US$100.5 million from the Plaintiff’s account to Supreme Well was due to expire on 4 December 2014, on 2 December 2014, the Liquidators filed the BOCHK Protective Writ to preserve potential claims set out in the Writ including, inter alia, claims against the Defendant in respect of dishonest assistance, knowing receipt and breach of contract…” (emphasis added)

“89. Some of the potential claims in the BOCHK Protective Writ are founded on events that date back more than six years. Because there is a prima facie limitation period in the Limitation Ordinance (Cap 347) of six years for bringing actions in tort and contract, the Plaintiff issued the BOCHK Protective Writ prior to the expiry of any prima facie limitation periods to prevent the Defendant from advancing any argument that potential claims founded on events occurring more than six years ago are statute barred. If the validity of the BOCHK Protective Writ is not extended and if the writ is not served by 1 December 2015, the Defendant may be able to argue that a prima facie limitation period has expired in respect of potential claims in the BOCHK Protective Writ which are founded on events occurring more than six years ago.” (emphasis added)

97.These paragraphs in Borrelli-1^st gave the impression that the limitation period had not yet expired when the Writ was issued.  This contradicted the Indorsement which implied the opposite, which was why the Plaintiff intended to rely on the provisions of the Limitation Ordinance to directly or by analogy extend the limitation period.  Paragraph 89 of Borrelli-1^st made no attempt to distinguish claims that dated back more than 6 years and those that did not.

98.At this hearing, Mr Manzoni SC concedes that §89 in Borrelli‑1^st contained a “mistake”, but he submits that it was a mistake without significance.  If the limitation defence was available prior to expiry of the Writ, neither issue of the writ nor its extension would have affected that defence.

99.Without disrespect, I am unable to agree.  Mr Borrelli himself never admitted that it was a mistake.  Borrelli-3^rd, §81, expressly refused to accept that any misleading impression was given by Borrelli-1^st as to limitation periods and went at length to deal with the limitation defences.

100.It is no answer to say that there were materials in the exhibits (eg the Fund Flow Diagram exhibited to Borrelli-1^st) from which the Master could compare with the Indorsement and work out for himself when any claim would prima facie have expired.  The Liquidators had to ensure that all relevant points were presented clearly and distinctly to the Master in the affidavit: Gee, at 9-005.

101.In Binning Bros Ltd (in liquidation) v Thomas Eggar Verrall Bowles (a firm) [1998] 1 All ER 409 at 411 d-e, the general indorsement on the writ mentioned no dates.  The affidavit in support of the extension application did not disclose that 8 out of 49 heads of claim would be statute barred on the date the extension order was granted and the rest would be barred in less than 8 weeks’ time (415f-417c).  Hutchison LJ held that to be a very serious omission, amounting to a failure to comply with the duty of making full disclosure on an ex parte application, following Waddon.

102.More importantly, the evidence of Mr Borrelli on the limitation issues was not simply a mistake but in fact constituted misrepresentation.  To explain the true position, I adopt Mr Manzoni SC’s categorization of the claims as follows:

Underlying Claim			Category according to Kleinwort v Benson
Date		Event
1.	3 November 2006	Payment of US$30 million by 5 cashier orders from the Plaintiff’s BOC account to Supreme Well’s BEA Account.
2.	5 March 2007	Payment of US$76.8 million by 13 cashier orders from the Plaintiff’s BOC account to Supreme Well’s BOC Account.
3.	29 May 2007	Payment of US$7.45 million by 2 cashier orders from the Plaintiff’s BOC account to Supreme Well’s BOC Account.
4.	2 August 2007	Payment of US$22 million by 4 cashier orders from the Plaintiff’s BOC account to Supreme Well’s BOC Account.
5.	11 February 2008	Payment of US$20 million by 4 cashier orders from the Plaintiff’s BOC account to Supreme Well’s BOC Account.
6.	16 October 2008	Payment of US$47 million by 8 cashier orders from the Plaintiff’s BOC account to Supreme Well’s BOC Account.
7.	4 December 2008	Payment of US$100.5 million by 16 cashier orders from the Plaintiff’s BOC account to Supreme Well’s BEA Account.	Category 2
8.	10 March 2009	Payment of US$10 million by 1 cashier order from CMED Technologies’ Standard Chartered Account to Supreme Well’s BOC Account.	Category 2
9.	3 July 2009	Payment of US$21.75 million by 1 cashier order from CMED Technologies’ Standard Chartered Account to Supreme Well’s BOC Account.	Category 2
10.	4 December 2009	Payment of US$20 million by 1 cashier order from CMED Technologies’ Standard Chartered Account to Supreme Well’s BEA Account.	Category 1
		Total: US$355.5 million

[Note: the Liquidators did say that Supreme Well made payments totalling $234.79 million into accounts held with BOC.]

103.In respect of Category 1: although the claim was made within the 6-year limitation period, the description of Event 10 did not show BOC’s involvement.  Moreover, the Plaintiff did not alert the Master that grant of the Extension Order for the period after 4 December 2016 would deprive BOC of a limitation defence. The Plaintiff had not attempted to segregate Event 10 from other Events. Even if the Master would have granted an extension order just for Event 10, he would have been unable to do so.

104.Category 2 totalled US$132.25 million.  Amongst Events 7-9, the identity of the payors were not shown on the 2 cashier orders dated 10 March and 3 July 2009.  Mr Borrelli did not explain how it could be suggested that BOC had knowingly or dishonestly assisted in the receipt of such sums. Further, although §62 of Borrelli-1^st stated that the Plaintiff would be affected to the extent of US$100.5 million, he did not inform the Master that, but for the extension, those claims would be time-barred.

105.For the uncategorized Events, Mr Manzoni SC submits that the extension of the Writ had no bearing on availability or otherwise of a limitation defence which had accrued prior to the issue of the Writ.  BOC could still run the limitation defence despite the Extension Order.

106.With the greatest respect, that was sophistry. Those other events (worth US$203.25 million) fell within Category 4.  The Liquidators knew about it as reflected in the Indorsement.  Mere issue of the Writ had deprived BOC of the limitation defence and BOC would have to incur costs on striking it out. 

107.By not mentioning the preceding paragraph, the Liquidators further misled the Master into believing that the Plaintiff would be denied an unexpired claim as large as US$355.5 million if the Writ was not extended.

108.Further, although s.26 of the Limitation Ordinance provides for postponement of limitation periods in cases of fraud, concealment or mistake, it should not be construed to postpone time where there was an inability to sue in a case of a company controlled by wrongdoers.  In other words, s.26 only postpones the running of the limitation period if the Plaintiff had no knowledge of the fraud, and not when the Plaintiff took no action due to reasons otherwise: Hotung Investment (China) Ltd v Ernst & Young (a firm) [2012] 5 HKLRD 421 at §§24-38, Court of Appeal. 

109.Mr Borrelli’s affidavits said nothing about BOC’s knowledge of the fraud to enable the Plaintiff to invoke s.26 of the Limitation Ordinance.  Their case is still premised on “inferences as the bank’s actual knowledge of certain matters and the course which the bank actually took in response to the suspicious transactions (other than to act on the instructions of the Plaintiff’s fraudulent management) remain unknown to the Liquidators.” (Borrelli-3^rd, §64).   Mr Manzoni SC is still arguing at this hearing that the only means of obtaining evidence of BOC’s knowledge was the s.221 Application (which failed).

110.I find that there was not only material non-disclosure but also misrepresentation of the limitation issues before the Master.

F.  ISSUE (4): IF THERE HAD BEEN MATERIAL NON-DISCLOSURE, WHETHER THE EXTENSION ORDER SHOULD BE AFFIRMED OR RE‑GRANTED

F1.  Legal principles for affirmation or re-grant of an ex parte order

111.If the Court finds that there has been material non-disclosure, the general rule is that it should discharge the order and refuse to renew it. Nevertheless, the Court has jurisdiction to continue or re-grant the order.  The relevant factors can be found in Excel Courage Holdings Ltd v Wong Sin Lai [2014] 3 HKLRD 642 at §56 (Kwan JA): 

(a) That jurisdiction should be exercised sparingly, and should take account of the need to protect the administration of justice and uphold the public interest in requiring full and fair disclosure.

(b) The Court should assess, among other things, the degree and extent of the culpability with regard to the non-disclosure, and the degree of importance of the undisclosed matters to the application (although the fact that the judge might have made the order anyway is of little significance).

(c) The application of the general principle that an order should be discharged upon material non-disclosure being established should not be carried to extreme lengths or be allowed to become the instrument of injustice.

(d) There are no hard and fast rules as to whether the discretion to continue or re-grant the order should be exercised, and the court should take into account all relevant circumstances.

112.An important issue will always be how material the information was.  Where the undisclosed information was central to the case, the order granted should be discharged notwithstanding the absence of deliberate concealment: Network Telecom at §§63-64 (Burton J).

F2.  Application of the Legal principles

113.Computation of the 6-year limitation period in this action would have posed no difficulty to the most junior solicitor or liquidator.  The material non-disclosure and misrepresentation of the limitation issues were central to the Extension Application.  They were serious and egregious.  Category 2 and 4 claims made up US$335.5 million, out of a total claim of US$355.5 million. On this ground alone, the Extension Order should be set aside without a re-grant.

114.I am fortified in this view because any matter capable of being good reasons at the time of the Extension Order ceased being so by virtue of Harris J’s Judgment.  And the Liquidators’ case on BOC’s knowledge of fraud is still unknown.

115.I am aware of the potential prejudice to the Plaintiff in setting aside the Extension Order.  Lack of a re-grant would mean dismissal of the action (being one of the Plaintiff’s only assets).  The creditors may be denied enormous sums of money as a consequence of the fraud.  However, this prejudice may be reduced if, eg, the Liquidators can establish their claims against other entities.  Anyhow, the court should take a hard stance on Liquidators who are guilty of material non-disclosure and misrepresentation. 

116.The prejudice to BOC, if there is a re-grant, would be great, for BOC would have to incur costs for striking out this action on limitation grounds.  Moreover, the relevant Events dated as far back as 12 years. There was potential prejudice in terms of difficulty in collecting evidence when officers involved had left the employ of BOC and witnesses’ memory has faded (the latter being acknowledged by Mr Borrelli on affidavits). It may be true that those officers (though retired) have sworn affidavits in response to interrogatories as recently as 21 December 2016.  It may also be expected that a lot of the evidence would be documentary in nature and as early as 2012 the Liquidators have specifically requested BOC that document preservation procedures be engaged in March 2013.  However, when it comes to the question of whether or not BOC had knowledge of certain matters, it could not be said that officers’ memory was not important. 

117.Mr Manzoni SC prays in aid Wing Fai Construction v Yip Kwong Robert (2011) 14 HKCFAR 935, §§64 & 68, wherein Ma CJ said that “the role of the court as not being to prevent actions being litigated but quite the opposite”.  He suggests that the foundation (for striking out, in that case) is whether or not there had been abuse of process.

118.With respect, that authority does not trump the legal safeguards which are to ensure fairness to both parties.  If the test of abuse is of any relevance, it was the Liquidators who have abused by their material non-disclosure and misrepresentation.

119.Just as the lack of prejudice to a defendant per se is not a good reason for extending a writ, the lack of prejudice to a defendant per se cannot be a good reason for a regrant of an extension order after the earlier one is discharged. 

F3.  Findings

120.In summary, there were matters capable of being good reasons at the time of the Extension Order.  However, those matters have turned out to be not good reasons because of Harris J's judgment.  The “other investigations” of the Liquidators could not carry their case further.  There was material non-disclosure in that the Liquidators failed to bring Harris J’s Judgment to the attention of the Master after the grant of the Extension Order, but that non-disclosure was innocent.  There was material non-disclosure and misrepresentation in that the Liquidators failed to properly inform the Master of the limitation defences; and on this ground alone, this court would set aside the Extension Order without a re-grant.

G.  ISSUE (5): WAS SERVICE OF THE WRIT EFFECTED BY LEAVING AT THE RECEPTION DESK OF BOC TOWER?

121.Given my ruling on the application to set aside the Extension Order, effective service of the Writ on BOC is irrelevant.  I only deal with the application for setting aside service of the Writ briefly for the sake of completeness and costs.

122.Section 827 of the Companies Ordinance, Cap 622 provides that “[a] document may be served on a company by leaving it at, or sending it by post to, the company’s registered office.”

123.Section 827 should be strictly adhered to by leaving the writ at the registered office of the limited company: Re Hongkong Zhongxing Group Co Ltd (unreported, HCCW 256/2011, 8 March 2012) at §13 (Barma J, as he then was).

124.In this case, the Writ was not left at the Registered Office but at the reception desk on the ground floor of BOC Tower on 29 November 2016.  The process server (Mr Tsang Tak Wah) explained that the reception desk was surrounded with BOC signage. He asserted that a receptionist (Ms Lui) told him to leave the Writ there, which was denied by Ms Lui.  Ms Lui stamped the Writ with BOC’s chop marked “Bank of China (HK) Ltd General Services Div (BOC Tower)”. 

125.The court is unable to resolve the conflict of evidence on the affirmations.  I place little weight on the video tape as it has no sound. It is impossible for the court to decide or infer what the gesture of Ms Lui or Mr Tsang meant and whether what was taken out from the drawer for handing over to another person was the Writ.

126.More importantly, the Liquidators could not refute Ms Lui’s evidence that she was employed by an entity called Sun Chung Property Management Co Ltd and not BOC.  And there was no dispute that it was perfectly possible for the process server to go up to the 14^th floor.  He only had to register his personal details at the reception desk.  The staff at the reception desk on 14^th floor could acknowledge service of the Writ.

127.The service was not valid.

H.  ISSUE (6): WAS SERVICE OF THE WRIT BY ORDINARY POST EFFECTED BEFORE EXPIRY OF THE VALIDITY PERIOD?

128.Ms Steffensen, solicitor for the Liquidators, could only depose to the “usual practice” of handling of mails in her firm and say that it was “likely that the letter was put in a post box on 29 November 2016”. 

129.The postal chop bearing the date of 30 November 2016 was the best evidence of the posting date of 30 November. The Writ was thus deemed to be served on the second working day after posting, ie 2 December 2016, after the Writ had expired: Practice Direction 19.2, §2.

130.Mr Manzoni SC submits that BOC has failed to adduce “convincing evidence” to the effect that the Writ was not received within the time for service: Bank of China (Hong Kong) Ltd v Cheung King Fung [2007] 1 HKLRD 462, Tang JA (as he then was) at §34.  BOC’s officers (Mr Chang and a Ms Lee) merely referred to an email on 6 December 2016 with the Writ attached, as if the Writ was received by BOC that day, without stating the actual date of receipt.

131.With respect, Bank of China (Hong Kong) Ltd v Cheung King Fung has to be read in context.  There, the plaintiff had served the writ by registered post and filed an affirmation of service showing that the copy writ had not been returned to the plaintiff through the post undelivered to the addressee.  In applying to set aside the default judgment, the defendant claimed that he had not received the writ and applied to set aside the judgment.  It was in that context that Tang JA said that the court did not have to accept a defendant’s assertion that he had not received the writ through the post and that a defendant was required to provide convincing evidence of receipt.

132.In the present case, the Plaintiff has not even crossed the threshold of proper service by leaving at the Registered Office or by ordinary post within the specified time.  BOC v Cheung King Fung did not begin to apply.

133.Service by ordinary post was not effected within time.

I.  ISSUE (7): SHOULD ANY IRREGULARITY IN SERVICE BE CURED?

134.Under Order 2, rule 1, RHC, defective service of proceedings, however gross the defect and even a total failure to serve, is curable by the court, which may exercise its discretion not to set aside service if (i) the irregularity is technical rather than substantive; and (ii) the court is satisfied that the proceedings have come to the attention of the defendant: 3D Gold Jewellery Holdings Ltd v Pricewaterhouse Coopers [2014] 4 HKC 528, Deputy Judge Lok (as he then was), at §20.

135.Examples of the court’s exercise of such discretion can be found in:

(a) Hong Kong and Shanghai Banking Corp Ltd v Ong Tong Sing [2008] 3 HKLRD 444, §§29-36, DHCJ Gill where, following substantial inter-partes correspondence, the writ was served by delivering a copy of the writ to the defendants’ office and leaving it with the receptionist, rather than personal service on the defendant.

(b) 3D Gold v PwC, where a writ was served on the general counsel of a firm of accountants rather than on a partner of the firm.  In that case there had been a history of prior dealings between the parties in the context of s.221 proceedings and the defendants had received a copy of the writ in that context well before the attempted service. Deputy High Court Judge Lok said, at §24, that the defendant was clearly aware of the service of the writ and the nature of the claim contained therein. Hence the error of the process server had not caused any actual harm to the defendant.

136.In the present case, BOC had received a copy of the writ in the context of the s.221 Application, but it was within the first year of validity.

137.The attempt of the Liquidators’ solicitors to ascertain if the Writ could be served on KW Ng met with no success.  A copy of the Writ was actually served by hand on KW Ng (who acknowledged receipt on 30 November 2016 with the firm’s chop) but that was not a mode recognized by s.827 of Cap 622.

138.Mr Manzoni SC submits that it is inappropriate for a defendant who has instructed solicitors in related proceedings, to refuse to instruct their solicitors to answer questions about whether they are instructed to accept service in the hope that service by some other means may be avoided.  The Court takes a dim view of such a “catch me if you can” approach by defendants:  see Bank of China (Hong Kong) Ltd v Chen Jianren [2009] 3 HKLRD 163, DHCJ Carlson at §§23-24.

139.In Chen Jianren, the writ was served on the defendant by leaving at his 4 last known addresses on a date when (unknown to the plaintiff) the defendant was out of Hong Kong.  Nearly 5 years after the plaintiff had obtained a “regular” default judgment, the defendant (through solicitors) applied to set it aside.  By consent, the default judgment was set aside.  On the day following, the defendant’s solicitors wrote to the plaintiff’s stating that the former had no instructions to accept service of the writ.  Thereupon, the plaintiff applied for, amongst others, extension of the validity of the writ and a master granted the extension.  However, what the defendant would want was to have the plaintiff re-serve the writ in Mainland China, obliging the plaintiff to go through the process under Order 11 with all the delay and expense. 

140.Whilst acknowledging that the court had no power under Order 6, rule 8 to extend the validity of the writ (§§12, 14 of Chen Jianren), and despite clear authorities referred to in his judgment that Order 6 provided a comprehensive code for renewal of a writ (§11) Deputy Judge Carlson nevertheless invoked Order 2, rule 1 (to cure irregularity) and Order 3, rule 5 (to extend time) (§18).  He found that renewal of the writ would not deprive the defendant of a limitation defence.  Having referred to several authorities, Deputy Judge Carlson came to the conclusion that the defendant has received the writ and knew what the case was all about and was able to respond to it.  “In the absence of any prejudice”, in circumstances that the writ had been brought to the defendant’s attention in November 2006, he upheld the master’s deemed service order (§24).

141.With respect, to Mr Manzoni SC, his proposition in paragraph 138 and failed to take into account the special circumstances of Chen Jianren. He overlooked the element of “absence of prejudice” specially pointed out by Deputy Judge Carlson and in Transamerica Occidental Life Insurance Co (Hong Kong Branch) v King Sound Industry Co Ltd [2005] 1 HKLRD 125, 133D-G, Stone J, which Deputy Judge Carlson referred to.

142.The plaintiff in Chen Jianren had purportedly served the writ properly on the defendant at the last known addresses within the first year of the validity.  Here, the Plaintiff deliberately deferred service of the Writ till the end of a 2-year validity period (compared to only one year in 3D Gold v PwC); it can hardly expect indulgence of the court.  Further, given my findings on material non-disclosure and misrepresentation above, I decline to make any order to cure the irregularity.

143.I therefore set aside service of the Writ and the action is dismissed.

J.  COSTS

144.In principle, costs should follow the event so that BOC will get the costs of both summonses.  As the action is dismissed, the Liquidators should be personally liable for such costs: Osman Mohammed Arab & anor v Cashbox Credit Services Ltd, CACV 67/2017, 13 November 2017, §45, Yuen JA.

K.  CONCLUSION

145.I order as follows:

(1) In respect of BOC’s summons to set aside the Extension Order, the Extension Order is set aside;

(2) In respect of BOC’s summons for setting aside service of the Writ, the service is set aside;

(3) The action is dismissed;

(4) On a nisi basis, costs of both summonses and the action be to BOC with certificates for 2 counsel only, ie Mr Huggins SC and Ms Janet Ho; and

(5) On a nisi basis, such costs are to be borne by the Liquidators personally.

146.I thank counsel for their able assistance.

Mr Charles Manzoni SC instructed by and Mr Jason Karas (Solicitor Advocate) of Lipman Karas, for the Plaintiff

Mr Adrian Huggins SC, Mr Richard Khaw SC and Ms Janet Ho, instructed by K.W. Ng & Co, for the Defendant