China Medical Technologies, Inc (in Liquidation) and Others v. Wu Xiaodong and Others

HCA 3391/2016 & HCA 1417/2013

[2025] HKCFI 4997

HCA 3391/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 3391 OF 2016

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BETWEEN

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AND

HCA 1417/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1417 OF 2013

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BETWEEN

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(Consolidated by Order of Master Chow dated the 23^rd day of July 2018)

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D E C I S I O N

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1.On the third day of the trial, an issue arose during counsel’s oral opening submissions as to whether the 6^th Defendant can raise a factual point during the trial and whether such a point needs to be pleaded. The issue arose in this way.

2.In this trial, one of the issues to be determined is whether the Plaintiffs’ claims are time-barred. In order to overcome the time bar defence raised by the 6^th Defendant, the Plaintiffs rely on section 26 of the Limitation Ordinance (Cap 347) to postpone the commencement of the limitation period. Specifically, the Plaintiffs have pleaded that they could not, with reasonable diligence, discovered the fraud of the 6^th Defendant before 23 or 24 December 2013. According to the Plaintiffs, that was the date when the Plaintiffs obtained the relevant banking documents and discovered that the 2^nd Defendant was on both sides of the relevant transactions.

3.In their written opening dated 15 September 2025, Mr Kerby Lau and Mr Paul Law on behalf of the 6^th Defendant submitted that “the Alleged Theft and/or the relevant facts of the case against D6 clearly could have been discovered by Ps much earlier by 2009 at the latest, even before liquidators were appointed”. Subsequent to the receipt of the document, I understand that the Plaintiffs’ solicitors wrote to the 6^th Defendant’s solicitors and complained that this was an unpleaded case.

4.At the end of his oral submission on the third day of the trial, Mr Charles Manzoni SC on behalf of the Plaintiffs submitted that the 6^th Defendant should not be allowed to raise the unpleaded case now because significant prejudice will be caused to the Plaintiffs. He also lay down the marker that the Plaintiffs will object if their factual witnesses are cross-examined during the trial for the purpose of advancing the 6^th Defendant’s unpleaded case.

5.In his oral opening submission and when dealing with the Plaintiffs’ pleading objection, Mr Lau confirmed that the 6^th Defendant does intend to argue that the Plaintiffs could have discovered the fraud on a date much earlier, and that he will cross-examine the Plaintiffs’ factual witnesses on this point. But he disagreed that this point needs to be pleaded.

(1) First, he submitted that the burden falls on the Plaintiffs to show that they could not with reasonable diligence have discovered the fraud. He said the 6^th Defendant has put them to strict proof, and the 6^th Defendant does not need to prove anything.

(2) Further, Mr Lau argued that the Plaintiffs have included in the trial bundles some documents for the purpose of showing that they could not have discovered the fraud with reasonable diligence, and the 6^th Defendant must be allowed to test the Plaintiffs’ case by suggesting some earlier dates or events.

(3) Moreover, Mr Lau suggested that the Plaintiffs must have known that this point would be taken against them because the very same point appeared in a striking out decision in a different action by the Plaintiffs against the Bank of China.

(4) Finally, Mr Lau urged the court not to make a hasty decision to rule on the pleading point now and should instead hear all the evidence on a de bene esse basis before coming to a final view.

6.For the reasons that I am about to give, I am unable to agree with the 6^th Defendant’s submissions that the new point does not need to be pleaded.

7.First, it is clear that the 6^th Defendant’s current pleading simply contains a bare denial on the application of s.26(1)(a) of the Limitation Ordinance, and puts the Plaintiffs to strict proof that they could not with reasonable diligence have discovered the 6^th Defendant’s alleged fraudulent, dishonest or unconscionable conduct sooner than they did. This appears in paragraph 59 of the 6^th Defendant’s Amended Defence. Under RHC O.18 r.13(5), where an allegation made in a statement of claim is traversed by a denial, the party who denies the allegation shall in his defence (a) state his reasons for doing so and (b) if he intends to put forward a different version of events from that given by the plaintiff, state his own version. Accordingly, if the 6^th Defendant wishes to suggest that the Plaintiffs could have discovered the fraud on a date much earlier than their pleaded date of 23 December 2013, the 6^th Defendant must state his own version of when he says the Plaintiffs could have discovered the fraud. As noted in Hong Kong Civil Procedure 2025 vol 1 at Note 18/13/12, if a party fails to plead his own version, he will be taken not to have put forward any positive case in defence and will not be entitled to call any evidence of fact contrary to or inconsistent with the plaintiff’s pleaded contention.

8.Second, by suggesting that the Plaintiffs could have discovered the fraud on a date much earlier than their pleaded date of 23 December 2013, the 6^th Defendant would have gone beyond merely testing the Plaintiffs’ case. In my view, testing the Plaintiffs’ case on s.26 may involve the 6^th Defendant showing, for example, that the Plaintiffs did not obtain the relevant banking documents on 23 December 2013, or that such documents did not reveal the 2^nd Defendant’s role in the relevant transactions. But the advancement of suggestions that the Plaintiffs could have discovered the fraud earlier than 23 December 2013 would constitute a positive case on the part of the 6^th Defendant, and would need to be pleaded.

9.As far as the documents in the trial bundles identified by the 6^th Defendant are concerned, they are minutes and notes of meetings and were included in Annexure 2 to Dr Crum’s witness statement. It is important to see what Dr Crum said in his witness statement as to why the various minutes and notes of meetings were referred to. Annexure 2 is referred to at paragraph 19.7 of Dr Crum’s witness statement. It appears from paragraph 19 that the purpose of referring to such meeting minutes and notes is to illustrate the general practice of the Board and Committee meetings of the 1^st Plaintiff. Contrary to Mr Lau’s suggestion, it does not appear that the purpose of including the documents in Annexure 2 is to show that the Plaintiffs could not have discovered the fraud with reasonable diligence.

10.Third, the fact that a similar point was taken by the Bank of China against the Plaintiffs in a different action does not mean that the Plaintiffs must have known or anticipated that one of the Defendants in this action will take the same point in this trial. As pointed out by Mr Manzoni, the Bank of China expressly pleaded the point in its defence. If the point is not pleaded by any of the Defendants in these proceedings, there is no reason for the Plaintiffs to expect that the point would be taken against them at the trial.

11.Fourth, as Ma CJ said in Kwok Chin Wing v 21 Holdings Ltd (2013) 16 HKCFAR 663 at [21], “[i]t is the pleadings that will define the issues in a trial and dictate the course of proceedings both before and at trial. Where witnesses are involved, it will be the pleaded issues that define the scope of the evidence, and not the other way round. In other words, it will not be acceptable for unpleaded issues to be raised out of the evidence which is to be or has been adduced.” It is therefore wholly inappropriate for the trial judge to allow evidence to be adduced on an unpleaded issue first, even on a de bene esse basis, and then to decide on whether the unpleaded issue can be advanced at the end of the trial.

12.Finally, I accept Mr Manzoni’s submission that allowing the 6^th Defendant to advance the point would cause significant prejudice to the Plaintiffs. It was pointed out that pursuant to the discovery protocol ordered by Ng J on 10 May 2019, the Plaintiffs have not disclosed any documents in these proceedings in relation to the engagement of the different professional advisers of the 1^st Plaintiff, or the advice they gave. And the Plaintiffs have also been deprived of the opportunity to investigate the extent to which the various advisers might or might not have made the alleged fraud of the 6^th Defendant discoverable, and adduce any form of evidence in these proceedings to rebut the unpleaded point.

13.For these reasons, I rule that the 6^th Defendant is not permitted to contend in this trial that the Plaintiffs could have discovered the alleged fraud of the 6^th Defendant earlier than 23 December 2013.

14.It is right to record that the 6^th Defendant’s Amended Defence was not settled by either Mr Lau or Mr Law. Both of them were only instructed shortly before the trial commenced. They have tried to take the point as far as they possibly can, but the point is simply not open to the 6^th Defendant to take on the existing pleading.

Mr Charles Manzoni SC and Ms Cherry Xu, instructed by Karas So LLP, for the 1^st to 3^rd Plaintiffs

The 3^rd Defendant appeared in person

Mr Kerby Lau and Mr Paul Law, instructed by Li & Partners, for the 6^th Defendant

Mr Benjamin Lam, instructed by Guantao & Chow Solicitors and Notaries, for the 13^th Defendant

The 1^st, 2^nd, 4^th, 5^th, 7^th to 12^th, 14^th to 23^rd Defendants were not represented and did not appear