Grand Pacific Equity Ltd v. R.S.H. Sports (HK) Ltd and Others

HCA4713/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4713 OF 2003

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BETWEEN

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Before : Hon Yam J in Chambers

Date of Hearing : 20 February 2006

Date of Judgment : 20 February 2006

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JUDGMENT

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1.In this action the plaintiff is a Hong Kong company suing the 1st defendant as a debtor, which is also a Hong Kong company.  The 2^nd, 3^rd and 4^th defendants are guarantors for the 1^st defendant’s debts.  They are outside the jurisdiction; they are Singaporeans.

2.There was a statement of an outstanding debt addressed to the 1^st defendant, dated 28 May 1998, with copies to the 2^nd, 3^rd and 4^th defendants.  The 3^rd defendant put forward — not strongly, I must say — that this is a demand against the 3^rd defendant for payment.  But I accept the plaintiff’s submission that that was, at most, a demand from the 1^st defendant.  The proper and official demand from the plaintiff against the 3^rd defendant was dated 8 April 1999 for the 1^st defendant’s debts and, therefore, the six years’ limitation period had not begun to run earlier and it only ran from 8 April 1999, for six years, to 8 April 2005.

3.In the year 2003, a writ was issued on 27 December and it was served on the 1^st defendant in Hong Kong.  There was no application to serve out of jurisdiction until 7 June 2004.  That is nearly six months afterwards.  However, Master de Souza, on 10 June 2004, raised three queries, whether service outside the jurisdiction was justified.  I stop here for a moment to say that those three queries raised did not recognise the fact that the plaintiff was entitled to serve it outside the jurisdiction since it was suing against the Hong Kong resident together with a foreigner, outside the jurisdiction.

4.Be that as it may, obviously there was a six months’ delay on the part of the plaintiff to apply for leave to serve outside the jurisdiction, and they did not reply to Master de Souza’s query until 19 November; that is more than five months afterwards, when the plaintiff filed its 2^nd affirmation in response.  At the same time, the plaintiff applied for renewal of the writs.  On 24 November, Master Kwan granted leave : (1) to extend the validity of the writ for six months, i.e. up to 25 May 2005; and (2) to serve the writ outside the jurisdiction.  Stopping here for a moment, the extension of time would therefore be beyond the six years’ limitation period of 8 April 2005.

5.On 3 December 2004, the plaintiff obtained default judgment against the 1^st defendant.  Between 17 and 23 December, the plaintiff attempted four times to serve it personally on the 3^rd defendant as was required under Singaporean law and procedure, but failed.  The writ, of course, expired by 26 December 2004 but it was extended, as aforesaid, by Master Kwan until 25 May 2005.

6.On 14 January 2005, the plaintiff wrote to the defendants’ Singaporean lawyers indicating that they wanted to serve the writ and other documents on the 3^rd defendant pursuant to Master Kwan’s order.  Eventually, it was arranged that the 3^rd defendant’s present solicitors would accept service of the writ on his behalf.  Therefore, on 3 February 2005, the writ was served on the firm of solicitors in Hong Kong acting for and on behalf of the 3^rd defendant.

7.However, on 2 March, the 3^rd defendant issued a summons to set aside the order of Master Kwan obtained by the plaintiff ex parte.  By 8 April 2005, as aforesaid, counting from the demand letter six years ago, the cause of action against the 3^rd defendant was time-barred.  Master Lung heard the 3^rd defendant’s summons by 20 December last year and dismissed the 3^rd defendant’s summons.  Now the 3^rd defendant appeals to this court.

8.Apparently, both parties, counsel appearing for either side, has said that the court in this kind of application will have to consider a two-stage inquiry.  Stage 1, the court must be satisfied there was a good reason to extend time and, if so satisfied that there was a good reason to extend time, the court then and only then would proceed to stage 2 and decide whether or not to exercise its discretion in favour of renewal by considering all the circumstances of the case, including the balancing of prejudice or hardship on both parties.

9.I will start from the House of Lords case in Kleinwort Benson Limited v. Barbrak Limited [1987] 1 AC 597, at page 615G–H, Lord Brandon said :

“My Lords, there are three main categories of cases in which, on an application for extension of the validity of a writ, questions of limitation of action may arise, all being cases in which the writ has been issued before the relevant period of limitation, that is to say the period applicable to the cause of action on which the claim made by the writ is founded, has expired.  Category (1) cases are where the application for extension is made at a time when the writ is still valid and before the relevant period of limitation has expired.  Category (2) cases are where the application for extension is made at a time when the writ is still valid but the relevant period of limitation has expired.  Category (3) cases are where the application for extension is made at a time when the writ has ceased to be valid and the relevant period of limitation has expired.  In both category (1) cases and category (2) cases, 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.  In category (1) cases, 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. In neither category (1) cases nor category (2) cases, therefore, can it properly be said that, at the time when the application for extension is made, a defendant who has not been served has an accrued right of limitation.  In category (3) cases, however, it is not possible for the plaintiff to serve the writ effectively unless its validity is first retrospectively extended.  In category (3) cases, therefore, it can properly be said that, at the time when the application for extension is made, a defendant on whom the writ has not been served has an accrued right of limitation.

It would not be right, however, to regard the question whether, at the time of the application for extension, a defendant on whom a writ has not been served has an accrued right of limitation as the only significant factor in relation to such extension.  For, even in category (1) cases and category (2) cases, where there is no such accrued right, the effect of an extension may still enable a plaintiff to serve a writ, which was issued before the relevant period of limitation expired, more than 12 months after the expiry of that period.  This necessarily involves a departure, in favour of a plaintiff, from the general rule on which a defendant is entitled to rely that a writ against him, if it is to be effective, must be issued before the relevant period of limitation has expired and must be served on him within 12 months of its issue.

My Lords, there is a considerable body of authority on the principles to be applied by the court where, on an application for the extension of the validity (in which I include the renewal) of a writ, questions of limitation are involved.  I do not think that it is necessary for me to examine the whole of this body of authority in detail, but it will be helpful if I refer to the statements of principle which are to be found in the more important reported cases.”

10.Mr Jason Pow, as the counsel for the plaintiff, submitted strongly that, in this case, a good cause could be shown and the fact that when Master Kwan considered the extension when the application to set aside the order of Master Kwan was made on 2 March 2005, the limitation period had not expired until 8 April 2005 as aforesaid.  If Master Kwan had refused the plaintiff’s application to extend the writ, or if Master Lung could have heard the 3^rd defendant’s application on 3 February 2005 and set aside the order of Master Kwan, the plaintiff could have issued a fresh writ and that would have been within the limitation period.  The plaintiff by reason of Order 11 rule 1, could have obtained also, at the same time, an order to serve the writ outside the jurisdiction on the 3^rd defendant.  Apparently, Mr Pow submitted to this court that this, by itself, would constitute a good reason to extend the validity of the writ.

11.However, I could not gather this proposition from the case of Kleinwort Benson and, in fact, in a subsequent case of the Court of Appeal in England, in the case Goldenglow Nut Food Co. Ltd v. Commodin (Produce) Ltd [1987] Vol. 2 Lloyd’s Law Reports, May LJ said at page 577 :

“However category (1) cases where a defendant is outside the jurisdiction are not so simple to be dealt with.  Although the limitation period may not have expired, the relevant considerations, upon which to decide whether leave to serve a fresh writ out of the jurisdiction should be given, may be very different when an application is made to extend the validity of the original writ than when leave to serve that original writ out of the jurisdiction was first made.  If a writ has not been served upon a defendant out of the jurisdiction when an application to extend its validity is made, an important consideration to include in the balance when deciding whether or not ‘good reason’ has been shown for an extension, will be whether leave would then be given to serve a fresh writ out of the jurisdiction which ex hypothesi the plaintiff could in any event issue.  If the probabilities are that in all the circumstances such leave to serve out would probably not be given, then this must militate against the grant of any extension of the validity of the writ.  For my part, I am not prepared to equate this type of case with category (3) cases as referred to in The Myrto, as was contended for by the respondents in the instant appeal.  I can see no reason to do so.  The basic rule remains - has a good reason been shown to extend the validity of the writ?  But the international aspects of any case are clearly material when answering this question, for the reasons that I have just given.”

12.I must point out the case of Goldenglow is a category (1) case.  The breach of contract and discovery of the same occurred in March or April 1981 and the six years’ period expired by April 1987.  The writ was issued on 1 August 1983 and it was not served for 15 months until, in February 1985, there was an extension until 31 July 1985.  The Registrar heard the case and refused to set aside the extension.  Rogers J heard the case and decided, in April 1986, to allow the appeal and set aside the extension.  At the time of both decisions, the plaintiff was still within the six years’ limit.  The plaintiff appealed to the Court of Appeal.  The Court of Appeal heard it outside the limitation period on 30 and 31 July 1987, but still the Court of Appeal in England upheld the decision of the judge below.

13.So the first hurdle the plaintiff must overcome is whether there is any explanation for the delay from the issue of the writ on 27 December 2003 up to the application for extension in November 2004.  What was the first period of delay of more than six months until they applied for service outside the jurisdiction, and what was the delay after Master de Souza raised the queries in June 2004?  The plaintiff explained by saying that in January 2004, the Singaporean lawyers representing the 3^rd defendant wrote to the plaintiff’s solicitors informing them about the 3^rd defendant’s defence.  Basically, the 3^rd defendant alleged that it was a joint venture among the 1^st defendant, the 3^rd defendant and one Mrs Nursalim, and it was agreed among them that the debt was not meant to be repaid by the 3^rd defendant and that Mrs Nursalim would shoulder the outstanding debts.  The plaintiff inquired from Mrs Nursalim who asked for time, but she never came back again.  There was no good reason explaining why they had to wait so long, until June, to ask for service outside jurisdiction and, thereafter, for another five months until they asked for the extension time.

14.It has been clearly stated in the White Book, under Order 6 rule 8, at page 68, that there are examples of good reasons, or reasons which have been held to be good, and they are : (a) a clear agreement with the defendant that service of a writ be deferred; (b) impossibility or great difficulty in finding or serving the defendant, more particularly if he is evading service.  There are also examples of bad reasons.  I cannot accept that the plaintiff has satisfied me of the first hurdle, and that is stage 1, that they have a good reason for extension of the writ.  Apparently, I cannot criticise the plaintiff after they got the order of service outside jurisdiction and extension of writ, they have promptly tried to serve on the 3^rd defendant.  I must say that it was quite unfortunate for the plaintiff that these four services were not fruitful.  If that was served before 26 December 2004, they could have served on the 3^rd defendant within the original validity period of one year of the writ.  Unfortunately, they could not serve it until February 2005.  Since, from the authorities, I could not read into the authorities that the fact that the plaintiff could issue a fresh writ at any time of the refusal of the extension for setting aside the extension, that could be a good reason.

15.Accordingly, I cannot go on to the second stage of balancing the hardship.  However, here, I must express that I have no sympathy for the 3^rd defendant and have every sympathy for the plaintiff.  If sympathy was the guiding principle, I would have held against the 3^rd defendant, but unfortunately, that is not to be the case.  If I am asked to exercise my discretion in the exercise of balancing hardship, I would have no doubt at all that I would rule in favour of the plaintiff.  There is no prejudice against the 3^rd defendant at all if the extension of time should not be set aside.  The prejudice and hardship to the plaintiff is considerable.  The main hardship, of course, is the plaintiff will have lost one guarantor out of the three guarantors.  Whether the 3^rd defendant could set up his defence as stated by his Singaporean lawyers is beside the point.  So with some reluctance, I must allow the appeal.

16.The order of Master Kwan on 24 November 2004 be set aside.  Costs of the appeal and before Master Lung be to the 3^rd defendant, to be taxed if not agreed.

17.I have to refuse the application for certificate for two counsel simply on the fact that, on the plaintiff’s side, they also work on the fact that one senior counsel is enough and, therefore, on taxation, I think a master will only allow the fee charged by the senior counsel.

Mr Jason Pow, instructed by Messrs Preston Gates & Ellis, for the Plaintiff

Mr Alan Leong, SC, leading Mr Hectar Pun, instructed by Messrs Fairbairn Catley Low & Kong, for the 3^rd Defendant