Tan Kah Eng v. Tan Eng Khiam

CACV 81/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 81 OF 2011

(ON APPEAL FROM HCA 9640 OF 1999)

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BETWEEN

BETWEEN

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Before : Hon Hartmann JA and Sakhrani J in Court

Date of Hearing: 25 October 2011

Date of Judgment : 25 October 2011

Date of Reasons for Judgment : 21 November 2011

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REASONS FOR JUDGMENT

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Hon Hartmann JA :

1.I agree with the reasons given by my brother and have nothing to add.

Hon Sakhrani J :

2.On 25 October 2011 after hearing arguments we dismissed the appeal of the defendant against the order of Bharwaney J made on 14 March 2011 whereby he ordered, inter alia, that

(1) the validity of the writ of summons be extended from the date of its expiry up to the date of the order and for a further period of 3 months thereafter; and

(2) leave be re-granted to the plaintiff to issue a concurrent writ having the same period of validity and re-granted leave to serve that concurrent writ out of the jurisdiction on the defendant in Singapore.

3.We also made an order that the costs of the appeal be costs to the plaintiff.

4.We indicated at the time that reasons in writing would be given later.  This I now do.

5.The defendant died on 7 May 2011 after the date of the judge’s order.

6.On 25 May 2011 the judge ordered that the action be continued against the executors or intended executors of the estate of TAN ENG KHIAM, deceased, namely TAN SECK YEOW and TAN SECK CHUN.  He also ordered that the writ of summons be amended by substituting the name of the defendant with “The executors or intended executors of the estate of TAN ENG KHIAM, deceased, namely TAN SECK YEOW and TAN SECK CHUN”.

7.The validity of the concurrent writ for service out of the jurisdiction was also extended up to 13 July 2011.

8.Although he is now deceased, it is convenient to refer to him as the defendant as counsel have done in their submissions.

9.The plaintiff’s claim against the defendant is for repayment of six loans made on various dates from October 1997 to February 1998 to the defendant pursuant to agreements reached between the plaintiff and the defendant in Hong Kong.  The claims are for the sums of S$3,120,190 and HK$3,000,000 with interest on those sums.

10.The writ of summons in this action was issued on 11 June 1999.  It is significant that when issued it was stamped with the endorsement “NOT for service out of the Jurisdiction”.  The defendant’s address given in the writ was an address in Singapore.

11.A concurrent writ and statement of claim was issued with leave of the court on 5 November 1999 for service out of the jurisdiction on the defendant in Singapore.  Such leave was granted by Master S. Kwan, as she then was, by her order made on 27 October 1999.

12.The concurrent writ that was issued out of the Registry pursuant to the order of the master made it plain that the same was issued pursuant to the order of the master dated 27 October 1999.  Also, the endorsement “NOT for service out of the Jurisdiction” was deleted on the concurrent writ that was issued.

13.There is no dispute that the concurrent writ was served on the defendant in Singapore pursuant to the leave that had been obtained.

14.Thereafter the defendant applied for a stay of the proceedings on the ground of forum non conveniens by his summons dated 25 January 2000.  That application was dismissed by Master Barnes, as she then was, on 2 June 2000.

15.There was no appeal from the decision of Master Barnes. 

16.The defendant’s defence was dated and filed on 22 June 2000 denying that loans were advanced as alleged and setting out his case as pleaded therein.

17.There was a period of inactivity in proceeding with the action to trial.  For that reason the defendant applied to strike out the action for want of prosecution.  That application was dismissed by Master S. Kwang on 14 October 2008.

18.There was, however, an appeal against the master’s order dismissing the defendant’s summons.  The appeal was determined by Deputy Judge To, as he then was.

19.By his decision dated 15 January 2009 Deputy Judge To dismissed the defendant’s appeal for the reasons given by him in his decision. In effect he held that the delay was inordinate but was excusable.  He also held that for the reasons given by him there was no prejudice to the defendant despite the fact that the defendant had suffered a massive stroke early in October 2007 and was mentally incapacitated and unable to give viva voce evidence at trial.

20.There was no appeal from the decision of Deputy Judge To.

21.Shortly before the trial of the action the defendant applied to strike out the plaintiff’s claim and to dismiss the action on the ground that the proceedings were a nullity for the reason that the plaintiff was an undischarged bankrupt in Singapore and had no capacity to bring these proceedings at the time the writ was issued.

22.The plaintiff was adjudged a bankrupt in Singapore on 11 November 1994.  The bankruptcy was annulled by a certificate of annulment dated 18 February 2000.

23.By his order made on 13 August 2010 Bharwaney J dismissed the defendant’s application to strike out the action on the ground that the action was a nullity.  He also ordered that the leave of the court obtained on 27 October 1999 to serve the concurrent writ on the defendant out of the jurisdiction in Singapore be discharged on the ground of material non-disclosure.  He further ordered that the hearing of the application to re-grant leave to issue the concurrent writ and the service of the same out of the jurisdiction be adjourned.

24.The judge gave detailed reasons for his ruling given on 13 August 2010.  He held that the plaintiff had no capacity to bring these proceedings and that they were a nullity.  He also held that the annulment had the effect to restore full capacity to the plaintiff retrospectively as if he had never been made bankrupt.  The judge went on to hold that there had been deliberate material non-disclosure on the part of the plaintiff when he applied for leave to issue and to serve the concurrent writ out of the jurisdiction in that he failed to disclose that he was a bankrupt in Singapore and had not obtained the prior sanction of the Official Assignee to commence these proceedings.  He, therefore, discharged the order that had been obtained granting leave to issue and to serve the concurrent writ out of the jurisdiction.  He adjourned the question of whether he should re-grant leave as the bankruptcy had been annulled and the plaintiff had been restored retrospectively to full capacity to commence and maintain these proceedings.

25.After the date of the judge’s order made on 13 August 2010 there were further developments leading to the hearings before the judge on 8 and 10 February 2011 in respect of which he gave his decision and made the order on 14 March 2011.  The further developments are set out at paragraphs 6 to 9 of his decision as follows :

“ 6. After that, a number of developments occurred which I recorded in my decision of 9 September 2010. The plaintiff had made an offer of composition of 20% to his creditors in 2000 that was accepted by his creditors. In view of the non-disclosure of the plaintiff’s assets, the Official Assignee came to the conclusion that he would revoke the certificate of annulment on the ground of the plaintiff’s failure to inform the Official Assignee and the creditors of his assets. This would require an application to the High Court of Singapore, the costs of which were to be borne by the plaintiff. After the revocation, the plaintiff could pay off his debts in full by making payment of the remaining 80% due to his creditors. He could then apply for an annulment once again. Although the Official Assignee would not object to the plaintiff’s fresh application for annulment, he reserved his right to pursue prosecution action against the plaintiff.

7. There was disagreement between the plaintiff’s and the defendant’s Singaporean solicitors as to the right of the defendant to appear and to be heard on the plaintiff’s application for a fresh annulment. I concluded that, whether or not the defendant was entitled to appear and be heard by the Singapore court, it was clear that the final decision whether or not to grant an annulment must lie with the Singapore court, notwithstanding that the Official Assignee did not intend to object to the application. In the light of this development, it became clear to me, when the parties returned to me on 3 September 2010, that the disclosure of the special resolution resulting in the issue of the certificate of annulment on 18 February 2000 was no longer an issue, and that the remaining issue on the plaintiff’s application to re-grant leave to serve out of the jurisdiction was no longer whether or not the original certificate of annulment was liable to be set aside (clearly, it was going to be set aside), but whether or not the plaintiff could obtain a fresh order of annulment from the Singaporean court and be restored, once again, to full capacity to maintain these proceedings.

8. In the light of these developments and having heard submissions from the parties, I granted an adjournment to the plaintiff for the further steps to be taken in the Singapore court, and I directed on 3 September 2010 that, if the Singapore court granted a fresh order of annulment, the plaintiff could proceed with his application before me for re-grant of leave to serve out of the jurisdiction at which point in time the defendant could raise before me all the matters that had been raised in opposition to the plaintiff’s application for adjournment.

9. When the parties returned to me on 8 February 2011, the following had occurred :

(a) The High Court of Singapore on 14 January 2011 made an order revoking the plaintiff’s annulment of Singaporean Bankruptcy No. 4312 of 1994;

(b) Thereafter, all the plaintiff’s creditors were immediately paid in full;

(c) On 24 January 2011, after all of his creditors had been paid in full, the plaintiff filed a fresh application in the High Court of Singapore for an order that his Singaporean Bankruptcy No. 4312 of 1994 be annulled;

(d) That application was heard on 26 January 2011. At the hearing, the Official Assignee did not oppose the plaintiff’s application for a fresh annulment. After hearing the application, the High Court of Singapore ordered that the plaintiff’s bankruptcy be annulled.”

26.By the notice of appeal the defendant seeks to set aside the judge’s order made on 14 March 2011.

27.The judge was obviously exercising his discretion when making the order under appeal.  It is well established that an appellate court will not lightly interfere with the discretion exercised by the judge below.  It will only do so in limited circumstances where it is satisfied that the judge has erred in law or in principle, or if he has taken into account matters which he ought not to have done or failed to take into account matters which he ought to have done, or if the decision was plainly wrong.

28.Mr Leo Remedios, with Mr Jose Remedios, for the defendant relied on O. 6; r. 7(1) RHC which provides

“ No writ which is to be served out of the jurisdiction shall be issued without the leave of the Court………”

29.It was submitted that there was a non-compliance with O. 6; r. 7(1) as the original writ was issued without leave of the court.  This, it was submitted, was a fundamental defect in the proceedings and that the action could not proceed even though leave was subsequently obtained.  I am unable to accept these submissions.

30.The original writ was clearly stamped with the endorsement “NOT for service out of the Jurisdiction” because the address given for the defendant on the writ was an address out of the jurisdiction in Singapore.  That writ was not served on the defendant.  As set out above, on 5 November 1999 leave was granted by the master to the plaintiff to issue a concurrent writ and to serve the same out of the jurisdiction on the defendant in Singapore.  The concurrent writ was served on the defendant in Singapore.

31.In Hui Suet Ying, the proposed personal representative of Hui Cheung, deceased and Anor v Sharp Corporation and Anor, HCPI 1269 of 1997, 15 February 2000, Suffiad J said at page 5 of his ruling

“ ……….I know of no practice in Hong Kong where the original writ, as opposed to a concurrent writ, has to be issued with leave of the court where it is intended to be served out of the jurisdiction. The practice in Hong Kong has always been that leave is required only for the issue of a concurrent writ which is to be served out of jurisdiction.”

32.At paragraph 37 of his decision Bharwaney J said :

“ I agree with the judgment of Suffiad J. The practice in Hong Kong is almost invariably to issue a writ on a foreign defendant, without leave of court, which is stamped with the words “not for service out of the jurisdiction”. Although, as Mr Sherry pointed out, such a writ is not good for service out of the jurisdiction, if the overseas defendant happened to be in Hong Kong, he might well be served with this writ in Hong Kong. More often than not, however, an application is made for leave to issue a concurrent writ for service out of the jurisdiction and for leave to serve that concurrent writ out of the jurisdiction. The grant of leave to issue a concurrent writ for service out of the jurisdiction has the effect of satisfying the requirement of O. 6, r. 7(1). In Bank of China (Hong Kong) Ltd v Regal Link Investment Ltd, no application had been made to issue a concurrent writ for service out of the jurisdiction. The plaintiff did not do so because it did not appreciate that the defendant had moved overseas. The judgment of the Court of Appeal in that case does not affect the correctness of Suffiad J’s decision in Hui Yuet Ying v Sharp Corporation.”

33.In my judgment the judge’s reasoning cannot be faulted.

34.The defendant’s reliance on Bank of China (Hong Kong) Ltd v Regal Link Investment Ltd [2009] 3 HKLRD 203 is misplaced.  That case is clearly distinguishable and provides no assistance to the defendant.  In that case there was no application made at any time to issue a concurrent writ for service out of the jurisdiction.  

35.I would observe that in Leah v Dunlop Bio-Process International Ltd [1984] 1 WLR 874 there was also no application made for leave to issue and serve the writ out of the jurisdiction before it was served.

36.It was common ground between the parties that the judge could not re-grant leave to serve the concurrent writ out of the jurisdiction unless he also extended the validity of the writ under O. 2; r. 1 and O. 3; r. 5.  It was also accepted that the writ which expired many years ago could not be extended under O. 6; r. 8.

37.It was also submitted on behalf of the defendant that the judge had wrongly exercised his discretion to extend the validity of the writ under O. 2; r. 1 and O. 3; r. 5.

38.In the exercise of his discretion the judge said at paragraphs 14 to 16 of his decision :

“ Re-grant of leave to serve out of the jurisdiction

14. I now turn to consider the present application to re-grant leave and conclude, for the reasons set out in §§ 29-30 and 32 and 33 of my decision on 13 August 2010, that I would be prepared to do so. For ease of reference, I replicate those paragraphs herein :

“29. It would appear, on all the facts now known, that it is appropriate that the leave be re-granted for service outside the jurisdiction. As can be seen from the plaintiff's statement of affairs prepared by him on 17 March 1995 in the Singapore bankruptcy proceedings, his unsecured creditors were owned (sic) the sum of S$169,008.44. As against that, the plaintiff claims the equivalent of about HK$18 million in these proceedings. To deny him the right to maintain these claims must be considered to be excessive for the transgression of the requirement to make full disclosure of the Singapore bankruptcy proceedings resulting from his unpaid debts of less than the equivalent of HK$1 million.

30. I accept the submissions of Mr Remedios that the non-disclosure was deliberate. The fact that the plaintiff was an undischarged bankrupt in Singapore must have been known to him and ought to have been disclosed by him to his solicitors making the application for leave to serve out of the jurisdiction. As against that, however, the bankruptcy was annulled some 3 months later on 18 February 2000 with the effect that full capacity to sue was restored retrospectively to the plaintiff. Mr Remedios has rightly submitted that the plaintiff has never made disclosure of the fact of his bankruptcy and it was only early this year that this fact became known to the defendant’s legal representatives. However, the weight to be placed on the plaintiff’s continuing non-disclosure of the fact of his bankruptcy has to be measured in the light of the annulment and its effect.

…

32. He also complained that the defendant suffers prejudice by reason of the fact that he suffered from a serious stroke in 2007 which has totally impaired his capacity to give evidence in defence of the plaintiff’s claims.

33. I do not see that the prejudice suffered by the defendant as a result of his stroke can be a relevant consideration in the exercise of discretion to re-grant leave for service outside the jurisdiction. Even if it were a relevant consideration, I note that Deputy Judge To, as he then was, dismissed the defendant’s application to strike out for want of prosecution on 15 January 2009. He was well aware of the fact that the defendant had suffered a stroke which had reduced him to a vegetative state. Notwithstanding that, he was unable to find that the delay in prosecuting the proceedings gave rise to any substantial risk that it was not possible to have a fair trial of the issues in the action or that the delay was such as was likely to cause or to have caused serious prejudice to the defendant. There has been no appeal from the judgment. No additional circumstances arising between 15 January 2009 and today have been identified to me as constituting additional prejudice and which I ought to have regard to before exercising my discretion to re-grant leave.”

15. In reaching this decision, I have also had regard to the fact that the setting aside of the original order of annulment on 14 January 2011 had the effect of incapacitating the plaintiff from maintaining these proceedings and that he was only restored to capacity to maintain these proceedings on 26 January 2011, when a fresh order of annulment was granted. These 14 days of incapacity do not cause me to refuse the application to re-grant leave to serve out of the jurisdiction. The important point to bear in mind is that the fresh annulment restored the plaintiff to full capacity once again and did so retrospectively.

16. I have also had regard to the submission made to me by Mr Remedios that it would be a wrongful exercise of discretion to re-grant leave to the plaintiff to serve out of the jurisdiction, given his fraudulent non-disclosure of his assets to the Official Assignee and the fact that he was subject to possible prosecution in Singapore for such conduct. I have taken this consideration into account. However, it does not cause me to refuse the application to re-grant leave. In my judgment, the primary relevant consideration on the application to re-grant leave is whether or not the plaintiff has been restored to capacity to maintain these proceedings. In my view, the plaintiff’s conduct in failing to make full disclosure of his assets to the Official Assignee is a matter for the Singaporean court to consider and deal with. It has apparently done so and has made a fresh order of annulment. If the Singaporean court is prepared to grant a fresh order of annulment, notwithstanding the plaintiff’s conduct, then I ought not to have regard to that same conduct and refuse the plaintiff’s application to re-grant leave to serve out of the jurisdiction……..”

39.The judge also said at paragraphs 39 to 41 :

“ 39. However, just because resort is being had to O. 2, r. 1 and O. 3, r. 5 to renew the writ does not mean that the strictures imposed on the court’s discretion to renew the writ under O. 6, r. 8 are to be ignored. As Slade LJ said in Leal v Dunlop Bio-Processes [1984] 1 WLR 874 at 885C-D :

“Likewise, in my opinion, it would have been an improper exercise of the registrar’s discretion under Ord 2, r 1 to make good the irregular service of the writ retroactively in this case, where he could not properly have renewed the writ under Ord 6, r 8. When seeking the indulgence of the court under Ord 2, r 1 [and, I would add, under Ord 3, r 5], in circumstances such as the present, a plaintiff cannot, in my opinion, expect the court to exercise its discretion more favourably than it would be prepared to exercise it on an application under Ord 6, r 8. If he cannot properly enter through the front door of Ord 6, r 8, he should not be allowed to enter through the back door of Ord 2, r 1.”

40. In two subsequent decisions of the English Court of Appeal, in Golden Ocean Assurance Ltd v Martin, the Golden Mariner [1990] 2 Lloyd’s Rep 215 at pp. 225-226, per Sir John Megaw and in Kuwait Oil Tanker Co SAK v Al Bader [1997] 1 WLR 1410 at pp. 1418-1419, perStaughton LJ, the view was expressed that the criterion of “exceptional case” to cure an irregularity, where service out of jurisdiction under O. 11, r. 1 was concerned, was too stringent and that the test of “good cause” or “good reason” would be the appropriate criterion to justify a retroactive validation. Having regard to the reasons given by the House of Lords for their decision in Kleinwort Benson Ltd v Barbrak Ltd, The Myrto (No. 3) [1987] AC 597, I incline to the view that a good reason or a good cause is required to explain the failure to obtain leave to serve out of the jurisdiction or the failure to serve the writ during its original period of validity and that it is not necessary to show an exceptional case or the presence of exceptional circumstances.

41. In this case, the plaintiff seeks the renewal of the writ in order that the court may re-grant leave to issue a concurrent writ for service out of the jurisdiction and to serve it properly on the defendant in Singapore within the period of its validity. The plaintiff is required to show good cause or that good reasons are present which support the application for the renewal of the writ in the circumstances of the present case. The application is prompted by the plaintiff’s difficulty which stems, not from the failure to seek leave to serve out of the jurisdiction, which was done, or the failure to serve the writ within time, which was also done, but from my order discharging the leave that was granted.”

40.I agree with what the judge said.  I would observe that the House of Lords’ decision in Kleinworth Benson Ltd., which was not mentioned in Bank of China (Hong Kong) Ltd v. Regal Link Investment Ltd, has been followed by the Court of Appeal in Chow Ching Man and Others v. Sun Wah Ornament Manufactory Ltd. and Others [1996] 2 HKLR 338 and Grand Pacific Equity Ltd v. R.S.H. Sports (HK) Ltd and Others [2006] 4 HKLRD 617.

41.The defendant also relied on a limitations defence which it was submitted that the defendant would be deprived of if the validity of writ were extended.  However, as the judge said at paragraph 42, correctly in my view, it was his order setting aside the original leave to serve out of the jurisdiction that has created a limitations defence in favour of the defendant. That was a fact to be borne in mind and the judge plainly did do so.  The limitations defence was not an absolute bar to the exercise of the discretion to renew the writ as the judge said at paragraph 43.

42.The judge has carefully considered all the relevant circumstances in the detailed reasons given in his decision before exercising his discretion. In my judgment there is no valid basis for interfering with the judge’s exercise of his discretion which, in my view, was correctly exercised.

Mr. James Sherry, instructed by Messrs Raymond Chan, Kenneth Yuen & Co, for the Plaintiff/Respondent

Mr. Leo Remedios and Mr. Jose Remedios, instructed by Messrs John Ip & Co., for the Defendant/Appellant