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A A

B HCA 2448/2014 B

[2018] HKCFI 1395


C C
IN THE HIGH COURT OF THE
D D
HONG KONG SPECIAL ADMINISTRATIVE REGION

E
COURT OF FIRST INSTANCE E
ACTION NO 2448 OF 2014
F ____________ F

G BETWEEN G

H CHINA MEDICAL TECHNOLOGIES, INC. Plaintiff H


(In liquidation)
I I
and
J J
BANK OF CHINA (HONG KONG) LIMITED Defendant
K ____________ K

L L
Before: Hon Au-Yeung J in Court
M Dates of Hearing: 27 and 28 March 2018 M

Date of Decision: 20 June 2018


N N

O O
_____________

P DECISION P
_____________
Q Q

R R

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

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B (1) To set aside a Master’s order extending the validity of the B

writ for 12 months; and


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(2) To set aside service of the writ.


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E E
2. The Plaintiff was wound up in the Cayman Islands in 2012. An

F
ancillary winding-up order was made in Hong Kong on 1 September F
2014. Mr Borrelli has been one of the Liquidators appointed by the
G G
Cayman Islands court and the Hong Kong Court respectively.

H H
3. The Plaintiff was hopelessly insolvent, with provable claims in excess
I I
of US$400 million. Ongoing investigations showed that the Plaintiff’s

J management perpetrated a fraudulent scheme to misappropriate J


US$355.5 million of the Plaintiff’s assets by purportedly acquiring
K K
worthless medical technology known as the FISH Technology and SPR
L Technology (collectively “the Technologies”). L

M M
4. There were transfers of funds made between November 2006 and
N December 2009 (“the Transfers”) from the Plaintiff’s account with BOC N

to accounts held by one Supreme Well Investments Limited (“Supreme


O O
Well”) with BOC and Bank of East Asia.
P P

5. Supreme Well and its bank accounts were controlled by the Plaintiff’s
Q Q
former management. Supreme Well did not have any business operations
R and was struck off the Register of Companies in the BVI after receiving R

US$355.5 million from the Plaintiff. The Liquidators do not know the
S S
ultimate recipients of the Plaintiff’s cash.
T T

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B 6. The Plaintiff issued a protective writ of summons with a general B

indorsement of claim on 2 December 2014 (“the Writ”). The


C C
Liquidators asserted that the Transfers were made by the Plaintiff’s
D D
management for which BOC was liable for at least US$303.75 million for

E
breach of contract, dishonest assistance, knowing receipt, breaches of E
duty and of trust, conspiracy, negligence and/or unjust enrichment.
F F

G
7. The Indorsement of Claim (“the Indorsement”) expressly stated as G
follows:
H H
“THIS WRIT is issued solely for the purpose of preserving the
I claims identified above in light of the pending expiry of I
possible limitation periods” and the Plaintiff “has made no
decision as to whether or not it will pursue the claims” which
J will be subject to “further and on-going investigations” by the J
Liquidators and the outcome of those investigations.
K To the extent that any prima facie limitation periods relating to K
the claims might have expired, and in circumstances where the
L Plaintiff only obtained knowledge of the claims in February L
2014, the Plaintiff intends to rely on provisions of the
Limitation Ordinance (Cap 347) either directly or by analogy to
M extend the relevant limitation period” M

N N
8. On 30 November 2015, ie one day before the expiry date, the

O
Liquidators made an ex parte application to extend the validity of the O
Writ for 12 months (“the Extension Application”).
P P

Q 9. The reasons advanced by the Liquidators were that despite all Q


reasonable efforts, they required further information before they could
R R
make an informed decision as to whether to proceed with any of the
S potential claims against BOC. The Liquidators referred, in particular, to S

its application against BOC (and BEA) for production of documents and
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oral examination of certain employees of the banks pursuant to s.221 of
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B the Companies (Winding Up and Miscellaneous Provisions) Ordinance, B

Cap 32 (“the s.221 Application”), for which judgment was then pending.
C C

D 10.On 7 December 2015, a Master made an order extending the validity D

E
of the Writ “for 12 months from the date of its expiry” (“the Extension E
Order”), ie up to 1 December 2016.
F F

G
11.Eight days later, on 15 December 2015, Harris J handed down his G
decision (“Harris J’s Judgment”) largely dismissing the Plaintiff’s s.221
H H
Application but ordering interrogatories to be served on BOC’s

I employees and ordering examination. The material findings were that: I

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

M (b) Whilst Harris J accepted “that the Liquidators would prefer M

to obtain further information if possible before deciding how


N N
to proceed”, he did not consider it necessary. The
O Liquidators had been provided with considerable O

information and “had sufficient information to make an


P P
informed assessment, sufficient for the purposes of deciding
Q whether or not to proceed, of the prospects of the banks Q

being able to assert credibly that they took reasonable steps


R R
to comply with the HKMA Guidelines and their own internal
S protocols intended to ensure that so far as possible the banks S

are not used as a conduit for unlawful money transfers …


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The Liquidators do not need any more information in order
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B to decide whether or not they have a viable claim” and B

therefore it would be oppressive to order the production and


C C
examination sought. (§§29-32).
D D

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

G G
13.On 3 November 2016, the Court of Appeal declined to give leave on
H H
further grounds that failed before Harris J. The Court of Appeal held

I (§§16, 17 & 22), amongst others, that I

“… The judge gave careful consideration to the material that


J J
the liquidators already had, and formed a view as to whether or
not such material should suffice to enable them whether or not
K to pursue their proposed claims against the bank.” K

L 14.On 4 November 2016, BOC’s solicitors informed the Liquidators that L

BOC’s employees would not be answering the interrogatories served on


M M
them pursuant to Harris J’s Judgment.
N N

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

Q Q
16.BOC submits that the Extension Order should be set aside because:
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(a) There were no good reasons or matters capable of being
S S
good reasons advanced for the extension. What were

T advanced turned out to be bad reasons, as was subsequently T

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B determined, inter partes, by Harris J and the Court of B

Appeal; and
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(b) The Liquidators were guilty of material non-disclosure in


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failing to inform the Master of Harris J’s Judgment which
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destroyed the basis for seeking the Extension Order.

F F
(c) The Liquidators were guilty of material non-disclosure in

G
failing to inform the Master that some causes of action have G
expired before filing of the Writ and that some causes would
H H
expire if the Writ was not renewed.

I I
17.BOC also submits that service of the Writ ought to be set aside
J J
because:
K K
(a) The Writ was not left at the registered office of BOC on
L 14th floor, Bank of China Tower, 1 Garden Road, Hong Kong L

(“the Registered Office”) but on the ground floor of the


M M
BOC Tower and the receptionist was not an employee of
N BOC; and N

O (b) The deemed date of service by ordinary post was after expiry O

of the validity of the Writ.


P P

Q 18.Logically, if the Extension Order is discharged and no re-grant is Q

made, BOC submits that it must follow that the Writ was not served
R R
during the period of validity and the action should stand dismissed.
S S

19.The Liquidators oppose both applications. They say that the grounds
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for seeking the extension was the Liquidators’ genuine views that they
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B needed investigation. That extended beyond pursuit of the s.221 B

Application, including the appeal, to using all reasonable means by which


C C
they might obtain information as to BOC’s knowledge (or otherwise) of
D D
breaches of duty by the Plaintiff’s management. They needed to do so

E
before pursuing serious allegations against BOC in costly and risky E
litigation.
F F

G
20.Whether there were matters capable of amounting to good reason was G
to be determined by reference to the circumstances prevailing at the time
H H
the Extension Application was made and not by reference to a subsequent

I event, in this case, a decision by a different court applying a different I


legal test.
J J

K 21.The Liquidators also submit that Harris J’s Judgment was of limited K

scope. There is a possibility that the Liquidators might get more


L L
information if they are successful in the pending appeal to the Court of
M Appeal. M

N N
22.Further, BOC has been provided with a copy the Writ since March
O 2015. BOC relied on it in the s.221 Application as the source of the O

oppression said to arise if an order for production of documents were


P P
made.
Q Q

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

T T

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B 24.Mr Manzoni SC, counsel for the plaintiff, conceded that Mr Borrelli B

made a “mistake” in his affidavit about possible limitation defences but


C C
BOC was not denied any of its right to run limitation defences.
D D

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

G
26.As to service of the Writ, the Liquidators contend that service had G
been validly effected by leaving with the receptionist who received the
H H
Writ on behalf of BOC. Ordinary post was effected 2 clear days after

I 29 November 2016. Service was effected by either mode before expiry I


of the extended validity period.
J J

K 27.The issues are therefore: K

L (1) Whether there were good reasons or matters capable of being L

good reasons for seeking the Extension Order;


M M

(2) Whether the Liquidators’ failure to inform the Master of


N N
Harris J’s Judgment amounted to material non-disclosure;
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(3) Whether there was material non-disclosure in failing to
P inform the Master of the possible defences in limitation; P

Q (4) If there had been material non-disclosure, whether the Q

Extension Order should be affirmed or re-granted;


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(5) Was service of the Writ effected by leaving at the reception


S S
desk of BOC Tower?
T T

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B (6) Was service of the Writ by ordinary post effected before B

expiry of the validity period?


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(7) Should any irregularity in service be cured?


D D

E E
B. LEGAL PRINCIPLES FOR SETTING ASIDE THE EXTENSION
ORDER
F F
28.The power to grant extension of validity of a writ involves a two-stage
G G
process under Order 6, rule 8(2) of the Rules of the High Court (“RHC”).
H In the first stage, the plaintiff must first establish matters amounting to H

good reason for extension or at least capable of so amounting. In the


I I
second stage, matters such as the balance of hardship will fall to be
J considered if the discretion to extend arises in the first place. The two J

stages are not “watertight” compartments for all purposes and some
K K
relevant factors may overlap: Chow Ching Man v Sun Wah Ornament
L Manufactory Limited [1996] 2 HKLR 338 at 341B-C (Bokhary JA, as he L

then was); following the English approach in Kleinwort Benson Ltd v


M M
Barbrak Ltd [1987] AC 597 and Waddon v Whitecroft Scovell Ltd [1988]
N 1 WLR 309. N

O O
29.Where the failure to serve a writ within its normal validity period is
P the result of a choice, then it is necessary to decide whether the choice P

was made for a good reason, meaning one which is at least capable of
Q Q
amounting to a good reason: Chow Ching Man, supra, at 344C.
R R

30.The court does not ordinarily treat a plaintiff’s desire to see through
S S
some parallel set of proceedings as a good reason for holding up service
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B of a writ in other proceedings: Pacific Electric Wire & Cable Co Ltd v Hu B

Hung Chiu [2011] 1 HKLRD 1000, §§28, 31.


C C

D 31.A wish to obtain further evidence in a case which require pleading of D

E
full particulars may be capable of being a good reason. In Portico E
Housing Association Ltd v Brian Moorehead & Partners (1986) 6 ConLR
F F
1, at p 8, Stephenson LJ, having referred to Howells v Taylor and Walker

G
decided in 1981, stated as follows: G

“I do not read [Waller LJ’s] judgment as attempting to lay down


H the proposition that insufficient evidence could never be a good H
reason for renewing a writ alleging professional negligence,
and I fully appreciate the importance of not alleging
I I
professional negligence until, like fraud, it can be particularized
and proved.”
J J

32.Portico Housing was based on the old test of showing exceptional


K K
circumstances in an extension application. However, the principle in the
L preceding paragraph holds good. In that case, the court refused to grant L

the extension application to enable the plaintiff in a negligence claim


M M
more time to obtain expert evidence.
N N

33.The saving of unnecessary legal proceedings and costs can be a good


O O
reason for extending the validity of a writ and in not requiring a party to
P prosecute its claim for the time being: Miruvor Ltd v Panama-Globe P

Steamer Lines SA [2006] 2 HKC 617 at §27, Stone J; Kleinwort Benson,


Q Q
Lord Brandon at 623H. However, there is a “world of difference” where
R a plaintiff delays service in order to save the plaintiff itself from incurring R

extra expense: Pacific Electric Wire, §31.


S S

T T

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B 34.Any extension of the validity of a writ should not deprive a defendant B

of a reasonably arguable limitation defence: Ramon L Siy v BPI


C C
International Finance Ltd [1987] HKLR 1020 at 1026G-1027C (Liu J).
D D

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

G “The law concerning the validity of a writ and its extension is G


no mere formal procedural rule. Underlying it is the policy of
the law that promotes finality to litigation, the prevention of
H stale claims, and the protection of a defendant from having a H
claim hanging over his head indefinitely. Inasmuch as a
I plaintiff with a reasonable cause of action has a right to bring I
and serve proceedings within prescribed periods, a (potential)
defendant has a right not to be vexed by actions that are time-
J barred or writs that have expired, unless they are extended by J
the Court in accordance with the law.”
K K
36.When considering the good reason ground, the court should have
L L
regard to what the situation was at the date of the extension order, albeit
M with the benefit of further evidence at the inter parte stage: National M

Commercial Bank v Haque [1994] CLC 230 at 241H, per Evans LJ.
N N

O C. ISSUE (1): WHETHER THERE WERE GOOD REASONS OR O


MATTERS CAPABLE OF BEING GOOD REASONS FOR SEEKING
P THE EXTENSION ORDER P

37.It was only 3 months before the issue of the Writ that Harris J had
Q Q
determined to re-open the petition to wind up the Plaintiff in Hong Kong
R and to grant the petition in Hong Kong. At that stage there were good R

S
reasons to be suspicious of fraudulent conduct which required S
investigation.
T T

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B 38.The liquidation was complex but the Liquidators had limited books B

and records of the Plaintiff available to them. The Liquidators had to


C C
gather documents in the United States and Hong Kong, some through
D D
court proceedings. There were 5 writs issued in Hong Kong and 1 in the

E
Cayman Islands, against a total of 18 defendants. None had been served E
pending further investigations by the Liquidators. The Liquidators’
F F
attempt to seek disclosure of information from the Plaintiff’s former

G
management and other individual or entities have met with opposition. G

H H
39.The Liquidators wanted to be responsible in pleading a case of fraud

I against BOC with proper particulars. They were aware of their duties to I
act in the interests of the creditors, their public interest in the proper
J J
investigation of the Plaintiff’s affairs and to avoid incurring costs for the
K pursuit of an unmeritorious claim against BOC. K

L L
40.The Liquidators’ basis for the Extension Application was that there
M was not enough information to make an informed decision on whether the M

Plaintiff had a viable claim against BOC which they should pursue.
N N
Borrelli-1st (placed before the Master) was replete with examples of such
O concerns of the Liquidators. O

P P
41.The Liquidators therefore needed to carry out further investigations,
Q not limited to the s.221 Application. Borrelli-1 st deposed that the Q

investigations would be greatly assisted by any production or


R R
examination orders made pursuant to the s.221 Application. After these
S investigations the Liquidators would be in a better position to make an S

informed decision as to whether or not it was in the best interest of the


T T
Plaintiff to serve the Writ. (§§ 20-24, 56-60, 63-73, 77-81, 82-86)
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A A

B 42.Borrelli-3rd (§34) added that an important benefit of the extension of B

the Writ was the possibility that further documents would be obtained
C C
through the s.221 Application, bridging large gaps in the Liquidators’
D D
understanding of BOC’s knowledge and conduct.

E E
43.In fact, Mr Manzoni SC acknowledged in his written submission
F F
(§§53 & 56) that the only means of obtaining relevant information

G
regarding BOC’s knowledge and conduct in relation to the subject G
payments stated in the Writ was the s.221 Application.
H H

I 44.There was frank disclosure to the Master that judgment on the s.221 I
st
Application was pending. Borrelli-1 informed the Master that BOC had
J J
argued that the documents sought did not relate to the Plaintiff and were
K not reasonably required by the Liquidators; and had argued that the K

Liquidators had sufficient information to determine whether the claims


L L
under the Writ ought to be pursued (§§22, 71 & 72 of Borrelli-1 st).
M Mr Borrelli of course disagreed with those arguments. M

N N
45.The s.221 Application was not a straightforward application. The
O hearing took 3 days and Harris J’s Judgment was handed down 3 months O

later. Harris J acknowledged that the Liquidators had a reasonable


P P
requirement for documents to carry out their functions (§§13 and 14 of
Q his Judgment). He also acknowledged that it was reasonable for them to Q

want to ensure that they had obtained, as far as possible, all information
R R
concerning the propriety of the acquisition by the Company of the
S Technologies and to trace the proceeds of the acquisition (§36 of his S

Judgment). He permitted interrogatories to be served on BOC’s former


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employees about these matters.
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A A

B 46.The question of interpretation of s.221 aside, it was through exercise B

of discretion that the Liquidators were denied the information sought in


C C
Harris J’s Judgment. There was no suggestion that the Liquidators had
D D
launched a vexatious or totally unmeritorious application.

E E
47.Failure to serve the writ within the first 12 months was a deliberate
F F
choice of the Liquidators. I do find that choice to be supported by

G
matters capable of being good reasons at the time of the Extension Order. G
However, that is not the end of the Extension Application. Further
H H
analyses is necessary as it may have impact on the exercise of the court’s

I discretion to cure any irregularity. I

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

Order.
L L

M 49.Although Harris J and the Master dealt with different statutory M

provisions, different tests and different balancing exercises, the subject


N N
matter of Harris J’s Judgment substantially overlapped the basis of the
O Extension Application. That Judgment (§13) expressly stated that it was O

not in dispute that some of the documents might contain information


P P
concerning the fraud suspected to have been perpetrated on the Plaintiff
Q and that the Liquidators reasonably required the documents to carry out Q

their functions.
R R

S 50.Both Harris J and the Court of Appeal never lost sight of the fact that S

one of the Liquidators’ purposes for the s.221 Application was to “assess
T T

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A A

B the viability of potential claims by the Company so as not to waste funds B

on claims that cannot succeed” (§20 of CA’s decision).


C C

D 51.Mr Manzoni SC submits that although the Liquidators had enough to D

E
decide whether or not to proceed, they did not have enough to plead a E
case of fraud. That, in my view, is sophistry. Harris J did not just mean
F F
that there was enough for the Liquidators to decide to proceed but also to

G
decide not to proceed. G

H H
52.The Liquidators did not accept Harris J's Judgment until the Court of

I Appeal’s refusal of leave to appeal (Borrelli-3rd, §§27 & 59). They had I
submitted to the Court of Appeal that they were still not in possession of
J J
any requisite information to point to BOC’s knowledge of any fraud or
K breach of duty by the Plaintiff’s management; that they could not point to K

any particular facts upon which to base a claim of dishonest assistance


L L
against BOC and they felt that they were “in the dark” and was forced by
M Harris J’s Judgment “to speculate as to the facts, and thus the strength or M

weakness of the potential claims”. See the Plaintiff’s submission on its


N N
application for leave to appeal before the Court of Appeal at §§10-18.
O With respect, all of these could not undermine the effect of that Judgment. O

P P
53.Mr Manzoni SC submits that Harris J’s Judgment was of limited scope
Q as it only dealt with internal documents of the BOC to see if there were Q

legal justifications for the Transfers; that Judgment did not remove the
R R
entire basis of the Extension Order.
S S

54.Assuming Mr Manzoni SC is right, what then, were left of the matters


T T
capable of being good reasons to support the Extension Application?
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A A

B According to the Liquidators, there were “other investigations” (eg B

Borrelli-1st, §§46, 80). §82 of Borrelli-1st stated:


C C

“Whilst the Liquidators have made substantial progress … they


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

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

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

M M
57.Firstly, there were said to be documents received from Paul Weiss.
N The Liquidators received the first tranche in November 2015, and further N

tranches in April, June and August 2016. Paul Weiss was the law firm
O O
which had carried out independent “internal investigation” into the
P Plaintiff’s business and affairs in 2009 and cleared the management of the P

very wrongdoing now under investigation by the Liquidators.


Q Q

R 58.However, Borrelli-1st did not mention how the Paul Weiss documents R

would have let the Liquidators learn more about BOC’s knowledge of the
S S
fraud, the information the Liquidators expected to obtain, the volume of
T documents, how long it would take to review them and why this would T

U U

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A A

B justify the grant of a 12-month extension. It turned out that the Paul B

Weiss documents caused the Liquidators to serve proceedings on the


C C
partners of Paul Weiss and a valuation firm.
D D

E
59.Secondly, the Liquidators had made enquiries as to the true market E
value of the Technologies and that required further work. However,
F F
ascertaining such market value was not mentioned in Borrelli-1 st. In any

G
case, this only went to proof of the view already formed by the G
Liquidators that the Technologies were not of commercial value, rather
H H
than help them to decide the viability of the case against BOC. Applying

I Portico Housing, I do not consider this to be a matter capable of being a I


good reason.
J J

K 60.Thirdly, there was investigation as to who controlled the Further K

Supreme Well Payee Accounts or the ultimate destination of the


L L
Plaintiff’s funds. In my view, whilst this may enable the Liquidators to
M trace more potential defendants, it could hardly affect the decision of M

whether or not to proceed against this defendant, BOC.


N N

O 61.Fourthly, the Liquidators made efforts to gain access to records of the O

Plaintiff’s former auditor which materially advanced the Liquidators’


P P
understanding of the Plaintiff’s affairs including the true value of the
Q Technologies. Q

R R
62.The Liquidators also interviewed relevant persons involved in the
S Plaintiff’s affairs. The s.221 Application relating to Bank of East Asia S

reinforced the Liquidators’ suspicions that former management of the


T T
Plaintiff were ultimate recipients of the Plaintiff’s assets. However, the
U U

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A A

B relevance of these investigations to BOC were not mentioned in Borrelli’s B

affidavits.
C C

D 63.Fifthly, §28 of Borrelli-3rd stated that “the Liquidators’ investigations D

E
were ongoing not only with respect to the knowledge and conduct of E
BOC, but also with respect to the nature and consequences of the
F F
suspicious transactions themselves, the location of the assets seemingly

G
misappropriated, and the conduct of other persons potentially responsible G
for the losses incurred by the Company.”
H H

I 64.In summary, Harris J’s Judgment answered the purpose of the I


Liquidators’ investigations – to decide the viability of the claim against
J J
BOC. The “other investigations”, even if genuinely believed in and
K conducted, could not undermine that answer. There were thus no good K

reasons to extend the Writ on the date the Extension Order was made.
L L

M D. ISSUE (2): WHETHER THE LIQUIDATORS’ FAILURE TO INFORM M


THE MASTER OF HARRIS J’S JUDGMENT AMOUNTED TO
N MATERIAL NON-DISCLOSURE N

D1. Legal principles concerning disclosure in ex parte applications


O O

65.When applying for an ex parte order, the duty is on the applicant to


P P
make full and frank disclosure to the court of all relevant facts which he
Q knows. Failure to do so may in itself be a ground for setting aside such Q

an order. Hong Kong Civil Procedure 2018, Vol 1, §§32/6/13.


R R

S 66.The test as to materiality is an objective one. It is not for the applicant S

or his legal advisers to decide the question, hence it is no excuse for the
T T
applicant subsequently to say that he was genuinely unaware, or did not
U U

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A A

B believe, that the facts were relevant or important: Gee on Commercial B

Injunctions, 6th ed, at §9-003.


C C

D 67.“Material information” means all matters which are relevant to the D

E
court’s assessment of the application in question, and it is no answer to a E
complaint of non-disclosure that if the relevant matters had been placed
F F
before the court, the decision would have been the same: Gee, 6th ed, at

G
§9-003; New Asia Energy Limited v Concord Oil (Hong Kong) Limited, G
unreported, CACV 347/1998, 3 November 1999, at pp.4-5, Keith JA.
H H

I 68.It will usually not be a sufficient answer to an allegation of non- I


disclosure for an applicant to say that the relevant information giving rise
J J
to the defence was contained in an exhibit though not referred to in the
K body of the affidavit in the context of a possible defence. The applicant K

has the responsibility of ensuring that all relevant points are presented
L L
clearly and distinctly: Gee, at §9-005.
M M

69.The duty of disclosure extends to identifying potential defences (such


N N
as limitation), which although not yet taken, would have been available to
O be taken by the defendant had he been present at the application, provided O

that: (a) the defence is one which can reasonably be expected to be raised
P P
in due course by the defendant, and (b) the defence is not one which can
Q be dismissed as without substance or importance. Gee, at §9-007; New Q

Asia Energy, at p.5.


R R

S 70.Mr Manzoni SC does not dispute these duties. However, he reminds S

the court that it must be vigilant to the possibility of litigants alleging


T T
material non-disclosure on slender grounds to seek discharge of an ex
U U

V V
- 20 -
A A

B parte order where there is little hope of doing so on the substantial merits B

of the case or on the balance of convenience: Brink’s Mat Ltd v Elcombe


C C
[1988] 1 WLR 1350, at 1359B-E, Slade LJ.
D D

E
71.In deciding whether to set aside an ex parte order on the ground of E
material non-disclosure, the court adopts a four-limb test:
F F
(a) Was there non-disclosure of facts?
G G
(b) Were the facts not disclosed material?
H H
(c) Was the non-disclosure innocent?

I (d) If there was material non-disclosure, should the court I

nevertheless exercise its discretion not to discharge the


J J
ex parte order?
K K
Hong Kong Civil Procedure 2018, §32/6/13; citing Yau Chiu Wah v
L Gold Chief Investment Ltd [2003] 3 HKLRD 553, Recorder Ma SC (as he L

then was), at pages 22 to 25.


M M

N N
D2. Application of the law to non-disclosure of Harris J's judgment
O 72.It is not disputed that the Liquidators had not returned to the Master O

with news of Harris J’s Judgment; nor had they alerted the Master to any
P P
possible defence of BOC arising out of that Judgment.
Q Q

R
73.Mr Manzoni SC does not dispute that the continuing duty of R
disclosure applies, post-ex parte order, to situations where a claimant has
S S
obtained an ex parte order on a basis which he knows he could no longer

T
support, or where the court has been misinformed, or has been given T

U U

V V
- 21 -
A A

B materially incomplete information. The claimant should then apply to B

discharge the order or to continue the order on a new basis.


C C

D 74.However, he submits that the continuing duty requires careful D

E
definition. There are no authorities that apply the continuing duty to an E
extension application. In Network Telecom (Europe) Ltd v Telephone
F F
Systems Intl Inc [2004] 1 All ER, 418, at §§83 & 85, Burton J held that he

G
would not have set aside the ex parte order on the ground of non- G
disclosure in the absence of any prior case which had extended the
H H
continuing duty to disclose, beyond a ‘nuclear weapons’ case, to service

I out of the jurisdiction. He found that the duty in that case was not I
something that would then have been obvious to a litigation solicitor.
J J

K 75.Mr Manzoni SC contends that the continuing duty should not apply to K

an extension application because:


L L

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

O (b) The Court should have regard to whether the duty ought to O

have been apparent to the litigant or their advisers in the


P P
particular circumstances, in considering the appropriate
Q consequences of any transgression. Q

R (c) At the time of the s.221 Application, significant international R

investigations were on-going. Each development was


S S
potentially relevant to the Liquidators’ understanding of the
T affairs of the Company, including the availability or merits T

U U

V V
- 22 -
A A

B of the claims available to them. To require the Liquidators B

to continuously update the Court with every development


C C
potentially relevant to the Liquidators’ understanding during
D D
the period of extension would be unworkable and

E
unnecessarily wasteful of time, costs and court resources. E
For example, the Liquidators may have to inform the Master
F F
of the s.221 Decision, the intended appeal, give an update on

G
the progress of the Liquidators’ review of documents G
produced by Paul Weiss, or their pursuit of other
H H
investigations, including what new questions those reviews

I and investigations might have raised. I

J (d) A defendant would only suffer limited prejudice by reason of J

his exposure to claims for a longer period than is ordinarily


K K
contemplated by the rules.
L L
(e) BOC’s situation was mitigated by its knowledge of the Writ
M back in 2015. Although BOC could not set aside the M

Extension Order unless and until it was served, it could


N N
invoke Order 12, rule 8A to seek accelerated service. BOC
O had not availed itself of its rights under that rule between O

March 2015 (when it was informed of the Writ) and


P P
December 2016 (when it was served with the Writ).
Q Q

76.The law is not entirely settled. In Spry on The Principles of Equitable


R R
Remedies (2014), 9th ed, p 518; Gee, at §§9-026–9-027, it is stated that:
S “The question has recently been raised whether a special duty S
of disclosure continues to rest on the plaintiff after an ex parte
T order has been made. It has been suggested that in these T
circumstances he must return to the court, not only if he

U U

V V
- 23 -
A A

B discovers that the court has been misinformed or has been B


given materially incomplete information, but also if there are
any subsequent material changes, while the proceedings remain
C C
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).
D However, when copies of the relevant order and of the affidavit D
material on which it is based are given to the defendant, it
becomes possible for him, as well as for the plaintiff, to
E E
approach the court, and in view of this consideration the special
duties of disclosure of the plaintiff are diminished. However, it
F is not yet clear to what extent any special duty continues to rest F
on the plaintiff. Hence it will be necessary for these questions
to be considered further by the courts before the limits in this
G respect of duties of disclosure will be able to be regarded as G
settled.”
H H

77.On that basis, Chow J granted leave to appeal in respect of an


I I
injunction to seek guidance from the Court of Appeal: Wason Holdings
J Ltd v BHP International Markets Ltd [2015] HKCU 801. In the end, the J

Court of Appeal did not address the issue, as the alleged non-disclosures
K K
were not of such materiality to justify the discharge of the injunction in
L question: [2018] HKCA 113, §35, per Barma JA (Yuen JA agreeing). L

M M
78.However, with regard to the contention in paragraph 75(a), there was
N Hong Kong authority which held that the continuing duty applied to all N

ex parte applications, not just Mareva injunctions or Anton Piller orders:


O O
New Asia Energy, at p 5, Keith JA.
P P

79.With regard to the contention in paragraph 75(b), it was not


Q Q
unreasonable for the Liquidators to think that having obtained the
R Extension Order, the Plaintiff was free to serve the Writ any time before R

expiry of the extended period: Lee Fai v Chan Kui [1997] HKLRD 1154,
S S
at 1157F, per Godfrey JA.
T T

U U

V V
- 24 -
A A

B 80.However, whether something fell within the continuing duty of B

disclosure was to be decided objectively by the court. Even if something


C C
was not apparent to the Liquidators or their litigation solicitors, it would
D D
not dis-apply that duty. At best, it only goes to mitigation and enables the

E
court to re-grant the order. E

F F
81.With regard to the contention in paragraph 75(c), the submission is an

G
exaggeration. The law does not require the Liquidators to continuously G
update the Master on every development in the investigation. It is the
H H
material changes of circumstances that the Liquidators need to report to

I the Master. If the report is cumbersome, it is because the bases of the I


application for the Extension Order necessitated it. Since the s.221
J J
Application formed a substantial part of the bases of investigations,
K plainly the Liquidators were under a duty to report Harris J's Judgment to K

the Master.
L L

M 82.With regard to the contention in paragraph 75(d), issue of a writ may M

itself cause adverse effect to a person or business as it may cause banks to


N N
withhold credit facilities. A defendant is entitled not to be vexed by stale
O claims. O

P P
83.With regard to the contention in paragraph 75(e), a defendant should
Q not be forced to seek accelerated service or to strike out a stale claim. Q

This was all the more so when BOC’s knowledge of the existence of the
R R
Writ was gained in the first 12 months of its validity, in the course of the
S s.221 Application. There was nothing which pointed to BOC’s knowledge S

of the Extension Application. Neither was there anything to show that


T T
BOC had waived their rights to oppose the Extension Order.
U U

V V
- 25 -
A A

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

extension application.
C C

D 85.Was non-disclosure of Harris J's Judgment material? The issue can be D

E
tested this way. (i) Had Harris J's Judgment been available at the time of E
the Extension Application, should the Plaintiff have produced it for the
F F
Master’s consideration? (ii) Alternatively, but for the fact that Harris J

G
was seized of the s.221 Application, would the Master have to decide if G
seeking the subject matter of the s.221 Application was capable of being a
H H
good reason? The answers to these 2 questions were plainly “yes”. The

I non-disclosure was material. I

J J
86.The Extension Order was not sealed until 5 months after its making, ie
K on 26 May 2017. There was ample time for the Liquidators to consider K

the effect of Harris J's Judgment and update the Master on it.
L L

M 87.Whilst the Master may be aware that “other investigations” were M

ongoing, it could not be said with certainty that in the light of Harris J’s
N N
Judgment, the Master would have definitely granted the Extension Order
O or for the full 12 months. O

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

R R
89.In my view, to set aside the Extension Order in such circumstances
S would be wholly disproportionate to the prejudice the Plaintiff would S

suffer in losing the right to litigate such an enormous claim. Accordingly,


T T
but for the fact that the good reasons for extension have been wiped out, I
U U

V V
- 26 -
A A

B would have set aside the Extension Order on the ground of non-disclosure B

of Harris J’s Judgment but re-granted the extension for the same period.
C C

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

F 90.Where a writ was issued before the period of limitation relevant to the F

causes has expired, Kleinwort Benson (at pp 615G-616C) refers to 3 main


G G
categories of cases in which an extension application is made. See
H Pacific Electric Wire & Cable, §18: H

I (1) At a time when the writ is still valid and before the relevant I

period of limitation has expired;


J J

(2) At a time when the writ is still valid but the relevant period
K K
of limitation has expired;
L L
(3) At a time when the writ has ceased to be valid and the
M relevant period of limitation has expired. M

N N
91.In both categories (1) and (2), it is still possible for the plaintiff
O (subject to any difficulties of service which there may be) to serve the O

Writ before its validity expires, and, if he does so, the defendant will not
P P
be able to rely on a defence of limitation.
Q Q

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

T T

U U

V V
- 27 -
A A

B 93.In neither category (1) nor category (2) cases, therefore, can it B

properly be said that, at the time when the extension application is made,
C C
a defendant who has not been served has an accrued right of limitation.
D D

E
94.In category (3) cases, it is not possible for the plaintiff to serve the E
writ effectively unless its validity is first retrospectively extended. In this
F F
category, therefore, it can properly be said that, at the time when the

G
extension application is made, a defendant on whom the writ has not been G
served has an accrued right of limitation.
H H

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

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

N “7. The BOCHK Protective Writ was issued to preserve N


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

“18. To protect against the possible expiration of limitation


R periods, the Plaintiff filed the BOCHK Protective Writ on R
2 December 2014…” (emphasis added)
S S
“62. … mindful that a prima facie limitation period in respect
of payments made on 4 December 2008 totalling US$100.5
T million from the Plaintiff’s account to Supreme Well was due to T
expire on 4 December 2014, on 2 December 2014, the
U U

V V
- 28 -
A A

B Liquidators filed the BOCHK Protective Writ to preserve B


potential claims set out in the Writ including, inter alia, claims
against the Defendant in respect of dishonest assistance,
C C
knowing receipt and breach of contract…” (emphasis added)

D “89. Some of the potential claims in the BOCHK Protective D


Writ are founded on events that date back more than six years.
Because there is a prima facie limitation period in the
E Limitation Ordinance (Cap 347) of six years for bringing E
actions in tort and contract, the Plaintiff issued the BOCHK
F Protective Writ prior to the expiry of any prima facie limitation F
periods to prevent the Defendant from advancing any argument
that potential claims founded on events occurring more than six
G years ago are statute barred. If the validity of the BOCHK G
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
H H
prima facie limitation period has expired in respect of potential
claims in the BOCHK Protective Writ which are founded on
I events occurring more than six years ago.” (emphasis added) I

J 97.These paragraphs in Borrelli-1st gave the impression that the limitation J

period had not yet expired when the Writ was issued. This contradicted
K K
the Indorsement which implied the opposite, which was why the Plaintiff
L intended to rely on the provisions of the Limitation Ordinance to directly L

or by analogy extend the limitation period. Paragraph 89 of Borrelli-1 st


M M
made no attempt to distinguish claims that dated back more than 6 years
N and those that did not. N

O O
st
98.At this hearing, Mr Manzoni SC concedes that §89 in Borrelli-1
P P
contained a “mistake”, but he submits that it was a mistake without

Q
significance. If the limitation defence was available prior to expiry of the Q
Writ, neither issue of the writ nor its extension would have affected that
R R
defence.

S S
99.Without disrespect, I am unable to agree. Mr Borrelli himself never
T T
admitted that it was a mistake. Borrelli-3 rd, §81, expressly refused to
U U

V V
- 29 -
A A

B accept that any misleading impression was given by Borrelli-1 st as to B

limitation periods and went at length to deal with the limitation defences.
C C

D 100. It is no answer to say that there were materials in the exhibits D

E
(eg the Fund Flow Diagram exhibited to Borrelli-1st) from which the E
Master could compare with the Indorsement and work out for himself
F F
when any claim would prima facie have expired. The Liquidators had to

G
ensure that all relevant points were presented clearly and distinctly to the G
Master in the affidavit: Gee, at 9-005.
H H

I 101. In Binning Bros Ltd (in liquidation) v Thomas Eggar Verrall I


Bowles (a firm) [1998] 1 All ER 409 at 411 d-e, the general indorsement
J J
on the writ mentioned no dates. The affidavit in support of the extension
K application did not disclose that 8 out of 49 heads of claim would be K

statute barred on the date the extension order was granted and the rest
L L
would be barred in less than 8 weeks’ time (415f-417c). Hutchison LJ
M held that to be a very serious omission, amounting to a failure to comply M

with the duty of making full disclosure on an ex parte application,


N N
following Waddon.
O O

102. More importantly, the evidence of Mr Borrelli on the


P P
limitation issues was not simply a mistake but in fact constituted
Q misrepresentation. To explain the true position, I adopt Mr Manzoni SC’s Q

categorization of the claims as follows:


R R

S S
Underlying Claim Category
according to
Date Event Kleinwort v Benson
T T

U U

V V
- 30 -
A A

B B
Underlying Claim
1. 3 November Payment of US$30 million by Category
C according to C
2006 5 cashier orders from the Plaintiff’s
Kleinwort v Benson
BOC account to Supreme Well’s BEA
D Account. D
2. 5 March 2007 Payment of US$76.8 million by
E 13 cashier orders from the Plaintiff’s E
BOC account to Supreme Well’s BOC
Account.
F F
3. 29 May 2007 Payment of US$7.45 million by
2 cashier orders from the Plaintiff’s
G BOC account to Supreme Well’s BOC G
Account.
H 4. 2 August 2007 Payment of US$22 million by H
4 cashier orders from the Plaintiff’s
BOC account to Supreme Well’s BOC
I Account. I

5. 11 February 2008 Payment of US$20 million by


J 4 cashier orders from the Plaintiff’s J
BOC account to Supreme Well’s BOC
Account.
K K
6. 16 October 2008 Payment of US$47 million by
8 cashier orders from the Plaintiff’s
L BOC account to Supreme Well’s BOC L
Account.
M 7. 4 December 2008 Payment of US$100.5 million by Category 2 M
16 cashier orders from the Plaintiff’s
BOC account to Supreme Well’s BEA
N N
Account.
8. 10 March 2009 Payment of US$10 million by Category 2
O O
1 cashier order from CMED
Technologies’ Standard Chartered
P Account to Supreme Well’s BOC P
Account.

Q
9. 3 July 2009 Payment of US$21.75 million by Category 2 Q
1 cashier order from CMED
Technologies’ Standard Chartered
R Account to Supreme Well’s BOC R
Account.
S S

T T

U U

V V
- 31 -
A A

B B
Underlying Claim
10. 4 December 2009 Payment of US$20 million by Category 1
Category
C C
1 cashier order from CMED according to
Technologies’ Standard Chartered Kleinwort v Benson
D Account to Supreme Well’s BEA D
Account.

E Total: US$355.5 million E

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

G 103. In respect of Category 1: although the claim was made G

H
within the 6-year limitation period, the description of Event 10 did not H
show BOC’s involvement. Moreover, the Plaintiff did not alert the
I I
Master that grant of the Extension Order for the period after 4 December

J
2016 would deprive BOC of a limitation defence. The Plaintiff had not J
attempted to segregate Event 10 from other Events. Even if the Master
K K
would have granted an extension order just for Event 10, he would have

L been unable to do so. L

M M
104. Category 2 totalled US$132.25 million. Amongst Events 7-
N 9, the identity of the payors were not shown on the 2 cashier orders dated N

10 March and 3 July 2009. Mr Borrelli did not explain how it could be
O O
suggested that BOC had knowingly or dishonestly assisted in the receipt
P of such sums. Further, although §62 of Borrelli-1st stated that the Plaintiff P

would be affected to the extent of US$100.5 million, he did not inform


Q Q
the Master that, but for the extension, those claims would be time-barred.
R R

105. For the uncategorized Events, Mr Manzoni SC submits that


S S
the extension of the Writ had no bearing on availability or otherwise of
T T

U U

V V
- 32 -
A A

B a limitation defence which had accrued prior to the issue of the Writ. B

BOC could still run the limitation defence despite the Extension Order.
C C

D 106. With the greatest respect, that was sophistry. Those other D

E
events (worth US$203.25 million) fell within Category 4. The E
Liquidators knew about it as reflected in the Indorsement. Mere issue of
F F
the Writ had deprived BOC of the limitation defence and BOC would

G
have to incur costs on striking it out. G

H H
107. By not mentioning the preceding paragraph, the Liquidators

I further misled the Master into believing that the Plaintiff would be denied I
an unexpired claim as large as US$355.5 million if the Writ was not
J J
extended.
K K

108. Further, although s.26 of the Limitation Ordinance provides


L L
for postponement of limitation periods in cases of fraud, concealment or
M mistake, it should not be construed to postpone time where there was an M

inability to sue in a case of a company controlled by wrongdoers. In


N N
other words, s.26 only postpones the running of the limitation period if
O the Plaintiff had no knowledge of the fraud, and not when the Plaintiff O

took no action due to reasons otherwise: Hotung Investment (China) Ltd


P P
v Ernst & Young (a firm) [2012] 5 HKLRD 421 at §§24-38, Court of
Q Appeal. Q

R R
109. Mr Borrelli’s affidavits said nothing about BOC’s knowledge
S of the fraud to enable the Plaintiff to invoke s.26 of the Limitation S

Ordinance. Their case is still premised on “inferences as the bank’s


T T
actual knowledge of certain matters and the course which the bank
U U

V V
- 33 -
A A

B actually took in response to the suspicious transactions (other than to act B

on the instructions of the Plaintiff’s fraudulent management) remain


C C
rd
unknown to the Liquidators.” (Borrelli-3 , §64). Mr Manzoni SC is still
D D
arguing at this hearing that the only means of obtaining evidence of

E
BOC’s knowledge was the s.221 Application (which failed). E

F F
110. I find that there was not only material non-disclosure but

G
also misrepresentation of the limitation issues before the Master. G

H H
F. ISSUE (4): IF THERE HAD BEEN MATERIAL NON-DISCLOSURE,
I
WHETHER THE EXTENSION ORDER SHOULD BE AFFIRMED OR I
RE-GRANTED
J F1. Legal principles for affirmation or re-grant of an ex parte order J

K 111. If the Court finds that there has been material non-disclosure, K

the general rule is that it should discharge the order and refuse to renew
L L
it. Nevertheless, the Court has jurisdiction to continue or re-grant the
M order. The relevant factors can be found in Excel Courage Holdings Ltd M

v Wong Sin Lai [2014] 3 HKLRD 642 at §56 (Kwan JA):


N N

(a) That jurisdiction should be exercised sparingly, and should


O O
take account of the need to protect the administration of
P justice and uphold the public interest in requiring full and P

fair disclosure.
Q Q

(b) The Court should assess, among other things, the degree and
R R
extent of the culpability with regard to the non-disclosure,
S and the degree of importance of the undisclosed matters to S

the application (although the fact that the judge might have
T T
made the order anyway is of little significance).
U U

V V
- 34 -
A A

B (c) The application of the general principle that an order should B

be discharged upon material non-disclosure being


C C
established should not be carried to extreme lengths or be
D D
allowed to become the instrument of injustice.

E E
(d) There are no hard and fast rules as to whether the discretion

F
to continue or re-grant the order should be exercised, and the F
court should take into account all relevant circumstances.
G G

H
112. An important issue will always be how material the H
information was. Where the undisclosed information was central to the
I I
case, the order granted should be discharged notwithstanding the absence

J of deliberate concealment: Network Telecom at §§63-64 (Burton J). J

K K
F2. Application of the Legal principles
L L
113. Computation of the 6-year limitation period in this action
M would have posed no difficulty to the most junior solicitor or liquidator. M

The material non-disclosure and misrepresentation of the limitation issues


N N
were central to the Extension Application. They were serious and
O egregious. Category 2 and 4 claims made up US$335.5 million, out of O

a total claim of US$355.5 million. On this ground alone, the Extension


P P
Order should be set aside without a re-grant.
Q Q

114. I am fortified in this view because any matter capable of


R R
being good reasons at the time of the Extension Order ceased being so by
S virtue of Harris J’s Judgment. And the Liquidators’ case on BOC’s S

knowledge of fraud is still unknown.


T T

U U

V V
- 35 -
A A

B 115. I am aware of the potential prejudice to the Plaintiff in B

setting aside the Extension Order. Lack of a re-grant would mean


C C
dismissal of the action (being one of the Plaintiff’s only assets). The
D D
creditors may be denied enormous sums of money as a consequence of

E
the fraud. However, this prejudice may be reduced if, eg, the Liquidators E
can establish their claims against other entities. Anyhow, the court should
F F
take a hard stance on Liquidators who are guilty of material non-

G
disclosure and misrepresentation. G

H H
116. The prejudice to BOC, if there is a re-grant, would be great,

I for BOC would have to incur costs for striking out this action on I
limitation grounds. Moreover, the relevant Events dated as far back as 12
J J
years. There was potential prejudice in terms of difficulty in collecting
K evidence when officers involved had left the employ of BOC and K

witnesses’ memory has faded (the latter being acknowledged by Mr


L L
Borrelli on affidavits). It may be true that those officers (though retired)
M have sworn affidavits in response to interrogatories as recently as 21 M

December 2016. It may also be expected that a lot of the evidence would
N N
be documentary in nature and as early as 2012 the Liquidators have
O specifically requested BOC that document preservation procedures be O

engaged in March 2013. However, when it comes to the question of


P P
whether or not BOC had knowledge of certain matters, it could not be
Q said that officers’ memory was not important. Q

R R
117. Mr Manzoni SC prays in aid Wing Fai Construction v
S Yip Kwong Robert (2011) 14 HKCFAR 935, §§64 & 68, wherein Ma CJ S

said that “the role of the court as not being to prevent actions being
T T
litigated but quite the opposite”. He suggests that the foundation (for
U U

V V
- 36 -
A A

B striking out, in that case) is whether or not there had been abuse of B

process.
C C

D 118. With respect, that authority does not trump the legal D

E
safeguards which are to ensure fairness to both parties. If the test of E
abuse is of any relevance, it was the Liquidators who have abused by
F F
their material non-disclosure and misrepresentation.

G G
119. Just as the lack of prejudice to a defendant per se is not a
H H
good reason for extending a writ, the lack of prejudice to a defendant per

I se cannot be a good reason for a regrant of an extension order after the I


earlier one is discharged.
J J

K F3. Findings K

L 120. In summary, there were matters capable of being good L

reasons at the time of the Extension Order. However, those matters have
M M
turned out to be not good reasons because of Harris J's judgment. The
N “other investigations” of the Liquidators could not carry their case N

further. There was material non-disclosure in that the Liquidators failed


O O
to bring Harris J’s Judgment to the attention of the Master after the grant
P of the Extension Order, but that non-disclosure was innocent. There was P

material non-disclosure and misrepresentation in that the Liquidators


Q Q
failed to properly inform the Master of the limitation defences; and on
R this ground alone, this court would set aside the Extension Order without R

a re-grant.
S S

T T

U U

V V
- 37 -
A A

B G. ISSUE (5): WAS SERVICE OF THE WRIT EFFECTED BY LEAVING B

AT THE RECEPTION DESK OF BOC TOWER?


C C
121. Given my ruling on the application to set aside the Extension
D Order, effective service of the Writ on BOC is irrelevant. I only deal with D

the application for setting aside service of the Writ briefly for the sake of
E E
completeness and costs.
F F

122. Section 827 of the Companies Ordinance, Cap 622 provides


G G
that “[a] document may be served on a company by leaving it at, or
H sending it by post to, the company’s registered office.” H

I I
123. Section 827 should be strictly adhered to by leaving the writ
J at the registered office of the limited company: Re Hongkong Zhongxing J

Group Co Ltd (unreported, HCCW 256/2011, 8 March 2012) at §13


K K
(Barma J, as he then was).
L L

M
124. In this case, the Writ was not left at the Registered Office but M
at the reception desk on the ground floor of BOC Tower on 29 November
N N
2016. The process server (Mr Tsang Tak Wah) explained that the

O
reception desk was surrounded with BOC signage. He asserted that O
a receptionist (Ms Lui) told him to leave the Writ there, which was denied
P P
by Ms Lui. Ms Lui stamped the Writ with BOC’s chop marked “Bank of

Q China (HK) Ltd General Services Div (BOC Tower)”. Q

R R
125. The court is unable to resolve the conflict of evidence on the

S affirmations. I place little weight on the video tape as it has no sound. It S

is impossible for the court to decide or infer what the gesture of Ms Lui
T T

U U

V V
- 38 -
A A

B or Mr Tsang meant and whether what was taken out from the drawer for B

handing over to another person was the Writ.


C C

D 126. More importantly, the Liquidators could not refute Ms Lui’s D

E
evidence that she was employed by an entity called Sun Chung Property E
Management Co Ltd and not BOC. And there was no dispute that it was
F F
perfectly possible for the process server to go up to the 14 th floor. He

G
only had to register his personal details at the reception desk. The staff at G
th
the reception desk on 14 floor could acknowledge service of the Writ.
H H

I 127. The service was not valid. I

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

128. Ms Steffensen, solicitor for the Liquidators, could only


L L
depose to the “usual practice” of handling of mails in her firm and say
M that it was “likely that the letter was put in a post box on 29 November M

2016”.
N N

O 129. The postal chop bearing the date of 30 November 2016 was O

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

R R
130. Mr Manzoni SC submits that BOC has failed to adduce
S “convincing evidence” to the effect that the Writ was not received within S

the time for service: Bank of China (Hong Kong) Ltd v Cheung King
T T
Fung [2007] 1 HKLRD 462, Tang JA (as he then was) at §34. BOC’s
U U

V V
- 39 -
A A

B officers (Mr Chang and a Ms Lee) merely referred to an email on 6 B

December 2016 with the Writ attached, as if the Writ was received by
C C
BOC that day, without stating the actual date of receipt.
D D

E
131. With respect, Bank of China (Hong Kong) Ltd v Cheung E
King Fung has to be read in context. There, the plaintiff had served the
F F
writ by registered post and filed an affirmation of service showing that

G
the copy writ had not been returned to the plaintiff through the post G
undelivered to the addressee. In applying to set aside the default
H H
judgment, the defendant claimed that he had not received the writ and

I applied to set aside the judgment. It was in that context that Tang JA said I
that the court did not have to accept a defendant’s assertion that he had
J J
not received the writ through the post and that a defendant was required
K to provide convincing evidence of receipt. K

L L
132. In the present case, the Plaintiff has not even crossed the
M threshold of proper service by leaving at the Registered Office or by M

ordinary post within the specified time. BOC v Cheung King Fung did
N N
not begin to apply.
O O

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


P P

Q Q
I. ISSUE (7): SHOULD ANY IRREGULARITY IN SERVICE BE
CURED?
R R
134. Under Order 2, rule 1, RHC, defective service of
S proceedings, however gross the defect and even a total failure to serve, is S

curable by the court, which may exercise its discretion not to set aside
T T
service if (i) the irregularity is technical rather than substantive; and (ii)
U U

V V
- 40 -
A A

B the court is satisfied that the proceedings have come to the attention of B

the defendant: 3D Gold Jewellery Holdings Ltd v Pricewaterhouse


C C
Coopers [2014] 4 HKC 528, Deputy Judge Lok (as he then was), at §20.
D D

E
135. Examples of the court’s exercise of such discretion can be E
found in:
F F
(a) Hong Kong and Shanghai Banking Corp Ltd v Ong Tong
G G
Sing [2008] 3 HKLRD 444, §§29-36, DHCJ Gill where,

H
following substantial inter-partes correspondence, the writ H
was served by delivering a copy of the writ to the
I I
defendants’ office and leaving it with the receptionist, rather

J than personal service on the defendant. J

K (b) 3D Gold v PwC, where a writ was served on the general K

counsel of a firm of accountants rather than on a partner of


L L
the firm. In that case there had been a history of prior
M dealings between the parties in the context of M

s.221 proceedings and the defendants had received a copy of


N N
the writ in that context well before the attempted service.
O Deputy High Court Judge Lok said, at §24, that the O

defendant was clearly aware of the service of the writ and


P P
the nature of the claim contained therein. Hence the error of
Q the process server had not caused any actual harm to the Q

defendant.
R R

S 136. In the present case, BOC had received a copy of the writ in S

the context of the s.221 Application, but it was within the first year of
T T
validity.
U U

V V
- 41 -
A A

B 137. The attempt of the Liquidators’ solicitors to ascertain if the B

Writ could be served on KW Ng met with no success. A copy of the Writ


C C
was actually served by hand on KW Ng (who acknowledged receipt on
D D
30 November 2016 with the firm’s chop) but that was not a mode

E
recognized by s.827 of Cap 622. E

F F
138. Mr Manzoni SC submits that it is inappropriate for

G
a defendant who has instructed solicitors in related proceedings, to refuse G
to instruct their solicitors to answer questions about whether they are
H H
instructed to accept service in the hope that service by some other means

I may be avoided. The Court takes a dim view of such a “catch me if you I
can” approach by defendants: see Bank of China (Hong Kong) Ltd v
J J
Chen Jianren [2009] 3 HKLRD 163, DHCJ Carlson at §§23-24.
K K

139. In Chen Jianren, the writ was served on the defendant by


L L
leaving at his 4 last known addresses on a date when (unknown to the
M plaintiff) the defendant was out of Hong Kong. Nearly 5 years after the M

plaintiff had obtained a “regular” default judgment, the defendant


N N
(through solicitors) applied to set it aside. By consent, the default
O judgment was set aside. On the day following, the defendant’s solicitors O

wrote to the plaintiff’s stating that the former had no instructions to


P P
accept service of the writ. Thereupon, the plaintiff applied for, amongst
Q others, extension of the validity of the writ and a master granted the Q

extension. However, what the defendant would want was to have the
R R
plaintiff re-serve the writ in Mainland China, obliging the plaintiff to go
S through the process under Order 11 with all the delay and expense. S

T T

U U

V V
- 42 -
A A

B 140. Whilst acknowledging that the court had no power under B

Order 6, rule 8 to extend the validity of the writ (§§12, 14 of Chen


C C
Jianren), and despite clear authorities referred to in his judgment that
D D
Order 6 provided a comprehensive code for renewal of a writ (§11)

E
Deputy Judge Carlson nevertheless invoked Order 2, rule 1 (to cure E
irregularity) and Order 3, rule 5 (to extend time) (§18). He found that
F F
renewal of the writ would not deprive the defendant of a limitation

G
defence. Having referred to several authorities, Deputy Judge Carlson G
came to the conclusion that the defendant has received the writ and knew
H H
what the case was all about and was able to respond to it. “In the absence

I of any prejudice”, in circumstances that the writ had been brought to the I
defendant’s attention in November 2006, he upheld the master’s deemed
J J
service order (§24).
K K

141. With respect, to Mr Manzoni SC, his proposition in


L L
paragraph 138 and failed to take into account the special circumstances of
M Chen Jianren. He overlooked the element of “absence of prejudice” M

specially pointed out by Deputy Judge Carlson and in Transamerica


N N
Occidental Life Insurance Co (Hong Kong Branch) v King Sound
O Industry Co Ltd [2005] 1 HKLRD 125, 133D-G, Stone J, which Deputy O

Judge Carlson referred to.


P P

Q 142. The plaintiff in Chen Jianren had purportedly served the writ Q

properly on the defendant at the last known addresses within the first year
R R
of the validity. Here, the Plaintiff deliberately deferred service of the
S Writ till the end of a 2-year validity period (compared to only one year in S

3D Gold v PwC); it can hardly expect indulgence of the court. Further,


T T

U U

V V
- 43 -
A A

B given my findings on material non-disclosure and misrepresentation B

above, I decline to make any order to cure the irregularity.


C C

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

E
dismissed. E

F F
J. COSTS
G 144. In principle, costs should follow the event so that BOC will G

get the costs of both summonses. As the action is dismissed, the


H H
Liquidators should be personally liable for such costs: Osman
I I
Mohammed Arab & anor v Cashbox Credit Services Ltd, CACV 67/2017,

J
13 November 2017, §45, Yuen JA. J

K K
K. CONCLUSION
L 145. I order as follows: L

M M
(1) In respect of BOC’s summons to set aside the Extension

N
Order, the Extension Order is set aside; N

O
(2) In respect of BOC’s summons for setting aside service of the O
Writ, the service is set aside;
P P
(3) The action is dismissed;
Q Q
(4) On a nisi basis, costs of both summonses and the action be to
R R
BOC with certificates for 2 counsel only, ie Mr Huggins SC

S and Ms Janet Ho; and S

T T

U U

V V
- 44 -
A A

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

personally.
C C

D 146. I thank counsel for their able assistance. D

E E

F F

G G

H H
(Queeny Au-Yeung)
Judge of the Court of First Instance
I High Court I

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

Mr Adrian Huggins SC, Mr Richard Khaw SC and Ms Janet Ho,


L instructed by K.W. Ng & Co, for the Defendant L

M M

N N

O O

P P

Q Q

R R

S S

T T

U U

V V