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Chow How Yeen Margaret And Others v Wex Pharmaceuticals Inc And Another

Judgment Cited authorities 4 Cited in Precedent Map Related
Vincent
Judgment Date07 March 2013
Year2013
Judgement NumberHCA1035/2011
Subject MatterCivil Action
CourtHigh Court (Hong Kong)
HCA1035/2011 CHOW HOW YEEN MARGARET AND OTHERS v. WEX PHARMACEUTICALS INC AND ANOTHER

HCA 1035/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1035 OF 2011

____________

BETWEEN

CHOW HOW YEEN MARGARET 1st Plaintiff
GAO CHENG (XIE LI) COMPANY LTD 2nd Plaintiff
MUSCULAR INVESTMENT COMPANY LTD 3rd Plaintiff

and
WEX PHARMACEUTICALS INC 1st Defendant
WEX MEDICAL LTD 2nd Defendant

____________

Before: Hon Chung J in Chambers
Date of Hearing: 6 February 2013
Date of Handing Down Decision: 7 March 2013

_____________

D E C I S I O N

_____________

INTRODUCTION

1. Two summonses have been taken out by the two defendants (collectively “this application”). The relief sought is similar. In short, they seek to:

(a) discharge the ex parte order dated 22 June 2012 whereby the master extended the validity of the writ herein (“the writ extension order”);

(b) discharge the ex parte order dated 17 October 2012 whereby the master granted leave to serve the 1st defendant (“WEX Canada”) out of the jurisdiction;

(c) set aside service of the writ herein on (1) the 2nd defendant (“WEX Hong Kong”) on 26 September 2012, and (2) WEX Canada on 28 November 2012;

(d) disallow the amendment of the writ herein and statement of claim herein.

BACKGROUND

2. This action is concerned with the plaintiffs’ earlier purchase of the shares of WEX Canada, a public company listed in Canada which operated a pharmaceutical business. The plaintiffs suffered financial loss because of a substantial drop in the share price. They claim that the loss was caused by the defendants’ fault.

3. A more detailed background has been given by the court of appeal in a judgment in Winland Enterprises Group Inc v Wex Pharmaceuticals Inc and Another, CACV 154/2011 (29 March 2012). I will gratefully quote therefrom:

“2. Winland is a company incorporated in the British Virgin Islands as a corporate vehicle for a group of investors represented by Margaret Chow (‘Chow’) and Timothy Ma (‘Ma’).

3. WEX is a listed company incorporated in Canada engaged in the pharmaceutical industry. It has a number of wholly owned subsidiaries, including WEX Medical Limited incorporated in Hong Kong (‘WEX HK’), GlobalMed Corporation incorporated in West Indies (‘GlobalMed’) and Acro Pharm Corporation incorporated in Barbados (‘Acro Pharm’), the 2nd defendant herein. WEX also has 97% interest in Nanning Maple Leaf Pharmaceutical Company Limited (‘Nanning’) incorporated in the People’s Republic of China (‘the PRC’).

4. WEX and the above subsidiaries shared some common staff. Frank Shum (‘Shum’) was until 16 August 2005 a shareholder, director, president and chief executive officer of WEX; a director and chairman of WEX HK; authorised person and ‘lawyer at large’ of Acro Pharm; and the chairman and legal representative of Nanning.

5. Grace Leong (‘Leong’) was a director of WEX; director and deputy manager of WEX HK and Shum’s assistant until 13 March 2006.

6. In about July 2001, Shum and Leong on behalf of WEX discussed with Chow and Ma the possibility of WEX granting exclusive distribution rights in Tetrodin for treatment for opiate withdrawal in Peru to a company to be nominated by Chow and Ma. Tetrodin, also known as Tetrodonin, is extracted from tetrodotoxin (referred to collectively as ‘TTX’). The discussion resulted in Chow and Ma agreeing to subscribe for shares in WEX through private placement (‘Share Purchase Agreement’) and in Winland entering into an agreement with GlobalMed on 5 December 2001 for sole distributorship of Tetrodin in Peru (‘GlobalMed Agreement’).

7. In about April 2003, at the request of Shum, the GlobalMed Agreement was cancelled and replaced by an agreement on identical terms between Winland and Acro Pharm (‘Acro Pharm Agreement’) on 21 May 2003.

8. On 25 November 2003, Winland entered into an exclusive distributorship agreement for Tetrodin in Peru (‘Peru Agreement’) with Forbest Medical International S.A.C. (‘Forbest’). On 12 April 2004, the Peru Agreement was transferred from Forbest to Equipos Y Medicinas S.A.C. (‘Equipos’).

9. With the documentation provided by WEX, Equipos obtained Sanitary Registry Authorisation from the health authority in Peru on 24 February 2004 which permitted and licensed Equipos to import and sell Tetrodin manufactured by Nanning in Peru. The authorisation commenced on 5 February 2004 and expired on 5 February 2009.

10. In August 2004, WEX, Winland and Equipos jointly arranged clinical testing of the effectiveness of Tetrodin for treatment of opiate withdrawal precipitated by cocaine abuse in Peru. Pursuant to the arrangement, Winland placed a small purchase order with Acro Pharm for Tetrodin on 25 August 2004. The Tetrodin was never delivered. In January 2005, Shum requested to delay the commencement of the Acro Pharm Agreement. Winland agreed.

11. In an e-mail dated 24 April 2010, WEX informed Winland that as the final study report prepared by Ventana Clinical Research Organisation issued on 9 January 2006 concluded that the administration of Tetrodin did not attenuate withdrawal symptoms precipitated by naloxone, WEX discontinued development of Tetrodin for opiate withdrawal. WEX proposed to Winland to terminate the Acro Pharm Agreement and to dissolve Acro Pharm whose only business related to that agreement. Winland considered the e-mail evinced an intention on the part of WEX not to be bound by the Acro Pharm Agreement and to repudiate that agreement. Winland accepted the repudiation by WEX and Acro Pharm by filing a writ of summons with a statement of claim on 19 October 2010.”

WEX and WEX HK in the quoted passages are the same as WEX Canada and WEX Hong Kong respectively (para 1(b) and 1(c) above).

4. CACV 154/2011 was an appeal from a decision in HCCL 4/2011 (or HCA 1573/2010). Both the first instance court and the appellate court set aside the concurrent writ of summons and leave to serve it out of the jurisdiction on WEX in Canada. These proceedings will be called “the earlier action” below.

5. The procedural steps relevant to this application are:

(1) the writ together with statement of claim was issued on 21 June 2011;

(2) (as stated above) the writ extension order was made on 22 June 2012;

(3) the writ together with amended statement of claim (which added WEX Hong Kong as the other defendant) was issued on 17 September 2012;

(4) the said court document was served on WEX Hong Kong at its registered office on 26 September 2012.

ISSUES IN THIS APPLICATION

6. In relation to the writ extension order, the defendants contend that:

(a) there was no good reason for making the writ extension order;

(b) this is particularly so because the plaintiffs’ claim herein is (or at least highly arguably is) time-barred by the time of the writ extension order;

(c) there has been non-disclosure of material facts when the plaintiffs applied ex parte for the writ extension order;

(d) the amended claim was only raised (and the amended writ was only served on WEX Hong Kong) after the amended claim has been (or at least highly arguably has been) time-barred;

(e) the amended claim (deceit) has not been adequately pleaded.

These will be discussed under separate sub-headings below.

(a) Good reason to extend validity of writ?

7. A writ is valid for 12 months from its issuance: RHC Ord 6 r 8(1). The court’s power to extend the validity of a writ is conferred by Ord 6 r 8(2).

8. It is trite law the court’s power to do so should only be exercised cautiously (Hong Kong Civil Procedure 2013, Vol 1, para 6/8/3). A summary of the manner in which the power is to be exercised can be found in Pacific Electric Wire & Cable Co Ltd and Another v Hu Hung Chiu and Others [2011] 1 HKLRD 1000:

“15. Order 6 Rule 8 empowers the Court to extend the validity of a writ where there is ‘good reason’ to do so. See Kleinwort Benson Ltd. (also known as The MYRTO) [1987] AC 597 (622G-623D) (Lord Brandon).

16. The Court first asks whether ‘the failure to serve a writ within its normal validity period is the result of a choice’ and (if so) ‘whether the choice was made for a good reason’. This means that ‘no discretion to extend the writ would arise unless the choice [deliberately not to serve the writ within its validity period] was made for a reason which is at least capable of amounting to a good reason’. See Chow Ching Man v. Sun Wah Ornament Manufactory Ltd. [1996] 2 HKLR 338 (CA), at 344C (Bokhary JA).

17. Extending the validity of a writ therefore entails a two-stage process. At stage one, a plaintiff must show ‘matters which could, potentially at least, constitute good reason for extension’. At stage two, the Court weighs all relevant factors (including the ‘good reason’ established at stage one and the relative hardships to the parties involved) so as to determine whether the writ should be extended as a matter of discretion. See Yip Kam v. Zhongshan Foodstuffs & Aquatic Import & Export Group Company Ltd. of Guangzhou [2010] 2 HKLRD 914 (at para 39) (Le Pichon JA).

18. In Kleinwort Lord Brandon distinguished 3 categories of situation. In Category 1 were cases in which a plaintiff applied for extension of a writ within the period of its validity and before the expiry of the limitation period for the causes of action pleaded. In Category 2 were cases in which a plaintiff applied for an extension after expiry of a writ’s validity but before expiry of the operative limitation period of the causes of action pleaded. In Category 3 were cases in which a plaintiff applied for an extension after expiry of the writ...

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