Pacific Electric Wire & Cable Co Ltd And Another v Hu Hung Chiu And Others

Judgment Date07 January 2011
Citation[2011] 1 HKLRD 1000
Judgement NumberHCA1299/2005
Subject MatterCivil Action
CourtHigh Court (Hong Kong)
HCA1299/2005 PACIFIC ELECTRIC WIRE & CABLE CO LTD AND ANOTHER v. HU HUNG CHIU AND OTHERS

HCA 1299/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1299 OF 2005

__________________

BETWEEN

PACIFIC ELECTRIC WIRE &
CABLE COMPANY LIMITED
1st Plaintiff
BLINCO ENTERPRISES LIMITED 2nd Plaintiff

and

HU HUNG CHIU (胡洪九) 1st Defendant
NM BANK LIMITED
(formerly known as TRIDENT BANK LIMITED
and CENTRAL PACIFIC BANK LIMITED)
2nd Defendant
MA KAM FOOK, ROBERT(馬金福) 3rd Defendant
LUI PUI WING AMY(呂佩穎) 4th Defendant
__________________

Before: Hon Reyes J in Chambers

Date of Hearing: 7 January 2011

Date of Judgment: 7 January 2011

__________________

J U D G M E N T

__________________

I. INTRODUCTION

1. The Writ in this action was issued on 7 July 2005. Its validity has then been extended a number of times upon ex parte applications by the Plaintiffs: first on 3 July 2006 for 1 year; second on 28 May 2007 for 1 year; third on 3 July 2008 for 9 months; fourth on 9 April 2009 for 9 months; and fifth on 5 January 2010 for 1 year. Hu, the 1st Defendant, now applies to set aside the third, fourth and fifth extensions of the Writ. If he succeeds, that will have the effect that the present action cannot be maintained against him.

2. When the Writ was first extended on 3 July 2006, the Master also gave leave for the Writ to be served on Hu in Taiwan. Hu also applies to set aside that first extension and the leave granted to serve outside Hong Kong. Hu alleges material non-disclosure as the basis for this further application.

3. The Writ was finally served on Hu in Taiwan on 16 January 2010 within the validity of the fifth extension granted by this Court.

II. BACKGROUND

4. In September and December 2004 Pacific Electric commenced 3 Main Actions in Hong Kong against Hu and numerous other defendants. At around the same time, in November 2004, Hu was indicted in Taiwan for criminal offences against Pacific Electric. On 22 April 2005 Pacific Electric commenced an Ancillary Action in Taiwan against Hu and others.

5. The Writ in this action claims that Hu misappropriated US$61.5 million of Pacific Electric’s funds in February 1997. The Writ also alleges that since November 1996 Hu conspired with others to injure Pacific Electric.

6. On 27 July 2005 Hu challenged this Court's jurisdiction to hear the Main Actions. He applied to set aside the leave granted to serve the Main Action Writs on him in Taiwan.

7. In late 2005 and early 2006 Pacific Electric applied for summary judgment in the Main Actions against specific defendants. But Hu was not among those specific defendants.

8. The jurisdictional challenge to the Main Actions was heard by Recorder Anthony Chan SC in August and September 2006. The Recorder held that the failure to disclose the Ancillary Action to the Court amounted to material non-disclosure. He consequently set aside the ex parte leave granted for service of the Main Action Writs on Hu in Taiwan. He refused to re-grant leave to serve out.

9. Pacific Electric appealed against the Recorder's decision. The Court of Appeal heard the matter on 17 July 2007. On 31 July 2007 it affirmed the Recorder’s decision to set aside leave. But the Court of Appeal reversed the Recorder on the question whether leave to serve out should be re-granted.

10. Hu then applied for leave to appeal against the Court of Appeal's decision. But his application for leave was finally refused by the Court of Final Appeal on 13 March 2008.

11. On 18 June 2008 the Writs in the Main Action were served on Hu in Taiwan.

12. Meanwhile, Pacific Electric obtained summary judgment in the Main Actions on 18 January 2008 against the specific defendants from Saunders J. On 18 October 2008 Pacific Electric further obtained an order that Hu (among other persons) pay the costs of the summary judgment proceedings personally, even though Hu was not a party to such proceedings.

13. The specific defendants appealed against the judgment of Saunders J. In light of the costs order against him, Hu participated as intervener in that appeal. On 3 March 2009 the Court of Appeal reversed Saunders J and set aside the summary judgments in the Main Actions. The personal costs order against Hu was discharged.

14. Pacific Electric applied for leave to appeal against the Court of Appeal’s setting aside of the summary judgments in the Main Actions. On 5 June 2009 the Court of Appeal, and on 14 September 2009 the Court of Final Appeal, refused leave to appeal.

III. DISCUSSION

A. Should the third, fourth and fifth extensions of the Writ be set aside?

A.1 Law

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 and the operative limitation period. The point of Lord Brandon’s distinction was to stress that it would be unlikely for there to be good reason for extension in Category 2 cases and even less likely for there to be so in Category 3 cases.

19. There is a dispute here as to whether the present case falls within Category 1 or 2.

20. Mr. Robert Whitehead SC (appearing for Hu) argues that this is a Category 2 situation. This is because the causes of action against Hu are said to have arisen in February 1997 (misappropriation) and November 1996 (conspiracy). By the time the Writ was issued in July 2005, the 6 year limitations for both causes of action (Mr. Whitehead argues) had expired.

21. Mr. Anthony Neoh SC (appearing for Pacific Electric) says that, as a director and Chief Financial Officer of Pacific Electric at the time of the relevant matters, Hu was liable as a fiduciary and constructive trustee to account for monies which he misappropriated (and conspired to misappropriate) from the time when such monies came into the hands of Hu or his agents. Consequently, relying on Limitation Ordinance (Cap.347) (LO) ss.20(1)(a) and (b), Mr. Neoh submits that there was no applicable period of limitation.

22. In the alternative Mr. Neoh argues that LO s.26(1) is applicable. That provides that, where there has been fraud or deliberate concealment, a limitation period “shall not begin to run until the plaintiff has discovered the fraud ... or could with reasonable diligence have discovered it”. Mr. Neoh says that, on the evidence, Hu’s alleged fraud was not discovered until “sometime early in 2004”. This would mean (Mr. Neoh reasons) that the Writ was issued and extended within the 6 year limitation period.

23. Mr. Whitehead counters that any constructive trust over the monies claimed by Pacific Electric could only be the result of the Court’s imposition of such a trust by way of remedial relief against wrongdoing by Hu. Until such wrongdoing is established at trial and a constructive trust imposed on monies in Hu’s hands by declaration of the Court, Hu (Mr. Whitehead says) cannot be treated as a trustee within the terms of LO s.20. Therefore, a limitation period is applicable.

24. As for LO s.26, Mr. Whitehead submits that it was incumbent on Pacific Electric, in the course of its ex parte applications for extension of the Writ and service out of the jurisdiction, to give full particulars...

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