AMADEAUS INVESTMENT LTD v. Dr. LIN KAO KUN

HCA 2379/2015

[2019] HKCFI 797

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2379 OF 2015

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DECISION

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Introduction

1.  This is the defendant’s (“D”) appeal against the Order of Master K Lo made on 15 October 2018 (the “Decision”) dismissing D’s Summons dated 9 January 2017 (the “Setting Aside Summons”) to set aside the Order of Master Chow made ex parte on 4 October 2016 (the “Extension Order”) extending the validity of the Writ herein for a period of 12 months. The main issues are whether the plaintiff (“P”) had shown good reason for the extension, and whether P had, when making the ex parte application for extension, breached its duty to make full and frank disclosure.

The material procedural background

2.  The Writ herein was issued on 14 October 2015.  It contains a brief Endorsement of Claim.  According to paragraph (1) thereof, P’s claimagainst D is for repayment of a loan in the sum of US$2,200,000 (the “Loan”) it advanced to D pursuant to a loan agreement dated 16 January 2009 (the “Loan Agreement”).

3.  P subsequently on 12 December 2016 filed its Statement of Claim.  It pleads therein that the Loan was drawn down on 16 January 2009, that it was for a term of 9 months, that repayment became due on 15 October 2009, and that D has failed to repay the same.

4.  According to P’s pleaded case, and applying the 6-year limitation period stipulated in section 4(1)(a) of the Limitation Ordinance (Cap 347), P’s cause of action would have been time-barred on 15 October 2015.  The clock was stopped one day before that when the Writ was issued.

5.  According to Order 6, rule 8(1), the Writ was valid for service within 12 months from the date of issue.  That period would have expired on 13 October 2016.

6.  On 27 September 2016, an ex parte application was made on P’s behalf for extending the validity of the Writ (the “Ex Parte Application”).  It was a paper application.  It was supported by the 1^st Affidavit of Mr MichaelWithington (“Withington 1^st”) sworn on that same day.  Mr Withington is a solicitor with Messrs Howse Williams Bowers (“HWB”).  HWB were at that time and still are the solicitors acting for P. 

7.  On 4 October 2016, the Extension Order was granted.

8.  Pursuant to the Extension Order, the Writ was subsequently formally extended.  On its face, it bears a stamp saying that “RENEWED FOR 12 MONTHS AS FROM 14 OCT 2016 PURSUANT TO ORDER DATED 4 OCT 2016 BY Master Chow”.

9.  On 11 November 2016, the Writ was successfully served upon D in Hong Kong.

10.  On 9 January 2017, D took out the Setting Aside Summons.  He seeks thereby an Order that, inter alia, (i) both the Extension Order and the service upon D of the Writ be set aside; and (ii) the action against him be dismissed.  By the Decision handed down on 15 October 2018, the Setting Aside Summons was dismissed.

The affirmatory evidence

11.  As has been mentioned above, the Ex Parte Application was supported by Withington 1^st. As this appeal turns on the adequacy of the reasons provided in support of the extension and whether P was guilty of material non-disclosure, it is important to set out the material contents of that affidavit (and the subsequent affirmations in support and opposition) in some details:

(a)   At §4, Mr Withington gave a brief description of P’s cause of action and produced the Loan Agreement. 

(b)   The Loan Agreement is a nine-page document.  Clauses 1.2 and 9 are relevant:

“ 1. INTEPRETATION

…

1.2   Clause and schedule headings do not affect the interpretation of this Agreement…”

“ 9. NOTICE AND SERVIVE OF PROCEEDINGS

9.1 Any notice or other communication given or made under or in connection with the matters contemplated by this Agreement shall be in writing.

9.2 Any such notice or other communication shall be addressed as provided in Clause 9.3. All such notice or other communication from the Borrower shall be irrevocable, and shall not be effective until received by the Lender. All such notice or other communication from the Lender shall be deemed to have been duly given or made as follows:

(a) if sent by personal delivery, upon delivery at the address of the relevant party;

(b) if sent by post, two Business Days after the date of posting;

(c) if sent by facsimile, when dispatched with confirmed electronic answerback.

9.3   The addressee, address and facsimile number of each of the Lender and the Borrower are: [an address in Shanghai was specified as that of the Borrower’s (the “Shanghai Address”)].”  

   (c)   Mr Withington then deposed at §§5 – 8 that:

“ 5. Pursuant to Clause 9.3 of the Loan Agreement, the address of the Defendant is stated to be [the Shanghai Address];

6. As [P] and [D] signed the Loan Agreement in 2009 (around 7 years ago), [P] does not know whether [D] still resides at the Shanghai Address. I have been informed by [P] and verily believe that it has made enquiries about [D’s] whereabouts in Shanghai, and as a result of these enquiries, [P] is reasonably certain that [D] no longer lives at the Shanghai Address but may now be living in Shenzhen.

Attempted service in separate proceedings

7. In July this year, in separate but related arbitration proceedings involving [D] and a company related to [P] (‘RelatedCompany’), the Related Company (through HWB in Hong Kong and King & Wood Mallesons in Shanghai (‘KWM’)) attempted to serve [D] at the Shanghai Address by hand. However, when the representative from KWM attended the Shanghai Address, he was informed that the [D] was not at the Shanghai Address at the time of service.

8.   Also in July this year, the Related Company (again through HWB) attempted to serve [D] at this Shanghai Address by registered post. However, the documents that HWB sent to the Shanghai Address by registered post were returned to HWB’s office.”

   (d)   Mr Withington set out at §9 certain information on D which P learnt about not long before the application.  The information related to D’s directorship in three Hong Kong private companies (the “three HK Companies”) and one registered non–Hong Kong listed company (the “Listco”).  Mr Withington then continued:

“ 9. … Accordingly, [P] believes that, by virtue of [D’s] apparent business connection with Hong Kong (of which [P] was not previously aware), it may be possible to effect service upon [D] in Hong Kong ….

10. [P] has ascertained that [D] travels to Hong Kong regularly. I believe that if [P] is able to find out when [D] is next in Hong Kong, [P] may be able to effect personal service upon [D].

11. In light of this new information (detailed in paragraphs 9 and 10 above), [P] is making further enquiries as to whether [D] can be served in Hong Kong.

Application for leave to serve [D] out of the jurisdiction

12. [P] instructed my firm to apply for leave to serve [D] out of jurisdiction.

…

Length of Extension

14.   [P] requires a time extension of 12 months in which to continue to attempt to locate [D] and effect service upon him.”

12.  The Setting Aside Summons was supported by the affirmation of Mr Yan Sherman Cheuk Ning (“Yan 1^st”).  He is a solicitor of Messrs ONC Lawyers who act for D.

13.  I observe that a lot of what are in Yan 1^st are in fact arguments, comments and submissions.  In so far as material evidence is concerned, he said:

(a)   D was served with the Writ on 11 November 2016 when he attended a board meeting of the Listco in Hong Kong;

(b)   D was appointed a director of the Listco on 23 September 2013, and that was a matter of public record;

(c)   During the 12 months when the Writ was originally valid for service, the Listco had published four notices of board meeting.  Those notices contained dates and places of the meetings to be held.  He said that “[P] had had at least four good chances of ascertaining the whereabouts of [D] and thus effecting personal service of the Writ on [D] at the said four board meetings, but it failed to do so;” (§11(2))

(d)   He then said at §12 that “Most important of all, service of the current proceedings should never be an issue in the first place if [P] commenced the present action based on the terms of the Alleged Loan Agreement.”  He referred to Clause 9.2 of the Loan Agreement, to which I will later return.  He said at §12(3) that “there is no evidence that [P] had ever attempted to serve the Writ on [D] by post to the Shanghai Address during the original validity period of the Writ …”;

(e)   He said at §13 that D had been a director with the three HK Companies since October 2013, January 2015 and March 2016;

(f)   He said at §14 that “[D] wishes to point out that the Shanghai Address remains his residential address on public record.”  Heproduced certain records.  He then said that “It is further noted that [P] did not make any allegation nor provide any evidence that [D] had any attempt of evading service.”

14.  Mr Withington filed his 3^rd affidavit in reply (“Withington 3^rd”).  I set out his material evidence as follows:

(a)   At §§4 – 5, he stated:

“ 4. … As explained below, however, [P] faced real difficulties in effecting service on [D].

5.   The only information that [P] had regarded [D’s] whereaboutswas that he resided in either Taiwan or Mainland China.  He was encountered by a representative of [P] at Songshan Airport in Taipei prior to the issuance of the Writ, but his movements were unknown.  [D] was first introduced to [P] through a Taiwanese business associate, Mr Chen …, but Mr Chen passed away in 2014.  [P] did not have any other business or personal contacts with [D]and was therefore unable to ascertain [D’s] whereabouts following the issuance of the original Writ in October 2015.”

(b)   At §§6 and 7, he repeated the unsuccessful service he mentioned in §§7 and 8 of Withington 1^st. He continued at paragraph 7 that:

“ During the Arbitration Proceedings, the HKIAC also attempted to deliver documents to the Shanghai Address by courier, but all delivery attempts were unsuccessful.”

(c)   At §§8 and 9, he stated that:

“ 8. [P] was unable to locate [D] and effect service of these proceedings upon him. Accordingly, in early September 2016,HWB, on behalf of [P], instructed an investigations and securityconsulting firm, I-On Asia Limited (‘I-On’), to attempt to locate [D].

9.   On 14 September 2016, I-On informed HWB that when their representatives had attended at the Shanghai Address, they were informed that a Chinese female was the occupant of the Shanghai Address, and that she did not know [D].  I-On concluded that [D] was likely to be residing in Shenzhen, and that he was also a director of various Hong Kong companies.  This was the basis of paragraph 6 of [Withington 1^st].”

(d)   In respect of Clause 9.2 of the Loan Agreement, he stated at §14 that:

“ [P] took the view that for the purpose of service of the Writ (as distinct from a notice of arbitration), it was not sufficiently clear that clause 9.2 of the Loan Agreement would have ensured that service had been validly effected.”

15.  Mr Sherman Yan filed his 2^ndaffirmation in reply to Withington 3^rd.  Again, a lot of the contents are submissions, arguments and comments.  He raised the issue of alleged material non-disclosure on P’s part, especially of Clause 9.2 of the Loan Agreement (§2.1(1)).  He also stated that “in the arbitration, the claimant (a company related to [P] and is also represented by HWB) relies upon a clause identical with Clause 9.2 of the Alleged Loan Agreement, arguing that service at the Shanghai Address is effect.”  He produced certain documents in that regard. 

16.  P has also taken out an application for summary judgment against D.  Affirmations in support and opposition have been filed.  They have been placed before me.  They however go to the merits of the claim and the proposed defence.  I am less concerned with them for the purpose of this appeal.

Applicable legal principles on extension of writs

17.  The applicable legal principles are not in serious dispute.  They may be summarized as follows.

18.  The Court has jurisdiction to renew a writ.  As stipulated in Order 6, rule 8(2), the Court “may by order extend the validity of the writ from time to time”.

19.  Issues of time bar can be relevant to an application for extension. In the present case, we are concerned with an application which was made when the Writ was still valid but the limitation period for the cause of action had expired.  This belongs to the second of the three categories of cases identified by Lord Brandon in Kleinwort Benson Ltd v Barbrak Ltd [1987] AC 597 (at 615H – 616B) [1]. The jurisdiction to extend covers all three categories of cases.

20.  The approach to be adopted when considering applications for extension has been the subject matter of a considerable body of authority[2], and has by now been well established.  Whilst the power to renew is ultimately a discretionary one, the discretion does not arise unless matters “at least capable of amounting to a good reason”[3]has been shown.  The onus of proving that is on the plaintiff.

21.  A two-stage process is hence involved.  As observed by Bokhary JA (as he then was) in Chow Ching Man v Sun Wah Ornament Manufactory Ltd [1996] 2 HKLR 338, at 341B–C:

“ (i) Order 6, rule 8(2) is to be construed so that the discretion to extend the validity of a writ does not arise unless the plaintiff first establishes matters amounting to good reason for extension or at least capable of so amounting; and that (ii) matters such asthe balance of hardship only fall to be considered if the discretion to extend arises in the first place.”

22.  As to what can property be regarded as amounting to “good reason”:

(a)   It is not possible to define or circumscribe the scope of that expression.  Whether there is good reason in any particular case must depend on all the circumstances of that case, and must therefore be left to the judgment of the judge[4];

(b)   “Good reason” is not as high as “exceptional circumstances”, the latter of which suggests a large degree of stringency[5];

(c)   Difficulties of service are not the only type of cases which amount to good reason, though “[the] best reason, of course, would be that the defendant has been avoiding service, or that his address is unknown”[6] ;

(d)   When deciding whether good reason has been shown, it is relevant to consider whether the non-service was the result of the plaintiff’s deliberate choice;

(e)   Chow Ching Man was such a case.  The plaintiffs’ lawyers chose to wait till the statement of claim and statement of specialdamage were ready so that they could be endorsed with the writ. This feature of the case was emphasized by Bokhary JA at 339J.  His Lordship observed further at 344C–D that:

“ Where the failure to serve a writ within its normal validity periodis the result of a choice, then it is necessary to decide whether thechoice was made for a good reason, meaning one which supportsa deliberate failure to comply with the time limit involved. And no discretion to extend the writ would arise unless the choice was made for a reason which is at least capable of amounting to a good reason.”

However, even in such a case, “a perfect reason is not necessary”[7].

(f)   That the non-service of a writ was the result of a deliberate choice can be inferred.  That was what Godfrey Lam J did in Sealegend Holdings Ltd v China Taiping Insurance (HK) Co Ltd [2013] 4 HKLRD 508 at 517.  Whether such an inference can be drawn is however facts sensitive;

(g)   The interplay between inability to effect service and non‑serviceout of choice is usefully illustrated by Grand Pacific Equity Ltd v RSH Sports (HK) Ltd [2006] 4 HKLRD 617, where Yuen JA observed at §29 that:

“ … It matters not whether the inability to serve the third defendantwas due to deliberate attempts on his part to evade service or not. The fact remains that the plaintiff was unable to serve the third defendant despite reasonable efforts having been made, which is clearly a good reason for leave to renew a writ. It was not as a matter of ‘choice’ that the plaintiff did not serve the third defendant within the original validity period of the writ (see Chow Ching Man at p.339J and p.344C–D).”

23.  I apply the above when considering the facts in this case.

D’s submissions

24.  D is represented by Mr Clifford Smith SC.  His submissions may be summarized as follows:

(a)   In his written submissions (§26), he makes an objection on the admissibility of paragraphs 7 and 8 of Withington 1^st, on the basis that Mr Withington has not identified the source or sources of the information;

(b)   On merits, Mr Smith points out that this is a category (2) case.  He submits that P has shown no good reason for the Writ to be extended.  In the course of his oral submissions, he places emphasis upon P’s inactivity.  The Writ was only taken out one day before the expiry of the 6-year limitation period.  There was no attempt to serve the same.  The attempted service revealed in Mr Withington’s affidavits was undertaken in separate arbitration proceedings, which took place in any event some nine months after issue of the Writ.  Investigators were not engaged until September 2016.  There was no application for substituted service, and the application for service out of jurisdiction was only made in September.  Mr Smith submits that even ignoring the effect of Clause 9.2 of the Loan Agreement, it can be inferred that the non-service was the result of P’s choice.  On this basis alone, he submits that the Court should find that P has shown no good reason for the extension;

(c)   Mr Smith then submits that D’s case on setting aside becomes even stronger when Clause 9(2) of the Loan Agreement is taken into account.  He submits that Clause 9(2) is a lawful and effective contractual mechanism, and that service attempted pursuant thereto would have been deemed good service.  D has made no attempt to utilize that.  This, Mr Smith submits “makes it impossible for [P] to demonstrate a good reason for not serving the writ within the period of its validity” (§20 of his written submissions).  He submits that in any event, the decision on the part of P not to rely on Clause 9(2) makes this case one of those “choice cases”, so that, on the strength of Chow Ching Man, P has shown no good reasons;

(d)   Mr Smith submits further that the failure on P’s part during the Ex Parte Application to draw the Court’s attention to Clause 9.2 of the Loan Agreement and P’s view on it amounts to material non-disclosure.

P’s submissions

25.  Mr Thomas Lee appears for P.  He agrees that this is a category (2) case.  He accepts that certain things could have been undertaken earlier.  He urges me to look at what have been done rather thanwhat could have been done or their likely effects.  He refers to the evidencewhich shows that there was uncertainty as to D’s whereabouts.  He submits that this is not one of those “choice cases”.  He submits Clause 9.2 is not a contractual service agreement.  Any service attempted in pursuance thereto would in any event have been invalid as being in contravention of the Arrangement for Mutual Service of Judicial Documents in Civil and Commercial Proceedings between the Mainland and Hong Kong Courts (the “Arrangement”).  He submits that good reason for extension has been shown.  He submits further than given the nature of Clause 9.2 (which in his submission does not amount to any contractual service agreement), the extent of disclosure in Withington 1^st, and the fact that the Loan Agreement is a short document, there has been no material non-disclosure.

The admissibility of paragraphs 7 and 8of Withington 1^st

26.  I have reproduced paragraphs 7 and 8 of Withington 1^st above. The contents concern the unsuccessful service upon D at the Shanghai Address in some related proceedings.

27.  Whilst raised in his written submissions, this is not a point which Mr Smith has developed any further during his oral submissions.  It nevertheless need to be dealt with it, and it is dealt with first.

28.  In his written submission, Mr Smith relies on Order 41, rule 5(2) and Leung Kin Fook v Eastern Worldwide Co Ltd [1991] 1 HKC 55. 

29.  In Leung Kin Fook, the defendant sought to amend its defence by withdrawing an important admission (that there had been a contractual relationship between the plaintiff and the defendant).  The affirmation filed in purported support was however that of the defendant’s solicitor.  The deponent did not adequately identify her sources of information.  Order 41, rule 5(2) was not complied with.  The Court of Appeal held that the decision to admit that affirmation was wrong.  In so holding, Power JA (as he then was) cited with approval the following passage from Wang King- fong v Chan Fook- hong [1961] HKLR 448 [8], that:

“ If it be the case that the parties do not choose to bring the attentionof the Court to the defect of an affidavit made in [non-compliance with Order 41, rule 5(2)], and are content to take the judgment of the Court upon such an affidavit, that is one thing. It does not follow that the Court is always bound to take the objection, but where the objection is taken, and where it is an objection of substance, and not a mere technical and frivolous objection, it seems to me that the Court would be acting contrary to its plainest duty if it refused to observe the rule.”

30.  From the above, it is immediately clear that whilst Order 41 rule 5(2) cannot be disregarded systematically, its strict compliance is not always insisted upon in interlocutory applications.  I can see two reasons for that.  The first one is the purpose of Order 41 rule 5(2), which is “to enable deponent to put before the court, frequently in circumstances of great urgency, facts which he is not able of his own knowledge to prove”— seeDeutsche Rückversicherung AG v Walbrook Insurance Co Ltd[1995] 1 WLR 1017, per Phillips J at 102D–E.  The second one is the need on the part of the court to maintain flexibility when dealing with interlocutory matters, and not be fettered by the technical rules of admissibility of evidence that apply at a trial—see the sentiments expressed also by Phillips J in Deutsche Rückversicherung at 102F–G.

31.  In the present case, I agree with Mr Lee’s submission that the primary source of the information concerned was clearly a law firm.  Factually, Leung Kin Fook is very different.  I note also the comments made by Mr Lee, which I agree, that nowhere in any of the affirmations filed by or on D’s behalf has it been said that D indeed resided at the Shanghai Address, or that documents served upon that address could have reached him, or that the information under challenge was in fact incorrect.  The objection that Mr Smith is taking in this regard on P’s behalf is at best technical in nature.  Borrowing the words in Wang King-fong which I have cited above, I am not bound to take the objection.

32.  Bearing in mind the above, whilst Withington 1^st was not prepared in circumstances of great urgency (like those in support of an urgent interlocutory injunction), I agree with Mr Lee that there should be no good reason for not permitting Mr Withington to recite and rely on the information concerned.

Stage 1 — Whether good reason

33.  This being a category (2) case, P has to show good reason for the extension.

34.  Both when opening the appeal and in reply, Mr Smith stressed that even ignoring the effect of Clause 9.2, the appeal should be allowed given P’s inactivity.  I therefore consider first of all P’s alleged inactivity and decide whether good reason has been shown.  I put aside for the time being Clause 9.2.

P’s alleged inactivity in effecting service

35.  I have set out the relevant evidence and Mr Smith’s submissions arising in this regard.

36.  Mr Lee submits that D’s whereabouts were uncertain until he was personally served with the Writ on 11 November 2017.

37.  In my view, Mr Lee’s submission in this regard is supported by the evidence:

(a)   P was introduced to D through a Taiwanese business associate.  That business associate passed away in 2014.  P did not have any other business or personal contacts with D and was unable to ascertain D’s whereabouts (§5, Withington 3^rd);

(b)   Attempted service upon D at the Shanghai Address in the related arbitration proceedings failed twice in July 2016;

(c)   Attempted service of documents by the HKIAC upon D at the Shanghai Address also failed;

(d)   In September 2016, P took steps to engage investigators to locate D.  Investigation conducted suggested that the Shanghai Address was occupied by a female who did not know D, and that D was likely to be residing in Shenzhen.  D’s directorship in the three HK Companies and the Listco were then discovered, and D was only served when he came to Hong Kong to attend one of the Listco meetings.

38.  I have ruled that the evidence on the unsuccessful service in the related arbitration proceedings is admissible.  The evidence is obviously relevant.  Mr Smith submits that the rules and mechanisms governing service in those arbitration proceedings were different, and that P is simply trying to latch onto those matters in an attempt to support its application to extend. I do not agree.  We are not concerned with the exact rules of service applicable to the related arbitration proceedings.  We are concerned with events that happened in those proceedings which gave P the belief (or supported that belief) that D did not live in the Shanghai Address.

39.  I regard as important the fact, as highlighted by Mr Lee, that D has never said that he lives or lived at the Shanghai Address.  By considering this fact, I am not shifting any burden of proof on D. It is just that when considering the evidence, and in particular when considering the evidence adduced by P in support of its concern and belief that D did not live in the Shanghai Address, I find, in the absence of any contrary evidence from P, that that concern and belief are adequately supported by the evidence before me, and are on balance credible.

40.  Given the evidence before me, I also refuse to draw any inference that P had chosen not to serve the Writ on D.I accept the evidenceadduced by P that the reason was because “[P] is reasonably certain that [D] no longer lives at [the Shanghai Address]” (§6 of Withington 1^st).

41.  Mr Smith criticizes P for not having engaged the investigators earlier.  He also criticizes P for issuing the Writ only one day before the expiry of the limitation period and for not having applied for substituted service or service out of jurisdiction earlier.

42.  To a certain degree, Mr Lee accepts those criticisms.  But even with those matters factored in, the evidence nonetheless supports a sufficient case of delayed service because of D’s uncertain whereabouts.  That a defendant’s address being unknown has been described in Battersby as one of the “best reasons” for an extension.  Whilst the case put forward by P is not perfect, P is not required to establish a perfect reason.  P has indeed taken steps to locate P, which steps yielded successful results.  In my view, the matters shown by P are “at least capable of amounting to a good reason”.  

Clause 9.2 of the Loan Agreement

43.  I now return to Clause 9.2 of the Loan Agreement.

44.  I first of all clarify what the issue is.  It is not so much what Clause 9.2 should be interpreted as meaning.  The issue is, bearing in mind its wording and certain relevant legal principles that have been argued before me, whether good reason for extension of the Writ has been shown notwithstanding the fact that P had not sought to invoke it.  Mr Smith’s submission in this regard (at §20 of his written submission) is that:

“ … there was nothing to prevent [P] from effecting service of the writ at any time of its own choosing by simply posting the document to the [Shanghai Address]. This makes it impossible for [P] to demonstrate a good reason for not serving the writ within the period of its validity.”

45.  Mr Smith first submits that Clause 9.2 covers the service of the Writ.  He submits that a writ is no more than a notice of the commencement of proceedings.  He relies on the speech of Lord Sumption JSC in Abela v Baadarani [2013] UKSC 44 at §53, cited by Lam VP in AXA China Region Insurance Co Ltd v Leong Fong Cheng [2016] 6 HKC 220 at §20, that:

“ The characterisation of the service of process abroad as an assertion of sovereignty may have been superficially plausible under the old form of writ (‘We command you …’). But it is, and probably always was, in reality no more than notice of the commencement of proceedings which was necessary to enable the defendant to decide whether and if so how to respond in his own interest.”

46.  Whether Clause 9.2 covers service of proceedings is primarily a question of contractual interpretation.

47.  Clause 1.2 of the Loan Agreement expressly provides that “Clause and Schedule headings do not affect the interpretation of this Agreement”.

48.  If it were the parties’ intention that Clause 9.2 should apply also to service of proceedings, they could easily have said so.  They did not.  They did not even say or mention “notice of commencement of proceedings” (even assuming that a Writ of Summons is no more than that).  The wordingwas “Any notice or other communication given or made under or in connection with the matters contemplated by this Agreement”.

49.  Mr Smith refers to a letter issued by HWM in the related arbitrations proceedings wherein HWM, based on a clause similar to Clause 9.2 and certain UNCITRAL Arbitration Rules 2010, sought to argue that as a result of the service of a notice of arbitration upon D on the Shanghai Address, the arbitration proceedings should be deemed to have been commenced on a particular date.  But there, the parties were dealing with a notice of arbitration.  The situation there was different.

50.  There is no need for me to make a definitive finding on the interpretation of Clause 9.2. Suffice for the present purpose for me to express my view that in the light of the unclear language of Clause 9.2, it was not unreasonable for P, and indeed any reasonable person reading the same, to have concern about its applicability to a writ.

51.  There are more to this issue than the language of Clause 9.2.

52.  Mr Smith, relying on the majority decision of the House of Lords in Kenneth Allison Ltd v A E Limehouse & Co [1992] 2 AC 105, submits that a contractual mechanism for effecting service of proceedings is valid and binding, so that an action will be validly commenced notwithstanding that the agreed method of service falls outside the scope of Order 10 as the rules do not prohibit the express authorization of a different mode of service.   

53.  Whilst that proposition submitted by Mr Smith may generally be correct, it is not inevitably so once the existence of an international convention or bilateral agreement governing service is introduced into the equation.  As has been explained by Lam VP in AXA, at §§25 – 26:

“ 25. With the modern approach in mind, in the absence of any applicable international convention or bilateral agreement governing the situation, the validity of the service of a summons by post under Hong Kong law should primarily be determined by reference to Hong Kong law irrespective of the law of the place of service. However, the law of the place of service can be relevant because as a matter of Hong Kong law if the serving of documents by post is illegal per se at the place of service, such mode of service would not be valid.

26.   For service to be effected at places where there is a relevant bilateral agreement or international convention governing service, Hong Kong courts must have regard to the provisions in the relevant instrument, see Abela v Baadarani, supra, [34].  Thus, for countries that subscribed to the Hague Convention on Service Abroad 1965, we must have regard to the terms of the Convention in deciding whether a particular mode of service abroad is valid.  As between Hong Kong and the Mainland, we must have regard to the Arrangement for Mutual Service of Judicial Documents in Civil and Commercial Proceedings between the Mainland and Hong Kong Courts 1999.  Further, in the Mainland, by reason of art 277 of the Civil Procedure Law (民事訴訟法), it is actually illegal for foreign authority or individual to serve process without permission from the competent authorities in the Mainland, see footnote 13 of Deutsche Bank AG v Zhang Hong Li, supra.”  

54.  That is the position here.  The address provided by D in Clause 9.2 is in Shanghai.  The Arrangement has application.  Mr Lee submits that were Clause 9.2 a contractual service agreement applicable to the service of writs in the Mainland, it would be inconsistent with the provisions of the Agreement and invalid (and see also Deutsche Bank AG, Hong Kong Branch v Zhang Hong Li [2016] 3 HKLRD 303, per Lam VP at §4).

55.  Mr Smith seeks to argue that the Arrangement has no application in the present case because, due to the deeming effect of Clause 9.2, any service of any writ pursuant thereto would have become effective once posted in Hong Kong.  There would not have been any need for the documents to reach the Shanghai Address, so that the Arrangement would not have been engaged or breached.  He also submits, relying on thespeech of Lord Goff in Allison at 126C–F, that D would have been estopped from denying the validity of the service.

56.  In my view, Mr Smith’s submissions in those regards are, with respect, artificial.  But in any event, there is again no need for me to make any definitive rulings on those issues.  My view is that in the light of the cases that have been cited before me, it is highly arguable that any purported service pursuant to Clause 9.2 would have been invalid.

57.  In my view, given the unclear language of Clause 9.2 and the legal issues identified above, any purported service pursuant to Clause 9.2 would have been fraught with problems. I repeat what Mr Withington has deposed to at paragraph 14 of Withington 3^rd. Whilst he has not provided full legal details for P’s view expressed therein, I am of the view that it was reasonable for P to have concern over the validity of any service pursuant to Clause 9.2.

State 1 — Conclusion

58.  For the reasons set out above, I am of the view that P has demonstrated matters which at least are capable of amounting to a good reason. In fact, in the light of the evidence before me, I am prepared to go further and find that good reason for the extension of the Writ has indeed been demonstrated.  My discretion is engaged.

State 2 — Exercise of my discretion

59.  Mr Smith has made no submission in this regard. 

60.  I have considered all the relevant circumstances.  I have accepted the evidence adduced by P that the reason for the delayed service was because “[P] is reasonably certain that [D] no longer lives at [the Shanghai Address]”.  I have refused to draw any inference that the delayed service was out of choice.  I note the absence of any evidence form D that he had in fact been living at the Shanghai Address.  I have set out my views above in relation to Clause 9.2. I observe that whilst certain of the steps ultimately taken by P could have been undertaken earlier, those steps have in fact been taken.  I note that the Writ was only issued one day before the expiry of the limitation period.  I take into account on the other hand the hardship on P if the extension were to be refused.  In my view, the overall facts, and the balance of hardship, justify the Court exercising its discretion in favour of the application for extension.  I so exercise my discretion.

Material non-discretion

61.  Mr Smith’s main points are that Clause 9.2 and P’s concerns about any service effected pursuant thereto should have been specifically drawn to the attention of the learned Master during the Ex Parte Application.

62.  In this regard, I accept Mr Lee’s submissions that adequate disclosure had been made.  The entirety of the Loan Agreement was produced.  It is not a long document (definitely not voluminous as in some other cases where the material points were buried among many documents and information).  Mr Withington has in any event made specific reference to the Shanghai Address in Clause 9.3.

63.  I have expressed my view on the unclear wording of Clause 9.2, and that it was for that reason not unreasonable for P, and indeed any reasonable person reading the same, to have concern about its applicability.  This also militates against the materiality of that clause or any need to make any specific reference thereto.

64.  I do not accept Mr Smith’s submission that there has been material non-disclosure.

Disposal

65.  For the reasons set out above, I dismiss D’s appeal.  I make a costs order nisi that P shall have the costs of this appeal, to be taxed if not agreed.  Any party who seeks any variation or any summary assessment should file its or his submissions within 14 days from the date of this Decision, then submissions in opposition within 14 days thereafter, and submissions in reply within 7 days thereafter.