XU HONGBIAO v. OASIS INVESTMENT GROUP LTD AND OTHERS

CAMP 350/2023, [2024] HKCA 988

On appeal from [2023] HKCFI 860

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 350 OF 2023

(ON AN INTENDED APPEAL FROM HCA NO 1963 OF 2020)

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(By Original Action)

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(By Counterclaim)

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J U D G M E N T

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Hon Kwan VP (giving the Judgment of the Court):

1.  On 10 September 2024, we handed down our judgment[1] dismissing the application of the 2^nd defendant by counterclaim (“D2”) for leave to appeal against the decision of Keith Yeung J on 29 March 2023. By his decision, the judge dismissed D2’s summons to set aside the service of the counterclaim and to strike out and dismiss the counterclaim (“D2’s Setting Aside Summons”). The filing and service of the defence to counterclaim has been deferred pending the determination of D2’s Setting Aside Summons and their attempts to seek leave to appeal. Having refused leave to appeal, we made an order in §83 of our judgment for D2 to file and serve the defence within 28 days thereof.

2.  On 7 October 2024, which was the day before the expiry of time, D2 issued a summons for extension of time of 28 days from the date of the order to be made to file and serve the defence. Directions were given on 7 October 2024 for the disposal of this application. On 10 October, D2 filed an affirmation of their solicitor[2] deposing to the reasons for extending time to file the defence and lodged submissions. On 16 October, the 1^st to 4^th plaintiffs by counterclaim (“Ps”) filed an affirmation in opposition by their solicitor[3] and lodged their submissions. Without leave of court or prior notice to anyone, D2 lodged a three-page submissions in reply on 21 October. We have nonetheless taken this into account.

3.  Ps’ stance is that the present case warrants the imposition of a short time extension of 14 days on an “unless order” basis.

4.  Having considered the papers and submissions, we will determine the summons on paper.

5.  In brief, D2’s contentions are that the defence is important, fairness and justice require that D2 should be given more time to prepare a proper pleading, D2 have made every effort to comply with the original deadline of 28 days and genuinely requires more time. Further, there is no prejudice to Ps if the extension sought is granted as there is no urgency in the reliefs sought by Ps and any prejudice suffered can be compensated by damages and interest (assuming that Ps succeed in the counterclaim). D2 have not attempted to delay the proceedings intentionally; it is within the legal rights of D2 to seek to set aside the service of the counterclaim, to strike out and dismiss the counterclaim, and to seek leave to appeal against the judge’s refusal of that application. Upon the handing down of the judgment by this court on 10 September 2024, D2 began to prepare the defence diligently. The summons is D2’s first application for extension of time to file the defence, under the prescribed time in our judgment. An unless order is an order of last resort, it is unwarranted and inappropriate to grant an unless order in this instance.

6.  Ps pointed out that the summons is not the first but the third time D2 asked for time to file the defence. It is pertinent to note the following:

(1)  D2 had knowledge of the counterclaim dated 29 April 2021 since May 2021. In May 2021, D2’s US counsel, Seiden Law Group LLP confirmed receipt of the defence but insisted that the pleading should be served on D2 in their respective addresses in Zurich and Shanghai.

(2)  On 15 November 2021, D2 via their current solicitors, DLA Piper Hong Kong acknowledged service of the counterclaim.

(3)  On 17 December 2021, in view of the de facto extension of time enjoyed by D2 in preparing the defence, Master Ho made an unless order for D2 to file the defence by 14 January 2022.

(4)  On 4 January 2022, D2 applied for relief from sanction imposed by Master Ho and sought another extension of time. On the same day, D2’s Setting Aside Summons was issued.

(5)  On 12 January 2022, Master So granted a second extension of time to file the defence within 28 days after the disposal of D2’s Setting Aside Summons.

(6)  Keith Yeung J handed down his decision dismissing D2’s Setting Aside Summons on 29 March 2023, and refused leave to appeal on 8 November 2023. This court handed down our judgment refusing leave to appeal on 10 September 2024. As noted in our judgment, D2’s grounds of appeal are a rehashing of the arguments deployed at the leave application in the court below, and the intended appeal is just another challenge to an evaluative decision of the judge. There is no explanation and no apparent reason why D2’s legal advisers did not prepare the defence after the judge turned down the application for leave to appeal last November.

(7)  Even though D2 were not involved in Ke Zhengguang’s business ventures prior to his passing in 2013, the proceedings in the counterclaim share the same background as the underlying arbitration. D2 had conduct of the arbitration since April 2016 and were involved in the trial. The failed attempt to challenge jurisdiction in D2’s Setting Aside Summons also addressed many factual issues in the counterclaim.

7.  It is clearly relevant to take into account that D2 had known of the contents of the counterclaim for over three years. We do not agree with the contention that the past history, including the unless order made by Master Ho is irrelevant. Nor do we think it is misleading to say this is D2’s third time to seek extension to file and serve the defence. There is no good reason why preparation of the defence was not commenced by November last year, at the latest.

8.  We agree with Ps there should be no further delay to the filing and service of the defence. It would be a proper exercise of our discretion to make an unless order in this situation. We allow D2 21 days from the date of this judgment to file and serve the defence.

9.  We make the following order: unless D2 file and serve the defence to counterclaim by 4 pm on 13 November 2024, D2 shall be debarred from doing so, and Ps may apply for judgment to be entered against D2 with costs.

10.  Ps should have the costs of this application, to be paid forthwith. Having considered the statement of costs for summary assessment and the objections to quantum raised in D2’s reply submission lodged without leave, we assess Ps’ costs at $33,085.