CHOW HOW YEEN MARGARET AND OTHERS v. WEX PHARMACEUTICALS INC AND ANOTHER

HCA 537/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 537 OF 2013

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J U D G M E N T

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Introduction

1. This is an application by the 2^nd defendant for an order to strike out the statement of claim and dismiss the action, alternatively for an order for the trial of a preliminary issue, namely, whether the plaintiffs’ claims against it are time-barred under the Limitation Ordinance (Cap 347).

Outline of plaintiffs’ claim

2. In very broad terms, the plaintiffs’ complaint is that as a result of certain representations by the common staff or agents of the defendants, which were made fraudulently, each of the plaintiffs was induced into purchasing certain shares of the 1^st defendant on several occasions between December 2002 and October 2004 and had suffered financial loss as a consequence because the shares were worth less than what the plaintiffs paid for them.

3. The 1^st defendant, which I shall call WEX, is a listed company incorporated in Canada engaged in the pharmaceutical industry.  It has a number of wholly owned subsidiaries, including (i) the 2^nd defendant, which is a company incorporated in Hong Kong and which I shall call WEX HK, (ii) GlobalMed Corporation (‘”GlobalMed”) and (iii) Acro Pharm Corporation (“Acro Pharm”). 

4. Until November 2007, WEX also had a 97% interest in Nanning Maple Leaf Pharmaceutical Company Limited (“Nanning”), a company incorporated in Mainland China.  Between November 2007 and 7 May 2010, Nanning was wholly owned by WEX.

5. Three individuals, namely, Frank Shum (“Shum”), Grace Leong (“Leong”) and Donna Shum are said to have been senior staff of both WEX and WEX HK (with Shum being the President and CEO of WEX) and to have been their agents in their dealings with the plaintiffs.  It is said that WEX HK also acted as the agent of WEX.

6. The 1^st plaintiff (“Chow”) is an individual who is a director of and owned half of the issued share capital of each of the 2^nd and 3^rd plaintiffs, both companies incorporated in Hong Kong.

7. WEX and its subsidiaries were at the material times engaged in the development and commercialisation of Tetrodin and Tetrodonin, both of which contained Tetrodotoxin, for the treatment of symptom relief associated with withdrawal from opiate addiction.  The use of Tetrodotoxin for abstaining from all opiate addiction was protected by a patent registered in Mainland China (no. ZL95190556.2) (“the China patent”).

8. The plaintiffs plead in their statement of claim that, beginning from about July 2001, Shum and Leong met with Chow and another investor Timothy Ma (“Ma”) on numerous occasions to discuss the possibility of WEX granting exclusive distribution rights for Tetrodin in Peru to a company to be nominated by Chow and Ma, and to promote WEX’s shares as an investment. Shum stated that WEX needed funds to continue its clinical studies for the Canadian patent registration and to expand the manufacturing facility of Nanning.

9. The plaintiffs aver that between July and November 2001, Shum and Leong made a number of representations to Chow and Ma. The most important representations for present purposes are that Nanning owned the China patent, that Nanning was in a position to manufacture and supply from its factory Tetrodin in Mainland China, and that WEX owned and was therefore in a position to grant exclusive distributor rights for Tetrodin in other countries especially Peru.

10. At the same time, to give credence to the representations, the plaintiffs say, Shum and Leong gave Chow and Ma a number of documents, including a copy of the China patent, WEX’s leaflets about Tetrodin, a brochure about Nanning’s factory and Tetrodin, and a letter from WEX HK to Chow dated 6 October 2001 stating:

“… we have done very well, and will do even better over the next 12 to 18 months specially if we can open up the Peru market with you. … We would be most grateful if you could help us to bring in some new funds”.

11. Acting in reliance on those representations, Chow and Ma on behalf of their nominated company, Winland Enterprises Group Inc (“Winland”), entered into, inter alia, a written distribution agreement for Tetrodin in Peru with an entity called GlobalMed Corp dated 12 November 2001.  This distribution agreement in turn contained further representations, including a statement in the recitals that:

“GlobalMed exclusively distributes, sells, and markets the drug Tetrodin^TM which is protected by patent and related intellectual property and know-how which is owned and manufactured by [WEX, Nanning, and WEX HK] … GlobalMed has the exclusive distributorships for every country except People’s Republic of China, Hong Kong and the Dominion of Canada”.

12. Acting in reliance on these oral and written representations, the plaintiffs, together with three other companies controlled or represented by Chow and Ma, began to subscribe for WEX’s shares in November 2001.

13. On 5 December 2001, the distribution agreement for Tetrodin in Peru was replaced by another distribution agreement between Winland and GlobalMed Corp.  This agreement contained the same representations complained of as in the agreement dated 12 November 2001.

14. The distribution agreement of 5 December 2001 was in turn replaced by a distribution agreement between Winland and a different subsidiary of WEX, namely, Acro Pharm in May 2003.  Chow says that she and Ma had relied on the representations made in 2001 as well as the statements contained in three letters provided by the defendants to Chow in 2003, in agreeing for Winland to enter into the new distribution agreement with Acro Pharm dated 21 May 2003. 

15. One of the three letters was dated 21 May 2003 and signed by Donna Shum on behalf of Acro Pharm and stated that Shum

“has been given the right … to enter into a contract regarding Peru, to manufacture and supply Tetrodin^TM and/or Tetrodonin^TM”.

16. The agreement with Acro Pharm dated 21 May 2003 contained further representations including a recital that:

“Acro Pharm exclusively distributes, sells and markets the drug Tetrodin^TM and Tetrodonin^TM which is protected by patent and related intellectual property and know-how which is owned and manufactured by [WEX, Nanning and WEX HK] … Acro Pharm has exclusive distributorships for every country except People’s Republic of China, Hong Kong and the Dominion of Canada”.

17. The plaintiffs plead that, in reliance on the representations made in 2001, the statements in the three letters given to them in 2003 and the representations in the agreement with Acro Pharm dated 21 May 2003, they (together with the three other companies represented by Chow and Ma) continued to purchase WEX’s shares until 29 October 2004.

18. The representations made to the plaintiffs are said to have been false in that:

(1) in the year 2000, the Beijing Municipal No. 2 Intermediate People’s Court had held that Nanning was not the qualified applicant for the China patent;

(2) in the same year 2000, Nanning appealed to the Beijing Municipal Higher People’s Court against the first instance decision. On 27 November 2001 the appellate court affirmed the first instance decision, holding that Nanning was not the qualified applicant for the China patent, and that instead the People’s Liberation Army Institute of Pharmaceutical Chemistry (“the PLA Institute”) and one Qiu Fanglong (“Qiu”) jointly had the right to apply for the China patent;

(3) as from the date of the first instance decision, Nanning was not in a position lawfully to manufacture or sell Tetrodin from its factory without the licence of the PLA Institute and Qiu;

(4) from 27 November 2001 at the latest, Nanning had in fact ceased manufacturing Tetrodin at its factory;

(5) none of WEX, WEX HK, Nanning, GlobalMed and Acro Pharm was in a position to grant the exclusive distributorship for Tetrodin manufactured by Nanning;

(6) pursuant to the decision of the Beijing Municipal Higher People’s Court, on 31 October 2002, the State Intellectual Property Office (“SIPO”) changed the name of the registered owner of the China patent from Nanning to the PLA Institute and Qiu; and

(7) there was no appeal lodged with either the China Patent Office or SIPO concerning the ownership of the China patent.  Neither authority entertains legal proceedings or appeals concerning the ownership of a Chinese patent.

19. It is said that the representations were fraudulently made by WEX and WEX HK knowing them to be false or being reckless whether they were true or false.  The particulars of knowledge given include the plea that Shum, being the legal person’s representative of Nanning, attended the hearings before both the first instance and appellate courts in Beijing.

20. The plaintiffs plead that they have suffered losses and accordingly claim damages from the defendants.

Public announcement

21. A further twist in the events is that on 29 June 2005, in a news bulletin published by WEX pursuant to its duty of disclosure as a listed company in Canada, it was announced that:

“WEX Pharmaceuticals Inc. (“WEX” or the “Company”) (TSX:WXI) announced that it has been notified that based on a court ruling (the “Ruling”) the Chinese Patent Office (“CPO”) has changed registered ownership of the drug withdrawal Patent No. ZL95190556.2 “Use of Amino Quinazoline Hydride Compound and its Derivative for Abstaining from Drug Dependence” in China from the Company’s subsidiary, Nanning Maple Leaf Pharmaceuticals (“NMLP”) to one of the two inventors and a third party who alleges to have been an employer of the other Inventor.

… WEX filed an appeal of the Ruling earlier this year and the Court subsequently dismissed the appeal. The Company disagrees with the Ruling and considers that the prior assignment of interest to NMLP in the invention was valid and therefore that WEX has at least part-ownership rights to the patent. Even though the Company is currently investigating other legal and business options, until the ownership of the patent is resolved and as a result of financial and other considerations, the Company has decided to temporarily postpone development and testing of its opiate addiction withdrawal drug in China.

‘l attach great significance to patents and the protection of industrial secrets for our technologies, products and processes and I am disappointed with the current Ruling’, said Frank Shum, President and CEO.  ‘We will continue to strengthen our patent portfolio around our products by adding to the 82 existing patent or patent applications we have filed in commercially significant areas. As a result of progress in research activities, the Company is planning to file several new patent applications before the end of the year’.”

22. Further, in its annual report for the year ended 31 March 2005, presumably published in the second half of 2005, WEX stated that:

“The Company was notified in April 2005 that its appeal with the Chinese Patent Office concerning ownership of a patent relating to addiction withdrawal in the territory of China was not successful. The Company is currently considering legal options and other possible business arrangements.”

The annual reports for the years ended 31 March 2006 and 31 March 2007 contain similar statements.

23. On the plaintiffs’ case, these announcements were also untrue and fraudulently made by WEX because they gave the impression that the group lost the patent litigation and appeal in Mainland China in 2005 when in fact the first instance and appellate decisions of the Beijing courts were given in the years 2000 and 2001.  WEX and WEX HK must have known the results at the time and not only as late as in 2005.

24. The statements in the news bulletin and annual reports were published after the share purchases made by the plaintiffs and are therefore irrelevant to their underlying cause of action.  They are, however, central to the rival arguments on whether the plaintiffs’ claims are time-barred. I shall return to them later.

Procedural history

25. On 21 June 2011, the three parties who are the plaintiffs in the present action caused a writ to be issued in High Court Action No 1035 of 2011 against WEX.  I shall refer to this as HCA 1035/2011, which was a claim for breach of the agreement entered into between the plaintiffs and WEX in around July to December 2001 in that WEX failed to inform the plaintiffs that Nanning had lost its claim for ownership of the China patent and ceased production of Tetrodotoxin, which had caused the plaintiffs to purchase WEX’s shares to their detriment.

26. On 22 June 2012, the plaintiffs obtained ex parte an order extending the validity of the writ in HCA 1035/2011.  On 17 September 2012, the plaintiffs amended the writ and statement of claim by adding WEX HK as a defendant and by pleading fraudulent misrepresentation.  The amended statement of claim in HCA 1035/2011 is similar to the statement of claim in the present action.

27. The plaintiffs then obtained leave ex parte to serve the amended writ on WEX out of the jurisdiction.

28. In due course WEX and WEX HK applied to the court in HCA 1035/2011 for orders to set aside the extension of the validity of the writ, to set aside leave for service out of the jurisdiction and service of the writ, and to disallow the amendments to the writ and statement of claim.

29. In his judgment dated 7 March 2013, Chung J discharged the order for extension of the validity of the writ and the order giving leave to serve out of the jurisdiction and set aside service of the writ on the defendants.  He also made certain comments on the plaintiffs’ amendments which the defendants have at one stage relied on in this action as having decided that the misrepresentation claim is time-barred.

30. HCA 1035/2011 having in effect come to an end, on 3 April 2013, the plaintiffs issued the writ in the present action indorsed with a full statement of claim.

31. Nevertheless, the plaintiffs sought to appeal out of time against Chung J’s decision in HCA 1035/2011.  In the result, the Court of Appeal refused to grant an extension of time for appeal and leave to appeal (HCMP 1516/2013, 5 September 2013), but made it clear that Chung J made no determination that the plaintiffs’ claim for fraudulent misrepresentation was actually time-barred by September 2012 (as opposed to being arguably time-barred).  In particular, Fok JA, giving the judgment of the court, stated:

“13. On the question of whether the amendments to the writ and statement of claim in September 2012 should have been disallowed, the Judge rightly identified the case of Global Bridge Assets Ltd and Others v SHK Securities Ltd [2012] 4 HKLRD 474 as laying down the applicable test where a plaintiff seeks to resist disallowance of an amendment on the ground that the claim is said to be time-barred (so that the amendment acts to the prejudice of the defendant because of the doctrine of relation-back), namely whether it can be shown that the defendant has no reasonably arguable defence of limitation to the new claim.

14. Applying that test, the Judge was plainly not satisfied that the defendants could be shown to have no reasonably arguable defence of limitation to the new misrepresentation claim advanced by way of the amendments to the writ and statement of claim. As such, following the course adopted in Global Bridge Assets, it was appropriate to leave the plaintiffs to advance the new claim in a fresh action. This they have done in HCA 537/2013, the writ in which was issued on 3 April 2013. The question of whether the claim is not time-barred by reason of the operation of s. 26(1) of the Limitation Ordinance can be resolved in that action.

…

19.  … we do not consider that it is correct to read §§26 and 27 of the Judgment as ruling definitively that the plaintiffs’ misrepresentation claim (now advanced in HCA 537/2013) is time-barred, which is a contention the defendants are apparently maintaining in an application seeking to strike out the writ in the new action.  In our view, such a contention is taking the Judge’s comments in §§26 and 27 of the Judgment out of context and attributing consequences to them which were either not intended or not necessary for the Judge to express.  For our part, we think those paragraphs should be understood as explaining the reason why the Judge concluded that the new misrepresentation claim was arguably time-barred (which was all that he needed to decide in order to resolve the question of whether the amendments should be disallowed).”

Limitation defence

32. There is no dispute between the parties that the ordinary limitation period for the cause of action pleaded by the plaintiffs is six years, and that more than six years have elapsed between the plaintiffs’ last purchase of WEX’s shares (29 October 2004) and the date of the writ herein (3 April 2013).

33. The plaintiffs however rely upon the extension of the limitation period based on fraud and deliberate concealment by virtue of s 26 of the Limitation Ordinance (Cap 347), which provides as follows:

“(1) Subject to subsection (4) [which is not relevant here], where in the case of any action for which a period of limitation is prescribed by this Ordinance, either-

(a) the action is based upon the fraud of the defendant;

(b) any fact relevant to the plaintiff’s right of action has been deliberately concealed from him by the defendant; or

(c) the action is for relief from the consequences of a mistake,

the period of limitation shall not begin to run until the plaintiff has discovered the fraud, concealment or mistake (as the case may be) or could with reasonable diligence have discovered it.

(2) References in subsection (1) to the defendant include references to the defendant’s agent and to any person through whom the defendant claims and his agent.

(3) For the purposes of subsection (1), deliberate commission of a breach of duty in circumstances in which it is unlikely to be discovered for some time amounts to deliberate concealment of the facts involved in that breach of duty.”

34. It is clear that the action as pleaded is based upon the fraud of the defendants, fraud being an essential element of the cause of action.  Further, the plaintiffs contend that two facts had been concealed from them by the defendants, such facts being necessary facts for the cause of action of fraudulent misrepresentation, namely, that the representations were false at the time when they were made and that the representations were made by the defendants fraudulently, with knowledge that they were false.

35. The right of the plaintiffs to the extended limitation period under s 26 will therefore depend upon whether the plaintiffs can prove – there being no dispute that the burden of proof rests on them – that they did not discover, and could not with reasonable diligence have discovered, these two facts.

36. This is however not the trial and I am not concerned with whether or not the plaintiffs have discharged that burden of proof.  This is a strike out application by the defendants and in order to succeed on this application, the defendants have to show that it is plain and obvious now that the plaintiffs will never be able to surmount the time-bar – in other words, that there is no possibility the plaintiffs can avail themselves of the extended period under s 26.  In deciding whether the defendants’ contention should prevail on this application, the facts pleaded by the plaintiffs are generally to be assumed to be true (unless perhaps they can be shown to be incontestably false).

37. Mr Carolan, appearing for the defendants, accepts that he cannot for present purposes gainsay the plaintiffs’ statement on oath that they did not discover the relevant facts until late 2010 or 2011.  His contention is that it is plain that they could have discovered them earlier if they had acted with reasonable diligence.

38. In Peco Arts Inc v Hazlitt Gallery Ltd [1983] 1 WLR 1315; [1983] 3 All ER 193 at 199, Webster J said this on the meaning of reasonable diligence in this context:

“… I conclude, first of all, that it is impossible to devise a meaning or construction to be put on those words which can be generally applied in all contexts because, as it seems to me, the precise meaning to be given to them must vary with the particular context in which they are to be applied. In the context to which I have to apply them, in my judgment, I conclude that reasonable diligence means not the doing of everything possible, not necessarily the using of any means at the plaintiff’s disposal, not even necessarily the doing of anything at all, but that it means the doing of that which an ordinarily prudent buyer and possessor of a valuable work of art would do having regard to all the circumstances, including the circumstances of the purchase.”

39. Mr Carolan relies on what Millett LJ said in Paragon Finance plc v D B Thakerar & Co (a firm) [1999] 1 All ER 400 at 418, namely, that the plaintiffs “must establish they could not have discovered the fraud without exceptional measures which they could not reasonably have been expected to take”.  I do not think this conflicts with the approach of Webster J in Peco Arts Inc.  In fact in Paragon Finance plc Millett LJ went on to agree with the test suggested by May LJ in that case, namely, “how a person carrying on a business of the relevant kind would act if he had adequate but not unlimited staff and resources and were motivated by a reasonable but not excessive sense of urgency”.  The reference to sense of urgency must be understood in the context of that case where the plaintiffs sought to introduce a new claim by way of amendment many years after they had instituted the original action.  The plaintiffs had been alerted much earlier to the fraudulent nature of the mortgage applications but did not discover the solicitors were implicated in the fraud.  Moreover, I note that the Court of Appeal’s conclusion there was that the judge should have reached no concluded view on limitation summarily at the amendment stage, and should have “left all to play for in fresh proceedings” (p 418).

40. In support of his submission Mr Carolan relies principally on the news bulletin published by WEX on 29 June 2005 as well as WEX’s annual report for the year ended 31 March 2005 I have referred to earlier.  They show that the ownership of the China patent had been changed as a result of a court ruling in Beijing.  He argues that the plaintiffs could with reasonable diligence have noticed the contents of the news bulletin and annual report, and could have conducted enquiries with SIPO which would have revealed that the owner of the China patent had been changed from Nanning to the PLA Institute and Qiu on 31 October 2002.

41. Mr Remedios, who appears for the plaintiffs, rhetorically asks: what right do the defendants have to say to the plaintiffs: “You ought not to have trusted us.  You are bound to carry out enquiries to see we are not cheating you.”  I bear in mind however that the question of what the plaintiffs could with reasonable diligence have discovered is to be answered dispassionately: Peconic Industrial Development Ltd v Lau Kwok Fai (2009) 12 HKCFAR 139 at §29.

42. In my view the defendants’ contention has no merit.  It is important to note that, on the plaintiffs’ case, the news bulletin and the annual report were misleading in suggesting that the court ruling that changed the patent ownership was only given in 2005 and that WEX only received notice of such ruling in 2005.  On the footing that the rights to the China patent were only lost in 2005 (or were only known in 2005 to have been lost), it would hardly appear to the plaintiffs that the defendants’ representations were false at the time when they were made in 2001 and 2003 respectively, still less that they were known by the defendants to be false when they were made.  The relevant statements in the news bulletin and the annual report tend therefore to exonerate the defendants by implying that their representations were accurate prior to 2005 and that they had no knowledge prior to 2005 that the representations were false or had become false.  On that basis, it seems to me that the effect of those statements is to conceal, rather than to reveal, the two facts that are crucial to the plaintiffs’ claims for fraud.

43. The defendants can point to nothing in the news bulletin and the annual reports or the surrounding circumstances that would suggest to any reader, including the plaintiffs, that the relevant statements in those public documents might be untrue, and that in fact the Beijing courts pronounced as early as in 2000 and 2001 that none of WEX, WEX HK and Nanning had any right in the China patent.  On the contrary, the news bulletin and the annual reports are public announcements made by a regulated listed company which were meant to convey information accurately to shareholders and the public at large.

44. In these circumstances there is force in Mr Remedios’ submission, relying on cases such as Betjemann v Betjemann [1895] 2 Ch 474 at 480 and Peco Arts Inc v Hazlitt Gallery Ltd [1983] 3 All ER 193 that until there was cause for suspicion, something that put them on inquiry, the plaintiffs were entitled to believe the public announcements to be accurate, without seeking to locate and turn up each and every relevant document so as to verify the facts asserted.

45. Mr Carolan relies on the evidence given by Chow herself that soon after discovering the news bulletin in about May 2010, she and Ma embarked on steps which eventually led the plaintiffs to obtain a copy of the China patent and the Beijing court judgments.  He argues that given that the news bulletin was published in June 2005, had the plaintiffs cared to read it, they would similarly have been led to the discovery of the facts in question.

46. However, the reason why Chow discovered the news bulletin in May 2010 was that in April 2010, she received an unexpected telephone call from an officer of WEX requesting the cancellation of the distribution agreement with Acro Pharm dated 21 May 2003, which agreement had been put in abeyance at Shum’s request since January 2005.  She received an email from the same person on 24 April 2010 suggesting that the parties enter into a simple termination agreement to cancel the distribution agreement.  She and Ma then became concerned about their distribution rights for Tetrodin in Peru.  This caused them to make enquiries, which resulted in their discovery of the news bulletin and, in turn, the other documents.

47. Absent such an event that caused concern and prompted enquiries, it is not plain and obvious to me that an ordinarily prudent investor in WEX would necessarily have taken steps to investigate the position with respect to the China patent.

48. On the evidence, even after locating the news bulletin, the plaintiffs did not in fact suspect that the public statements might be false until December 2010 when Ma found on the internet a partially translated copy of the judgment of the Beijing Municipal Higher People’s Court.  Thereafter they made enquiries as a result of which they obtained further information and documents.

49. Thus, on 16 February 2011, Chow obtained a sealed copy of the China patent which showed that SIPO had changed the registered owner of the patent from Nanning to the PLA Institute and Qiu on 31 October 2002.

50. On 23 September 2011, Chow obtained a notarised full copy of the judgment of the Beijing Municipal Higher People’s Court dated 27 November 2001.

51. The public announcements by WEX in 2005 made no mention of the dates of the first instance and appellate judgments of the Beijing courts.  There is evidence from Mainland lawyers that without specific information such as the case numbers, parties and dates, it would have been impossible for the plaintiffs to locate a copy of the judgments.

52. The steps taken by the plaintiffs after their chance discovery of the Beijing appellate judgment have been set out in the affidavit evidence.  It is unnecessary to go into any further detail here since there is no challenge from the defendants, at least for the purposes of this application, that from December 2010 onwards the plaintiffs did use reasonable diligence to discover the facts.  The question is whether the plaintiffs should have done all those things much earlier, in 2005, soon after the news bulletin was published by WEX.  For the reasons I have already given, I do not think it is so plain and obvious that an ordinarily prudent investor would have done so, that there is no possibility the plaintiffs could prove at trial they are entitled to the extended limitation period under s 26.  Whether or not the plaintiffs could have with reasonable diligence discovered the facts in question is, in my view, a matter for trial.

Preliminary issue

53. As an alternative, the defendants contend that the question of limitation should be ordered to be tried as a preliminary issue.  It seems to me the application is at best premature.  WEX has not even been served and has not taken part in this application.  No defence has been filed by either defendant.  No one is therefore in a position to tell with any degree of certainty what other issues of fact or law there will be at trial and how many witnesses are likely to be involved.  Mr Carolan confirms that he has no instructions as to what his client’s defence might be.  In these circumstances there is no material on which I can properly assess the benefit of ordering a preliminary issue.

54. Furthermore, the general rule is that all the issues in a case are tried at one and the same time.  It is for the 2^nd defendant who makes this application to show that it is just and convenient to depart from that general rule: Telford Development Ltd v Shui On Construction Co Ltd [1990] 2 HKC 110.  In the present case, the limitation point is not a pure point of law based on undisputed facts, but an issue that turns very much on the facts and circumstances.  As Webster J said in Peco Arts Inc, at 199g, the meaning of the words “could with reasonable diligence have discovered it” depends very much on the context in which they have to be applied.  There will in this case need to be discovery, witness statements, possibly even expert evidence on Chinese law, and a trial involving oral evidence, for the purpose simply of determining such a preliminary issue.  There may also be appeals from the determination. 

55. I doubt whether this will after all translate into a saving in costs.  Moreover, if the plaintiffs eventually prevail on the preliminary limitation issue, they would still have suffered great delay in having their substantive claim determined and resolved by the court, which aggravates the injustice to them in a case where, ex hypothesi, the defendants had defrauded them and concealed their fraud. 

56. It should further be borne in mind that the representations in question were made in 2001 and 2003 and the share purchases made by the plaintiffs allegedly in reliance on such representations took place between 2002 and 2004.  It seems to me that the further delay that could potentially be caused by ordering a preliminary issue is highly undesirable in these circumstances.

Conclusion

57. The 2^nd defendant’s summons is therefore dismissed.