CHINA MEDICAL TECHNOLOGIES, INC (In liquidation) v. THE BANK OF EAST ASIA, LTD

HCA 2449/2014

[2019] HKCFI 554

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2449 OF 2014

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D E C I S I O N

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1.  BEA took out a summons to: (a) set aside extension of time for service of the writ; and (b) set aside service, which would be heard before this court on 21 March 2019 (“the BEA hearing”).

2.  The plaintiff liquidators have a pending appeal (“BOC appeal”) against this court’s order made in relation to Bank of China’s strikeout application (“BOC set aside summons”) in a separate action.  It will be heard on 22 March 2019 before the Court of Appeal.  BEA is not involved in the BOC appeal.

3.  This is the liquidators’ application for an adjournment of the BEA hearing pending determination of the BOC appeal.  I have dismissed the liquidators’ application after hearing submissions this morning. Here are my reasons.

Background

4.  The plaintiff was the alleged victim of a substantial fraud by its former management.  The liquidators allege that a substantial amount of more than US$355 million was laundered through accounts held with BOC and BEA.  The facts are complicated.  The liquidators have had difficulties in investigation.  They issued protective writs against BOC in HCA  2448/2014 and BEA in HCA 2449/2014 on 2 December 2014, in substantially the same terms.

5.  The validity of the two writs had twice been extended by a Master on the strength of Mr Borrelli’s affidavits in both actions.  Similar grounds were relied on.  The writs were served on BEA and BOC in late November and early December 2016. 

6.  Both BOC and BEA have taken out applications to set aside the extension of validity of the writs and hence service.  BEA’s application was taken out six months after service of the writ.  The BOC set aside summons was heard before this court for two days in March 2018.  This court gave a decision on 20 June 2018 allowing BOC’s application.  The liquidators launched the BOC appeal.  In the meantime, the BEA set aside summons has been set down for hearing.  The BEA hearing is 20 months from the date of that summons. 

7.  There is no dispute that there is a lot of facts in common between BEA and BOC’s set aside summonses both being based on Mr Borrelli’s affidavits.

8.  BEA’s criticisms of the liquidators’ disclosures to the court in support of the ex parte applications for relief substantially overlap with those of the BOC. 

9.  The Court of Appeal will be asked to determine issues on the test for granting extension of validity of a writ, non-disclosure of material facts to the Master, and issues on limitation.

10.  The decision of the BOC appeal will have a strong bearing on this court’s decision on the overlapping issues in the BEA set aside summons.

11.  Mr Manzoni SC for the liquidators submits that adjournment of the BEA hearing, pending CA’s decision on the BOC appeal will achieve significant savings in terms of time, costs and court resources.

12.  A minor delay by putting back the hearing for a few months will not prejudice BEA’s ability to defend in due course.  In fact, pointing to paragraph 3 of BEA’s own set aside summons, BEA had asked for a stay of the action until final determination of the set aside summons and any appeal therefrom.

13.  It is fair to say that the liquidators have tried by correspondence to adjourn the BEA set aside summons until after disposal of the BOC appeal, but to no avail.

14.  In view of the fact that there is already a hearing date for the BEA set aside application, there must be compelling reasons before the adjournment can be granted. 

15.  This application is opposed by BEA on two grounds:

(1)  On true analysis, the proposed adjournment will not result in any significant saving of time and will only cause inordinate delay to the determination of the claims against BEA and longer if there is an appeal to the CFA after the BOC appeal is disposed of – issue (1).

(2)  There are two distinct issues raised by BEA different to those in the BOC set aside summons.  So the BOC appeal could not be dispositive of the BEA set aside summons – issue (2).

Legal principles

16.  This is essentially a case management matter. In exercise of its power, the court bears in mind the underlying objectives of Order 1A of the Rules of the High Court.  This includes dealing with a case as expeditiously as is reasonably practicable and in a cost-saving manner.

Analysis

17.  On issue (1), solely from the fixing of the BEA hearing, 20 months from the issue of the BEA set aside summons, one can see how long it may take to fix a substantive hearing.  If I were to grant an adjournment, for how long should I defer the BEA hearing? 

18.  It should not be adjourned sine die, but then, having regard to the CFI’s diary, the need to accommodate the diaries of two eminent senior counsel and the uncertainty over the time needed for the Court of Appeal to hand down its judgment in the BOC appeal, an adjournment will not give rise to much benefit to the parties.  I can foresee more delay in the disposal of the BEA set aside summons.

19.  Mr Manzoni SC has referred to paragraph 3 of the BEA set aside summons wherein BEA asked for the action to be stayed until final determination of its summons and any appeal therefrom.

20.  With respect, that paragraph was not an indication that BEA was content with delay in progress of the action.  It was but a logical suggestion of BEA that the issue as to validity of the writ should be determined before any substantive issue should go ahead.  That is a stance that this court agrees unless for any other compelling reasons which the liquidators can show. 

21.  On issue (2), it is important to note that the liquidators have not conceded that the BOC appeal is dispositive of BEA set aside summons.  There are two distinct issues raised by BEA, but not BOC:

(a)  the question of whether the reasons for extending the writ amounted to exceptional circumstances; and

(b)  whether it would amount to abuse of process if at the time when the plaintiff issued the writ it did not know whether it had any claim and was not able to formulate such claims as the plaintiff ultimately advanced and the purpose of the writ was simply to circumvent the provisions of the Limitation Ordinance.

22.  Issue (a) raised by BEA forms part of the test for granting extension of validity of a writ and is likely to be dealt with by the Court of Appeal.  However, whether as a matter of fact the reasons did amount to exceptional circumstances has to be dealt with by the CFI. 

23.  Mr Man SC submits that there has been no consolidation of the BOC and BEA’s respective set aside summons.  (On that matter, I shall not find fault against the liquidators, BEA, or BOC, at this point in time.)  But as Mr Man says, BEA will be bound by the Court of Appeal’s decision if it is in favour of the liquidators without BEA being afforded an opportunity to advance its arguments.

24.  I agree issue (b) is a matter that this court has to decide upon and not covered by the BOC appeal.  As of today, the liquidators have not even suggested, for example, that at the BEA hearing they would advance the same arguments before this court as for the BOC set aside application for record purpose, but reserve their right to appeal against this court’s decision in the BEA set aside application.

25.  I see no reason then why this court should defer resolution of issue (b) until the outcome of the BOC appeal is known.  What I consider to be the better course is for the parties to advance their respective case at the BEA hearing.  If the Court of Appeal shall hand down its judgment in the BOC appeal during the time this court reserves its judgment, I can then direct the parties to make further submissions arising out of the Court of Appeal’s judgment.

26.  Alternatively, the Court of Appeal can be informed about the fact of judgment being reserved after the BEA hearing.  The Court of Appeal can decide whether to adjourn the BOC appeal or direct further written submissions when this court shall hand down its decision in the BEA set aside summons.

27.  Either way, under paragraphs 25 or 26 (that is the preceding two paragraphs) less pressure will be caused to the Court of Appeal or CFI in finding a hearing date to hear counsel further or to hear the BEA set aside summons in the CFI.  After an adjournment, the further submissions that either court shall direct can be considered without an oral hearing.  This will cause the least amount of delay.

Conclusion

28.  Having considered the circumstances, I decline to grant the order sought in exercise of my case management powers.  No significant time and resources can be saved if an adjournment is granted. Therefore, I dismiss paragraph 1 of the liquidators’ summons. 

29.  Paragraph 2 asked for directions upon determination of the BOC appeal.  In my view, that is the kind of directions that I may consider making after hearing arguments at the BEA hearing.  I make no order today.

30.  Having regard to my decision, costs should follow the event and be to BEA with certificate for counsel.