YU QUAN LI AND ANOTHER v. SUEN KIN WING

HCMP 633/2019

[2021] HKCFI 513

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 633 OF 2019

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DECISION

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INTRODUCTION

1.  Before me this morning is the 1^st and 2^nd plaintiffs’ application to extend time to issue and serve a notice of appointment to hear the amended originating summons pursuant to Order 52, rule 3(2) of the Rules of High Court.

2.  These are contempt proceedings brought by the plaintiffs against the defendant.  On 18 July 2018, the plaintiffs were granted a worldwide mareva injunction, together with ancillary disclosure order, against the defendant in High Court action HCA 1671/2018 (“the Main Action”).  The plaintiffs say that the defendant violated the terms of the injunction.  On 16 April 2019, the plaintiffs were granted leave to apply for an order of committal against the defendant.  Pursuant to such leave, on 29 April 2019, the plaintiffs issued the originating summons in the present proceedings.

3.  However, the plaintiffs failed to enter the originating summons for hearing within 14 days after leave was granted, as required under Order 52, rule 3(2).  The plaintiffs now seek an extension of time to do so pursuant to Order 2, rule 1(1), Order 3, rule 5 and the inherent jurisdiction of the court.

THE MAIN ACTION

4.  The plaintiffs are husband and wife.  They maintain a joint bank account with UBS AG.

5.  Their case in the Main Action is that during the period from November 2016 to February 2018, they were defrauded by the defendant in the sum of about HK$120 million.  At that time, the defendant was assigned by the bank to serve the plaintiffs’ account as client advisor.  The plaintiffs contend that based on the defendant’s misrepresentations, they transferred sums of money in Renminbi to an account designated by the defendant for currency conversion, believing that the converted sums would then be transferred back to their UBS account.  It turned out that some of these funds were not transferred back.  The defendant further fabricated transaction slips and bank statements to conceal the fraud from the plaintiffs.  The plaintiffs say that the defendant had misappropriated these funds.

6.  On 18 July 2018, a worldwide mareva injunction against the defendant was granted on an ex parte basis.  The injunction was continued on the return date, with slight modification to its terms.  At that hearing, the defendant was represented by counsel.

THE PRESENT CONTEMPT PROCEEDINGS

7.  It was then discovered by the plaintiffs that after the grant of the injunction, the defendant disposed of his interest in some properties in England, namely 27 units at 8 Casson Square, Southbank Place, London.  The documentary evidence adduced by the plaintiffs at the leave stage included copies of three deeds under which the defendant assigned his interests in these London properties to a BVI company.  It is notable that the three deeds were dated 27 July 2018.  That is the very day when the defendant, through counsel, appeared at the return date hearing of the mareva injunction in Hong Kong.

8.  The plaintiffs say that the disposal amounts to a serious and deliberate breach of the injunction.  The plaintiffs also contend that the defendant has failed to comply with the ancillary disclosure order.

9.  On those grounds, the plaintiffs obtained the ex parte leave to commence the present committal proceedings on 16 April 2019.

10.  As noted at the outset, the plaintiffs issued the originating summons on 29 April 2019.  With leave of the court, the originating summons was amended to correct a typographical error and to include an update.  Pursuant to the order of Master J Wong made on 9 September 2019, the plaintiffs were granted leave to effect substituted service of the amended originating summons and other court documents on the defendant by the following means: (a) by ordinary post to the defendant’s last known address, and (b) by sending the court documents to the solicitors acting for the defendant in the Main Action.

11.  On 30 September 2019, steps were taken to effect service in the above manner.  On 11 October 2019, the defendant, through his solicitors, lodged an acknowledgement of service with the court, indicating that he would contest the proceedings.  However, the defendant has to date not filed any affidavit evidence in opposition to the amended originating summons. Then, on 20 November 2019, the defendant filed a notice to act in person.

GROUND OF THE PLAINTIFFS’ APPLICATION

12.  The plaintiffs’ present application to extend time is supported by an affirmation made by Mr Ronald Sum, a partner of the plaintiffs’ solicitor firm.  Mr Sum deposed that he has the conduct of the action.  In gist, Mr Sum explained that the reason for the plaintiffs’ failure to issue a notice of appointment within 14 days after leave was granted was due to an oversight on the part of the plaintiffs’ solicitors.  Mr Sum also said that the legal team acting for the plaintiffs were busily and heavily engaged in other proceedings relating to the fraud.  These included the Main Action, an application for a freezing order in England against the defendant and an action against UBS for breach of contract and vicarious liability.

13.  Mr Sum further explained that after the service of the amended originating summons on the defendant, the plaintiffs’ legal team was waiting for the defendant to file opposing affidavit evidence.  When none was forthcoming notwithstanding the expiry of the prescribed deadline which should fall in late October 2019, the plaintiffs were contemplating to fix a date for the hearing.  But then the defendant applied for legal aid in early November 2019.  According to the court records, the memorandum of notification was filed by the Director of Legal Aid on 12 November 2019.  This triggered the 42-day statutory stay of the proceedings from that day by virtue of section 15 of the Legal Aid Ordinance.

14.  The defendant’s legal aid application was refused on about 10 March 2020.

15.  Mr Sum then said this in his affirmation:

“… As the Courts were closed during the General Adjournment Period (“GAP”) for public health concerns, the Plaintiffs decided to continue the action by filling the [notice of appointment] as soon as possible after GAP ends and the High Court Registry re-opens. GAP ended and the High Court Registry re-opened on 6 May.”

16.  In sum, the plaintiffs contend that the failure to issue a notice of appointment was an oversight and was not due to any deliberate action or decision of the plaintiffs.  As there is no prejudice to the defendant if the plaintiffs are to issue the notice now, the plaintiffs ought to be granted leave to do so.

THE DEFENDANT’S OPPOSITION

17.  The defendant, acting in person, opposes the application.  He filed a short affirmation suggesting that it would be unfair to him if the application is acceded to.

18.  In his oral submissions today, the defendant said that he was under the impression in around late 2019 and the early part of 2020 that the action was “cancelled”, as nothing happened after the service of documents on him in September 2019.  Then, all of a sudden, he was served with the present application in August 2020.  He felt aggrieved as he had then to prepare for the hearing, take leave from work and try to find money to hire lawyers.

DISCUSSION

19.  Order 52, rule 3(2) provides as follows:

“Unless within 14 days after such leave was granted the originating summons is entered for hearing the leave shall lapse.”

20.  Although it is not so expressly stated, the rule requires that a notice of appointment to hear the originating summons be issued within the 14-day period.  If that is not done, the rule is not complied with even if an originating summons is taken out within that period: see the Court of Appeal decision in Effiscient Limited v Edward Eugene Lehman [2012] 3 HKLRD 671 at paras 5 and 6; and Secretary for Justice v Cheng Kam Mun [2015] 5 HKLRD 41 at paras 23 and 26.

21.  Here, the plaintiffs allege that the defendant has disobeyed the injunctive order made in the Main Action.  It is therefore a case of civil contempt.  The court has the power to extend the time stipulated in the rule.  Where a notice of appointment is issued within the extended period, the leave which has previously lapsed will be revived: Effiscient Limited at paras 22 to 25; Cheng Kam Mun at para 43.

22.  When considering whether to exercise the power to extend time, the court would consider the following factors: (a) the length of delay in complying with the rule, (b) the reason for the non-compliance, (c) the merits of the substantive application, and (d) any prejudice to the respondent if time is extended: see, eg, Tang Yin Becky v Pang Chun Ngor [2020] HKCFI 65 at para 6.

Length of delay

23.  The ex parte leave to commence these contempt proceedings was granted on 16 April 2019.  Accordingly, under Order 52, rule 3(2), the plaintiffs ought to have issued a notice of appointment to hear the originating summons on or before 30 April 2019.  They failed to do so.  They then took out the summons to extend time on 28 August 2020.

24.  Hence we are here dealing with a case of a prolonged period of non-compliance of about 16 months.  On the face of it, it is a long delay.  This is particularly so in the context of contempt proceedings, which should generally be dealt with swiftly and expeditiously. It is therefore important to scrutinise with care the explanation given for such a long period of delay.

Reason for non-compliance

25.  Mr Sum, the plaintiffs’ solicitor who handles the case throughout these proceedings, has gone on affirmation to confirm that the failure to comply with the requirement was due to an oversight.  There does not appear to be any reason for me to doubt the truth of that allegation.

26.  In fact, upon a perusal of the case law in this area, such oversight of the procedural requirement on the part of solicitors is not uncommon.  See, eg, Effiscient Limited (para 8) and Cheng Kam Mun (paras 47 and 48).  By way of footnote, such oversight may be attributable to the wording used in the rule (“entered for hearing”).  Counsel in Cheng Kam Mun argued unsuccessfully (at paras 21(5), 24 and 25) that the rule ought to be satisfied if the originating summons (as opposed to the notice of appointment) is taken out or issued within the 14-day period.

27.  Here, I am satisfied that the plaintiffs’ failure to comply with the rule was due to a genuine mistake on the part of their solicitors overlooking the procedural requirement.  And it was not due to any deliberate decision of the plaintiffs themselves.

28.  It is unclear from Mr Sum’s affirmation when he and his team discovered the mistake.  At the hearing this morning, Ms Tiffany Chan, counsel appearing for the plaintiffs, informed the court that it was in fact she who spotted the mistake and informed the legal team of the non-compliance with the rules.  That was in late May 2020.

29.  Nevertheless, the application was only taken out three months later in late August.

30.  In the circumstances, it would appear that the plaintiffs’ solicitors had not exactly acted with promptitude to rectify the mistake.  I shall take that into account in my deliberation.

Progress in contempt proceedings

31.  In any event, in view of the time lapse of 16 months, it is incumbent on the court to examine whether the plaintiffs have proceeded with this action with reasonable despatch.  If so, it may be a case where the non-compliance with the rules does not have any substantive impact on the progress of the contempt proceedings.  And it would be a factor that points in favour of the court exercising its discretion to extend time.

32.  In this regard, I am generally satisfied that the plaintiffs had been prosecuting this action at a reasonable pace after leave was granted in April 2019 and up to around early May 2020, ie the end of the General Adjourned Period of the courts (“the GAP”).  However, from that point onwards, there does not appear to be any explanation why the plaintiffs did not promptly proceed with the present application when the Registry re-opened after the GAP but instead waited until late August 2020 to take out the present application.

33.  After leave was granted, the plaintiffs quite promptly (and within 14 days) caused the originating summons to be issued thus commencing the present proceedings.

34.  As deposed to in the affirmations filed in support of the order of substituted service of the originating summons, the plaintiffs’ solicitors took steps shortly afterwards to effect personal service on the defendant but the efforts were in vain.  The efforts included an attempt to hand over the documents to the defendant when he was on his way to attend a hearing of a criminal case in August 2019.  At today’s hearing, the defendant explained why he did not accept the documents on that occasion as he did not know the server and he was with his family at that time.  

35.  Ms Chan submitted that the defendant was evading service.  I do not think it proper or necessary for me to come to a view on this factual allegation of evasion.  For today’s purposes, I am satisfied that the plaintiffs’ solicitors had taken various steps in an attempt to personally serve the contempt documents on the defendant. 

36.  At around the same time, the plaintiffs applied for, and was granted, leave to amend the originating summons to correct a typo and to include an update.  They also obtained leave for substituted service in September 2019.  Service was effected later in the same month.  The plaintiffs’ solicitors then waited for the defendant to file his affidavit evidence in opposition. After the expiry of the time for doing so under Order 28, rule 1A(4), just when the plaintiffs’ solicitors were considering to fix a hearing date (the truth of which I have, again, no reason to doubt), the defendant made a legal aid application.  As a result, the proceedings were stayed to around the end of December 2019.  There is no explanation in Mr Sum’s affirmation for why no step was taken to fix a date after the Christmas vacation.  And there is a period of about four weeks in January 2020 during which the plaintiffs could have applied to fix a hearing date but did not.

37.  There then followed the Chinese New Year holiday.  After that, the GAP was imposed from the end of January 2020 due to the COVID-19 situation in Hong Kong.  Except for a two-week period in March, the GAP continued until early May.

38.  When one takes an overall view of the chronology, no substantive step had been taken by the plaintiffs since the service of the amended originating summons in late September 2019.  The next thing which they did was to take out the present application in August 2020.  However, I am of the view that such inaction up to early May 2020 is accounted for by events which were not within the control of the plaintiffs, including the time allowed under the rules for the defendant to file evidence, the defendant’s legal aid application and the GAP.

39.  However, the plaintiffs have not put forward any reason why there was a lack of action after the Registry re-opened in early May and up to August 2020, save that Ms Chan submitted to the court that time was required to prepare the present application.

Prejudice

40.  In his opposing affirmation, the defendant said:

“… 原告有豐富的資源和專業的律師團隊去處理文件，不應因為律師的出錯而對我做成不公平的情況出現，對於我的財務和正常生活都因為對方律師的關係而出現不公平的情況”

41.  It is not clear from the above paragraph why allowing the plaintiffs’ application would be unfair to the defendant as far as his financial condition and his daily life are concerned.  What he described in his oral submissions (see para 18 above) are regrettably the inconvenience that all litigants will have to go through, albeit to varying degrees.  There has been some delay in the progress of these proceedings, ie from May to August 2020, for which the plaintiffs’ solicitors are responsible.  But that in itself has not caused any prejudice to the defendant in augmenting his inconvenience or otherwise.

42.  On the whole, there does not appear to be any real prejudice which the defendant will suffer if the court is to extend time for the plaintiff to comply with Order 52, rule 3(2).  At least there is no prejudice in the form of loss of evidence as the defendant had been served with the amended originating summons and made aware of the allegations against him all along.  He had also applied for legal aid for contesting the claim which was only rejected in March last year.

Merits of the contempt proceedings

43.  I have set out above the grounds in support of the plaintiffs’ application for a committal order.  If made out, the plaintiffs’ case reveals a serious flouting of the court order by the defendant.  The timing of the alleged disposal of his interests in the London properties, which appears to be supported by contemporaneous documents, points to a blatant breach of the injunction.

44.  On the basis of the materials before me, the plaintiffs’ committal application appears to have merit.  This is clearly a factor that weighs in their favour.

Discretion

45.  The purpose of the 14-day time period stipulated in Order 52, rule 3(2) is to ensure that contempt proceedings are prosecuted by an applicant promptly after leave to apply for a committal order is granted: Secretary for Justice v Chau Wan Ying [2016] 2 HKLRD 434 at para 34; Liao Chen Toh v Loyal International Enterprises Co Ltd [2020] HKCFI 2272 at para 76(a).

46.  Here, the initial failure to comply with the rule was due to the solicitors’ oversight of the procedural requirement.  In the present case, on the face of the chronology of events, there has been a long delay of 16 months in which the non-compliance of the rule has persisted unremedied.  However, on closer scrutiny, the plaintiffs had been prosecuting the action at a reasonable pace for the first five months of this period.  No substantive step was then taken for the following seven months but that was the case by reason of events not within the control of the plaintiffs.  There was then a period of about four months where no reasonable step was apparently taken to prosecute the action. 

47.  That delay of four months is not satisfactory but it is a far cry from the initial impression of a 16-month delay.

48.  On the other hand, if the plaintiffs are allowed to rectify the mistake and thus allowed to continue the contempt proceedings against the defendant, there is no real prejudice suffered by the defendant. Given the seriousness of the alleged misconduct of the defendant, on balance, I consider that I should exercise my discretion to grant the time extension to the plaintiff, so that they can continue to pursue the committal order on what appear to be meritorious grounds.

49.  The plaintiffs accept that they are seeking an indulgence from the court and propose that the defendant should have costs of the application, including costs of today’s hearing.

ORDER

50.  For the above reasons, I order that time be extended for the plaintiffs to issue a notice of appointment to hear the amended originating summons under Order 52, rule 3(2) to 14 days from today.

51.  As pointed out in Liao Chen Toh at para 56, the rule stipulates a requirement to enter the originating summons for hearing, that is to say, to issue the notice of appointment.  It does not impose a time limit for serving the notice.

52.  Notwithstanding that, I would direct that the plaintiffs do serve the notice on the defendant also within 14 days from today.

[Submissions on costs]

53.  The defendant do have costs of the application, including all reserved costs.  His costs are agreed to be $6,000.