IU PO SHING PATRICK v. EMPRESA HOTELEIRA DE MACAU, LIMITADA also known as MACAU HOTEL DEVELOPERS LTD AND ANOTHER

HCA 1461/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1461 OF 2007

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J U D G M E N T

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I.  INTRODUCTION

1.  Mr. Iu claims to have made loans amounting to nearly $5 million to Empresa between 1997 and 1998.  Mr. Iu alleges that the loans were made in response to telephone requests made by Mr. Ng in Macau to him in Hong Kong.  Mr. Iu contends that, when Mr. Ng made the telephone requests, Mr. Ng said that he would personally guarantee the amounts loaned. 

2.  On 6 July 2007, Mr. Iu took out a Writ against Empresa and Mr. Ng in respect of the alleged unpaid loan monies (together with interest at 8.75%).  Mr. Iu sued Empresa as principal debtor and Mr. Ng as guarantor.

3.  The questions before me today concern the difficulties which Mr. Iu has encountered in serving the Writ on Mr. Ng in Macau.

4.  Mr. Iu obtained leave to serve the Writ on Mr. Ng outside the jurisdiction.  He attempted to do so by registered post.  But it was questionable whether Macau law entitled him to serve in such a way.  He attempted to serve the Writ personally on Mr. Ng. But his Macanese lawyers were unable even to meet Mr. Ng.

5.  Mr. Ng in fact acknowledged service of the Writ through his Hong Kong solicitors.  But this was only for the purpose of disputing the Hong Kong Court’s jurisdiction and the validity of the initial attempted service on Mr. Ng through registered post.

6.  On 22 September 2008, on the application of Mr. Ng’s Hong Kong lawyers, Master Hui declared that Mr. Ng had not been validly served in Macau.

7.  By that time, more than a year had elapsed since the issue of the Writ.  The Writ had expired.

8.  So Mr. Iu’s lawyers filed an ex parte application on 26 September 2008 for an extension of the Writ for 6 months from the date of its expiry.  By the same application, Mr. Iu also sought an Order for substituted service of the Writ on Mr. Ng at the Hong Kong offices of Cham & Co. (Mr. Ng’s solicitors).

9.  On 29 September 2008, Master Ko granted Mr. Iu’s ex parte application.

10.  Mr. Ng now seeks to set aside Master Ko’s Order on a variety of grounds.

II.  DISCUSSION

A.  Material non-disclosure?

11.  First, Mr. Benjamin Chain (appearing for Mr. Ng) submits that there has been material non-disclosure before Master Ko.  In particular, Mr. Chain says that the following matters ought to have been disclosed, but were not:-

(1)     That Mr. Ng had a potential limitation defence to Mr. Iu’s claim.

(2)     How precisely it was alleged that the guarantee was made in Hong Kong.

(3)     That Mr. Ng’s lawyers had made it clear that they wished to be heard.

(4)     That, when personal service of the Writ was attempted at Mr. Ng’s offices in Macau, the process servers had chosen not to inform Mr. Ng’s staff of their reason for trying to see Mr. Ng.

12.  Let me assume that matters (3) and (4) are accurate statements of fact and that such were not disclosed.  Even then, I do not think that matters (3) or (4) can, by any stretch of the imagination, be said to have constituted material non-disclosure. I do not think that they could conceivably have affected any Master’s decision to renew the Writ. 

13.  As for matter (2), Mr. Iu’s case would have been apparent to the Master from the Writ read together with Mr. Iu’s 2nd Affirmation in this action (which would have been in the Court file before the Master). 

14.  Mr. Iu is alleging an oral guarantee concluded in a telephone conversation between himself in Hong Kong and Mr. Ng in Macau.  If so, given use of instantaneous means of communication, it must be at least arguable that the contract of guarantee was concluded in Hong Kong. 

15.  For example, presumably, Mr. Iu would only have been prepared to lend monies on the strength of a personal guarantee from Mr. Ng.  Mr. Iu would have said so over the telephone (thereby making an offer to loan on the security of a guarantee) and Mr. Ng would have accepted.  On that scenario, following Entores v. Miles Far East Corporation [1955] 2 QB 327, there is a case for saying that the contract is made where Mr. Ng’s acceptance was communicated to Mr. Iu.  In other words, the contract would have been made in Hong Kong where Mr. Iu was.

16.  I do not therefore think that matter (2) constitutes a material non-disclosure.

17.  As for matter (1), Mr. Leo Remedios (appearing for Mr. Iu) has drawn my attention to UCB Corporate Services Ltd. v. Kohli [2004] EWHC 1126 (Ch) (Richard Sheldon QC).  That is authority for the proposition that “part payment of a debt will cause a re-accrual of the cause of the limitation period against the surety” (see UCB §36, quoting Rowlatt on Principal and Surety (5^th ed.) §10-07).  For the purposes of these proceedings before me, Mr. Chain is content to accept that principle as representing the law.  See also Limitation Ordinance (Cap. 347) ss. 23(3) and 25(6) to similar effect.

18.  Mr. Iu alleges that demand for payment by Mr. Ng was first made in December 2001.  He further contends that 2 part payments of the guaranteed debt were made by Mr. Ng.  One in March 2002 and another in October 2002.  If one applies the principle just mentioned, that would mean that Mr. Iu has at least an arguable case that his claim against Mr. Ng did not become time-barred until October 2008 at the earliest.  That would be at some point after Master Ko’s Order.

19.  Of course, whether or not Mr. Iu’s claim against Mr. Ng is time-barred must ultimately be a fact-sensitive question.  It all depends (for example) on whether Mr. Iu can substantiate his allegations of a demand in December 2001 and part-payments in March and October 2002.  It all depends as well on whether a so-called “marker” (signed by Mr. Iu in October 2002) constitutes a receipt by Mr. Iu for a $50,000 part-payment from Mr. Ng (as Mr. Iu maintains) or evidence of a debt of $50,000 owed by Mr. Iu to Mr. Ng’s casino (as Mr. Ng maintains).

20.  Mr. Chain contends that the several underlying loans to Empresa were “separate and distinct”. So that the “part-payments” (all in any event denied by Empresa and Mr. Ng) should not be attributed to the loans as a lump and thereby render Mr. Iu’s action in respect of all of the loans within time.  Mr. Chain may be right or wrong in this submission.  But it is not something that can be determined summarily and I doubt that it would have deterred any Master from extending the Writ.

21.  In any case, Mr. Chain complains that the “potential” defence of a time-bar was not even made apparent to Master Ko in the course of Mr. Iu’s ex parte application.  But I disagree on this. 

22.  As Mr. Remedios points out, it should have been self-evident on the Writ alone that there were time problems.  Mr. Iu’s claim is expressly pleaded to be in relation to loans made between 1997 and 1998 with a partial repayment being alleged as having been made in March 2002.  Master Ko would have no doubt been aware, given the time frames expressly pleaded, of a potential limitation defence on the parts of both Empresa and Mr. Ng.  But again that should not have materially prevented him (or anyone else) from granting the extension sought, especially since the determination of a limitation defence is often (as here) fact-sensitive.

23.  Thus, I do not find there to have been material non-disclosure.

B.  No case for service out

24.  Mr. Chain suggests that there is no good arguable case that the contract was one to which Order 11, rule 1(d) applies. 

25.  I do not agree.

26.  As noted above, there is an arguable case for saying that the contract of guarantee was concluded in Hong Kong (that is, within the jurisdiction).  If that is right, it is perfectly arguable that by implication the guarantee is governed by Hong Kong law as its proper law.

27.  Mr. Chain then submits that Hong Kong is not an appropriate forum for the trial of the guarantee.

28.  Again I am unable to agree.  It seems to me that Hong Kong is the most appropriate place for the trial of this action, in particular for the saving of time and cost.

29.  For instance, whatever happens there will be a trial here in relation to the alleged loans to Empresa.  Empresa has already filed a Defence.   The main witnesses in that trial are likely to be Mr. Iu (resident here) and Mr. Ng (resident in Macau).  Thus, Mr. Ng will presumably be giving evidence here on behalf of Empresa at least. In those circumstances and to avoid contradictory findings on liability and quantum in relation to loan and guarantee, it would make eminent sense to try Mr. Ng’s liability on the alleged guarantee here as well. Substantial time and cost would be saved.

C.      Failure to extend Writ before expiry

30.  Mr. Iu’s lawyers encountered enormous difficulties in serving Mr. Ng personally in Macau.  Such difficulties in service are a basis for extending the Writ and making an Order for substituted service.

31.  In my view, there were plainly difficulties in service.  It seems to me that Mr. Ng has been laying a game of cat and mouse with the process servers.  Service has been resisted tooth and nail by Mr. Ng.

32.  Mr. Ng’s staff would routinely intercept Mr. Iu’s Macanese process-servers and ask the same for their business.  Insofar as the process servers said that they were there to serve Mr. Ng, they would be directed to Mr. Ng’s Hong Kong lawyers.  No meeting would be arranged with Mr. Ng.  Insofar as the process servers were silent about their purpose, they were denied access to Mr. Ng and sent away empty-handed.

33.  But plainly in the context of the numerous attempts to serve and the correspondence between the parties’ solicitors at the time, Mr. Ng must have been fully aware that efforts were underway to serve the Writ on him.  I am sceptical of Mr. Chain’s suggestion that, had Mr. Ng’s Hong Kong solicitors been approached at some point by Mr. Iu’s solicitors, arrangements would have been made for Mr. Ng to be personally served in Macau.

34.  Mr. Chain says that Mr. Iu delayed for no good reason in applying to extend the Writ.  Mr. Iu (Mr. Chain complains) allowed the Writ to expire before seeking an Order from Master Ko.

35.  Mr. Remedios argues that the delay between expiry of the Writ in July 2008 and the application to Master Ko in September 2008 is adequately explained.  There was a need (Mr. Remedios points out) to await Master Hui’s decision on the validity of the original service by registered post.  Once Master Hui decided adversely to Mr. Iu on service, an application was made to Master Ko within a few days.

36.  I accept Mr. Remedios’ submission.  It seems to me that there has been no inordinate or unreasonable delay in applying to Master Ko.  It made sense to await Master Hui’s decision, rather than incurring extra time and expense in a possibly premature application for extension.

37.  Given all the foregoing considerations, I believe that Master Ko was perfectly justified in exercising his discretion to extend the Writ and order substituted service. 

III.     CONCLUSION

38.  There is no basis for setting aside Master Ko’s ex parte Order.