SHINE ARCHIT. DESIGN LTD v. YEE WAI FONG AND OTHERS

DCCJ 152/2020

[2024] HKDC 147

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 152 OF 2020

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(By original Amended Writ of Summons and Order to Carry On Proceedings dated 3 July 2023)

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DECISION

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A.  OVERVIEW

1.  This is the appeal (“the Appeal”) of the 1^st and 2^nd Defendants (“D1” and “D2”) from the Order of Master Kerby Lau dated 24 May 2023 dismissing their Summons for discharge of the ex parte Order of Master WY Ho dated 25 February 2021, which extended the validity of the amended Writ of Summons (the “Amended Writ”) for 12 months from its date of expiry, i.e. 10 January 2021.

2.  The Appeal operates by way of rehearing before this Court.

3.  Essentially, D1 and D2 argue as follows:

(1)  P has failed to show good reason for the extension of the validity of the Amended Writ.

(2)  D1 and D2 would suffer irreparable prejudice should the validity of the Amended Writ be extended.

(3)  There was material non-disclosure on P’s part at the ex parte stage.

4.  For the reasons below, I see no merits in the Appeal and have therefore ordered it to be dismissed.

B.  BACKGROUND

5.  P was at all material times and is an architectural design company registered in Hong Kong.

6.  D1 and D2 were at all material times and are the registered owners of the property at No. 20 Hennessy Road, Hong Kong (“the Hennessy Road Property”) as tenants in common.

7.  In short, the parties’ dispute relates to certain renovation works undertaken by P at the Hennessy Road Property.

8.  It is P’s pleaded case as follows:

(1)  Between February 2017 and August 2018, LWT Management Limited, the 3^rd Defendant (“D3”) herein, acting on behalf of D1 and D2, placed orders (“the Orders”) with P for renovation of the 1^st to 4^th and 6^th to 12^th floors of the Hennessy Road Property for a total sum of $4,762,010.

(2)  In or around July 2018, D2 requested P to leave the Hennessy Road Property. By August 2018, P had completed all the works under the Orders except for those on the 5^th and 14^th floors.

(3)  Pursuant to the Orders, D1 and D2 made payment of $3,274,700, through cheques drawn in D3’s name, to P from August 2017 to January 2018.

(4)  P’s primary case is that D1 and D2 have breached the Orders in failing to pay P the sum of $1,487,310 (“the Outstanding Sum”). Alternatively, if D3 was not acting as D1’s and D2’s agent but was a contracting party to the Orders, D3 has failed to pay the Outstanding Sum to P.

9.  On 10 January 2020, P commenced the present action. P had originally stated the Hennessy Road Property to be the address of D1 and D2 on the Writ.

10.  According to P:

(1)  P was not aware of any other address of D1 and D2 at the time when the present action was commenced.

(2)  However, P’s solicitors, Messrs. Gilbert Tang & Co (“GT”), later discovered that D1 and D2 could not be contacted at the Hennessy Road Property. GT then conducted a land search (“the Land Search”) and discovered another address of D1 and D2, namely, Flat A, 1^st Floor, Full View Court, 7 & 9 Happy View Terrace, Hong Kong (“the Happy Valley Address”).

(3)  On 9 March 2020, service of the Writ was attempted on D1 and D2 at the Happy Valley Address by way of insertion into the letterbox.

(4)  On 27 October 2020, P applied for default judgment after D1 and D2 filed no Acknowledgement of Service.

(5)  On 12 November 2020, the Court raised requisition to GT as to why there was discrepancy in D1’s and D2’s address stated on the Writ and in P’s affirmation for service.

(6)  Upon obtaining Counsel’s advice, P proceeded to amend the Writ to change D1’s and D2’s address to the Happy Valley Address.

(7)  On 22 January 2021, GT’s clerk attended the District Court with the purpose of sealing the Amended Writ, but was told that leave to amend would be required as pleadings had closed.

(8)  On 26 January 2021, Mr Lai Wing Kwan (“Mr Lai”) of GT attended the District Court, explaining to the Registry that no leave was required. Mr Lai was then pointed to the fact that the Amended Writ had expired on 9 January 2021.

(9)  For present purpose, D1 and D2 highlight that Mr Lai admitted on that occasion that GT had “inadvertently missed the time”.

11.  In the above circumstances:

(1)  On 16 February 2021, P applied for extension of the validity of the Amended Writ.

(2)  D1 and D2 contend that P should not have waited until 16 February 2021 to make such application. They further complain that P had failed to make full and frank disclosure to the Court at the ex parte stage.

(3)  On 25 February 2021, Master WY Ho ordered the validity of the Amended Writ to be extended for 12 months from 10 January 2021.

(4)  On 22 March 2021, P served the Amended Writ on D1 and D2 at the Happy Valley Address.

(5)  On 4 May 2021, P obtained final judgment against D1 and D2 in default of their filing of Notice of Intention to Defend (“the Default Judgment”).

12.  By way of Summons dated 30 December 2021, D1 and D2 applied for the setting aside of the Default Judgment.

13.  On 5 October 2022, Master Jocelyn Leung set aside the Default Judgment on the basis that the service at the Happy Valley Address was irregular, but subject to the undertaking from Messrs. Ravenscroft and Schmierer (“RS”) at the hearing to accept service of the Amended Writ on behalf of D1 and D2.

14.  On 19 October 2022, P served the Amended Writ on RS, which was duly accepted by RS pursuant to their undertaking.

C.  APPLICABLE LEGAL PRINCIPLES

15.  O. 6, r. 8 of the Rules of the District Court (“RDC”) (Cap. 336H) provides:

“(1) For the purpose of service, a writ (other than a concurrent writ) is valid in the first instance for 12 months beginning with the date of its issue…

(2) Where a writ has not been served on a defendant, the Court may by order extend the validity of the writ from time to time for such period, not exceeding 12 months at any one time, beginning with the day next following that on which it would otherwise expire, as may be specified in the order, if an application for extension is made to the Court before that day or such later day (if any) as the Court may allow (emphasis added).”

16.  The parties do not dispute the applicable legal principles governing the extension of the validity of a writ, as summarized by Marlene Ng J in Ganatra, Annemarie Claire v Freda, Giovanni [2021] HKCFI 3611:

(1)  The exercise of discretion to extend the validity of a writ under RDC O. 6, r. 8 involves a 2-stage inquiry: at Stage 1, the court must be satisfied that there is good reason to extend time; and afterwards, at Stage 2, the court exercises its discretion by considering all relevant circumstances, including prejudice and hardship (§18).

(2)  It is recognized that there can be a degree of overlap between these 2 stages, but such overlap does not undermine the 2-stage approach (see Chow Ching Man & Others v Sun Wah Ornament Manufactory Ltd & Others [1996] 2 HKLR 338 per Bokhary JA) (§19).

(3)  If the interests of justice require, the court will entertain an application to extend the validity of the writ even after the expiration of the validity period (§20).

(4)  3 main categories of cases in which questions of limitation of action may arise, on an application for extension of the validity of a writ, are identified. All are cases in which the writ has been issued before the relevant period of limitation has expired: (a) Category (1) cases are where the application for extension is made at a time when the writ is still valid and before the relevant period of limitation has expired; (b) Category (2) cases are where the application for extension is made at a time when the writ is still valid but the relevant period of limitation has expired; and (c) Category (3) cases are where the application for extension is made at a time when the writ has ceased to be valid and the relevant period of limitation has expired (§21).

(5)  Where the application for renewal is made after expiry of the validity period of the writ and after expiry of a relevant period of limitation (i.e. a Category (3) case), the applicant must not only show good reason for the renewal, but must give a satisfactory explanation for his failure to apply for renewal before the validity of the writ has expired (§23).

(6)  A plaintiff has duty to serve the writ promptly and therefore has to first establish a good reason for extension, or matters at least capable of so amounting so as to justify the exercise of a discretion to extend the validity of the writ (§24).

(7)  But good reason is not as high as exceptional circumstances (§24).

(8)  Whether there is good reason depends on all the circumstances of the particular case. It must be left to the judgment of the master/judge dealing with the matter (§25).

(9)  Indeed, the showing of a good reason for failure to serve the writ during the original period of validity is normally a necessary step to establishing a good reason for the grant of an extension (§25).

(10)  The court should not countenance deliberate failure to serve writ within time in the absence of good reason (§27).

(11)  Once the requirement for a good reason has been satisfied (and a satisfactory explanation has been given for the failure to apply for renewal before the validity of the writ expired), the court is entitled to have regard to the balance of hardship between the parties and the possible prejudice to the defendant in all the circumstances if an extension if allowed (§30).

D.  STAGE 1 – GOOD REASON FOR EXTENSION OF TIME

17.  After taking into account the matters below, I am satisfied that there is good reason to extend time in the present case and P has also given a satisfactory explanation for its failure to apply for renewal before the expiry of the validity of the Amended Writ.

18.  First of all, I bear in mind, as held in Ganatra (supra) (at §26), that in deciding whether good reason has been shown, it is relevant to consider whether the non-service was the result of the plaintiff’s deliberate choice. Where the failure to serve was the result of a choice, there has to be a good reason for such choice, namely, a reason which supports deliberate non-compliance with the time limit involved.

19.  In this regard, I accept P’s account that there was no deliberate attempt to hold up the proceedings. This can be shown from all the steps taken by P to effect service after the issue of the Writ. In reality, there was also no incentive on P’s part to cause delay as the claimant (or at least not something shown in the evidence). P’s failure to serve the Writ within the original validity period merely resulted from the need to amend the address of D1 and D2 in the Writ. It was not a deliberate, conscious choice of P, nor was there anything sinister about it.

20.  In support, I highlight the following events in chronological order:

(1)  After issuing the Writ on 10 January 2020, GT discovered that D1 and D2 could not be reached at the Hennessy Road Property, which was at that time the only address of D1 and D2 known to P.

(2)  GT then proceeded to conduct the Land Search revealing the Happy Valley Address. Upon discovery of the same, GT attempted service on D1 and D2 by inserting the Writ into the letterbox at the Happy Valley Address on 9 March 2020.

(3)  On 27 October 2020, P applied for default judgment. On 12 November 2020, GT received requisitions from the Court on service. GT then proceeded to consult Counsel on the best way forward and was advised to amend the Writ to change the address of D1 and D2 to the Happy Valley Address.

(4)  In late January 2021, when GT sealed the Amended Writ at the District Court Registry, the fact that the Amended Writ had already expired was drawn to its attention. Accordingly, on 16 February 2021, P applied for extension of the validity of the Amended Writ.

21.  I have not lost sight of the numerous challenges mounted by D1 and D2 against P’s account, which can, broadly speaking, be grouped as follows:

(1)  Inadvertence of a solicitor does not constitute a good reason.

(2)  P has adduced no evidence of any investigation aside from the Land Search of 3 March 2020.

(3)  No explanation or good reason is given by P for the ‘mis-delivery’ in March 2020, or for the 10 months’ delay before expiry or even for the 4 weeks after GT was ‘alerted’ to the fact that the Amended Writ had expired before applying for extension.

22.  It certainly goes without saying that things could have been better done by GT, particularly with the benefit of hindsight. However, this does not mean that P has not been able to show, on evidence, that there is good reason for the validity of the Amended Writ to be extended. P is not obliged to demonstrate exceptional circumstances, which involves a large degree of stringency, less still a perfect explanation. For present purpose, I should not be bogged down by what and why certain things could not have been done differently by GT, as submitted by D1 and D2. The material question of whether there is good reason must be answered with evaluation of all the relevant circumstances of the present case as a whole, including what follows.

23.  Second, there is no real dispute that at the time when P applied for extension of the validity of the Amended Writ or when the Order was made by Master WY Ho on 25 February 2021, the relevant limitation period had not expired.

24.  As reiterated in Ganatra (supra) (at §§31-32), even though a limitation defence is not an absolute bar to the exercise of discretion to renew the writ, it has been said that a writ will not normally be renewed if the effect of which will be to deprive the defendant of the accrued benefit of a limitation period, unless there is good reason, e.g. where there is the impossibility or great difficulty in finding or serving the defendant or if he is evading service.

25.  In Sealegend Holdings Ltd v China Taiping Insurance (HK) Co Ltd [2013] 4 HKLRD 508, G Lam J (as he then was) explained at §29:

“...The law concerning the validity of a writ and its extension is no mere formal procedural rule. Underlying it is the policy of the law that promotes finality to litigation, the prevention of stale claims, and the protection of a defendant from having a claim hanging over his head indefinitely. Inasmuch as a plaintiff with a reasonable cause of action has a right to bring and serve proceedings within prescribed periods, a (potential) defendant has a right not to be vexed by actions that are time-barred or writs that have expired, unless they are extended by the court in accordance with the law…”

26.  Practically speaking, as P’s claims were not time-barred when P applied for extension from Master WY Ho in February 2021, it was open to P either to seek an extension to proceed with the present action or to commence a fresh action against D1 and D2 altogether. Relevant hereto, D1 and D2 also observe that in the event that the Court is minded not to extend the validity of the Amended Writ, it is up to D3 to decide whether it is worth bringing third party proceedings to bring back D1 and D2 and to substantiate its agency defence.

27.  The list of good reasons required for extension is not exhaustive. Saving unnecessary proceedings and costs in furthering the underlying objectives of the CJR must constitute one of them, unless the plaintiff desires to hold up the proceedings while some other case is tried or to await some future development (see Ganatra (supra) at §29), which is plainly not the case here.

E.  STAGE 2 – EXERCISE OF DISCRETION

28.  I now have to decide whether or not to exercise the discretion, by considering all the relevant circumstances including the prejudice and hardship alleged.

29.  D1 and D2 contend that there will be serious and irreparable prejudice to them if the Court allows the validity of the Amended Writ to be extended, as they can no longer expect a fair trial of this matter:

(1)  D1 and D2 intend to dispute on factual matters including whether or not D3 was authorised to act as their agent in respect of the renovation works carried out by P; whether or not P completed all the works pursuant to the Orders; and if so, whether or not P completed the works to the standard of reasonable skill and competence required.

(2)  In order to run those defences and possibly to bring a counterclaim, the instructions and evidence of D1 and D2 are essential. However, these would have now become impossible, following the death of D2 in May 2022. Insofar as D1 is concerned, she is now 86 years old and is seriously incapacitated.

30.  While I can understand from where the grievances are coming from, I am being reminded by P that the question of whether or not there would be irreparable prejudice to D1 and D2 must be properly viewed at the time when the application for extension of the validity of the Amended Writ was made in February 2021.

31.  On this point, Fok PJ held in China Medical Technologies Inc (in Liq) v Bank of China (Hong Kong) Ltd (2020) 23 HKCFAR 296 as follows:

“16. In looking to evidence of events after the date of the application to extend the validity of the writ, both the judge and Court of Appeal purported to apply the decision of the English Court of Appeal in National Commercial Bank v Haque [1994] CLC 230. In that case, at pp.241-242, Evans LJ (with whom Butler-Sloss LJ and Rose LJ agreed) held that, on an application to set aside an ex parte extension of a writ, it was permissible for the court to look not just at what evidence was placed before the court at the time of the application to extend the writ, but also the evidence (including subsequently filed evidence) to show what the situation was as at that time. For this reason, the judge and Court of Appeal both looked to the evidence contained in Mr Borrelli’s 3^rd affidavit which was filed in opposition to the setting aside application and also the judgment of Harris J on the s.221 application, both of which necessarily post-dated the date of the application to extend the writ’s validity.

17. There was no error of law in the judge or Court of Appeal looking to evidence filed subsequently to the extension application when considering the setting aside application. However, that subsequently filed evidence could only be relevant, on the setting aside application, to showing the position as it obtained at the time of the extension application. In the present case, that meant the position as at 30 November 2015 when the ex parte application was made to the master to extend the writ’s validity.

18. When the judge expressed her decision in terms of the “good reason” which she held existed on 30 November 2015 to have been “wiped out” by the evidence disclosed in Mr Borrelli’s 3^rd affidavit and Harris J’s judgment on the s.221 application, this would be using evidence after the event to re-assess the adequacy of the reason prima facie already found to have been good. That would have been an apparent misapplication of the principle for which National Commercial Bank v Haque (supra) is authority. It is at least reasonably arguable this was an error of law which would have vitiated the judge’s exercise of discretion to set aside the extension of the validity of the writ…(emphasis added)”

32.  In February 2021, D2 was still alive and there was no indication that D1 was suffering from any condition which would prevent her from standing trial. It follows that the alleged prejudice now raised by D1 and D2 could not have been relevant to Master WY Ho’s decision then.

33.  Furthermore, even assuming that the validity of the Amended Writ was not then extended, P would presumably still have commenced a fresh action against D1 and D2, in which case they would be facing the same – if not a much worse-off – situation given the flight of time.

F.  NO MATERIAL NON-DISCLOSURE

34.  Lastly, I am also unable to accept that P had failed to make full and frank disclosure at the ex parte stage.

35.  It is well-established, as reiterated by Coleman J in Sky Motion Holdings Ltd v China Create Capital Ltd [2019] HKCFI 2408 at §83, that an applicant owes the duty to make full and frank disclosure of all material facts at the ex parte stage. It is a stringent duty which is designed to protect the absent party, among others.

36.  But as accepted by D1 and D2[1], the material issue herein is not whether it was proper and appropriate to serve the Writ at the Happy Valley Address, or whether it was not necessary to serve the Writ at the Hennessy Road Address. It is simply whether a good reason was given for extension of its validity.

37.  I therefore remain to be persuaded that P was obliged to disclose at the ex parte stage the periods of alleged delay (a) from 9 March 2020 to 12 November 2020; (b) from 12 November 2020 to 9 January 2021; and (c) after the Counsel opinion was obtained, or the date of the Land Search (since when GT had possessed knowledge of the Happy Valley Address).

38.  On the other hand, it can be seen from P’s supporting affirmation for extension that the actual sequence of factual events was sufficiently disclosed to the Court, including the material ones being that: (a) the Hennessey Road Property was originally stated on the Writ to be the address of D1 and D2; and (b) P later discovered that the Happy Valley Address was the usual and last known addresses of D1 and D2 and that they could not be contacted at any other address. It was also on such basis that P applied to amend the address of D1 and D2 on the Writ and for extension of the validity of the Amended Writ.

G.  CONCLUSION

39.  For all the reasons above, the Appeal should be dismissed. There is no reason why costs should not follow the event. I therefore make the order nisi that D1 and D2 shall pay the costs of P, with certificate for counsel, to be taxed if not agreed.

40.  It remains for me to thank the Counsel team for their able assistance.