News & Events

Deacons Litigation & Dispute Resolution Newsletter - Issue 4, 2013

Submitted By Firm: Deacons

Contact(s): Cynthia Chung


Karen Dicks

Date Published: 12/3/2013

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The Court of Appeal confirms that a bankruptcy or winding up petition is considered an ''action'' and subject to section 4(4) of the Limitation Ordinance (Cap 347), by Richard Hudson ( and Benjamin Ng (

On 30 August 2013, the Court of Appeal handed down an important judgment in Re Li Man Hoo which confirms that bankruptcy and winding up petitions fall within the definition of an "action" under section 4(4) of the Limitation Ordinance (the "Ordinance"). As a result, any bankruptcy or winding up petition based on judgment debts that are more than 12 years old will be statutorily time-barred. The judgment is welcome judicial clarification in light of previously conflicting case law existing both in England and Hong Kong.

The Relevant Provisions

Section 4(4) of the Ordinance provides that "An action shall not be brought upon any judgment after the expiration of 12 years from the date on which the judgment became enforceable, and no arrears of interest in respect of any judgment debt shall be recovered after the expiration of 6 years from the date on which the interest became due."

Section 2 of the Ordinance defines "action" as "includes any proceedings in a court of law."

Previously Conflicting Decisions

The English Court of Appeal, considering the equivalent sections of the English limitation legislation, in which the wording is materially identical to the provisions in Hong Kong, established in the case of W.T. Lamb & Sons v Rider [1948] 2 KB 331 that "action" has a restricted meaning and refers only to an "action upon a judgment" – a new set of proceedings brought for the purpose of re-establishing the judgment debt. Such a meaning excludes bankruptcy or winding up proceedings, as a bankruptcy or winding up petition is not an action on a judgment in the strict sense.

This decision was not free from controversy, as subsequent English decisions remarked upon the inconsistency. In Lowsley v Forbes [1999] HC 329, the English House of Lords acknowledged that the decision in W.T. Lamb was erroneous. However, since there was clear evidence that when enacting the revisions to the English limitation provisions the UK Parliament had proceeded on the understanding that W.T. Lamb was correct, the House of Lords held that it must have been Parliament's intention at that time to give the word "action" the restricted meaning as in W.T. Lamb, rather than the wider meaning which would include bankruptcy or winding up proceedings, and the House of Lords had to give effect to the restricted meaning.

In the first instance decision of Re Li Man Hoo [2012] 2 HKLRD 743 the court followed the English authorities and held that section 4(4) of the Ordinance does not bar presentation of a bankruptcy or winding up petition, as the case may be. However, two further decisions of the Hong Kong Court of First Instance, Re Man Po International Holdings Limited [2012] 5 HKC 539, a decision of Harris J, in front of whom Li Man Hoo was not cited, and Re Lau Wan [2013] 3 HKLRD 567 a decision of Anthony Chan J, both held that there was nothing to suggest that the legislature in Hong Kong had a particular meaning of "action" in mind at the time the Ordinance was introduced. In the absence of any established authorities to the contrary, the correct approach in Hong Kong was to give section 4(4) the construction found by the House of Lords in the Lowsley case, and there was no reason why Hong Kong should read into its law a construction which was wrong and against the plain reading of section 4(4).

The Decision of the Court of Appeal

In an appeal brought in the Li Man Hoo proceedings, the Court of Appeal overturned the first instance decision and held that "action" shall be given a wider meaning so as to catch bankruptcy or winding up proceedings based on judgment debts that are more than 12 years old. The Court of Appeal held that, as a matter of ordinary language, a bankruptcy or winding up petition is clearly a "proceeding in a court of law" pursuant to section 2 of the Ordinance, and insofar as the debt on which it is founded is a judgment debt, it would appear to be a proceeding that is "brought upon" the judgment under which the judgment debt arose.

The Court of Appeal did acknowledge that it should not only consider the literal meaning of the provisions but also the preceding case law. When considering the abovementioned English cases, the Court of Appeal was of the view that the English courts have come to reach their current position by tracing the legislative history of the limitation provisions in England. The Court of Appeal, following Harris J and Anthony Chan J's reasoning, held that the Hong Kong courts need not be burdened by the legislative history of the English law and should interpret the Ordinance in whatever way was the correct interpretation of such legislation.

The Court of Appeal also clarified a point concerning the recovery of interest on a judgment debt. It was held that the effect of the second part of section 4(4) of the Ordinance is to bar the recovery of interest on a judgment debt more than six years after it becomes due. As interest accrues from day to day, the effect of the provision is that only interest accruing due within six years of the date of commencement of proceedings can be claimed.

The judgment gives much needed certainty to the Hong Kong law of limitation of actions: bankruptcy or winding up petitions (as the case may be) cannot be used to "enforce" a judgment more than 12 years after it is delivered.

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Provisions on enforcement of Macau Arbitral Awards in Hong Kong to come into effect on 16 December 2013, by Philipp Hanusch (

In Issue 3 of 2013 of our Litigation & Dispute Resolution Newsletter, we reported on the passing of the Arbitration (Amendment) Bill 2013, by which the "Arrangement Concerning Reciprocal Recognition and Enforcement of Arbitral Awards Between the Hong Kong Special Administrative Region and the Macau Special Administrative Region" signed by the Hong Kong and Macau Governments was implemented.

On 7 October 2013, the Secretary for Justice gave notice that the relevant provisions of the Arbitration (Amendment) Ordinance 2013 will come into operation on 16 December 2013.

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Court confirms that parties who unsuccessfully challenge arbitral awards will pay costs on an indemnity basis, by Philipp Hanusch (


On 29 June 2011, the Court of First Instance ("CFI") granted an application of Pacific China Holdings Ltd ("Pacific China") Holdings Ltd to set aside an International Chamber of Commerce (ICC) arbitral award ("the Award") made against it in favour of Grand Pacific Holdings Ltd ("Grand Pacific") for US$55 million. The Award was set aside under Article 34 (2) of the UNCITRAL Model Law (which is incorporated in Hong Kong's Arbitration Ordinance) on the grounds that Pacific China had been unable to present its case and/or that the arbitral procedure had not been in accordance with the parties' agreement.

By a unanimous decision, on 9 May 2012, the Court of Appeal reversed the CFI's decision and reinstated the Award. On 19 February 2013, the Court of Final Appeal ("CFA") refused to grant Pacific China leave to appeal to the CFA, the Court of Appeal having previously also refused leave.

The decisions of the Court of Appeal and CFA have further cemented and enhanced Hong Kong's reputation as an attractive arbitration seat. More details on the decisions of the Court of First Instance, Court of Appeal and CFA can be found in Issue 1 of 2013 of our Construction and Arbitration Newsletter.

Decision on costs

On 23 July 2012, the Court of Appeal decided on the costs of the unsuccessful challenge. In its ruling, the Court of Appeal followed the principle that, in the absence of special circumstances, a party that is unsuccessful in setting aside an arbitral award in Hong Kong shall pay the successful party's costs on an indemnity basis. The Court of Appeal left open, however, in what circumstances to allow the Court to depart from the indemnity costs principle in such cases.

The indemnity basis is the most generous basis and allows the successful party to recover all of its legal costs incurred, unless they are of an unreasonable amount or have been unreasonably incurred, with any doubt in this regard being resolved in favour of the successful party.

The Court of Appeal adopted the rationale for awarding costs on the most generous basis previously laid down by Reyes J in A v R [2010] 3 HKC, as follows:-

  • A party who obtains an award in its favour should be entitled to expect that the Court will enforce the award as a matter of course. Applications by a party to appeal against or set aside an award or for an order refusing enforcement should be exceptional events. Where a party unsuccessfully makes such application, it should in principle expect to have to pay costs on a higher basis. This is because a party seeking to enforce an award should not have had to contend with this type of challenge.
  • Further, if the unsuccessful party is only made to pay costs on a conventional party-and-party basis, the successful party would in effect be subsidising the unsuccessful party's unsuccessful attempt to frustrate enforcement of a valid award. The successful party would only be able to recover about two-thirds of its costs of the challenge and would be out of pocket as to one-third. This is despite the successful party already having successfully gone through an arbitration and obtained an award in its favour. The unsuccessful party, in contrast, would not be bearing the full consequences of its unsuccessful application.
  • Such state of affairs would only encourage the bringing of unmeritorious challenges to an award. It would turn what should be an exceptional and high-risk strategy into something which was potentially "worth a go".
  • Accordingly, in the absence of special circumstances, the court will from now on normally award costs against an unsuccessful party on an indemnity basis.

On 16 August 2013, the CFA refused to grant Pacific China leave to appeal to the CFA against the Court of Appeal's decision on costs, thereby confirming that parties, who are unsuccessful in setting aside arbitral awards made in Hong Kong, will generally be ordered to pay costs on an indemnity basis.

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Tiger Asia - Date fixed for Market Misconduct Tribunal Proceedings, by Joseph Kwan (

In Issue 3 of 2013 of our Litigation & Dispute Resolution Newletter, we reported on the SFC commencing proceedings in the Market Misconduct Tribunal (MMT) against Tiger Asia Management LLC and three of its officers for market misconduct, contrary to sections 270 (insider dealing), and 274 (false trading) of Part XIII of the Securities and Futures Ordinance (Cap 571). Those proceedings have now been set down for hearing on 5 May 2014, with 30 days reserved.

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Court orders re-trial on insider dealing case - CITIC Pacific Limited, by Joseph Kwan (

On 10 September 2013, the Court of First Instance allowed the appeal of Mr Simon Chui Wing Nin, a former assistant director of finance at CITIC Pacific Limited (CITIC Pacific), against his convictions for insider dealing and ordered a re-trial. In November 2012, Chui was found guilty at Eastern Magistrates' Court of two counts of insider dealing in CITIC Pacific shares and sentenced to 15 months' imprisonment, fined HK$1,018,855 and ordered to pay the SFC's investigation costs of HK$228,469. He was also disqualified from being a director of corporations in Hong Kong, including listed corporations, for three years.

The Magistrate heard that Chui was involved in assessing the impact of the fall in the Australian dollar in mid-2008 on a number of foreign exchange derivatives contracts, including target redemption forward contracts in Australian dollars, that CITIC Pacific had entered into to hedge its position in funding an Australian mining subsidiary. The target redemption forward contracts were similar to accumulator contracts, requiring CITIC Pacific to purchase a multiple amount of Australian dollar if it fell below designated strike rates.

By late August 2008, the Australian dollar had fallen significantly against the designated strike prices in the contracts. Chui was involved in calculating the financial impact on CITIC Pacific and knew that CITIC Pacific faced a very substantial mark to market loss that would materially impact the company's financial position. Whilst in possession of that information and before it was generally available, Chui sold most of his shares in CITIC Pacific.

On 20 October 2008, CITIC Pacific announced a mark to market loss, as at that point, of over HK$14.7 billion, sending the share price down approximately 60%.

Mrs Justice Bokhary found that the trial Magistrate had not given adequate reasons in his decision when dismissing Chui's arguments concerning expert evidence on the price sensitivity of the information that the SFC alleged was in Chui's possession. Chui's lawyer had argued that the expert's opinion was deficient, but the Magistrate dismissed those arguments. Mrs Justice Bokhary said that the arguments put forward by Chui's lawyer needed to be addressed by the Magistrate in giving his reasons because giving adequate reasons is a principle of paramount importance in the common law system. Mrs Justice Bokhary therefore quashed Chui's conviction, set aside his sentence and ordered a re-trial.

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Recent Deacons' publications


The new Companies Ordinance

Gearing up for the New Companies Ordinance

Human Resources and Pensions Newsletter, Issue 4 of 2013: November


Closer Economic Partnership Arrangement Between Mainland China and Hong Kong

Financial Services Newsletter, Issue 7 of 2013: October

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Altra Industrial Motion Inc.

Altra Industrial Motion Inc. has multiple locations in the U.S., as well as Central America, Europe, and Asia. The Employment Law Alliance has proved to be a great asset in assisting us in dealing with employment issues and matters in such diverse venues as Mexico, Australia, and Spain. We have obtained excellent results using the ELA network for matters ranging from a multi-state review of employment policies to assisting with individual employment issues in a variety of foreign jurisdictions.

In one instance, we were faced with an employment dispute with a former associate in Mexico that had the potential for substantial economic exposure. The matter had been pending for over a year, and we were not confident in the employment advice we had been receiving. I obtained a referral to the ELA counsel in Mexico, who was able to obtain a favorable resolution of the dispute in only a few days. Based on our experiences with the ELA, we would not hesitate to use its many resources for future employment law needs.

American University in Bulgaria

In my career I have been a practicing attorney, counsel to the Governor of Maine, and CEO of a major public utility. I have worked with many lawyers in many settings. When the American University in Bulgaria needed help with employment litigation in federal court in Syracuse, New York, we turned to Pierce Atwood, the ELA member we knew and trusted in Maine, for a referral. We were extremely pleased with the responsiveness and high quality of service we received from Bond Schoeneck & King, the ELA's firm in upstate New York. I would not hesitate to recommend the ELA to any employer.

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Member of Board of Trustees 

Arcata Associates

I really enjoyed the Conducting an Effective Internal Investigation in the United States webinar.  We are in the midst of a rather delicate employee relations issue in California right now and the discussion helped me tremendously.  It also reinforced things that you tend to forget if you don't do these investigations frequently.  So, many, many thanks to the Employment Law Alliance for putting that webinar together.  It was extremely beneficial.

Lynn Clayton
Vice President, Human Resources

Barrett Business Services, Inc.

I recently participated in the ELA-sponsored webinar on the Employee Free Choice Act.  I was most impressed with that presentation.  It was extremely helpful and very worthwhile.  I have also been utilizing the ELA's online Global Employer Handbook.  This compliance tool is absolutely terrific. 

I am familiar with several other products that purport to provide up-to- date employment law information and I believe that this resource is superior to other similar compliance manuals.  I am delighted that the ELA provides this free to its members' clients.

Boyd Coffee Company

Employment Law Alliance (ELA) has provided Boyd Coffee Company with a highly valued connection to resources, important information and learning. With complex operations and employees working in approximately 20 states, we are continually striving to keep abreast of specific state laws, many of which vary from state to state. We have participated in the ELA web seminars and have found the content very useful. We appreciate the ease, cost effectiveness and quality of the content and presenters offered by these web seminars.  The Global Employer Handbook has provided our company with a very helpful overview of legal issues in the various states in which we operate, and the network of attorneys has helped us manage issues that have arisen in states other than where our Roastery and corporate headquarters are located in Portland, Oregon.

Capgemini Outsourcing Services GmbH

As an international operating outsourcing and consulting supplier Capgemini has used firms of the Employment Law Alliance in Central Europe. We were always highly satisfied with the quality of employment law advice and the responsiveness. I can really recommend the ELA lawyers.

Hirschfeld Kraemer

As an employment lawyer based in San Francisco, I work closely with high tech clients with operations around the globe. Last year, one of my clients needed to implement a workforce reduction in a dozen countries simultaneously. And they gave me 48 hours to accomplish this. I don't know how I could have pulled this off without the resources of the ELA. I don't know of any single law firm that could have made this happen. My client received all of the help they needed in a timely fashion and on a cost effective basis.

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Hollywood Entertainment Corporation

As the Vice President for Litigation & Associate General Counsel for my company, I need to ensure that we have a team of top-notch employment lawyers in place in every jurisdiction where we do business. And I want to be confident that those lawyers know our business so they don't have to reinvent the wheel when a new legal matter arises. With more than 3400 stores and 35,000 employees operating in all 50 U.S. states and across Canada, we rely on the ELA to partner with us to help accomplish our objectives. I have been delighted with the consistent high quality of the work performed by ELA lawyers. I encourage other in-house counsel to use their services, as well.

Ingram Micro

Ingram Micro is the world's largest technology distributor, providing sales, marketing, and logistics services for the IT industry around the globe. With over 13,000 employees working throughout the U.S. and in 35 international countries, we need employment lawyers who we can count on to ensure global legal compliance. Our experience with many multi-state and multi-national law firms is that their employment law services are not always a high priority for them, and many do not have experts in many of their offices. The ELA has assembled an excellent team of highly skilled employment lawyers, wherever and whenever I need them, and they have proven to be an invaluable resource to our company.

Konami Gaming

Our company, Konami Gaming, Inc., is growing rapidly in a very diverse and highly regulated industry. We are aggressively entering new markets outside the domestic U.S., including Canada and South America. I have had the recent opportunity to utilize the services provided by the ELA. The legal advice was both responsive and professional. Most of all, the entire process was seamless since our Nevada attorney coordinated the services and legal advice requested. I look forward to working with the ELA in the future, as it serves as a great resource to the legal community.

Jennifer Martinez
Vice President, Human Resources

Nikkiso Cryo, Inc.

Until recently, I was unaware of the ELA's existence. We have subsidiaries and affiliates throughout the United States, as well as in Asia, the Middle East and Europe. When a recent legal issue arose in Texas, our long-time Nevada counsel, who is a member of the ELA, suggested that this matter be handled by his ELA colleague in Dallas. We are very pleased with the quality and timeliness of services provided by that firm, and we are excited to now have the ELA as an important asset to help us address employment law issues worldwide.

Palm, Inc.

The ELA network has been immensely important to our company in helping us address an array of human resources challenges around the world. I strongly encourage H.R. executives who have employees located in many different jurisdictions to utilize the ELA's unparalleled expertise and geographic coverage.

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Former Senior Director of Human Resources

Rich Products

As the General Counsel for a company with 6,500 employees operating across the U.S. and in eight countries, it is critical that I have top quality lawyers on the ground where we do business. The ELA is an indispensable resource. It has taken the guesswork out of finding the best employment counsel wherever we have a problem.

Jill K. Bond
Senior Vice President/General Counsel, Shared Services and Benefits

Ricoh Americas Corporation

We have direct sales and service offices all over the U.S., but have not necessarily had the need in the past for assistance with legal work in every state where we have a business presence. From time to time, we suddenly find ourselves facing a legal issue in a state where we have no outside counsel relationship. It has been a real benefit to know that the ELA has assembled such an impressive team of experts throughout the U.S. and overseas.

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Roberts-Gordon LLC

Our affiliated companies have used the Employment Law Alliance in connection with numerous acquisitions, and have always been extremely pleased with our ability to obtain the highest quality legal advice on due diligence issues from jurisdiction to jurisdiction. We have found the Employment Law Alliance firms to be not only first rate with respect to their legal advice but also responsive and timely in assisting us with federal and state law issues critical to our due diligence efforts. We consider the Employment Law Alliance to be an important part of our team.

Rockwell Collins, Inc.

We have partnered with many ELA firms on the development and execution of case management strategies with very positive results. We have been very pleased with the legal advice and counsel provided by the law firms we have utilized who are affiliated with the Employment Law Alliance. The ELA firms we have worked with are customer focused, responsive, and thorough in their approach to handling labor and employment law matters.

Elizabeth Daly
Assistant General Counsel


Sanmina-SCI has facilities strategically located in key regions throughout the world. Our customers expect that we will provide them with the highest quality and most sophisticated services in the marketplace. We have that same expectation for the lawyers with whom we do business. With operations in 17 countries, we need to be certain that we have a team of lawyers working together to address our employment law needs worldwide. The ELA has delivered exactly what it promised-- seamless and consistent high quality services delivered in each locale around the globe. It has quickly become a key asset for our human resources department.


We own, manage, and franchise hotels throughout the U.S. and in more than 90 countries. With more than 145,000 employees worldwide, ensuring that we comply with the complex web of local labor and employment laws in every one of these jurisdictions is a daunting task. The Employment Law Alliance has served as an important resource for us and we have benefited greatly from its expertise and long reach. When a legal dispute or issue has arisen in some far-flung place, Employment Law Alliance lawyers have always provided responsive, practical, and cost-effective assistance.

Wilmington Trust Corporation

Wilmington Trust has used the ELA to locate firms in California, Washington State, Georgia, and Europe. Our experience with the ELA lawyers with whom we have worked has always been one of complete satisfaction and prompt, practical advice.

Michael A. DiGregorio
General Counsel