Jurisdiction - Hong Kong
Hong Kong – Court of Final Appeal Rules That Expiry Of Limitation Period Is To Be Assessed By Looking At Endorsement On Writ And Not Statement Of Claim.

29 July, 2014



The effect of section 35 of the Limitation Ordinance (Cap. 347) is that where a “new claim” is sought to be made in the course of an action and such claim would otherwise be time-barred, it will be allowable only if it arises out of “the same facts or substantially the same facts” as a cause of action “in respect of which relief has already been claimed” in the action by the party seeking leave to make the amendment.


In a recent judgment, the Court of Final Appeal has held that for the purpose of determining whether an amendment to a pleading constitutes a “new claim” under section 35 of the Limitation Ordinance and is time-barred, the identity of the causes of action on which the plaintiff relies are to be ascertained by reference to the nature and scope of claims identified and constituted by the Indorsement on the Writ and NOT by reference to the then current Statement of Claim. In this case, the Court of Final Appeal held that the claims in the Amended Statement of Claim did fall within the purview of the Indorsement on the writ and were not therefore time-barred and should not therefore have been struck out by the Court of Appeal.




This was an action by the liquidators of Moulin Global Eyecare Holdings Ltd (Moulin), a company formerly listed on the Hong Kong Stock Exchange, against Moulin’s former director and alleged principal advisor.


The action was commenced on 29 January 2008 and the Indorsement on the writ sought “…equitable compensation in respect of loss and damage suffered by the Plaintiff … as a result of breaches of fiduciary… duties and/or breaches of the duty of care and skill owed by the Defendant…arising out of her role as director or employee of the Plaintiff” in the course of the preparation, auditing and certification of the Moulin accounts, the discharge by the Defendant of her duties as a member of Moulin’s Audit Committee, and the provision by the Defendant of professional advice and services to Moulin.

In the Amended Statement of Claim, the liquidators sought recovery of (a) dividends in excess of HKD 242m paid by Moulin out of capital, despite Moulin being insolvent (“the Dividends Loss“), (b) USD 15m and more than HKD 98m paid by Moulin for early redemption in 2002 by Moulin of convertible notes, at times when Moulin was insolvent (“the Convertible Notes Loss“), and (c) more than HKD 37m paid for share repurchases out of capital during the period 2000 to 2004 (“the Share Repurchases Loss“).


Court Of First Instance Ruling


The Court of First Instance struck out the Convertible Notes Loss and Share Repurchases Loss claims, but allowed an amendment to plead a claim quantifying Moulin’s loss as at least HKD 1.23bn by reference to the increase in its net deficiency from 31 March 2001 (the date of the first accounts after the Defendant became a director), when Moulin contended that provisional liquidators would have been appointed had the Defendant discharged her duties, and the date of appointment of the provisional liquidators on 23 June 2005 (“the IND Loss“).


Court Of Appeal Ruling


The Court of Appeal upheld the Court of First Instance rulings that:


  1. the Convertible Notes Loss claim be struck out because Moulin had suffered no loss by virtue of its early redemption of the notes; and
  2. both the Share Repurchases Loss and Convertible Notes Loss claims were “new claims” within the meaning of s.35 of the Limitation Ordinance and should not be allowed because they were time-barred at the time of filing of the Amended Statement of Claim and did not arise “out of the same facts or substantially the same facts” as a cause of action in respect of which relief had already been claimed in the action.


Further, the Court of Appeal held that the IND Loss claim was also a “new claim” within the meaning of s.35 and struck it out. This left standing only the Dividends Loss claim which had been made in the original Statement of Claim, filed shortly after issue of the writ.


Court Of Final Appeal’s Ruling


The first question before the Court of Final Appeal was whether the expiry of an applicable limitation period is to be assessed (i) by looking to the terms of Indorsement on a writ filed within time, or, (ii) exclusively by looking to the terms of the then current statement of claim, or (iii) by looking to both. The Court of Appeal held that (i) was correct.


The Court of Final Appeal also held that the following propositions (advanced by Moulin), were correct:


  1. the issue of the writ will satisfy the statute of limitations with respect to all claims which fairly fall within the range or purview of the Indorsement;
  2. the Indorsement is not in the nature of a pleading, does not form part of the pleadings, and should not be read as such; rather, the Indorsement marks out the perimeter or range of the area within which the plaintiff may express its claim in a formal fashion in the statement of claim whether as originally filed or as sought to be amended;
  3. if a pleading first omits a claim within the purview of the Indorsement on the writ, this does not amount to abandonment of that claim, and does not have the consequence that a later amendment application must be refused; and
  4. the allowance of an amendment to the statement of claim to set up a claim within the Indorsement will be a matter of discretion under the applicable Rules of Court.


The Court of Final Appeal went on to consider the purview of the Indorsement on the Writ in this case. It identified equitable compensation for breaches of “fiduciary duty” and also for breaches of the duty of care and skill owed by the Defendant. In the Indorsement, the Court of Final Appeal said, the term “fiduciary” was used not in its strict sense, but more broadly to encompass the established or asserted equitable duties of a director to act bona fide in the interests of Moulin as a whole, to act fairly between different shareholders, and to consider the interests of creditors if Moulin be insolvent or of doubtful solvency.


Moulin relied in particular upon alleged failures of the Defendant in discharge of her equitable duty to act bona fide in the interests of Moulin as a whole, which failures were alleged to have occasioned loss and damage to Moulin for which the Defendant must account by providing equitable compensation. Accordingly, Moulin’s claims were within the purview of the Indorsement.


In the above circumstances, the Court of Final Appeal set aside the Court of Appeal ruling which had struck out the IND Loss claim and which had affirmed the striking out of the Shares Repurchases Loss claim and Convertible Notes Loss claim. In respect of the Convertible Notes Loss claim, the Court of Final Appeal held that as presently drafted, it did not plead a triable issue and was therefore “embarrassing” and Moulin should, if so advised, seek leave to re-plead that claim, subject to the Court’s discretion.




This case reinforces the importance of drafting the Indorsement of claim on the writ precisely and wide enough to cover all of the Plaintiff’s possible claims in the action and the importance of clients providing full and detailed instructions and documents at the outset to enable this to be done.




For further information, please contact:


Karen Dicks, Deacons

[email protected]


Deacons Dispute Resolution Practice Profile in Hong Kong

Homegrown Dispute Resolution Law Firms in Hong Kong


Comments are closed.