SONG LIHUA v. LEE CHEE HON (Former Name: QUE WENBIN) AND ANOTHER

HCA 1747/2022

[2023] HKCFI 2429

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1747 OF 2022

________________________

________________________

________________________________

REASONS FOR DECISION

________________________________

1.  Before me was the summons issued by the Plaintiff on 6 September 2023 seeking an interim stay of all further proceedings in this action, and particularly, vacating the substantive hearing scheduled on 27 September 2023 before me and adjourning the matters to be heard sine die until the expiry of the stay with liberty to restore thereafter (“the Stay Application”).

2.  At the conclusion of the hearing, I made an order (a) in terms of paragraphs 1 and 2 of the summons with minor changes in wording staying all further proceedings pending and until the determination of the Plaintiff’s intended appeal in HCCT 111/2022, vacating the hearing on 27 September 2023 and adjourning the hearing of the 4 applications mentioned below with liberty to restore (b) imposing a term for the stay and adjournment that the Plaintiff do pay into court on or before 10 October 2023 security for the costs of the 1^st and 2^nd Defendants at HK$200,000 each (which will be without prejudice to the security for costs presently applied for by them), failing which the Plaintiff’s application for summary judgment will be automatically dismissed with costs to be summarily assessed forthwith, (c) directing that the 4 applications be heard together if and when they are restored, and (d) that the costs of the Stay Application be in the cause.

3.  I said reasons will be provided, which I now do.

4.  The Stay Application arose from the following circumstances.

5.  This action was commenced by the Plaintiff (“P”) on 13 December 2022 to seek to declare as void under section 60 of the Conveyancing and Property Ordinance Cap 219 the conveyance by assignment executed on 30 November 2022 by the 1^st Defendant (“D1”) in favour of his son, the 2^nd Defendant (“D2”), of the property known as Flat A, 32^nd Floor, Tower 8, and Carpark No. 190, Residence Bel-Air, Hong Kong (“the Property”), as being a deposition made with intent to defraud creditors.

6.  P sues as a creditor by virtue of an arbitral award of the Chengdu Arbitration Commission dated 11 October 2021 whereby D1 is to pay to P a sum of RMB 337,222,219.90 with interest and costs (“the Award”), which remains completely unsettled.

7.  One day before the issuance of the Writ herein, P obtained ex-parte a Mareva injunction against D2 up to the alleged full value of the Property at HK$42,640,000. Later, on 23 December 2022 and pursuant to the revised terms of the Mareva injunction as continued and granted on 16 December 2022, D2 paid into court HK$4,240,000 to discharge the Mareva injunction, D1 having earlier on paid HK$38,400,000 into court in HCCT 111/2022.

8.  On 12 January 2023, leave to enforce the Award in Hong Kong was granted by Madam Justice Mimmie Chan in HCCT 111/2022 upon P’s ex-parte application (“the Leave”).

9.  On 26 January 2023, D1 issued a summons in HCCT 111/2022 applying to set aside the Leave.

10.  In the meantime, steps were taken in this action. Notably, D2 issued a summons on 15 February 2023 applying for security for costs to be provided by the Plaintiff (“D2’s Security Application”). Shortly after on 24 March 2023, the Plaintiff issued a summons applying for summary judgment against both defendants (“the Summary Judgment Application”). The Summary Judgment Application was made apparently in response to D2’s Security Application as P indicated to the Master at the call-over hearing of D2’s Security Application on 24 February 2023 that she intended to apply for summary judgment.

11.  These 2 applications were then directed to proceed together. They were then scheduled to be heard before me substantively on 27 September 2023.

12.  However, on 24 August 2023 and after a contested hearing in HCCT 111/2022, Madam Justice Mimmie Chan set aside the Leave with reasons to be provided later. Application for leave to appeal against that decision was filed by P on 6 September 2023 (“P’s Appeal”).

13.  Consequently and also on 6 September 2023, P issued the Stay Application.

14.  Meanwhile, 2 new applications both made by D1 were also listed to be heard before me on 27 September 2023. They are:

a.  His summons dated 4 September 2023 to file his 2^nd affirmation; and

b.  His summons issued yesterday, ie 18 September 2023, for security for his costs to be provided by the Plaintiff.

15.  This hearing of the Stay Application was listed as a 3-minutes call-over hearing.

16.  D2 has lodged his Skeleton Submissions by Ms Kang, his counsel, stating his position that D2 did not oppose to the interim stay of all further proceedings or the adjournment of the hearing of the Summary Judgment Application pending the outcome of P’s Appeal but opposed the adjournment of the hearing of D2’s Security Application. D2 set out his contentions there and proposed that the Stay Application, insofar as it concerned D2’s Security Application, be heard substantively on 27 September 2023 together with D2’s Security Application.

17.  P and D1 did not lodge any written submissions but appeared by counsel - respectively Mr Chiu and Mr Chen. At the hearing, P indicated that it would like to seek an order in terms if the court was minded to hear the matter substantively, while D1 advocated the same position and proposal as D2.

18.  Ms Kang referred this court to the approach as held by Madam Justice Kwan (as the V-P then was) in Re Chime Corporation Ltd (HCMP 4146/2001, unrep., 11 March 2005), which was not disputed by Mr Chiu or Mr Chen, and which I accept as correct and apposite:

“14. The correct approach, … , in an application for a temporary stay of proceedings is ‘to consider the balance of convenience and fairness as between the parties’ (Alfred McAlpine Construction Ltd. v. Unex Corporation Ltd. (1994) 70 BLR 26 at 45C to D, per Glidewell LJ; applied in Clinton Engineering Ltd. v. B-Tech (Holdings) Ltd. [2001] HKCU 1002 at para. 9 and SWE Ltd. v. Chong Lai Fun, HCA No. 1064 of 2004, 28 October 2004, Reyes J, pages 5 and 6; see also Halsbury’s Laws of Hong Kong, Vol. 5(2), footnote 7 to para. [90.0938]) and the court should exercise its discretion in such a manner ‘to ensure that its procedures are used in a logical, fair and cost-efficient manner’ (SWE Ltd., page 5). The question at hand is not a question of deprivation of the right of a litigant to proceed altogether, but a question of case management.” (my emphasis)

19.  Bearing in mind the considerations and the approach above elucidated, I did not find D1’s and D2’s proposal to hear the remaining part of the Stay Application substantively on 27 September 2023 at all attractive, as the parties would be required to expend time and costs to prepare to argue the security for costs applications substantively, if not actually arguing it, on 27 September 2023.

20.  Upon the invitation of the court and after a short adjournment to consider, the parties, in my view very sensibly, agreed to have the remaining part of the Stay Application heard at the hearing.

21.  Having heard their submissions, I took the view that D1’s and D2’s Security Applications should also be stayed and their hearing adjourned with liberty to restore until after the determination of P’s Appeal, upon the following considerations:

a.  As parties agreed that otherwise an interim stay ought to be imposed pending the outcome of P’s Appeal, there would be no other costs to be expended by D1 and D2 during the stay period, for which they need the protection of security. There is thus little detriment to D1 and D2 if the hearing of their Security Applications is put off until after the determination of P’s Appeal.

b.  If P’s Appeal turned out to be unsuccessful, then the time and costs expended to argue the security for costs applications as well as the judicial resources to hear and determine it would be completely wasted, as by then the substratum of this action would have crumbled and D1 and D2 could very well proceed to seek, and then enforce, costs orders against P.

c.  Both D1 and D2 submitted that the scenario mentioned in (b) above might not necessarily follow, as Mr Chiu has indicated at the hearing that P might amend her pleading substantially to rely on matters other than the Award to sustain her status as a creditor. If that would happen, then all the more reason why the Security Applications would be better timed to be heard after the outcome of P’s Appeal (and after P’s application to amend pleading) so that the court could then have all these new matters (if any) in view, and the amount of security revised to reflect them.

d.  As the strength of the merits of parties’ respective case, or lack thereof, would potentially be a consideration, even a weighty consideration, concerning whether to grant security for costs, just hearing the security for costs applications while adjourning the Summary Judgment Application would thus be rather unsatisfactory. On the other hand, if P’s Appeal were successful, then the Summary Judgment Application and D1’s and D2’s Security Applications would be heard together.

e.  D1 and D2 expressed eagerness to obtain the security early and both intimated that it might prove to be a means to end this action early if the sanction against failure of payment of security was the dismissal of the action. With respect, stifling a party from his claim is not the aim, nor the consideration, for ordering security. I therefore did not consider this matter relevant.

22.  Weighing these matters, I thus was of the clear view that adjourning the hearing of the Security Applications, as opposing to hearing them on 27 September 2023, would much better balance the fairness between the parties and ensure that this case and the pending applications are managed in a logical, fair and cost-efficient manner.

23.  In terms of fairness, at the hearing Mr Chen and Ms Kang asked that a term be imposed for granting the interim stay and adjournment requiring P to pay into court some costs as security because :

a.  P knew that D1 has on 26 January 2023 lodged a substantial challenge to the Leave in HCCT 111/2022; while P then has already had the subject matter of this action secured through registering the Writ as a lis pendens and D1’s and D2’s respective payment into court.

b.  Yet, P disregarded or took the risk that the Leave might be set aside upon D1’s successful challenge (in which case the substratum of this action might crumble) and P peddled full-gas in this action, particularly in countering D2’s Security Application aggressively with the Summary Judgment Application, even though central to P’s case is the serious allegation of an intention to defraud, which usually is not suitable for summary determination but much more suitable to be tried.

c.  To support the Summary Judgment Application and again disregarding or taking the risk, P has filed very substantial affirmations alleging a width of matters, which necessitated D1 and D2 to expend much costs to rebut and defend.

d.  Yet, once D1 successfully set aside the Leave, P made a hasty application to put everything on hold to minimize her costs exposure.

e.  The unfairness was accentuated when considering the fact that D1 and D2 had to made very substantial payments into court to discharge the Mareva injunction over a claim which, as it turned out, was crumbling.

24.  I agreed with D1 and D2 that there was a measure of unfairness as so adulated by them (though I note that D2 has the cross-undertaking given by P to protect him insofar as the Mareva injunction is concerned, and D1 probably has it too). D1 and D2 impressed upon this court that as a matter of principle, even if the amount might not be much, such a term should be imposed. Though Mr Chiu has tried his best to submit that the Summary Judgment Application was a natural or necessary response to D2’s Security Application, I was not persuaded it was so.

25.  In the round, I think it appropriate and just to impose a term of paying into court some security for costs as a condition for granting the stay and adjournment. Having heard parties rather extensively, I took the view and it was not seriously disputed that (a) the appropriate part of costs that the security should cover were the costs D1 and D2 spent in preparing their affirmation evidence to oppose the Summary Judgment Application, (b) the quantum would necessarily be assessed in a very broad-brush manner and would not be meant to provide full security, and (c) in the circumstances, the usual consequence imposed upon failure to make the payment – further proceedings be stayed – would not be an effective means to ensure compliance; rather and in the circumstances, the automatic dismissal of the Summary Judgment Application with costs would be the most apt. Thus, I fixed the security at HK$200,000 each for D1 and D2.

26.  In respect of the costs of the Stay Applications, parties were agreed that they should be costs in the cause.

27.  For these reasons, I granted the stay and adjournment and made the order set out in summary in paragraph 2 above.

28.  I thank all counsel for their valuable assistance.