SHANGHAI METGOAL INDUSTRIAL CO. LTD. (formerly known as SHANGHAI PUCAKON INDUSTRIAL CO. LTD.) AND OTHERS v. LUK SUET YIM AND ANOTHER

HCA 2680/2016

[2026] HKCFI 3996

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2680 OF 2016

____________

(By Original Action)

(By Counterclaim)

______________

_________________________________

REASONS FOR DECISION
AND
DECISION ON COSTS

_________________________________

A.  INTRODUCTION

1.  It is a bedrock of an effective civil justice system that courts deal with cases fairly and expeditiously. That objective must be pursued in a manner that not only achieves fairness between the parties before the court, but takes into account the needs of litigants in other cases as well, so as to ensure that finite judicial resources are allocated fairly and efficiently among all court users.[1] This is the common theme which undergirds the orders I have made in relation to a number of applications which came before me at the start of what was to have been a 15-day trial of a complex action that commenced back in 2016.

2.  The underlying claims by the 1^st to 9^th Plaintiffs (By Original Action) and the 1^st to 9^th Defendants (By Counterclaim) (collectively the “Plaintiffs”) were for breach of contract and also for breach of duties said to have been owed to the Plaintiffs by the 1^st and 2^nd Defendants (By Original Action) (collectively the “Defendants”) as trustees and/or as agents. The claims arose out of the sale of a water treatment business to a company called AO Smith Corporation (“AO Smith”). The sale was effected by way of a series of agreements, pursuant to which the shares and assets of Chanitex (Shanghai) Pure Water Equipment Ltd (“Chanitex”) and the Plaintiffs were transferred to a subsidiary of AO Smith. The Plaintiffs accuse the 1^st First Defendant (By Original Action) and the Plaintiff (By Counterclaim) (“1^st Defendant” or “Madam Luk”) and the 2^nd Second Defendant (By Original Action) (“2^nd Defendant” or “Tianlong BVI”) (of which Madam Luk was the sole shareholder) of having misappropriated the sales proceeds. The Defendants deny these claims and, among other things, contend that the agreements on which the Plaintiffs rely in support of their claims were forged.

3.  It is against this backdrop that the following three applications were heard and determined on the opening day of what had been set down as a 15-day trial, each of which is discussed in detail in the later sections of this decision:

(1)  an application by the Plaintiffs for an adjournment of the trial, which I refused;

(2)  an application by the Plaintiffs in the alternative for their witnesses to give oral evidence by way of video-link, which I granted; and

(3)  an application for a stay of the action against the 2^nd Defendant (i.e. Tianlong BVI), which I granted.

B.  ADJOURNMENT OF THE TRIAL

(1)  Relevant legal principles

4.  Adjournments of hearings should only be granted in exceptional circumstances. This even more so where what is being sought is an adjournment of trial dates. The court expects litigants and their legal representatives to treat procedural timelines seriously. This applies with greater force where milestone dates are concerned. Adjournments should not be sought lightly, but should one truly be necessary, an adjournment application should be made at the earliest reasonably available opportunity, so as to minimise the inconvenience that would be caused to the other parties in the case and also to other court users.

5.  This is consistent with the guidance laid down in earlier case law on the principles by reference to which adjournment applications fall to be considered, which are distilled below, supplemented by observations of my own as to how those principles ought to apply in practice:

(1)  The court should not grant an application to vary a milestone date unless there are exceptional circumstances justifying the variation. Trial dates are considered milestone dates.[2]

(2)  Ultimately the court undertakes a balancing exercise, in which the competing interests of the party seeking an adjournment are weighed against the party resisting the adjournment.

(3)  The balancing exercise which the court has to undertake is fact-sensitive.[3] It therefore follows that just because a court had, in another case, acceded to (or refused) an adjournment application for a similar reason to that being relied upon by the applicant in the present case is not conclusive.

(4)  Particular consideration needs to be given to the likely extent to which an adjournment would resolve the issues which gave rise to the adjournment application to begin with.

(5)  The relevant circumstances which a court is entitled to take into account includes the timing of the adjournment application and its likely impact on other court users.

(6)  Active consideration should be given to whether there are any workarounds or other directions that could reasonably be made by way of alternatives to the grant of an adjournment.[4]

(2)  Application of the relevant principles to the present case

6.  The application before me was an example of the sort of case which failed to clear the high threshold of exceptional circumstances that would warrant an adjournment of the trial dates. Having taken all relevant considerations into account, I did not consider the Plaintiffs’ adjournment application to be justified. The reasons for my decision are sevenfold:

(1)  The Plaintiffs’ summons for an adjournment was taken out on Friday, 10 April 2026, the working day before when the trial was due to commence. The application was listed to be heard in the morning of what should have been the opening day of a 15-day trial. This was unfortunate.

(2)  The timing of the application was even more regrettable in circumstances where the principal reason which precipitated the application, namely that nine out of 12 of the Plaintiffs’ factual witnesses could not apparently be located and another witness had apparently since died, were matters which the Plaintiffs should have discovered earlier on:

(a)  Indeed, the Plaintiffs say they had lost contact with these 10 witnesses of fact over the preceding two years. However, this invites questions as to how it came to pass that the proposed trial timetable that was presented to the court for its approval at the pre-trial review (“PTR”) on 19 November 2025 not only included these ten individuals (including the deceased witness) on the roster of the witnesses who would be giving oral evidence at the trial.

(b)  The indicative trial timetable was sufficiently detailed so as to suggest specific date/time slots for each such witness’ oral testimony, the reasonable inference being that all of the witnesses on the roster had been consulted as to their prospective availability to give oral evidence (which would obviously not have been possible if they could not in fact be found or were dead).

(3)  The gravamen of the Plaintiffs’ submissions were that an adjournment should be granted, not least because one of the absent witnesses, Mr Zhang Dacheng (also known as Mr Zhang Kaiming), is a key witness:

(a)  The Plaintiffs say that they had made “many attempts to reach him” and that despite this “Mr Zhang has completely gone missing/uncontactable by [the Plaintiffs]” and, what is more, “only Mr Zhang would know why he has decided to disappear.”

(b)  The clear impression I formed from the Plaintiffs’ own submissions is that they had done their level best to repeatedly contact Mr Zhang Dacheng and to secure his attendance at the trial. Indeed, in response to a question I had posed, the Plaintiffs’ counsel confirmed the Plaintiffs had taken all reasonably necessary steps to locate Mr Zhang Dacheng and the other missing witnesses. Against that backdrop, I do not think an adjournment is warranted. In circumstances where none of the missing witnesses were found despite the Plaintiffs having taken all reasonably necessary steps to find them, I fail to see how an adjournment would help matters. So far as the deceased witness is concerned, an adjournment would obviously not assist.

(c)  Nothing of substance turns on the reliance placed by the Plaintiffs on the claimed amount being significant (approximately RMB 330 million) as a reason for granting an adjournment:

(i)  The size of the amount in dispute is a neutral factor at best. What is crucial as a first-step analysis, at least so far as the present application is concerned, is an assessment of the likelihood of the missing witnesses (especially Mr Zhang Dacheng) turning up were an adjournment granted.

(ii)  In circumstances where the Plaintiffs confirm they had done all that they reasonably could in order to locate the missing witnesses, I fail to see how the adjournment could get off the ground, even before the position of the 1^st Defendant (i.e. Madam Luk) is taken into account for the purposes of the balancing exercise the court has to perform.

(4)  This is all reinforced by the fact that, when matters are considered from Madam Luk’s perspective, the grant of an adjournment would undoubtedly cause her prejudice:[5]

(a)  Serious allegations have been made by the Plaintiffs against Madam Luk. It would be unfair to vacate the trial dates and thus prolong the time by which these allegations are determined. This is even more so given that this action commenced back in 2016 and, what is more, suitably substantial interval of time would likely elapse before a refixed trial could take place. As I observed in the opening paragraph of this decision, an effective civil justice system is one by which disputes are determined in a fair and timely manner.

(b)  The unfairness that would result if an adjournment is granted is reinforced by the fact that Madam Luk and the other two factual witnesses who were being called on her behalf (namely Ms Jin Shan Shan and Mr Wilfridus Brouwer, who is formerly of AO Smith) were ready to give oral evidence at the trial as scheduled.[6]

(c)  Furthermore, fairness is to be assessed not only through the bilateral lenses of the opposing parties in any given litigation, but in circumstances which also take into account the needs of other court users. Judicial and court resources are not unlimited and the re-fixing of a trial (especially one as long as that needed for the current action) would inevitably have an impact on other cases that are currently pending before the courts. This coheres with and explains why the courts in other cases (and the Rules of the High Court) counsel against a variation of a milestone date unless there are exceptional circumstances.

(d)  Taking all circumstances into account, the balance of justice lies firmly against the grant of an adjournment.

(5)  For the avoidance of doubt, I wish to make it clear that I am not prepared to accede to the criticism made on behalf of Madam Luk to the effect that the adjournment was not bona fide and that the application had been sought because the Plaintiffs were, in truth, not prepared to proceed to a trial of their claims. In reaching my decision on the adjournment application, I am prepared to proceed on the basis that the Plaintiffs had taken all reasonably necessary steps to secure the attendance of the missing witnesses, although the timing of the application (including the circumstances in which the indicative trial timetable came to be prepared) left much to be desired, on which I elaborate further in paragraph 7 below.

(6)  The Plaintiffs had also sought to make something of the fact that their two remaining witnesses who were able to give oral evidence, namely Ms Zhang Xiaoheng (“Ms Zhang”) and her mother, Madam Xu Qianwen (“Madam Xu”), were nonetheless unable to travel to Hong Kong to do so in person. This was not itself a reason for granting an adjournment as reasonable accommodation could be made for both Ms Zhang and Madam Xu to give evidence by video link. This is an example of the sort of reasonable alternative referred to in paragraph 5(6) above. The Plaintiffs’ alternative application for Ms Zhang and Madam Xu to give evidence remotely by video link is discussed in paragraphs 8 to 11 below.

(7)  At one stage the Plaintiffs appeared to rely on the fact that Tianlong BVI has since been struck off the register of companies in the British Virgin Islands (“BVI”) and would thus need to be restored to the register as a basis for seeking an adjournment. However, this is not a good reason for ordering an adjournment and I set out in paragraphs 12 to 15 below, my views as to how this could be better dealt with whilst the trial against Madam Luk proceeds.

(3)  Observations about hearing estimates and timetables

7.  Before moving on to the other two applications which form the basis of this decision, I wish to add some observations to the point in paragraph 6(2) above about the fact that the indicative hearing timetable presented to the court at the PTR included reference to witnesses who were either missing or dead:

(1)  Consistent with the principle alluded to in the opening paragraph of this decision, it is important that those who need the assistance of our civil justice system to resolve their disputes are able to secure access to the courts.

(2)  To this end, there is a concomitant obligation on all litigants and their legal representatives to take steps to ensure that hearing estimates (and also hearing timetables) are accurate. This includes ensuring that the hearing timetable that is drawn up accurately and realistically reflects the availability of the factual and expert (if any) witnesses who are being called to give oral evidence.

(3)  Somewhat remarkably, in her fourth affirmation dated 10 April 2026 that was served in support of the adjournment application, Ms Zhang’s evidence at [8.3] was that she had learned of the death of the deceased witness (Mr Gao Peng) “several years ago through his daughter”. Against this backdrop, it is not clear to me how the late Mr Gao was nonetheless still identified on the roster of witnesses set out in the indicative hearing timetable and was, in fact, slated to have been cross-examined for half a day at that.

(4)  Hearing estimates and timetables can and do sometimes vary, for reasons which are unanticipated. However, what has happened here is unfortunately a situation that could have been avoided if proper enquiries had been made to ascertain the availability of all the Plaintiffs’ witnesses before an indicative hearing timetable was submitted to the court. Had this been done, it would likely have resulted in a significant reduction in the number of days that would have been set down for trial.

C.  VIDEO LINK EVIDENCE

8.  Turning to the second of the trio of applications before me, this is the Plaintiffs’ application for permission to be granted to Ms Zhang and Madam Xu to give oral evidence remotely by way of a video link. This application was made by way of an alternative to the Plaintiffs’ adjournment application, in that were I to refuse the adjournment application, the Plaintiffs ask for permission for their two remaining witnesses to give evidence by way of video link.

9.  The reasons for the video link application differ slightly in respect of each of Ms Zhang and Madam Luk:

(1)  Ms Zhang’s evidence is that she is restrained by way of an order of the Shanghai courts from travelling to Hong Kong to give evidence in person.

(2)  As for Madam Xu, her age and health conditions render it impractical for her to travel to Hong Kong unless she is accompanied by her daughter, Ms Zhang.

10.  Madam Luk initially opposed the application for video link evidence, the upshot of which is that the court would end up receiving no oral evidence from any of the Plaintiffs’ witnesses from whom written evidence had been served. I did not consider this to be either a reasonable or proportionate order to make. To the contrary, the fact the Plaintiffs’ two remaining witnesses were willing and able to give evidence remotely was a contributory factor to a refusal of the adjournment application.

11.  During the course of the hearing of these applications, perhaps cognisant of the inter-relationship between the adjournment application on the one hand and the remote evidence application on the other, those acting for Madam Luk sensibly ended up tempering their initial objections to the latter and I ultimately granted permission for Ms Zhang and Madam Xu to give evidence by video link. Such an approach would not only enable the trial to proceed, but in circumstances which ensures that there is a fair opportunity for the evidence of the Plaintiffs’ two remaining witnesses to be examined orally. This would strike the right balance between expedition and fairness.

D.  STAY OF ACTION AGAINST TIANLONG BVI

12.  Finally, there was an application by the Plaintiffs for the action against Tianlong BVI to be stayed. It was discovered shortly before the trial was due to commence that Tianlong BVI had been dissolved on 31 October 2019. The Plaintiffs asked for the action against Tianlong BVI to be stayed, pending any application in the BVI for Tianlong BVI to be restored.

13.  Madam Luk who, up until its dissolution, was the sole shareholder of Tianlong BVI, did not oppose this application. Those acting for Madam Luk also informed the court that steps were being taken to restore Tianlong BVI to the BVI register of companies. In the circumstances, I granted the stay application and directed that Madam Luk inform the court and the Plaintiffs of any restoration order that is ultimately made by the BVI courts, whereupon the parties shall have liberty to file and serve written submissions within 14 days thereafter, addressing the consequences of any such restoration in the present action.

14.  Although this stay application was not opposed, I think it helpful to explain why I considered it appropriate to accede to the stay application whilst allowing the trial of the action against Madam Luk to proceed as scheduled. The reason for this was twofold:

(1)  Such a decision is consistent with the expedition/fairness decision matrix which should inform any balancing exercise, in that it allows the trial to progress as scheduled without further delay. I have already made the point in paragraph 6(3) above that I did not consider Tianlong BVI’s dissolution to justify an adjournment of the trial.

(2)  No unfairness could really be said to visited upon any of the parties to this action as a result of such an order, in circumstances where the Defendants had throughout these proceedings run the same case, relied on the same roster of witnesses and shared the same legal representation. In addition, it bears repetition that Madam Luk was the sole shareholder of Tianlong BVI up until its dissolution.

(3)  As I observed in the course of oral argument from counsel for both sides, it is difficult to envisage how the defence case would have been presented differently at trial had Tianlong BVI not been dissolved and were represented at the trial. Neither counsel ventured to express otherwise but, if there are indeed any material differences, pursuant to the directions I had made, the parties (including Tianlong BVI) would have liberty to make submissions on this if and when a restoration order is made in the BVI.

(4)  Such a procedure would, subject to any submissions which the parties may wish to make, allow a judgment that covers the position of both Defendants to be issued so as to finally determine all the claims and counterclaims which have been advanced by all parties in these proceedings.

15.  The decision I have made on the stay application is consistent with the approach set out in a pair of authorities from England and Hong Kong respectively, each of which had to grapple with a choice between ordering a stay of an action against a dissolved defendant as opposed to an order for dismissal. Given the significance of this issue in a case management context, set out below are the salient principles relevant to such applications which have informed my decision to order a stay:

(1)  Where one of the parties has ceased to exist (e.g. deregistration of a corporate litigant), the continuation of proceedings involving such a party would constitute a nullity.[7] To the extent proceedings involve more than two parties, the proceedings as between the other parties (who remain in existence) are capable of progressing.

(2)  In cases involving deregistered corporate litigants, although the decision as to whether or not to order a stay of the proceedings involving the deregistered litigant was a matter for the court’s discretion on the facts of the particular case, generally speaking the correct approach is to stay the proceedings involving the deregistered company pending an application for the company’s restoration to the register, as opposed to dismissing the action.[8] A dismissal is not ideal in circumstances where an order for dismissal might be set aside should the company end up being restored to the register. [9]

E.  COSTS

16.  The Plaintiffs seek their costs of the adjournment application and also ask for any costs order to be made on an indemnity basis and for any such order to be made on an unless basis, in that failure to pay would result in the dismissal of the Plaintiffs’ claims.

17.  As a starting point, I accept that costs should follow the event and, in circumstances where the Plaintiffs’ have been unsuccessful in their adjournment application, it is right that a costs order is made against them in principle.

18.  However, whilst I think it appropriate for the Plaintiffs to be ordered to pay Madam Luk’s costs of the adjournment application, I decline to order that payment is made on the indemnity basis. As I explained in paragraph 6(5) above, I was not prepared to accept the submission made on behalf of Madam Luk that the adjournment was not bona fide and that the application had been sought because the Plaintiffs were not prepared to proceed to a trial of their claims.

19.  The real criticism that might be made of the Plaintiffs’ adjournment application is more to do with the fact that it fell short of the high threshold of exceptional circumstances that would warrant an adjournment of the trial dates: see paragraph 6 above.

20.  However, the fact that I considered the adjournment application not to be a particularly strong one does not, in and of itself, justify an order for indemnity costs. This is because the conduct of the party against whom indemnity costs is sought must be unreasonable to a high degree for such an order to be warranted and unreasonable in this context does not mean merely wrong or misguided in hindsight: Cheung Wei Man Vivien and Chan Kim Thiam v Centaline Property Agency Ltd and others (HCA 286/2000, unreported, 15 December 2006), per Lam J (as he then was) at [6].

21.  Although I have expressed some reservations about the deficiencies about the indicative trial timetable that was presented to the court at the PTR, in considering the extent to which this factors into the decision as to the basis on which the costs of the adjournment application is to be made, it is important to identify the impact this has on the adjournment application itself:

(1)  So far as the adjournment application is concerned, its true impact is as to the timing of the application, in that, had proper steps been taken to identify the availability of the Plaintiffs’ various witnesses for the purposes of preparing the indicative trial timetable, this may well have resulted in the adjournment application being made at the PTR itself, or perhaps even obviated altogether because a decision may have been taken to proceed with the trial on the basis of the witnesses who were available, but with the trial estimate reduced.

(2)  On any view, this does not engage the threshold necessary to warrant the grant of indemnity costs and I have reminded myself in this regard that what matters is whether, looking at all the circumstances of the case as a whole, there is some conduct or some circumstance that takes it out of the norm so as to make it appropriate for costs to be ordered on the indemnity basis: Excelsior Commercial & Industrial Holdings Ltd v Salisbury Hammer Aspden & Johnson [2002] EWCA 879, per Lord Woolf CJ at [32].

22.  So far as Madam Luk’s request for an unless order is concerned, I do not consider it either proportionate or reasonable for the costs order to be made on the basis that the Plaintiffs’ claims are dismissed if and to the extent they fail to pay the costs ordered against them.

23.  In all the circumstances, costs are therefore to be assessed on the standard basis, but not on an unless basis. I order that Madam Luk’s costs of the adjournment application shall be paid by the Plaintiffs to be summarily assessed. I hereby give consequential directions for the summary assessment of costs as follows:

(1)  The 1^st Defendant shall, within 7 days from the date of this decision, lodge and serve a succinct statement of costs.

(2)  The Plaintiffs shall, within 7 days thereafter, lodge and serve a succinct statement of objections in respect of the 1^st Defendant’s statement of costs.

(3)  Unless otherwise directed, the summary assessment of costs shall be by way of paper disposal.

F.  CONCLUSION

24.  For the reasons set out above, I hereby order as follows:

(1)  The Plaintiffs’ application for an adjournment of the trial is dismissed.

(2)  The Plaintiffs’ application for Ms Zhang and Madam Xu to be granted permission to give evidence by video link is granted.

(3)  The Plaintiffs’ application for the action against the 2^nd Defendant to be stayed, pending any application in the BVI for the 2^nd Defendant to be restored, is granted.

(4)  The 1^st Defendant’s costs of the adjournment application shall be paid by the Plaintiffs, to be summarily assessed in accordance with the directions set out in paragraph 23 above.