SECURITIES AND FUTURES COMMISSION v. CHINA METAL RECYCLING (HOLDINGS) LTD AND OTHERS

HCMP 1536/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO. 1536 OF 2015

(ON APPEAL FROM HCCW NO. 210 OF 2013)

________________________

________________________

________________________

JUDGMENT
________________________

Hon Lam VP (giving the Judgment of the Court):

1.  In this renewed application for leave to appeal against the costs order of Harris J made on 12 March 2015 (leave was previously refused by the learned judge on 10 June 2015), Mr Man SC representing Mr Chun relied on one ground only: that the judge took account of matters which Mr Chun had no opportunity to contest. The basis for such argument is that the judge said in his judgment on costs of 12 March 2015 that he took account of his reasons of 9 March 2015 for making the winding-up order in drawing the inference that Mr Chun had been behind the company’s defence of the petition and been paying for it.

2.  The costs order was made in the context of an unsuccessful application to discharge the appointment of provisional liquidators.  The application to discharge was dismissed by the judge on 12 November 2014 [“the Discharge Judgment”]. The judge initially made an order nisi for costs against a Mr Yan, a director of the company on indemnity basis.  There were applications to vary the costs order by the petitioner (the SFC) and the provisional liquidators, in which they sought an order against Mr Chun together with Mr Yan.  Mr Chun was a party to those applications and he had through counsel put forward submissions.

3.  The judge deferred his decision on these applications until the trial of the winding-up petition.  The judge did not do so secretly.  Instead in a letter of 16 January 2015 he informed the parties (including Mr Chun) of his intention to do so.  It is quite clear from this letter that the judge adopted such a course because there was a possibility of the other director involved (Mr Yan) would give evidence at the trial of the winding up petition and his cross-examination might be relevant.  Thus, if Mr Chun was concerned about the judge being influenced by what happened at the trial in determining the costs of the discharge application, he could have appear at the petition, whether by counsel or otherwise.

4.  Mr Chun did not take part in the trial (which had become uncontested) because he applied (and the court granted leave) for his withdrawal from the proceedings on 12 November 2014.  As mentioned, Mr Chun remained a party to the costs application and submissions were advanced on his behalf after 12 November 2014.

5.  As said, the petition became uncontested and no evidence was led.  Mr Yan did not give evidence.  Mr Chun did not attend.  But it is a matter of his own choice rather than him being excluded from the trial by the court.

6.  Thus, Mr Man properly accepted that there was nothing which Mr Chun had not been given any opportunity to answer.

7.  The only paragraphs in the reasons of 9 March 2015[“the Winding-up Judgment”] which are relevant to such inference are §§22 to 24 thereof,

“22. Shortly after these proceedings were commenced by the Petitioner in July 2013, on 2 August 2013, Mr Chun asked for leave to be joined as a party.   He (and Wellrun) subsequently filed affirmations in opposition, their Points of Defence, followed by witness statements from Mr Chun and Mr Chen Sijin (the head of the China Southern Region of the Group) in response to the Petitioner’s substantive allegations against the Company.

23. It is clear from the Company’s original Points of Defence and Mr Yan’s affirmation that the Company did not independently advance a substantive defence, choosing, instead, to rely almost entirely on the defence and evidence put forward by Mr Chun.

24. Mr Chun played a significant role throughout these proceedings, including in the Discharge Application.   In my assessment Mr Chun, in conjunction with Mr Yan, has been uncooperative and has used excuses to avoid assisting the Provisional Liquidators in taking control of the Company’s subsidiaries: paragraphs 36-37 of the Discharge Application Judgment.   It is plain that Mr Chun, who indisputably was the Company’s founder, Chairman and CEO and the person exercising control over the Company and its subsidiaries prior to the appointment of the Provisional Liquidators, clearly would have knowledge of the matters which give rise to the Commission’s complaints.   Mr Chun was the main protagonist in these proceedings and had worked closely with Mr Yan in the conduct of the defences.  It seems an obvious inference that every major step taken by Mr Yan on behalf of the Company in these proceedings was taken with the knowledge or approval of Mr Chun.”

8.  Those paragraphs added little to what the Judge had already said in the Discharge Judgment on which Mr Chun had ample opportunity to make submissions in the context of the costs application against him.

9.  Of the three matters set out in §§22 to 24 of the Winding-up Judgment, apart from what had already been set out at §§36-37 of the Discharge Judgment, the rest were simply procedural history in the proceedings whilst Mr Chun was a party.

10.  There is simply nothing Mr Man can pinpoint which counsel can reasonably argue that Mr Chun had no opportunity to contest. The intended ground of appeal has no merit whatsoever.

11.  An appeal against a decision of a judge on costs is an appeal against the exercise of discretion by the judge.  An applicant faced a high threshold in that regard, see Ho Shu Kwong v Chiang Chun Yuan [2002] 3 HKLRD 419.  Further, in the present context, the judge was plainly right in coming to the conclusion that Mr Chun was behind the company’s defence of the petition and had been paying for it.

12.  We are not satisfied that the intended appeal has any reasonable prospect of success and we see no reason why leave should be granted in the interest of justice.

13.  With respect, we are of the view that this is an application which is so unmeritorious that it should not have been brought.

14.  We dismiss the application for leave and order Mr Chun to pay the costs of the SFC and the Provisional liquidators on indemnity basis.  Based on their respective costs statements, we fix such costs at $69,145 and $57,205 respectively.