HUNG WING SAN TONY v. KOO SHING SUN AND ANOTHER

HCCW 350/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING‑UP PROCEEDINGS NO 350 OF 2011

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Background

1.  There are two summonses before me today.  Both arise out of my judgment delivered on 26 February 2014 wherein I dismissed the petition for winding-up after a full hearing and made an order nisi on costs against the petitioner. The first summons was taken out by the 1^st respondent seeking a variation of the costs order nisi.  The 1^st respondent asked for indemnity costs and a certificate for two counsel.  The second summons was taken out by the petitioner seeking stay of execution of my judgment and order dated 26 February 2014.

2.  In relation to the first summons, counsel for the 1^st respondent referred me to the Court of Final Appeal’s decision in Town Planning Board v Society for Protection of the Harbour Ltd (No 2) (2004) 7 HKCFAR 114 for the governing principles in the exercise of the court’s discretion to order indemnity costs.  In order to obtain such an order, the successful party should show that the case has some “special or unusual feature”.  It is not confined to cases brought with an ulterior motive or for an improper purpose or where there is some deception or underhand conduct on the part of the losing party. The discretion is unfettered and it is undesirable to attempt to define the circumstances in which orders for indemnity costs are to be made.  The order has to be “appropriate” in the circumstances of the case.

3.  Counsel also referred me to the decision of Deputy Judge Yan SC in Chow Sau Hei v Ho Keung Yuen, Turbo Cheer Development Limited (HCMP 875/2010, 7 August 2013) in which, following the dismissal of a petition, the learned deputy judge made an indemnity costs order on the following grounds:

(i) that the petitioner gave evidence, and ran cases, which he knew to be untrue;

(ii) that the petitioner made grave accusations of cheating and misappropriation of the companies’ funds by the respondent, knowing such allegations to be untrue and unfounded; and

(iii) that the petitioner made numerous allegations against the respondent which were “inconceivable”, “wholly unmeritorious” or unsupported by evidence.

4.  Counsel for the 1^st respondent referred to various parts of my judgment to demonstrate that the petitioner gave evidence and ran cases which he knew to be untrue.  He had accused the 1^st respondent of misappropriation of company’s property and funds which I rejected in my judgment. She also referred me to various passages of my judgment in which I described the petitioner or his cases as “disingenuous”; “dishonest”; “making up his evidence and excuses as he went along”; “utter nonsense”; “preposterous”; “extremely artificial” and “plainly unbelievable”.

5.  The petitioner appeared in person.  His only argument in reply was that in making the costs order nisi, I would have taken those matters into consideration and there is no reason to alter the costs order nisi.

6.  In my judgment, that is not an adequate answer.  At the end of the hearing before I adjourned for judgment to be reserved, there was no application for a more stringent taxation basis from either party.  The costs order nisi was made on the basis of usual taxation basis and is by nature a provisional order.  In the circumstances, I am satisfied that the 1^st respondent has established “special or unusual features” in this case and taxation on indemnity basis is appropriate.

7.  As for the application for certificate for two counsel, it was made on the basis that the case was “factually very heavy and involved substantive cross‑examination of the petitioner”.  It was also said that the result of the case is important to the 1^st respondent as the company still has prospect of a viable business.  Lastly, it was said that the amount involved is high in that HK$6 million is sitting in the 2^nd respondent’s bank account.

8.  With respect, the 1^st respondent has exaggerated the complexity of this case.  There were no legal issues in dispute, let alone difficult ones. The facts were not complex.  Although quite a volume of affirmations were filed, a lot of the contents were repetitive.  It is also true that the volume of documentary exhibits was not small.  Yet, a lot of them had not been specifically referred to at the hearing and I was left to read them during my deliberation.  The extent of cross‑examination was again not so extensive as to bring it outside the norm of an ordinary commercial litigation.   As for the 2^nd respondent which is the subject matter of the petition, it is a company that has ceased most (if not all) of its business operation since around October 2011. Its real substantial and valuable asset is the HK$6 million sitting in its bank account.  In all the circumstances, I am not persuaded that it is a suitable case in which I would exercise my discretion to grant a certificate for two counsel. 

9.  As for the petitioner’s application for stay of execution, his Chinese summons was issued pursuant (apparently) to Order 45, rule 11 and Order 47, rule 1.  In his skeleton submissions, he mentioned that he has appealed against my judgment.  Since he is a litigant in person, I am prepared to consider his application as if it is also on the basis of Order 59, rule 13(1).

10.  As explained by the Court of Appeal in Credit Lyonnais v SK Global Hong Kong Ltd [2003] 4 HKC 104, at §§14‑15 and §28, Order 47, rule 1 relates to a stay of execution by writ of fiery facias and does not empower the court to order a stay in relation to other forms of execution or enforcement of judgment.  In the present case, the effect of my judgment and order is merely to dismiss the petition for winding‑up.  Order 47, rule 1 is wholly inapt.

11.  As for the application of Order 45, rule 11, the Court of Appeal explained that it empowers a court to order a stay of execution of a judgment or order on grounds or matters which have occurred since the date of the judgment or order.  Furthermore, the matters that justify a stay would be matters which would have prevented the order from being made, or which would have led to a stay of execution if they had already occurred at the date of the order [see Tam Ho Man v Wong Kwok Tai (HCA 4736/1985, Hunter J, 20 October 1986)].  In the petitioner’s affirmation in support, he only referred to one instance which apparently occurred post‑judgment, ie his removal from the board of directors at an Extraordinary General Meeting of the company.  At the hearing, the petitioner added that after his removal from directorship, the 1^st respondent and his son would be in sole control of the company’s bank account in which the sum of HK$6 million is kept. 

12.  Counsel for the 1^st respondent submitted that the said removal of the petitioner from the board of directors was wholly justified since the court specifically found as fact that the petitioner had acted in breach of fiduciary duties.  As for the control over the bank account, it happened even well before the judgment.  In fact, it was one of the complaints in the petition that the 1^st respondent’s son was added as a director and then the bank mandate was changed.  In any event, counsel for the 1^st respondent submitted that these are not matters that would render the basis of the judgment and order invalid or inappropriate in any sense.  She further pointed out that there was absolutely no evidence to show that the current directors of the 2^nd respondent would not apply the funds of the company for legitimate purposes of the company.  I agree.  Order 45, rule 11 is not engaged.

13.  The only remaining basis for stay is Order 59, rule 13(1).  At the hearing, I have been supplied with a copy of the petitioner’s Notice of Appeal filed on 21 March 2014 (CACV 58/2014).  It contained detail grounds of appeal written in Chinese.  I agree with the submission of counsel for the 1^st respondent that the purported grounds are all challenges to my findings of fact and credibility in the judgment.  They are effectively the re‑run of the petitioner’s arguments presented at the hearing of the petition.  I was referred to the decision of Ma J (as he then was) in Star Play Development Ltd v Bess Fashion Management Co Ltd [2007] 5 HKC 84 in which his Lordship held that the existence of an arguable appeal (that is, one with reasonable prospects of success) is the minimum requirement before a court would even consider granting a stay.  I am not convinced that there exist arguable grounds of appeal.  In the circumstances, I refuse to grant a stay of my judgment and order which in any event involve merely the dismissal of a petition for winding‑up.

14.  In conclusion:

(1) I vary my costs order nisi in that I now order the petitioner to pay the respondents costs of the petition (including all orders and costs reserved), to be taxed if not agreed on indemnity basis.

(2) I dismiss the petitioner’s application for stay of execution of my judgment and order dated 26 February 2014.

15.  As for costs of the variation summons, the 1^st respondent is only half successful.  The petitioner succeeds in resisting the application for certificate for two counsel.  I exercise my discretion to make no order as to costs.  In relation to the stay application, I order that the petitioner do pay to the 1^st respondent costs of the summons, to be taxed if not agreed on part‑and‑party basis.