TONG CHOI YAU v. KONG, SIN MAN (also known as SIN MAN KONG, KEN S KONG, KENNETH S KONG and SINMAN S KONG)

HCA 1056/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 1056 OF 2014

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D E C I S I O N

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The application

1.  The hearing is for the summons that is taken out by the Defendant (“D”) on 18 November 2016 for dismissal of the claim pursuant to the Unless Order of Master H. Au-Yeung dated 2 November 2016 (the “Unless Order”). This application is contested and the parties are legally represented.[1]

2.  Pursuant to the Unless Order, it was ordered that “Unless the Plaintiff do file and serve an affirmation by 4:00 p.m. on 16 November 2016 to affirm the documents set out in paragraph 1(i) to (v) of the Order dated 22 August 2016 made by Master Leong are no longer in the Plaintiff’s possession, custody and power, and when and the reason why they are no longer in his possession, custody and power, the Plaintiff’s action against the Defendant be dismissed with costs of this action to the Defendant, to be taxed if not agreed.”

The Unless Order

3.  Paragraph 1(i) to (v) of the Order dated 22 August 2016 are:

“ 1(i) Purchase Orders issued by Vicstar International Inc. to Daily Fine Industrial Ltd and invoices issued by Daily Fine to Vicstar to prove that Vicstar owed a debt to Daily Fine at the sum of USD668,457.01;

1(ii) Save as to the documents disclosed in the Plaintiff’s 1^st Supplemental List of Documents filed on 4 August 2016, i.e. copy of Report and Financial Statements of Daily Fine Industrial Limited for the year ended 30 November 2008 and copy of Report and Financial Statement of Daily Fine Industrial Ltd for the year ended 30 November 2009, other documentary evidence to prove the payment of money by P to Daily Fine to settle the Debt, including the bank transfer slips;

1(iii) Save as to the tri-parte agreement dated 18 June 2008 as pleaded in paragraph 1 of the Statement of Claim, other written agreement between the Plaintiff and Vicstar for the arrangement that the Plaintiff would in his own personal capacity settle the Debt;

1(iv) Name card of the Defendant; and

  1(v) Name card of the solicitors firm referred to in paragraph 11 of the Witness statement of Tong Choi Yau filed on 16 March 2016.”

4.  The above items correspond with those documents described as paragraph 3(a) to (e) of the 2^nd affirmation of P.[2]

Discussion

5.  It is not disputed that the Plaintiff (“P”) did file the affirmation on 15 November 2016 (the “2^nd Affirmation”), which was filed pursuant to the Unless Order made by Master H. Au-Yeung.

6.  However, the D opines that the affirmation filed was in breach of the Unless Order and took out this summons on 18 November 2016 for the present application.

7.  D submits that the present application turns on whether P has failed to comply with the Unless Order, or alternatively, even if the Unless Order is construed as a time order, whether the purported “compliance” by P was made in good faith or illusory.[3]

8.  D has raised a number of issues in support of this application.  Of those issues, I consider that only whether P has complied with the Unless Order is relevant.  As to the credibility of P and the relevancy of those documents, they are simply irrelevant to this application.

9.  An Unless Order is a draconian order with serious consequences to the party who is in breach of it.  In this case, if P is found to be in breach of the Unless Order, P’s action against D will have to be dismissed with costs of the action to D, to be taxed if not agreed.

10.  Therefore, the question falls squarely on whether P has complied with the substance of the Unless Order.  See paragraph 36 of Daimler AG v. Leiduck [2012] 3 HKLRD 119.  Alternatively, if P has not fully complied with the substance of the Unless Order, whether the sanction is proportionate to the breach.  See §57 of the Daimler case.

11.  The test is whether the sanction of the Unless Order would have taken effect automatically.  See §44 of the Daimler case.

12.  This morning, I have obtained useful assistance from D that the only issue in dispute is in respect of the whereabouts of the other documentary evidence to prove payment of the money by P to Daily Fine to settle the debt, including the bank transfer slips.  P has given the explanation that he had passed the documents over to the provisional liquidators in paragraph 11 of his 2^nd affirmation dated 14 November 2016.  But P admits that there has been no explanation as to whether he had attempted to obtain the same from the bank and when the bank will release those documents to him in order to comply with the Unless Order.

13.  The parties have been referred to the Court of Appeal of the Daimler case.  They have made no further submissions on it.

14.  In the circumstances, D asks this Court to make a further order to require P to make another affirmation in relation to enquiry with the bank, which P has raised no objection.  P asks for 49 days to make the enquiry.  D has no objection to this proposal.

15.  This Court will accede to D’s request.

16.  As to the costs of this application, D submits that since this Court will order P to make another affirmation on the other documents as requested by D, though D has failed to obtain an order in terms of the summons, the Court should award costs to D.  P submits that D has failed its application.  But P has not fully complied with the Unless Order.  He therefore submits that there should be no order as to costs.  D then counter proposes that the costs should be in the cause.  However, upon further discussion with the parties, this Court decides that the more appropriate order should be no order as to costs for this application, including the costs for today’s hearing.  So I order.

Costs and Order

17.  This Court shall now make an Order in terms as follows:

(a) D’s summons be dismissed;

(b) By consent, P shall, by 4:00 pm on 30 March 2017, make an affirmation as to what steps have been taken by him to obtain those “other documentary evidence to prove the payment of money by P to Daily Fine to settle the Debt, including the bank transfer slips” as provided in paragraph 1(ii) in paragraph 3 above, including enquiry from the bank or banks, failing which P’s claim shall be struck out with costs.

(c) The costs are as per paragraph 16 above.