AENEAS CAPITAL LTD AND OTHERS v. CHEUNG WING TSZ

HCA 655/2021

[2025] HKCFI 3949

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 655 OF 2021

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DECISION

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INTRODUCTION

1.  This Decision resolves the question of costs in relation to the application of discovery against non-party taken out by the defendant (by Original Action) and plaintiff (by Counterclaim) (“Cheung”) by virtue of the summons filed on 3 June 2025 (“the Non-Party Discovery Summons”).

BACKGROUND

2.  In the present case, one of the issues to be resolved is whether the opening of a securities account with a company known as Futu Securities International (Hong Kong) Limited (“Futu”) under Cheung’s names (“the Futu Account”) as well as the trading of shares through such an account have been done without Cheung’s authorisation. 

3.  According to the case of the plaintiffs (by Original Action) and defendants (by Counterclaim) (“the defendants”,and “D1”, “D2”, “D3” and “D4” respectively), the Futu Account was opened with Cheung’s full authorisation, so that D1 could manage Cheung’s funds in accordance with an agreement between D1 and Cheung (“the Client Agreement”) under which D1 was obliged to accumulate shares in Aptorum Group Limited which shares were traded on the NASDAQ global market.

4.  On the other hand, it is alleged by Cheung that the defendants conspired to injure her, and one of the material facts relied on is that D1 had used a phone number (64xx xx83[1]) (“the Designated Phone Number”) and an email (“the Designated Email Account”), neither of which  belonged to Cheung, to open the Futu Account.

5.  On 16 April 2024, Cheung took out a specific discovery application against the defendants (“the Specific Discovery Summons”) in an attempt to obtain, among others, the following documents:

(1)  All emails received from, or sent to, Futu by the Designated Email Account (“the Futu Emails”);

(2)  All SMS messages received from, or sent to, Futu by the Designated Phone Number, and all records of communication between the said number and Futu (“the Futu SMS”);

(3)  All SMS messages received from, or sent to, Futu by a phone number (91xx xx73[2]) (“the Designated Phone Number No.2”), and all records of communication between the said number and Futu (“the Futu SMS No.2”).

(“the Requested Documents”)

6.  On 24 April 2024, the Registrar Kwang made, among others, the following orders:

(1)  The defendants do file an affirmation stating whether the Requested Documents are, or have at any time been, in their possession, custody or power, and if the Requested Documents were no longer in the defendants’ possession, custody or power, stating when they parted with the same and what has become of them;

(2)  The defendants do produce the Requested Documents for inspection and provide Cheung with copies thereof insofar as they were within their possession, custody and/or power.

(“the Registrar’s Order”)

7.  Pursuant to the Registrar’s Order, D3 filed his 3^rd Affirmation on 11 June 2024, in which he affirmed that:

(1)  The Designated Phone Number was tied to a prepaid SIM card (“the Prepaid SIM Card”) which was assigned to a mobile phone (“the Designated Mobile Phone”) provided by D1’s operations team to him for the purpose of placing and executing trade orders in relation to the Futu Account;

(2)  After the Client Agreement was terminated on around 21 July 2020, he had returned the Designated Mobile Phone to D1’s operations team;

(3)  Although the Futu Emails were previously in the possession, custody and power of D1, that was no longer the case because the Designated Email Account deployed a two-factor authentication process, which required typing in the correct verification code sent to the Designated Phone Number to complete the login process.  However, the Designated Mobile Phone and the Prepaid SIM Card had been lost by 26 February 2024.  As a result, D1 was unable to receive any verification code for the purpose of logging into the Designated Email Account;

(4)  Although the Futu SMS were previously in his possession, custody and power, he had parted with them because he had retuned the Designated Mobile Phone to D1’s operations team;

(5)  Although the Futu SMS were previously in the possession, custody and power of D1, that was no longer the case because the Designated Mobile Phone and the Prepaid SIM Card had been lost by 26 February 2024;

(6)  The Designated Phone Number No.2 was not a number designated by the D1’s operations team, nor had this number ever been used by D1 or himself.  The user of this number could not be identified. Hence, the Futu SMS No.2 have never been in the possession, custody or power of D1 or himself.

8.  In light of the said Affirmation, Cheung did not pursue the specific discovery matter further.

9.  However, as aforesaid, Cheung took out the Non-Party Discovery Summons on 3 June 2025.  Orders as same as those sought under the Specific Discovery Summons were sought, save that the receiving end this time is the respondent.

10.  In Cheung’s 8^th Affirmation which was filed in support of the Non-Party Discovery Summons, she stated, among other things, that:

(1)  On 14 May 2025, she received an email from a police officer, informing her that, upon police investigation, the Designated Phone Number was found to be registered by the non-party (i.e. Ling Maximilian Shui Hung);

(2)  She took the view that it was false and misleading for D3 to allege in his 3^rd Affirmation that the Designated Phone Number was tied to a prepaid SIM card;

(3)  In light of this latest information, she believed that the respondent has or likely to have the Requested Documents because:

(a)  If he is the registered owner of the Designated Phone Number, the Futu SMS would have been received by him;

(b)  Since he is the user/owner of the Designated Phone Number, he should also be able to log into the Designated Email Account since the two-factor authentication would be sent to the Designated Phone Number;

(c)  According to other evidence, the user of the Designated Phone Number would also be able to access the Designated Phone Number No.2;

(4)  Further, it was discovered that the respondent was actually a close associate of the defendants:

(a)  he has been or has held himself out as the Investment Manager of Aeneas Group Limited since December 2018, and it is the defendants’ own case that D1 was at all material times owned by Aeneas Group Limited;

(b)  he had been one of the directors of D2, together with D3.

11.  The call-over hearing of the Non-Party Discovery Summons was fixed to be heard by this Court on 15 July 2025.

12.  On 9 July 2025, the respondent’s solicitor filed an Affirmation which exhibited the respondent’s own draft affirmation (“the respondent’s 1^st Affirmation”), saying that the respondent was out of town at the time and therefore could not make the Affirmation. 

13.  The respondent’s 1^st Affirmation stated, in gist, that:

(1)  Cheung had never made any request to him before she took out the Non-Party Discovery Summons.  If she had done so, he would have explained to her or her solicitors that he did not have any of the Requested Documents in his possession, custody or power;

(2)  He was a director of D1 until 30 November 2024;

(3)  In around 2018, he procured a prepaid SIM card corresponding to the Designated Phone Number to be registered under his name;

(4)  After he had procured the said SIM card, he handed it over to D1’s operations team for its use.  Since then, he had nothing to do with the SIM card;

(5)  He did not set up the Designated Email Account nor did he have the password thereof.  Hence, he had no access to that email account;

(6)  He had been informed by the Office of the Communications Authority (“the Authority”) that they did not hold the SMS record;

(7)  He had also been informed by the operator of the Prepaid SIM Card that they only retained the SMS record for 90 days following the termination of the service;

(8)  He had no knowledge of the Designated Phone Number No.2, and did not know who registered such a number.

14.  On the day before the call-over hearing, the respondent served his 2^nd Affirmation on Cheung, in which he supplemented that it had further been confirmed by the operator of the Prepaid SIM Card that although the respondent was the registered user thereof, the service of that SIM card could not be reconnected because such service had been disconnected for over 90 days (the service termination date of the said card is 11 July 2023).

15.  At the call-over hearing on 15 July 2025, Cheung’s counsel informed this Court that, upon perusal of the respondent’s 2^nd Affirmation, he took the view that the application under the Non-Party Discovery Summons had been substantively resolved.   However, the parties could not agree on the costs order to be made. 

16.  Hence this Decision.

PARTIES’ RESPECTIVE STANCES

17.  The parties’ respective stances are as follows.

18.  Cheung submitted that:

(1)  The defendants should at least be liable for her costs of the call-over hearing, if not her costs of the Non-Party Discovery Summons.  Alternatively, her costs should be in the cause.

(2)  The defendants should also bear the respondent’s costs, or alternatively, there should be no order as to the respondent’s costs.

19.  The defendants’ stance is that Cheung should be liable for the costs of both the defendants and the respondent, and that such costs should be assessed on indemnity basis.

20.  The respondent asked for an order that his costs be borne by Cheung on indemnity basis.

THE LEGAL PRINCIPLES

21.  This is a non-party discovery application, which was made pursuant to section 42(1) of the High Court Ordinance (Cap.4, Laws of Hong Kong) and Order 24 rule 7A(2) of the Rules of the High Court (Cap.4A, Laws of Hong Kong) (“RHC”).

22.  Order 62 rule 3(12) of the RHC provides that:

“Where an application is made in accordance with Order 24, rule 7A or Order 29, rule 7A, for an order under section 41, 42 or 44 of the Ordinance, the person against whom the order is sought shall be entitled, unless the Court otherwise directs, to his costs of and incidental to the application and of complying with any order made thereon […]”

23.  In other words, the starting point is that the non-party should be entitled to costs.  Furthermore, the non-party’s costs, if awarded, would normally be taxed/assessed on indemnity basis: Ngan In Leung & Others v Chu Yuet Wah (No. 1) [2013] 1 HKLRD 717, at [87].

24.  However, the non-party’s entitlement is not absolute, for the Court has been empowered by Order 62 rule 3(12) of the RHC to “otherwise direct”.

25.  In this regard, it is trite that costs are a matter of wide discretion for the judge.  The discretion is to be exercised in accordance with principles and with a view to reality and justice: Mimi Kar Kee Wong Hung v Raymond Kin Sang Hung (FACV 10 & 11/2014, unreported, 7 July 2015) at [7].

26.  The RHC has not specifically provided for the costs of the applicant vis-à-vis the other party in the action.  In such a case, the parties’ costs should be dealt with in the usual way.  The relevant principles on the exercise of discretion as to costs have been summarised by Lam VP (as he then was) in YBL v LWC (No 2) [2017] 2 HKLRD 783 at [10]:

“(a) whilst the courts often start with the proposition of costs following event, it is no longer a general rule but a starting point, see Hung Fung Enterprises v Agricultural Bank of China [2012] 3 HKLRD 683;

(b) there have to be some justifications for depriving a successful party of his costs;

(c) in measuring who is the successful party and the extent of his success, the court must examine the reality and justice of the case. Thus, in Hysan Development Co Ltd v Town Planning Board (No 2) (2016) 19 HKCFAR 635, the Court of Final Appeal made no order as to costs notwithstanding the success of the appellants in reversing the Court of Appeal's decision because they did not achieve the full objects of their appeals;

(d) in addition, under Order 62 Rule 5, the court in exercising its discretion shall take into account the matters set out in Rule 5(1) as may be appropriate in the circumstances;

(e) Rule 5(2) highlights some conduct which the court may take into account including whether it is reasonable for a party to take an issue, the manner in which the matter was pursued or defended, the extent of success, and conduct before, as well as during the proceedings;

(f) if a successful party has brought the litigation upon himself or has done some wrongful act in the course of the transaction, he could be deprived of his costs.”

DISCUSSION

27.  I will first of all deal with the respondent’s costs.

28.  This Court’s attention has been drawn by the respondent’s counsel to the case of Jowers v Kinney [2019] 5 HKLRD 686, in which it was held that:

“If a litigant is able to obtain copies of documents without a court order, a court order is ‘unnecessary’. Since P1 made no attempt to invite P1’s Contacts to provide copies of the relevant documents to him, and there is no evidence that P1’s Contacts would have refused his request if it was made formally (possibly by solicitors' letters), ordering specific discovery against Ds is unnecessary at this stage. In my view, on the evidence before me, I should only order specific discovery if prior requests for copies of the relevant documents had been made to P1’s Contacts, and P1’s Contacts had refused to assist. The failure on the part of P1 to invite P1’s Contacts to assist him appears to me to be fatal to Ps’ present application for specific discovery.” (at [25])

29.  It is also stated in Commentary 24/8/1 of Hong Kong Civil Procedure 2025, Vol.1 that:

“The court will not make a discovery order if the litigant is able to obtain copies of those requested documents from a third party without a court order, and there is no evidence that such requests would have been refused by such third party.”

30.  The respondent’s counsel argued that, pursuant to Order 24 rule 8(2) of the RHC, the Court shall not make any discovery order against a non-party unless it is “necessary” to do so.  It was therefore submitted by the respondent that, on the strength of the said case authority:

“As explained at Ling 1^st §11, [Cheung] made no such prior request through her solicitors (or otherwise). Instead, her solicitors unceremoniously showed up at R’s flat one morning and served the [Non-Party Discovery] Summons on him. In other words, P did not even attempt to satisfy the fundamental threshold of necessity, and for that reason the Summons was liable to be dismissed in limine.”[3]

31.  As mentioned, pursuant to Order 62 rule 3(12) of the RHC, the non-party (i.e. the respondent) should be entitled to his costs unless the Court is satisfied that the circumstances of the case justify a departure from such a usual order.  Hence, the respondent’s argument is unnecessary.  It should be up to Cheung to satisfy this Court that the usual order should not be made, if she so wished.

32.  In any event, with greatest respect, the respondent’s argument is misconceived. 

33.  Order 24 rule 8(2) stipulates that:

“No order for the disclosure of documents shall be made under section 41 or 42 of the Ordinance, unless the Court is of opinion that the order is necessary either for disposing fairly of the cause or matter or for saving costs.”

(emphasis added)

34.  It can be seen that the word “necessary” should not be interpreted in isolation, but together with the purposes which follow. In other words, the question of “necessity” is in relation to (1) disposing fairly of the cause or matter and (2) saving costs.  Here, the “cause or matter” means the claims and counterclaims of this action.  The question which should be asked is not whether it is necessary to make the order so as to obtain the documents requested.

35.  The matter can be analysed by considering an application for further and better particulars of pleadings.  The relevant rule is Order 18 rule 12 of the RHC.  Under Order 18 rule 12(3B), a similar requirement is laid down:

“No order shall be made under paragraph (3) unless the Court is of the opinion that the order is necessary either for disposing fairly of the cause or matter or for saving costs.”[4]

36.  However, it is noted that, under Order 18 rule 12(6), it is also stated that:

“Where the applicant for an order under this rule did not apply by letter for the particulars he requires, the Court may refuse to make the order unless of opinion that there were sufficient reasons for an application by letter not having been made.”

37.  In my view, there is no need to have Order 18 rule 12(6) if the “necessity” test has the effect which is now advocated by the respondent. 

38.  Although Order 18 rule 12 is not applicable to the present application, I cannot see why the same logic should not be applicable herein.

39.  In fact, it is noted that the requirement of “necessary either for disposing fairly of the cause or matter or for saving costs” appears in various rules within the RHC, namely, Order 18 rule 12 (further and better particulars), Order 20 rule 8 (amendment of pleadings and certain other documents), Order 24 rule 8 (discovery), Order 24 rule 13 (production of documents) and Order 26 rule 1 (interrogatories).  The meaning of the phrase should be the same.

40.  Hence, with greatest respect to the learned Master in Jowers v Kinney (supra), that case is wrongly decided and should not be followed.  There is no requirement that a “pre-application request” must be made before an application for non-party discovery is taken out, even though that may be a matter which the Court would take into account when deciding on costs.

41.  Coming back to the question of whether there is any justification to depart from the usual costs order, although Cheung had pointed her fingers at the respondent, for example, by saying that he had failed to disclose his involvement when she made her specific discovery application against the defendants back in April 2024, it is Cheung’s primary position that the respondent should be entitled to his costs.  Her only contention is that such costs should be borne by the defendants.

42.  In the circumstances where there is no evidence to show that the respondent was involved in the handling of the Specific Discovery Summons in April 2024, I cannot see why he should be blamed in any way even if the defendants (in particular D3) have had any misconduct in relation thereto (I will deal with this matter below).  Hence, I am of the view that the Court should not depart from the usual costs order, namely, that the respondent should be entitled to his costs of and incidental to the application.

43.  The next question is whether the respondent’s costs should be borne by the defendants or Cheung or both.

44.  In this regard, it should be noted that Order 62 rule 3(12) of the RHC only provides for the respondent’s entitlement to costs. However, paragraph (12) has stopped short of specifying who should be responsible for such costs.  The intention is obvious: the Court is given unfettered discretion to decide on the matter, depending on the circumstances of the case.

45.  Here, Cheung argued that the defendants should be liable for costs because:

(1)  The application is necessitated by the defendants’ misconduct in the previous specific discovery application in that, in D3’s 3^rd Affirmation, he had misled the Court in that the Designated Phone Number was not registered under anybody’s name but just tied to a prepaid SIM card;

(2)  Cheung should be regarded as the successful party;

(3)  Cheung has been reasonable in her conduct of the present application;

(4)  It is reasonable for Cheung not to request for the documents from the respondent before taking out the Non-Party Discovery Summons.   

46.  On the other hand, the defendants submitted that Cheung should be liable for the respondent’s costs for the following reasons:

(1)  Cheung has in effect withdrawn the Non-Party Discovery Summons;

(2)  Cheung’s application is premised upon the respondent being the registered owner of the Designated Phone Number, which is said to allow his access to (1) the Designated Email Account and the Futu SMS and (2) the Designated Phone Number No.2.  However, it turns out that such a basis is completely wrong;

(3)  Cheung has acted wholly unreasonably in issuing the application before approaching the respondent for voluntary disclosure;

(4)  The application would have been dismissed anyway by reason of the principle laid down in Jowers v Kinney (supra);

(5)  The defendants should not be blamed for Cheung’s making of the application.

47.  I hold the following view:

(1)  Although I do not think there is adequate basis to hold that D3 had knowingly misled the court by virtue of what he stated in his 3^rd Affirmation, I am of the view that he has at least given a wrong impression that the Prepaid SIM Card was not registered under anybody’s name, such that once it was lost, there was no way that the data in relation thereto could be retrieved;

(2)  Therefore, upon being informed by the Police that the Designated Phone Number was in fact registered under the respondent’s name, it was reasonable for Cheung to pursue the matter again;

(3)  As explained, I hold the view that Jowers v Kinney (supra) is wrongly decided.  Having said that, as a matter of principle, the Court may take into account all the circumstances when deciding on costs, and “all circumstances” may include whether the applicant for non-party discovery has made “pre-application request”;

(4)  In the present case, given the respondent’s previous relationship with the defendants, it is reasonable for Cheung to take out the Non-Party Discovery Summons without asking the respondent for the Requested Documents by letter first;

(5)  The focus of the Court should not be solely on finding out which party is the winner as far as this non-party discovery application is concerned because, while on one hand, Cheung succeeded in obtaining an affirmation from the respondent to confirm whether he has or has had the Requested Documents, on the other hand, Cheung could not achieve her ultimate purpose of getting the documents she wanted;

(6)  The agreement on the part of Cheung not to pursue the application any further at the call-over hearing upon perusal of the respondent’s affirmations cannot be seen as her acceptance of defeat.  She only acted in accordance with the well known principle that the respondent’s affirmations should normally be taken to be conclusive;

(7)  While Cheung ultimately could not get her hands on the Requested Documents, it was only because of a practice not known to her beforehand (namely, the data would only be kept by the operator of the Prepaid SIM Card for 90 days upon termination of service).  In fact, such information shows that Cheung was at least partly correct: the data in relation to the Prepaid SIM Card could still be retrieved even if the card had gone lost (even though only for a limited period of time unbeknown to her) if the card was registered under somebody’s name, as opposed to the suggestion of D3 in his 3^rd Affirmation that once the card was lost, no data could be retrieved (hence his assertion that the Requested Documents were no longer in the possession, power or custody because the Prepaid SIM Card could no longer be found).

48.  Having considered the above matters, I am of the view that the respondent’s costs should initially be borne by Cheung and the defendants equally, but such costs shall be treated as part of their respective costs of this action. 

49.  For the same reason, I am of the view that a fair order in relation to the respective costs of Cheung and the defendants in relation to the Non-Party Discovery Summons should be costs in the cause.

50.  For the sake of completeness, I note that it is the defendants’ submissions that their costs should be borne by Cheung not on the usual party-and-party basis but indemnity basis, on the ground that the Non-Party Discovery Summons is totally without merits. 

51.  With greatest respect, what is totally without merits is not the Non-Party Discovery Summons but the defendants’ submissions for indemnity costs, which should not have been made. 

52.  Practitioners are once again reminded that they should exercise their good common sense when deciding whether the seriousness of the case is to the extent that it worth incurring time and costs on the pursuance of indemnity costs: Holinail H. K. Limited v Matthias Pou & Others [2025] HKCFI 1157, at [41] – [48].

ORDER

53.  I therefore make the following orders:

(1)  The respondent’s costs of and incidental to the Non-Party Discovery Summons (“the respondent’s Costs”) shall be initially borne by the parties to this action equally;

(2)  The respondent’s Costs shall be summarily assessed and shall be paid by:

(a)  the defendant (by Original Action) and plaintiff (by Counterclaim) (50%); and

(b)  the plaintiffs (by Original Action) and defendants (by Counterclaim) (50%);

(3)  The amount of the respondent’s Costs paid by the parties herein shall be regarded as their respective costs of the action, which are in the cause of this action;

(4)  The parties to this action may lodge on or before 5 September 2025 their respective statements of objection in relation to the respondent’s Statement of Costs dated 12 August 2025.  Summary assessment of the respondent’s Costs will be conducted on paper after 5 September 2025 (no matter whether any statement of objection is lodged by any party to this action within time);

(5)  The respondent’s Costs as assessed shall be paid within 14 days after summary assessment;

(6)  The respective costs of the Non-Party Discovery Summons of the parties to this action (including the costs on their submissions for costs) shall be in the cause.