CHEN YUNG NGAI KENNETH AND ANOTHER v. HO YUK WAH DAVID (A BANKRUPT) AND OTHERS

HCA 971/2012

[2024] HKCFI 2135

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 971 OF 2012

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JUDGMENT

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1.  On 28 September 2020, this court handed down a Judgment in this Action in Chen Yung Ngai Kenneth & Anor v Ho Yuk Wah David (a bankrupt) & Ors [2020] HKCFI 2518. In that Judgment, this court found at para 171 that after June 2007, David Ho continued to beneficially own and control the 6^th Defendant via his nominee the 5^th Defendant.

2.  At para 188, this court granted inter alia the following relief to the Plaintiffs/Trustees:

(1)  a declaration that the 2^nd and 5^th Defendants held and hold all the shares of the 6^th Defendant registered in their names on behalf and for the benefit of David Ho;

(2)  an order that the 2^nd and 5^th Defendants do take all necessary steps to transfer their respective shareholdings in the 6^th Defendant to the Plaintiffs/Trustees within 56 days.

3.  At para 190, there is a “liberty to apply” provision.

4.  By Summons filed on 28 March 2024 (“Summons”), the Trustees apply for orders that:

a.  The joint and several liquidators of the 6^th Defendant (“Liquidators”) do take all necessary steps to register the Trustees as the sole shareholders of the 6^th Defendant within 14 days;

b.  The Liquidators do provide the Trustees with: (i) copies of the 6^th Defendant’s Register of Members; and (ii) share certificate of the 6^th Defendant, within 14 days;

c.  In default of the Liquidators’ compliance with the above, a solicitor of at least 25 years’ standing from the Trustees’ solicitors firm be directed under section 25A of the High Court Ordinance (Cap 4) (“HCO”) to take all necessary steps and execute all necessary documents to cause the Trustees to be registered as the sole shareholders of the 6^th Defendant.

5.  As submitted by Mr Wong, this is a straightforward matter as the rationale is clear. It would be meaningless to order the transfer of the shares of the 6^th Defendant to the Trustees without registering them as the 6^th Defendant’s shareholders. All necessary steps must include registration of the Trustees as the shareholders of the 6^th Defendant upon the transfer of the shares to the Trustees. That’s the whole point of providing for liberty to apply in the Judgment which is to enable the parties to work out the implementation of this Court’s Order in case of disagreement.

6.  Mr Wong told this court the transfer of the 6^th Defendant’s shares to the Trustees’ had been done, not by the 2^nd Defendant and the 5^th Defendant as such, but by a partner of the Trustees’ solicitors firm under section 25A of the HCO.

7.  The Liquidators of the 6^th Defendant ie Ms Hou Chung Man and Mr Tang Chung Wah, oppose the application and seek to dismiss the Summons. They have filed Ms Hou’s 3^rd Affirmation (“Hou 3”) in opposition. The salient background has been set out in Hou 3 and summarized in Mr Chan’s skeleton and shall not be repeated here.

8.  The most important point is that the Liquidators are not in possession of (i) copies of the register of members of the 6^th Defendant or (ii) blank share certificates of the 6^th Defendant, so they have to engage a secretarial firm to entertain the Trustees’ requests by inter alia reconstructing the 6^th Defendant’s Register of Members which would of course involve payment to the firm. Mr Chan told this court that the 6^th Defendant’s documents are in a warehouse in Mainland China and subject to a lien of the owner of the warehouse for its default in payment of rent.

9.  Previously, the Liquidators had in their letter dated 5 April 2024 suggested one secretarial firm’s costs and their own remuneration added up to $53,400. In a letter dated 12 August 2024 from the Liquidators’ solicitors to the Trustees’ solicitors, the Liquidators managed to obtain a quote of $15,000 plus disbursements from another secretarial firm.

10.  The grounds of opposition to the Summons, according to Mr Chan’s skeleton at para 4, are that:

a.  The Summons was not pursued under the proper forum;

b.  Under the “liberty to apply” provision, the Judgment could not be worked out as requiring the Liquidators to do all necessary steps to register the Trustees as the sole shareholders of the 6^th Defendant without the expenses and fees related to registration process being provided for.

11.  Yet, in para 7(1) of Mr Chan’s skeleton, he submits that:

a.  The Liquidators do not in principle object to the Trustees’ request to be registered as shareholders of the 6^th Defendant ie the so-called New Three Requests, although their position remains that the Trustees have pursued the matter in the wrong forum.

b.  The only concern for the Liquidators is the allocation of expenses and costs related to the handling of the New Three Requests. Considering the 6^th Defendant’s insolvency, the Liquidators believed it would be unjustifiable to incur additional expenses to deal with the Trustees’ requests.

12.  In court, Mr Chan told this court that the 6^th Defendant is not just insolvent, it has no assets at all. Mr Chan also told this court that the Liquidators are willing to waive their own remuneration in complying with this court’s Order, if this court is minded to grant the orders sought in the Summons.

13.  Given the 6^th Defendant has no assets at all, this court agrees that it would be unreasonable to expect the Liquidators to pay for the costs and expenses to deal with the Trustees’ requests from their own pocket.

14.  From the correspondence, it appears another obstacle is the question of costs of the Summons. The Trustees insist the Liquidators to bear the costs whereas the Liquidators insist there should be no order as to costs. However, in Mr Chan’s skeleton at para 46, the Liquidators ask for the Summons be dismissed with costs against the Trustees on an indemnity basis.

15.  This is not the first time nor the last time that parties cannot agree on costs of an application and are so-called “compelled” to argue on the substantive matter. This is an entirely wrong approach.

16.  Costs are at the discretion of the Court. Disagreement on costs should not preclude the parties from behaving reasonably in relation to the substantive matter. If the parties in this application were reasonable, the Summons could have been dealt with by consent in that they could very well agree on the outcome of the substantive application and come to Court to argue costs or invite the Court to deal with costs on paper. That would save a lot of the Court’s time and allow the Court to focus on the real difference between them.

17.  By opposing the Summons, when in fact the Liquidators do not in principle object to the Trustees’ reasonable requests to be registered as shareholders of the 6^th Defendant, they are in fact wasting the Court’s time. If their only concern is the costs of the secretarial firm, they can come to Court to argue that point only instead of opposing the entire Summons.

18.  Having said that, the Trustees are also wasting the Court’s time by not willing to bear the costs of the secretarial firm. In para 3 of the Summons, the Trustees ask for an Order that a solicitor of at least 25 years’ standing from the Trustees’ solicitors firm be directed under section 25A of the HCO to take all steps and execute all documents as may be necessary to cause the Plaintiffs to be registered as the sole shareholders of the 6^th Defendant. That would involve costs as well.

19.  For all these reasons, this court rejects the Liquidators’ grounds of opposition and grant an Order in terms of paras 1 and 2 of the Summons save that (i) 14 days be replaced by 28 days and (ii) the Trustees are to reimburse the costs of the secretarial firm to be incurred by the Liquidators not exceeding HK$15,000 plus disbursements. This court is not minded to grant paragraph 3 of the Summons yet, but this court will grant liberty to apply to pursue paragraph 3 of the Summons in case that is necessary. I doubt that will be necessary because if the Liquidators defy this court’s Order, they will be in contempt of court. No doubt their solicitors will advise them of the serious consequences of being in contempt of court. Para 4 is unnecessary. It is up to the Trustees to put a penal notice on the Order if they wish. They do not need the Court’s permission.

20.  Given that Counsel for the Liquidators had been warned about the costs consequences at the hearing on 30 May 2024, costs of the Summons be to the Trustees and paid by the Liquidators of the 6^th Defendant personally forthwith to be assessed summarily but not on an indemnity basis, at HK$110,000.