WONG LUEN HANG AND ANOTHER v. CHAN YUK LUNG AND OTHERS

HCA 1265/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1265 of 2015

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REASONS FOR DECISION

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1.  This was the application of the plaintiffs (“the applicants”) for leave to appeal the Decision dated 11 March 2016 dismissing their application to appoint receivers and managers in respect of the 3^rd defendant (“D3”), the 10^th defendant Topmix (International) Company Ltd (“TICL”) and the 11^th defendant Topmix Industrial Ltd (“TIL”). At the conclusion of the hearing leave was refused with costs to the respondents to the application (“the respondents”). The reasons appear below.

2.  It is common ground that as this application seeks to overturn the exercise of the court’s discretion, the well‑known principles in Hadmor Productions Ltd v Hamilton [1983] 1 AC 191, 220B–F apply.

3.  The applicants’ intended draft notice of appeal sets out 6 groundsas follows:

(1)  The Judge erred in finding that there was no risk of dissipation of assets.

(2)  The Judge erred in finding that the undertakings offered by D1, D2, D4, D5 and D6 were adequate protection in respect of any loss which TICL and TIL might suffer.

(3)  The Judge erred in finding that there would be a risk of uncompensatable loss if receivers were appointed.

(4)  The Judge erred in finding that, if receivers were not appointed, the losses of TICL and TIL were compensatable by an award of damages.

(5)  The Judge erred in finding that receivership is only granted if the court “is convinced of its necessity” and/or when “a compelling case” is made out.

(6)  The Decision was made in breach of natural justice.

4.  Ms Kei who appeared for the applicants rested on the draft notice of appeal and the short submissions that summarised the main thrust of the draft notice.  When asked to identify her two best points, reference was made to certain paragraphs of the Decision that were said to illustrate grounds 1, 2 and 6.

No risk of dissipation of assets

5.  It was said that the court was in error in concluding (at §75) that there was no solid evidence of dissipation on the facts as presented.  A number of disparate examples were mentioned including the following but the common thread was elusive.

6.  Attention was directed to §§68 – 69 concerning the issue of depletion of the applicants’ bank balances between March and October 2015.  That was said to be an instance of past dissipation. Then there was a reference to §§54 – 55 relating to TICL’s alleged inability to pay licence fees for the Kwun Tong premises as a reason for the termination of the licence, suggesting that given the court’s conclusion as to depletion of bank balances and the amounts standing in those accounts in March 2015, the lack of funds to defray licence fees could not have been true.

7.  As to the depletion of bank balances per se, that was a post‑cessation of business event that plainly was compensable by damages.  At the hearing, it was not put as a matter relevant to a consideration of the cessation of business that had already taken place.  Cessation flowed from the statutory demands made in late 2014 and the winding up petitions presented in January 2015 causing, inter alia, the accounts of TICL and TIL to be frozen.

8.  But the drift of the submission was that having found instances of past dissipation the court had asked itself the wrong question.

9.  The applicants’ position verged on saying that once the court finds that there are serious issues to be tried and there are instances of past dissipation and low commercial morality, the court has to conclude that there is a real risk of dissipation and any other conclusion would be illogical.  In other words, in those circumstances, the court must exercise its discretion in the applicants’ favour and make an appointment.  That cannot be correct since an exercise of discretion necessarily engages a balancing exercise involving an array of relevant factors.

10.  In any event, the court has set out its reasons and having reconsidered the Decision in light of the draft notice, I stand by them.

Undertakings as sufficient protection and natural justice

11.  On the issue of sufficiency or otherwise of the undertakings, the applicants merely repeated the arguments made at the hearing in February.  I see no reason to resile from what is stated in the Decision in that regard.

12.  It then emerged that it was relevantto the applicants’ breach of natural justice complaint which, on its face, was difficult to comprehend given that Mr Tang, counsel for the applicants, did make an oral reply at the hearing to the respondents’ submissions.  Not only did his oral reply last 20 minutes, it supplemented the applicants’ written reply dated 24 February 2016 running to 22 pages excluding the four-page chronology.  Noteworthy is the fact that §§30 – 38 were in response to the ‘undertakings’ point.

13.  It emerged from the applicants’ oral submissions that it is not said that the court refused to hear the applicants’ counsel or stopped counsel from making submissions at the hearing.  The plaintiffs’ counsel apparently drew an inference or gained an impression (whether from exchanges between the court and counsel and/or the court’s remarks made in the course of the hearing) that the court was in agreement with the applicants on the issue of insufficiency of the undertakings proffered by the respondents.  It was said that that impression caused Mr Tang not to make further submissions to persuade the court of the insufficiency of the undertakings and to cut short his reply.  That was said to amount to a breach of natural justice, equivalent to “depriving” the applicants of the opportunity to make a reply.

14.  Putting the matter bluntly, the complaint underlying ground 6 is not far short of saying that the court had somehow misled Mr Tang.  I consider the complaint borders on the absurd and should not be dignified by further comment.