KWOK WAI TAK v. LU XIN, PERSONAL REPRESENTATIVE OF THE ESTATE OF LI NING QIAO, THE DECEASED

HCA 979/2022

[2024] HKCFI 3471

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 979 OF 2022

____________

BETWEEN

(by the Carry-on Order made by Master S.P. Yip dated 27^th May 2024)

____________

_______________

D E C I S I O N

_______________

Background

1.  This is the first hearing of the Defendant’s Stay Summons for a stay of the Plaintiff’s Injunction Summons sine die with liberty to restore. The parties have come to terms that the Plaintiff undertakes to provide documents disclosed from third party discovery to the Defendant upon the Defendant’s cross undertaking to pay reasonable photocopying costs. The only question that remains is the costs of the Stay Summons.

2.  The Plaintiff claims that the deceased (“LNQ”) is holding stocks and monies held in LNQ’s securities account (“LNQ’s Accounts”) on trust for the Plaintiff. The Plaintiff’s case is premised on an agreement that he and LNQ entered into dated 23 September 2014 (“the Agreement”), pursuant to which the Plaintiff would and did provide HK$10,026,000 (“the Funds”) for the Deceased to acquire stocks for the Plaintiff.

3.  Pursuant to the Agreement, the Defendant did acquire stocks for the Plaintiff. During the period of 30 September 2014 to 23 September 2021, the Plaintiff was in control of LNQ’s Accounts pursuant to the Agreement and had freely handled the stocks. LNQ provided monthly and daily statements of those Accounts upon the Plaintiff’s request.

4.  Despite the Plaintiff’s demand on 23 September 2021, LNQ has failed to return the stocks within one month as required by the Agreement.

5.  On 4 August 2022, the Plaintiff issued the writ against LNQ, seeking specific performance of the Agreement by returning the stocks, balance of the Funds, damages, and/or a declaration that the Defendant is holding the stocks on trust for the Plaintiff.

6.  It transpired that LNQ had passed away in November 2022. It was after some procedural steps that, on 26 May 2024, pursuant to a carry on order, Madam Lu Xin, wife of the Deceased, was named as a personal representative of the Deceased. As of this hearing, Madam Lu has not yet obtained the letters of administration in Hong Kong.

7.  On 23 July 2024, the Plaintiff obtained a non-party discovery order against CIS Securities Asset Management Limited (“CIS”) for CIS to disclose various documents relating to LNQ’s Accounts at CIS (“1^st NPO").

8.  On 9 August 2024, the Plaintiff obtained an interim-interim proprietary injunction and preservation order against the Defendant in respect of LNQ’s Accounts maintained with CIS. Tsui J gave directions for filing of affidavits and for the Injunction Summons to be adjourned for argument.

9.  On 23 August 2024, the Defendant filed a defence raising a “Mixed Funds Defence”, alleging that LNQ’s accounts were opened 3 months before the Agreement and there was money in those Accounts before the Plaintiff’s injection of the Funds. LNQ’s accounts contained LNQ’s assets and not the Plaintiff’s.

10.  The Defendant was of the view that at the time of the injunction application, the Plaintiff had not produced any evidence as to the movement of funds during 17 November 2015 to 1 October 2021 with gaps in the evidence for 2 periods. The Defendant engaged in correspondence and even took out a summons for discovery. The Defendant failed to comply with the discovery order on time. What was produced was a mere 25 pages covering a period of over 8 years, with a few illegible pages.

11.  Since the Defendant was acting in a representative capacity and all related transactions were handled by the Deceased, she had no personal knowledge.

12.  On 7 October 2024, the Defendant invited the Plaintiff to stay the Injunction Summons on the grounds that:

(1) Madam Lu has no personal knowledge of the matters giving rise to the Mixed Funds Defence;

(2) The documents obtained pursuant to the 1^st NPO and the Plaintiff were insufficient for Madma Lu to make out the Mixed Funds Defence and prepare her affidavit in opposition for a fair disposal of the Injunction Summons;

(3) The Defendant intended to apply for a Norwich Pharmacal Order against CIS to close any gap in evidence.

13.  The Plaintiff did not respond to the Defendant’s request and chaser, but proceeded to fix the date for argument of the Injunction Summons, which has now been fixed to 15 April 2025.

14.  The Defendant thus took out the present Stay Summons on the grounds that she is unable to obtain sufficient evidence to make out the Mixed Funds Defence and oppose the Injunction Summons effectively.

Events after issue of the Stay Summons

15.  On 12 November 2024, the Plaintiff applied for a 2^nd NPO against CIS, which was likely to fill all the evidential gap in the Plaintiff’s tracing claim. The supporting affirmation (Kwok-9^th) stated that the Plaintiff would share the documents sought (“Further Documents”) upon receipt with the Defendant.

16.  On 14 November 2024, SW wrote to the Plaintiff’s solicitors (“C&T”) inviting the Plaintiff to give an undertaking to the Court that the Plaintiff shall provide copies of the Further Documents to the Defendant (“the Undertaking”). SW would only explore settlement of the Stay Summons upon the Plaintiff’s giving of the Undertaking.

17.  On the following day, C&T wrote to SW, stating that the Undertaking would only be given on SW’s counter-undertaking that the Stay Summons should be withdrawn forthwith with no order as to costs upon SW’s receipt of the documents under the 2^nd NPO.

18.  SW informed the Court that it took a neutral stance on the 2^nd NPO Summons. On 22 November 2024, Master A Ho made an order in terms of that Summons. CIS is due to supply the Further Documents by 6 December 2024.

19.  On the same day, C&T again invited the Defendant to withdraw the Stay Summons with no order as to costs, but the Defendant has not accepted the same.

Analyses

20.  An order for stay of proceedings is discretionary. It is a matter of case management and ultimately a question of balance of convenience and fairness as between the parties: Hong Kong Civil Procedure 2025, Vol 1, §1B/1/2.

21.  Where an action was commenced as of right, the court should only grant a stay when there are very good reasons and in rare and compelling circumstances. The stay must not cause injustice to the plaintiff and the defendant must show that continuing the proceedings would be unjust to her. The ultimate question is what would serve the ends of justice. The Court should balance between possible wastage of Court’s time and resources and the parties’ time and costs if there is no stay on the one hand, and the possible (short delay) if there is a stay on the other. The court must bear in mind the underlying objectives of increasing cost-effectiveness of court proceedings, ensuring that a case is dealt with expeditiously, promoting reasonable proportion and procedural economy in the conduct of the proceedings, and to facilitate settlement of disputes. See Poon Ka Man Jason v Cheng Wai Tao [2018] HKCFI 771, §§37-39, Au-Yeung J.

22.  I accept that the Defendant did have concerns over whether she had enough evidence at hand to contest the Injunction Summons. There was reason to take out the Stay Summons in the first place.

23.  However, despite being represented, the Defendant has not taken out any application for a Norwich Pharmacal Order as indicated to assist herself in filling the evidential gap.

24.  The Plaintiff has done so instead. It was a reasonable application that has to be done anyway by either party. The Further Documents are likely to be relevant to the trial, if not also to the Injunction Summons. Not only has the Plaintiff offered to provide copies of the Further Documents to the Defendant but he has twice suggested to have the Stay Summons withdrawn with no order as to costs, the second occasion being after the 2^nd NPO. There was no reason why the Defendant should not accept the offers.

25.  SW claims that there was no certainty as to whether the Plaintiffs would supply the Further Documents after rounds of correspondence and due to the Plaintiff’s past breaches of various orders, such as (i) failure to pay summarily assessed costs, (ii) failure to take out a case management summons and (iii) provision of the documents under the 1^st NPO out of time. The Plaintiff only offered the Undertaking after the Stay Summons was issued.

26.  With respect, item (i) has nothing to do with the Injunction Summons. There are ways for the Defendant to enforce the costs orders.

27.  Item (ii) was taken out by the Defendant, which Mr Lau claims was to press for discovery. However, the case management summons (“CMS”) was taken out only 2 days before the hearing of the 2^nd NPO, which was precisely to deal with discovery that the Defendant was concerned with. No date has been fixed for hearing the CMS. It could add nothing to the Defendant’s reasons for seeking a stay.

28.  Item (iii) was a proper concern. However, if the Defendant had concerns that the Plaintiff would not provide all the documents obtained under the 2^nd NPO, that could have been reflected in a properly worded undertaking or court order that specified the time for the Plaintiff to comply, such as the Undertaking given at the time of this hearing.

29.  All in all, I do not see why the Defendant needs to continue the Stay Summons, latest after the Plaintiff’s second offer on no order as to costs. Even at this hearing, SW was not able to explain why the Stay Summons has to be adjourned sine die with liberty to restore.

30.  Accordingly, I dismiss the Stay Summons. The costs up to and including 22 November 2024 shall be costs in the cause of the Injunction Summons and costs thereafter should be borne by the Defendant forthwith. I summarily assess the same on the basis of one fee earner of $5,800 per hour, with certificate for counsel, and allow the amount of HK$ 38,000.

Conclusion

31.  In conclusion,

UPON the Plaintiff’s undertaking to the Court that he shall provide true and complete copies of the documents disclosed by CIS Securities Asset Management Limited (“CIS”) to him pursuant to the order made by Master A Ho dated 22 November 2024 to Messrs. Stevenson, Wong & Co, solicitors for the Defendant, within 7 days of the Plaintiff obtaining copies of the documents from CIS.

AND UPON the Defendant’s cross undertaking to pay the Plaintiff reasonable photocopying costs for the documents to be obtained from CIS, I order that the Stay Summons be dismissed.

32.  Costs of the Stay Summons up to and including 22 November 2024 be in the cause of the Injunction Summons and the costs thereafter be paid by the Defendant to the Plaintiff forthwith, summarily assessed at $38,000.

33.  I thank Mr Leung and Mr Lau for their assistance.