MAK SIK BUN v. CERTIFIED MANAGEMENT CONSULTANTS LTD

HCA 1555/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1555 OF 2003

____________

____________

_______________

D E C I S I O N

_______________

1.  This hearing is for determining the scale of taxation for the costs of this action which have been ordered to be paid by the plaintiff to the defendant.  The defendant argued that the costs should be taxed on the indemnity or common fund basis, but the plaintiff submitted that the party and party basis is appropriate.

Background

2.  The plaintiff was a member of a Mak Shing Yue Tong Commemorative Association Limited (“the Tong”) and also one of the three members of its Executive Committee (“the Ex Co”).  The other two members of the Ex Co were Mr Mak Lei Wun, Larry (“Larry Mak “) and Mak King Mun, Philip (“Philip Mak”).  They were the president and secretary of the Ex Co respectively.  The plaintiff was the vice president.  The Tong was set up to perform the functions of a traditional Chinese tong.  It was to organize ancestral worship for one Mak Hon Fun and to provide assistance to his descendants, if need be. 

3.  The defendant was the company secretary of the Tong.  The evidence in this case suggests that the defendant was controlled by one Mr Yiu Hon Lam (“Yiu”), its consultant.  Yiu was the sole proprietor of Yiu Hon Lam & Co., Certified Public Accountants.  He had been practising as a certified public accountant since 1982.  He had also been qualified as a chartered company secretary since 1980.  Barma, J, in a judgment that I will refer to below, said that he had apparently been qualified as a barrister too.  Also featuring on the defendant’s side in this action is one Ms Tsang (“Tsang”).  She was Yiu’s audit manageress and was also a certified public accountant.

4.  The plaintiff started this action on 2 May 2003 for an order that the defendant do produce to him for inspection and provide to him copies of all the minutes of the general meetings of the Tong and all the minutes of the meetings of the Ex Co/board of directors from the date of incorporation of the Tong.  There was also a prayer for damages for breach of statutory duties under section 119(1) and 120 of the Companies Ordinance, Cap. 32.

5.  This action was discontinued by consent on 23 December 2005.  The consent order required the plaintiff to pay the defendant’s costs of the action but the basis of the taxation had to be argued.  Since the action did not proceed to trial, both sides agreed that I should not resolve any disputed facts but should only proceed on the basis of the evidence available to me.

6.  The action developed from a letter by the plaintiff to the defendant dated 7 May 2003.  It read:

“Dear Mr Yiu,

Re - Mak Shing Yue Tong Commemorative Association Limited

I would like to request copies of all Minutes of Meeting (including Executive Committee Meeting and General Meeting of members) from the date of incorporation of the above named company.

Kindly take this letter as my formal instruction.  I will arrange my staff, Mr Yu Wing Hong to visit your office tomorrow at 11:30 a.m. to collect the documents.”

7.  When Yu Wing Hong arrived at the defendant’s office on 8 April and asked for the copy of minutes, he was received by Tsang.  But he was not given the copy documents sought by the plaintiff. 

8.  Tsang said in her witness statement that she had in about the end of January 2002 received a phone call from Larry Mak advising her of a restriction that the minutes of the meetings of the Ex Co could not be provided to or inspected by anyone unless with the authorization/permission of the Ex Co.  Tsang did not say whether this was an instruction from the Ex Co or from Larry Mak himself.  She did not appear to have sought clarification from Larry Mak on this.  She also did not appear to have asked Larry Mak for a copy of the minutes of the Ex Co which contained this restriction.  I note that paragraph 13(b) of the defence pleaded that this restriction was imposed by the Ex Co., but no minutes containing it were ever disclosed by the defendant in discovery.  In any case, Tsang agreed to abide by this restriction without ascertaining its source.  She then relayed it to the staff of the defendant as well as her supervisor, Yiu.

9.  Tsang then said that on 7 April 2003 Yiu passed her a fax copy of the plaintiff’s letter requesting for the minutes.  She said she found it strange that the plaintiff should have addressed the request to Yiu of the defendant and not to the Tong.  But she did not say that the plaintiff’s request should be rejected on the ground that it had been addressed to the wrong party.  She then referred to the restriction Larry Mak told her and discussed the matter with Yiu.  She telephoned Larry and Philip Mak and relayed the plaintiff’s request to them.  She also sought from them authorization/permission to provide the plaintiff with the copy documents sought. 

10.  I do not understand why she had thought it proper to seek authorization from Larry and Philip Mak.  They were only two members of the Ex Co.  If she had thought that she needed authorization before she could accede to the plaintiff’s request, which appeared to be the defendant’s case, she should have referred the matter to the Ex Co for discussion rather than privately phoning up two members of the Ex Co. 

11.  According to her, both Larry and Philip Mak took the view that they had not received the request from the plaintiff and they did not understand why the plaintiff did not address the request to them or to the Tong.  They therefore refused the authorization. 

12.  Tsang then abided by their view and did not release the documents to Yu Wing Hong in next morning.  She said she had told Yu Wing Hong that the defendant could not obtain authorization from the Ex Co and could not accede to the plaintiff’s request, but she did not tell Yu Wing Hong that it was Larry and Philip Mak who refused to release the documents and that she was abiding by their refusal.  She also did not tell Yu Wing Hong that the plaintiff’s letter of request had been addressed to the wrong party.

13.  According to Yu Wing Hong’s witness statement, when he arrived at the defendant’s office on 8 April and asked for the copy minutes, Tsang told him that the plaintiff had no right to obtain the documents and she asked Yu Wing Hong to relate this message to the plaintiff. 

14.  The matter did not end there.  About 20 minutes later, the plaintiff himself in the company of another employee arrived at the defendant’s office and asked for the documents.  According to the plaintiff’s witness statement, Tsang initially told him that coping charges were payable for the documents to which he immediately agreed.  He then asked Tsang to let him peruse the minutes in the meantime.  However, she did not accede to his request.  After a while, he repeated his request for perusal.  Tsang then retracted from her previous stance and said that his status did not entitle him to the minutes of meetings.  He was surprised by this and reminded her of his status as member of the Ex Co.  However, she only repeated her reply that his status would not entitle him to the minutes but without explaining why.  She told him to seek independent advice from professionals and then ignored him.  A short while later, an officer of the building management told him to leave the defendant’s office.  He and his employee were escorted out of the defendant’s office and the door was locked behind them. 

15.  Tsang’s version of this is not exactly the same as that of the plaintiff.  She said that the plaintiff came and demanded the documents.  He intimated that he would only leave with the documents.  She then telephoned Philip Mak apparently in the absence of the plaintiff.  Philip Mak maintained his refusal and his reason thereof.  She then told the plaintiff that the defendant was not given the authority to provide copies of the documents and she invited the plaintiff and his employee to leave.  She did not appear to have told the plaintiff that the refusal came from Larry and Philip Mak.  She also did not tell him that his request had been addressed to the wrong party and should have been addressed to the Tong.  When the plaintiff refused to leave, she relayed this to Yiu who sought help from the security manager of the building.  The security staff of the building told the plaintiff to leave.  She denied that the plaintiff had ever asked to inspect the minutes.

16.  Yiu also said in his witness statement that he had on 7 and 8 April confirmed with Larry and Philip Mak on the phone that the two of them did not authorize the release of the documents sought by the plaintiff. 

17.  After the incident on 8 April, the plaintiff’s solicitors wrote to the defendant on 15 April saying that the defendant was the Tong’s company secretary since incorporation and had all the minutes of proceedings of the members and of the directors meetings.  They demanded the defendant to produce all the minutes of meetings of members to the plaintiff under section 120 of the Companies Ordinance.  They also demanded an inspection by the plaintiff, as a director of the Tong, of all the minutes of the directors meetings.  They threatened litigation if their demands were not met within seven days. 

18.  The defendant’s solicitors gave a holding reply on 16 April promising a substantive reply after the Easter holidays (which ended on 23 April).  However, no reply came and the plaintiff issued and served the writ in this action on 2 May.

19.  On 5 June, the plaintiff and some other descendants of Mr. Mak Hon Fun filed a petition to wind up the Tong on the ground that its affairs had been conducted by Larry and Philip Mak in an unfairly prejudicial manner.  Barma J heard the petition and ordered the Tong to be wound up on 28 July 2005. 

20.  After the writ had been served on the defendant on 2 May 2003, its solicitors sent the plaintiff’s solicitors a reply on 3 May 2003.  The reply in particular stated that the minutes were kept at the Tong’s registered office and not kept by the defendant though the Tong’s registered office was at the defendant’s office.  Apart from making this distinction, they further said that the minutes of the Ex Co could not be inspected or provided to anyone save with the Ex Co’s authorization.  Regarding the minutes of the members meetings, they said that the request should be addressed to the Tong.  They said they did not understand why the plaintiff did not write to the Ex Co or the Tong direct.

21.  The reply letter further said that the defendant had relayed the plaintiff’s request to Larry and Philip Mak, the other two members of the Ex Co, and they had refused authorization to the defendant to release the documents on the grounds that the plaintiff had not sent the request to either of them or to the Tong, to direct the request to the defendant was a deviation from the practice that all matters of the Tong should be referred to and resolved by the Ex Co and it was unlikely that the plaintiff’s request would advance the interest of the Tong.  This letter ended with a demand for the immediate withdrawal of the action and the demand was backed by a threat of indemnity costs.  However, the plaintiff did not withdraw.

22.  By a letter of 16 June 2003, the plaintiff’s solicitors proposed to put the action on hold pending the determination of the winding up petition.  The defendant’s solicitors declined the proposal on 17 June 2003.  The plaintiff then served the statement of claim on 18 June 2003.

23.  The plaintiff pleaded in the statement of claim that the defendant, as the secretary of the Tong, had the duty of keeping the minutes of Tong’s general meetings and to open them for inspection by any member of the Tong pursuant to section 120 of the Companies Ordinance.  It also pleaded the plaintiff’s written request dated 7 April 2003 to the defendant through Yiu.  It then pleaded the defendant’s breaches of duty in denying the plaintiff inspection of the minutes of the Tong and of the Ex Co and failed to provide him with copies of the same.

24.  The petition to wind up the Tong was then heard before Barma J.  Both Larry and Philip Mak gave evidence.  They both denied that they had instructed the defendant to refuse the plaintiff’s access to the Tong’s books, records and minutes or that there was any resolution which authorized the defendant to do so.  They said they had left the defendant to discharge its duties to the plaintiff.  The plaintiff then amended the statement of claim on 17 February 2005 to include a ground that the defendant had falsely alleged that its refusal of access to the plaintiff was directed by Larry and Philip Mak.  

25.  Barma J in his judgment on the wind-up petition disbelieved Larry and Philip Mak on this point.  The learned judge held that Larry and Philip Mak had indeed instructed the defendant to refuse the plaintiff’s request for copy minutes or inspection of the same. 

26.  The defendant denied the matters pleaded in the statement of claim including the allegation that the plaintiff had asked to inspect the minutes. 

27.  The minutes of meetings were made available to the plaintiff before this action was concluded.  Larry Mak in his affirmation filed on 24 September 2003 in the winding-up proceedings said that he and Philip Mak were prepared to provide the copies if the plaintiff herein should have formally directed his request to the Tong or to them informally.  The offer in the affirmation was not taken up by the plaintiff.  The minutes were then volunteered by Larry and Philip Mak to the plaintiff in June 2004 in the winding-up proceedings. 

28.  As I have referred to above, the Tong was wound up by Barma J on 28 July 2005.  On 21 December 2005, a consent order was made for the plaintiff to discontinue this action with costs to be paid to the defendant, but the scale of costs had to be argued. 

The Legal Principles

29.  Godfrey J (as he then was) said in Overseas Trust Bank Ltd v Coopers Lybrand (a Firm) and Ors [1991] 1 HKLR 177 at 182I-183D:

“To justify an order for costs on the common fund basis, the case has to have some special or unusual feature: seePreston v. Preston[1982] Fam 17 and my own judgment in Wharf Properties Limited v. Eric Cumine Associates,HCA No. 13431/1983 and CL No.48/1985, 24th February 1988, unreported.  In my opinion, in order to justify a taxation on the indemnity basis, the successful party has to show, either that the case is one of a type already recognised in the practice of the court as warranting a taxation on that basis (such as, for example, the contempt cases to which I have already referred) or that there is some feature in the case even more special or unusual than one which would justify a taxation on the common fund basis.  A case in which the successful party has demonstrated that the proceedings were initiated or prosecuted by the unsuccessful party in a manner which constitutes that party’s proceedings an abuse of the process of the court might well be a candidate for an award of taxation of costs on an indemnity basis.  A taxation of the successful party’s costs on an indemnity basis could properly be ordered, in my opinion, where the proceedings were scandalous or vexatious, or had been initiated or prosecuted maliciously, or for an ulterior motive, or in an oppressive manner.  Any proceedings instituted or prosecuted in such circumstances as to constitute an affront to the court could properly be the subject of a direction for the taxation of the successful party’s costs on the indemnity basis.”

30.  In Sung Foo Kee Ltd v Pak Lik Co. (a Firm) [1996] 3 HKC 570 at 575C-E, Godfrey JA said the discretion to order indemnity costs was not limited by the indications in the Overseas Trust Bank case.  In Choy Yee Chun v Bond Star Development Ltd [1997] HKLRD 1327, the Court of the Appeal reiterated that the discretion to order indemnity costs should not be limited by the approach in the Overseas Trust Bank case, Stock J further said at page 1338F-H:

“In determining whether the conduct of proceedings or the motive behind that conduct is or is not of a particular colour, the court cannot put on blinkers and shut out earlier behaviour by a litigant which might well explain conduct within the litigation itself.  In any event, in the course of normal litigation, whilst “the grounds upon which costs are awarded must be connected with the case, this may extend to any matter relating to the litigation and the parties’ conduct in it, and also to the circumstances leading to the litigation, but no further” (See Scherer v Counting Instruments Ltd [1966] 1 WLR 615 per Buckley LJ at 619).”

31.  More recently, the Chief Justice said in Town Planning Board v Society for Protection of the Harbour Ltd (No. 2) (2004) 7 HKCFAR 114 at 124A-I:

“Grounds for making an order for indemnity costs

16.       The courts have rejected the proposition that an award of indemnity costs will only be made where a case has been brought with an ulterior motive or for an improper purpose or where there is some deception or underhand conduct on the part of the losing party.  (Macmillan Inc v Bishopsgate Investment Trust Plc (unrep., 10 December 1993) (Millett J); Disney v Plummer (unrep., English Court of Appeal, 16 November 1987)).  These decisions and the reasoning on which they were based have been endorsed by the Hong Kong Court of Appeal (Sung Foo Kee Ltd v Pak Lik Co (a firm) [1996] 3 HKC 570 at pp. 575E-576F, per Godfrey JA; see also Choy Yee Chun v Bond Star Development Ltd [1997] HKLRD 1327 at pp. 1334G-1335I, per Stock J.)

17.       In these and other cases, courts have emphasised the undesirability of attempting to define the circumstances in which orders for indemnity costs are to be made.  It has been said that:

 . . .  the discretion is not to be fettered or circumscribed beyond the requirement that taxation on an indemnity basis must be “appropriate”.

(Macmillan Inc v Bishopsgate Investment Trust Plc (unrep., 10 December 1993), per Millett J; Sung Foo Kee Ltd v Pak Lik Co (a firm) [1996] 3 HKC 570 at pp. 575E-576F, per Godfrey JA; see also Choy Yee Chun v Bond Star Development Ltd [1997] HKLRD 1327 at pp. 1334G-1335I, per Stock J).

18.       Neither statements of principle nor authority provide any support for the Board’s proposition that the attributes of the parties and the character of the proceedings are irrelevant to the exercise of the discretion to award indemnity costs. In relation to the award of costs generally, it has been accepted, as Chu J pointed out, that while:

 . . .  the grounds [upon which costs are awarded] must be connected with the case.  This may extend to any matter relating to the litigation and the parties’ conduct in it, and to the circumstances leading to the litigation, but no further.  (Emphasis added.)

(Scherer v Counting Instruments Ltd [1986] 1 WLR 615 at p. 621F, per Buckley LJ).  There is no reason why this statement does not apply with equal force to the exercise of the discretion to award indemnity costs.”

The defendant’s grounds and analyses thereof

32.  Mr Pao submitted five grounds to ask for indemnity costs, or failing which, common fund costs.  They are:

(1)     unmeritorious claim; 

(2)     prosecution of action had become unreasonable at later stages;

(3)     allegations of dishonesty and false representations which were never withdrawn; 

(4)     orchestrated and pro-ordained attacks on the defendant and Yiu; and

(5)     undue delay. 

Unmeritorious claim 

33.  Mr Pao complained in his skeleton submissions that the plaintiff had initiated this action without waiting for a substantive reply from the defendant’s solicitors.  This criticism does not appear to be valid.  The defendant’s solicitors had promised a substantive reply to the plaintiff after the Easter Holidays (which ended on 21 April).  That promise was not kept and the plaintiff only issued and served the writ on 2May.

34.  Mr Pao submitted that this action was completely devoid of merit at the outset.  That again does not appear to be a fair statement.  The plaintiff claimed that he had sought in writing copy minutes and orally for inspection of the same.  His solicitors repeated in writing his request for copy minutes.  However, he was denied of both.  I understand that the defendant disputes that there was any request for inspection.  There is however no dispute that the request for copies was not entertained with no reasons given on 8 April.

35.  Yiu and Tsang, who handled this matter for the defendant, were professional accountants of longstanding.  Yiu was also a chartered company secretary since 1980.  If they had any reasons not to provide the plaintiff with the copy of minutes, I cannot understand why such reason could not have been revealed to him there and then.  Instead of telling or explaining to the plaintiff that Larry and Philip Mak had refused authorization and the defendant thought that it was bound by the refusal, Tsang merely said that the defendant had no authority.  In these circumstances, I am of the view that the plaintiff was justified in issuing the writ against the defendant.  This was particularly so when there was the unresolved allegation that the plaintiff’s oral request on 8 April for inspection had also been declined.  I note that when the plaintiff wrote his complaint to the Companies Registry on 9 April (which will be discussed in detail below), he not only referred to the denial of his requests for provision of copies, but also his request for inspection.

36.  Mr Pao then referred to the next stage of the action on 3 May 2003 when the defendant’s solicitors gave the substantive reply to the plaintiff’s solicitors.  He submitted that it was then obvious that the request for documents had been addressed to the wrong party as it should have been addressed to the Tong or the Ex Co.  The plaintiff should have withdrawn the action then.  This was particularly so as the defendant had threatened that it would seek indemnity costs at the end if the action was not withdrawn. 

37.  However, the matters referred to in the reply letter by the defendant’s solicitors might not be enough to defeat the plaintiff’s claim.  It is useful to consider the grounds of defence in the amended defence in order to appreciate the strength or otherwise of the defendant’s case. 

38.  The defence started by saying that the plaintiff was a member of the Tong and a member of the Ex Co.  It then pleaded that the defendant was only the agent of the Tong acting in the capacity of the company secretary and in accordance with the instructions of the Ex Co.  It then pleaded that the Ex Co had at all material times imposed a restriction that the minutes of the Ex Co were not permitted to be inspected or copied to anyone except would be Ex Co’s permission.  There was, however, never produced any written minutes of the Ex Co containing such restriction. 

39.  The defence further pleaded that all the secretarial services were provided by the employees of the defendant, but Yiu was not an employee or officer of the defendant.  However, the fact was that Yiu was the person who made decisions for the defendant on 7 and 8 April vis-à-vis the plaintiff’s request.  He had also signed a notice on behalf of the defendant calling for an EGM of the Tong (see the plaintiff’s letter to the Hong Kong Society of Accountants dated 16 April 2003).  The evidence shows that he was the directing mind of the defendant.  This plea in the defence, with a view to distance him from the defendant, is obviously untenable and less than forthright.  On the evidence available, Yiu appeared to be a director of the defendant though not formally appointed as such.

40.  The defence then took the point that the plaintiff had wrongly sent the request to the defendant.  However, there was the admission at the beginning of the defence that the defendant was the Tong’s agent.  If that was so, letters or requests to the Tong could no doubt be addressed to the defendant.  This was at least arguable.

41.  The defence then pleaded that the defendant had on 7 April referred the plaintiff’s written request to Larry and Philip Mak, being the president and secretary of the Ex Co, but could not obtain authorization from them to comply with the request.  Assuming that the defendant should act in accordance with the instructions of the Ex Co., I do not think that seeking instructions from Larry and Philip Mak could be regarded as seeking instructions from the Ex Co.  The individual decisions of some members of the Ex Co do not amount to a decision of the Ex Co.  The Ex Co had its own machinery to conduct its proceedings which allowed its members to voice their views and to deliberate on the views of one another before making a decision. 

42.  Furthermore, it was at least arguable on whether the defendant, as the company secretary and thus an officer of the Tong, could have declined a request for inspection of the minutes or the provision of copies thereof simply because it was so instructed by the Ex Co.  Section 120(3) of the Companies Ordinances requires the Tong and every officer of the Tong to comply with this section and the failure is sanctioned by a fine or even a daily fine.

43.  There was also a defence that the plaintiff, in seeking the copy minutes, had not allowed the defendant seven days as provided in section 120.  However, this ground could not work in relation to the subsequent request made by the plaintiff’s solicitors. 

44.  From the above analyses, I do not think it can be said that the plaintiff’s case was doomed from the start.

Prosecution of action had become unreasonable at later stages

45.  Mr Pao then submitted that the plaintiff’s complaint should have been dealt with in the petition to wind up the Tong.  However, this ignored the point that the defendant, as an officer of the Tong, could be under an independent obligation to allow inspection and provide copies of the minutes to the members.  I also note that when the plaintiff’s solicitors suggested on 16 June to put the action on hold until the winding up petition was concluded, the defendant’s solicitors replied that the outcome of the winding-up petition had no relevance to this action.

46.  Mr Pao further submitted that there were a number of occasions on which the plaintiff should have stopped the action.  The Ex Co (in the absence of the plaintiff) resolved on 4 May 2003 that if any member would like to inspect the minutes, he should give three days prior notice to the Tong and such inspection would take place in the presence of a member of the Ex Co or a member of the defendant’s staff.  Mr Pao said that the plaintiff could have used this procedure to inspect the minutes and resolve his problem. 

47.  As I see it, this procedure was contrary to section 120.  I do not understand why the defendant would have agreed to carry out such procedure for the Ex Co as it would attract a fine or even a daily fine against it under section 120(3).  I therefore cannot see anything wrong on the part of the plaintiff in not given blessing to this unreasonable procedure.

48.  The next occasion was on 24 September 2003 when Larry Mak offered in his affirmation to provide the minutes.  Mr Pao said that in the light of such offer, the lis of this action had been taken care of and there was no good reason for the plaintiff to continue with the action for the minutes.  However, I have already said that the action was not doomed from the start.  I cannot say whether the plaintiff would succeed at the end, I therefore cannot say that he was unreasonable in not withdrawing the action just as I cannot say that the defendant was unreasonable in not conceding to the action with costs.

49.  The same rationale applied when the copy of minutes were provided by Larry and Philip Mak to the plaintiff in June 2004 in the winding-up proceedings and when the Tong was wound up by Barma J on 28 July 2005.

Allegations of dishonesty and false representations which were never withdrawn 

50.  The 1^st allegation complained by Mr Pao was the plaintiff’s pleading that the defendant had wrongly and falsely alleged that it had been directed by the other two members of Ex Co to deny the plaintiff access to the minutes.  This pleading was put in by way of amendment to the statement of claim on 17 February 2005.  That was after Larry and Philip Mak had given evidence on this matter at the winding up hearing but before it was adjudged by Barma J.  This pleading was in line with their evidence.  I would not criticize the plaintiff for making this amendment at that time despite the fact that his stance at the hearing of the petition was a contrary one. 

51.  I also cannot say that the plaintiff was unreasonable in not withdrawing the action after Barma J had given the judgment in the petition.  The defendant was not a party to the petition.  as a matter of law, it was open to the plaintiff to take the stance as pleaded in the amendment and to support it with evidence.  I understand that he had subpoenaed Larry and Philip Mak to give evidence in this action on this matter.  If this action should proceed to trial, I cannot tell whether Yiu and Tsang would give evidence and, if so, how well they may perform.  If Larry and Philip Mak should at the trial of this action maintain what they have said in the winding-up proceedings, it is not impossible for the trial judge to conclude differently from Barma J.  I cannot tell whether this pleading by the plaintiff is dishonest or false or whether it was doomed from the start.

52.  The next allegation of dishonesty that Mr Pao complained of is in paragraph 23 of the plaintiff’s witness statement filed on 10 September 2004.  It was a response to the defendant’s alleged instruction from the Ex Co that minutes of the Ex Co meetings could not be inspected or copied to others save with the Ex Co’s permission.  This allegation first appeared in paragraph 13(2) of the defence filed on 2July 2003.  In paragraph 23(a) and (b) of the defence (which was later renumbered to 25(a) and (b) by amendment), the defendant further pleaded that the plaintiff, as one of the three members of the Ex Co, was aware of such restriction and, despite such knowledge, still addressed his request to the defendant for such minutes.  The effect of these averments was that the plaintiff had knowingly put the defendant in difficulty. 

53.  In paragraph 7(b) of the reply filed on 1April 2005, the plaintiff denied that there was such restriction.  He also pleaded that at the winding-up hearing, Larry and Philip Mak had denied that there was such restriction.  In paragraph 8(b) of the reply, he also pleaded that the defendant was the Tong’s agent to whom request for documents could be addressed.

54.  I have already said that no minutes of the Ex Co containing the alleged restriction were ever disclosed.  There were in addition two letters dated 30 April 2003 and 6 May 2003 (wrongly dated 2002) written by Larry and Philip Mak respectively which dealt with inspection of minutes and the incident on 8 April.  Neither of them said in the letters that there was such pre-existing restriction imposed by the Ex Co.  The plaintiff in paragraph 23 of his witness statement filed on 10 September 2004 said that as far as he was aware, there was no such restriction as at the Ex Co Meeting on 8 April 2003.  He said he believed the alleged restriction was a recent fabrication by the defendant with the collusion of Larry and Philip Mak.  I have also referred to Tsang’s witness statement above on how she was instructed by Larry Mak on this so-called restriction.

55.  Mr Pao said that the plaintiff had in paragraph 23 of his witness statement accused the defendant of lying.  However, in the light of the pleadings, the witness statements, the two letters by Larry and Philip Mak aforesaid and the absence of any documentary evidence to prove that the Ex Co had ever imposed such restriction, I cannot say that the plaintiff’s allegation of lying was without basis or that it could never be proved.  I also do not think the defendant has any solid basis to say that the plaintiff was making this statement out of sheer malice.

56.  Mr Pao’s 3^rd complaint was on the use of expressions like “blatant lies” and “create some self serving evidence” which “exemplified the collusion that has taken place between the defendant and the other Ex Co members”.  Paragraph 16 of the defence (which was later amended to 18) pleaded that the secretarial services were provided to the Tong by the defendant’s employees and not by Yiu and that Yiu was not an employee or officer of the defendant.  I have already referred to above this tactic of distancing Yiu from the defendant and it was less than forthright for the defendant to have said so.  The plaintiff said in paragraph 24 of his witness statement that this averment was a blatant lie.  Such expression might be a bit strong, but I do not think the defendant’s pleading about Yiu’s relationship with the defendant could be regarded as truthful or honest.

57.  The allegations about self-servicing evidence and collusion were in paragraph 27 of the plaintiff’s witness statement.  It was the defendant’s case that the refusal of the plaintiff’s access to the minutes on 8 April was dictated by Larry and Philip Mak.  The defendant relied on the letter of its solicitors to the plaintiff’s solicitors dated 3 May and the minutes of the Ex Co dated 4 May to prove its case.

58.  However, Larry Mak had written to Philip Mak on 9 April 2003 and Philip Mak had also written to the plaintiff on 22 April 2003.  Both of them suggested in their letters that they had no idea of the incident on 8 April.  Philip Mak in his letter of 22 April further said that he only learned of what happened on 7 and 8 April from the letter of the plaintiff’s solicitors dated 17 April 2003.  The plaintiff thus took the stance that the letters of 19 April and 22 April by Larry and Philip Mak were more reliable as they were written at times closer to the happening of the event.  He regarded the letter of 3 May and minutes of the Ex Co of 4 May as subsequent attempts by the defendant and Larry and Philip Mak to create self-servicing evidence.  He said that such attempts exemplified their collusion. 

59.  I do not know whether such stance would or would not be accepted at the trail, but I cannot say that such stance had no basis at all.  The defendant had not made any attempt to ask Larry and Philip Mak to explain by letters or otherwise why they should have in their letters of 19 and 22 April disclaimed knowledge of the incident on 7-8 April.

60.  Mr Pao further complained that the plaintiff had subjected the defendant and Yiu to these unjustified attacks for about 2½ years.  I think the timing is incorrect.  The plaintiff’s witness statement was filed on 10 September 2004, which was a little bit more than one year and three months before the action was discontinued.  No doubt, it was still a long period, but not as long as 2 ½ years.  The material amendment to the statement of claim which Mr Pao complained of was made on 17 February 2005, which was about 10 months, and not 2 ½ years, before discontinuance.  On whether these attacks were justified, I have already analyzed them and made my observations above.

61.  Mr Pao also complained about some of the contents of the letters by the plaintiff’s solicitors.  I think these matters are covered by the above analyses.

Orchestrated and pro-ordained attacks on the defendant and Yiu

62.  Mr Pao submitted that this action was part of an orchestrated,
pre-ordained and unsuccessful attempts to destroy the professional reputation of the defendant and Yiu. 

63.  As a result of the incident on 8 April, the plaintiff on 9 April complained to the Companies Registry against the defendant’s conduct as contrary to section 120 of the Companies Ordinance.  At that time, the plaintiff still did not know that one of the defendant’s grounds of defence was that Larry and Philip Mak had withheld authorization.  Furthermore, based on my analyses and observation on the respective grounds of claim and defence in this action, I cannot say that this complaint was a groundless one except that it was pre-mature in relation to the complaint against failure to provide copies. 

64.  Unfortunately, the Registrar in its reply of 21 May 2003 to the plaintiff appeared to have accepted the Ex Co’s newly imposed regulation of requiring three working days prior notice for inspection and that the inspection had to take place in the presence of a member of the Ex Co or a member of the staff of the defendant.  This incorrect attitude seemed to have been put right by the plaintiff’s further representation on 26 May 2003.  The Registrar then notified the parties on 13 and 27 August 2003 that after considering the complaint and the representations of the parties, he considered that it involved an internal dispute between the members/directors of the Tong in which the Registry should not be involved.  The parties were further advised that the Registrar would take no further action.  The involvement of the Registrar appeared to have ended there.

65.  The plaintiff’s complaint to the Hong Kong Society of Accountants (which changed its name to Hong Kong Institute of Certified Public Accountants sometime after June 2004) against Yiu was made on 10 April 2003 and before the start of this action.  He complained that Yiu, as a professional accountant, had knowingly and intentionally contravened the Companies Ordinance.  He also enclosed in the complaint letter a copy of his complaining to the Companies Registry dated 9 April.

66.  Yiu responded to the complaint on 5 May 2003.  He advised the Society that he was not responsible for the secretarial matters of the Tong.  He further stated that he had referred the plaintiff’s request to the Tong’s secretary, namely the defendant and the defendant advised him that the defendant only acted on instruction.  He also provided that the Society would certain confirmation letter and attachments from the Tong which were not produced to me.  He confirmed to the Society that the defendant was his connected company in which he held no share or directorship. 

67.  I have already dealt with Yiu’s relationship with the defendant.  These statements by him to the Society are obviously not in accord with the reality and are less than truthful.  They gave a false picture to the Society on his control of the defendant and his role in the defendant’s handling of the plaintiff’s request for copy minutes.  

68.  On 21 June 2004, which was more than a year after Yiu had responded to the complaint, the Society replied to the plaintiff that his complaint against Yiu had not been sufficiently substantiated.  The grounds given by the Society were that the plaintiff’s request was declined by the defendant and not by Yiu, the defendant declined the request because Larry and Philip Mak had declined authorization, Yiu did not hold any share or directorship in the defendant and there was no evidence to prove that he was involved in the decision of Larry and Philip Mak. 

69.  It thus appeared that Yiu was successful in distancing himself from the defendant insofar as the investigation by the Society was concerned.  The Society also accepted that it was Larry and Philip Mak who decided against the plaintiff’s request.

70.  The plaintiff thought that the Society had been misled.  He wrote back on 2 July 2004 and asserted that Yiu was the shadow director in control of the defendant.  He also pointed out some instances in which Yiu was involved in the defendant’s work.  The Society, however, remained unconvinced.  In a reply dated 30 September 2004 to Yiu, the Society stated that the complaint should be closed because the complaints panel convener decided that there was insufficient evidence to substantiate the allegation.  The complaint however did not end there.

71.  After Larry and Philip Mak had denied in the winding up hearing of any role in the defendant’s refusal of the plaintiff’s request, the plaintiff wrote to the Society (now called the Hong Kong Institute of Certified Public Accountants) again on 22 February 2005 and provided the Society with a copy of the transcript of the evidence of Larry and Philip Mak.  He also enclosed for the Society’s reference a copy of Yiu’s witness statement filed in this action in which he admitted his role in the defendant’s handling of the plaintiff’s request on 7 and 8 April.  The Society was not persuaded by such information and advised Yiu on 3 August 2005 that the plaintiff’s complaint was unfounded.

72.  In the light of my analyses and observations above, I do not think these complaints to the Companies Registry and the Society were groundless or motivated by sheer malice.  I do not know on what basis the Society had dealt with the complaint and I refrain from making any comment about its conclusion.

73.  Judging from the pleadings, the witness statements, the contemporaneous correspondence including those by Larry and Philip Mak, the oral evidence of Larry and Philip Mak at the winding-up hearing, the ways that the parties have behaved vis-à-vis the complaints, I do not think this action and the complaints were groundless or that they were brought maliciously or for an ulterior motive to damage or destroy the reputation of the defendant and Yiu.  The plaintiff had a genuine complaint and grievance and he was seeking redress for the same. 

74.  If Yiu or Tsang should have told the plaintiff on 8 April that his request was blocked by Larry and Philip Mak and the defendant then openly referred the plaintiff’s request to the Ex Co for deliberation and decision, the plaintiff might not have initiative these complaints against Yiu and this action against the defendant.  I am of course not saying that if Yiu or the defendant should have so acted, that would have been a sufficient answer in law.  However, such would certainly not have made the plaintiff feel that Yiu had sided with Larry and Philip Mak.  The fact that the plaintiff has so felt, rightly or wrongly, can be seen in his letters to the Society.

75.  There is a further complaint by Mr Pao on discovery which was embedded in this complaint.  Mr Pao said that the plaintiff had failed to disclose the letter dated 30 September 2004 from the Society to him and his further letter to the Society dated 22 February 2005.  However, I cannot seek how these letters would be relevant to the court’s task of resolving the dispute which took place on 8 April 2003. 

Undue delay

76.  Mr Pao made three complaints under this heading.  The 1^st complaint is that the plaintiff did not file the statement of claim in time and instead proposed to put this action on hold.  This was by a letter of 16 June 2003 from the plaintiff’s solicitors which stated:

“We referred to the above action and the order made by Master Woolley on 9^th instant regarding the extended time for filing and serving the Statement of Claim herein.

Please take notice that Mak Shing Yue Tong Commemorative Association Limited is being petitioned to be wound up under Section 177(1)(f), or alternatively, Section 168A of the Companies Ordinance, Cap. 32 of the Laws of Hong Kong in High Court Companies (Winding-up) No. 624 of 2003.  The petition was filed on 5 June 2003. 

In the light of said petition, we propose on a completely without prejudice basis, that the proceedings herein be put on hold pending the final determination by the Companies Court in the said winding-up proceedings in order to save time and costs for both parties and the Court. 

Kindly let us have your comments on the above proposal on or before 1:00 p.m., Tuesday, the 17^th instant, failing which we shall file and served the Statement of Claim on 18^th instant and proceed with the above proceedings as usual.” 

77.  The defendant’s solicitors replied on 17 June 2003 saying that the outcome of the winding-up petition had no relevance to this action.  They further said that any further delay on the prosecution of the action would only prejudice the defendant’s interest.  They suggested that, if the plaintiff indeed wanted to save time and costs, he should have the action dismissed by consent with costs to the defendant.  The plaintiff then filed the statement of claim on the next day, 18 June 2003.  The delay in filing the statement of claim was less than a month.

78.  The second complaint is the plaintiff’s failure to take out a summons for directions and it was the defendant which took out such summons.  The plaintiff instead applied to stay the summons pending the outcome of the petition.  This application was dismissed by Master S Cheung on 1 March 2004.  However, the plaintiff went on to appeal against the Master’s order.  His appeal was dismissed by Reyes J on 31 May 2004. 

79.  The plaintiff’s application for stay was obviously without merit.  However, I do not think that it was made for delaying the progress of this action.  I accept that it was made with a view to save costs as it was the plaintiff's perception that the petition was the main litigation.  Though it was not made for delaying the matter, this application for stay and the subsequent appeal, which were both unjustified, had indeed delayed the progress of the action for a few months.  However, I do not think this delay in these circumstances would constitute an affront to this court or that it was conduct bad enough to warrant the costs to be taxed on the indemnity or common fund basis.

80.  Mr Pao also complained that the plaintiff had belatedly applied to amend his statement of claim and to introduce new evidence at the checklist hearing even after the result of the petition was clearly known to the plaintiff.  I think this criticism is unfair.  The statement of claim was amended after the trial of the petition but before judgment was handed down.  The amendment was to introduce the evidence of Larry and Philip Mak as given at the trial.  They both denied of any role in the 8 April incident.  At that stage, the plaintiff did not know whether the defendant was lying or whether Larry and Philip Mak were lying.  I am of view that this amendment was properly made.  For the scenario after Barma J had given judgment on the petition in which he disbelieved Larry and Philip Mak on this point, I have already dealt with it above.

Conclusion

81.  In the premises, I do not think the action was wrongly commenced or that the plaintiff’s conduct had been vexatious or oppressive.  I also do not think that the plaintiff in prosecuting this action has made the defendant a scapegoat for his family dispute.  The plaintiff had a proper cause of action against the defendant.  The defendant could not have struck out this action under Order 18 rule 19 or the inherent jurisdiction of this court.  Yiu’s conduct is also not beyond reproof.  I do not think that I should order costs to be taxed on an indemnity or common fund basis.  I am of the view that taxation on a party and party basis is fair and I so order.

82.  For this hearing, since the defendant has not succeeded, I make an order nisi that the defendant do pay the plaintiff the costs of and incidental to this hearing.