MING LAI SIU FUN v. TSANG HUNG KONG AND OTHERS

HCA 2057/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2057 OF 2009

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R U L I N G

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1.  In this instance, I need to rule on two distinct matters.  The first concerns the costs of the hearing on 17 and 19 March this year upon which I handed down judgment on 30 April and invited written submissions.  These submissions are now available and I will in a moment say what, in my view, the appropriate orders for costs should be.  Secondly, the 1st Defendant has sought leave to appeal against the order that I made consequent upon my judgment of 30 April.  I heard argument on the leave application on 24 May and I will also deal with that in this Ruling.

Costs

2.  There were three summonses.  Firstly, the Plaintiff’s application to continue an injunction, secondly, the 1st Defendant’s summons to strike out the statement of claim and, finally, the Plaintiff’s summons to enter judgment in default of defence.  The injunction was continued.  The outcome of that summons had to await the result of the 1st Defendant’s application to strike out the statement of claim which, if successful, would have put an end to the action.  Mr Scott, for the Plaintiff, submits that the appropriate order for costs should be Plaintiff’s costs in the cause.  The basis for this is that on 25 January 2010, the Plaintiff’s solicitors wrote to the 1st Defendant’s solicitors inviting them to consent to the injunction continuing.  This was not responded to.  By then, the 1st Defendant had taken out his summons to strike out the statement of claim which, if successful, would have put an end not only to the action but to any question of the injunction continuing.  The offer in the letter of 25 January having been ignored, Mr Scott had to press for this summons at the hearing of 17 and 19 March.  The summons was resisted in circumstances where I took the view that the injunction should be continued after I had dismissed the application to strike out the statement of claim.  Sir John Swaine, SC and Mr Chiu, in their written submissions, have suggested that I take an overall approach and say that two/thirds of the costs of the hearing on 17 and 19 March should be Plaintiff’s costs in the cause.  No mention is made of the remaining third but I presume that it is intended that these should be costs in the cause.  As will become apparent in a moment, I propose to compartmentalise the costs order to reflect the outcome of each summons separately.  As to the injunction where this had to be pressed and was opposed, it seems to me that Mr Scott is right and these costs should be Plaintiff’s costs in the cause. 

3.  As to the summons for judgment in default of defence, Mr Scott says that notwithstanding having failed to get his judgment in default he should get his costs in any event.  This is really on the basis that the Defendant was in breach of the Master’s unless order as to the filing of the defence.  I took the view that the 1st Defendant had filed his summons to strike out the statement of claim within the time provided in the unless order and so that summons fell to be heard and decided before the consequences of the unless order could take effect.  Nevertheless, the strike out summons failed and so the court had to extend time for the 1st Defendant to file his defence.  The failure to strike out required the 1st Defendant to obtain the court’s indulgence by extending time for the defence and so, whilst successful in staving off judgment in default, as a matter of procedure, the fact remained that having failed to strike out the statement of claim, the 1st Defendant found himself in breach of the Master’s unless order.  Therefore, it seems to me that Mr Scott has done rather better than the order on his summons dismissing the application for judgment in default of defence would suggest.  The 1st Defendant by failing in his application to strike out the statement of claim put himself in peril of a judgment in default of defence but for my having extended time for the defence to be filed and served, which has now taken place.  Whilst the Plaintiff had failed in securing judgment in default of defence, the effective reason for that not happening was the 1st Defendant’s application to strike out the statement of claim which in the event was also unsuccessful.  It is this which should really inform the question of costs on this summons rather than the fact that Mr Scott has not succeeded in his summons to have judgment entered in default of defence.  Accordingly, the Plaintiff will have her costs of this summons in any event including of course, the costs of the hearing of 17 and 19 March.

4.  Finally, there are the costs of the 1st Defendant’s summons to strike out the statement of claim.  It is submitted that a number of important issues were left open and which will need to be decided at the trial so, for this reason, an order for costs between the parties is not an appropriate one hence the submission that these costs should be Plaintiff’s costs in the cause.  I disagree.  The fact is that I have decided that this is not a case which justifies an order striking out the statement of claim.  These costs ought to follow the event irrespective of how the points that were left open by me are finally decided by the trial judge.  The simple fact is that because those matters could not be resolved at this stage the summons to strike out the statement of claim was unsuccessful.  Accordingly, the Plaintiff will also have her costs of this summons including the costs of the hearing of 17 and 19 March in any event.  I will also certify that there should be certificate for two counsel in respect of these two summonses.  For the assistance of the taxing master, I will also say that the time taken for the hearing of the application for the injunction was minimal and should be left out of account in terms of the actual hearing.  The hearing itself was for all intents and purposes entirely taken up by the other two summonses.

Leave to Appeal

5.  The test is that in order to obtain leave the prospective appellant needs to show that he has a reasonable prospect of success in the appeal.  This means that he needs to show more than just an arguable case but he need not go so far as showing that the appeal will probably succeed.  See for example, Chu J in Wynn Resort (Macau) SA v Mong (2009) HKEC 1238 and Kwan JA in Re Wing Fai Constructions Co. Ltd, HCCW 535/2002.

6.  Mr Chiu submits that I have erred in a number of respects in refusing to strike out the statement of claim.  As the judge at first instance, I need to approach the matter objectively.  There are five grounds of appeal.

(a) Grounds 1 and 2 can conveniently be dealt with together.  They relate to my approach to O.12 r.8 and in particular the new r.2 which has been added by the CJR.  Ground 1 is concerned with whether a Plaintiff’s locus to bring a double derivative action is one going to the merits or is a matter related to the court’s jurisdiction to hear such a challenge.  The new r.2 is said to be wide enough in its ambit to cover questions of a party’s locus.  Reliance is placed on the last two sentences in the commentary to the White Book in 12/8/1 (page 182) which says that:

“The new r.8(2) enables a defendant to apply to the court for a declaration that in the circumstances of the case, the court should not exercise its jurisdiction.  The bases for an application under r.8(2) include that considering the best interests and convenience of the parties and the witnesses, the proceedings should be conducted in another court.”

It is submitted by Mr Chiu that by virtue of the new r.8(2), the reference to the court declining jurisdiction in favour of another court is “inclusive” and not “exclusive”.  Mr Chiu says that I should give leave because if r.8(2) does in fact apply to a challenge against “locus” to bring a derivative action then, in this post CJR era, this would be the only procedure available for such a challenge to be made and where a time limit is imposed by r.8(2) for such a challenge which is “before the time limited for filing of the defence” all applications against locus brought under O.18 r.19 or O.33 r.3 after the time limited for the filing of the defence would fail in limine.  He describes the point as one of general importance which ought to be resolved by the Court of Appeal.

7.  In reply, Mr Scott submits that any appeal based on O.12 r.8 would be academic because I had allowed the same challenge to be mounted under O.18 r.19.  Secondly, that the submission based on the new r.8(2) is illogical because if that submission was correct then all challenges on “locus” would need to be brought before the time for the filing of the defence had expired. 

8.  For my part, the structure and purpose of O.12 r.8 in all its constituents is perfectly clear and the uses to which the Order may be put to challenge jurisdiction are, on all the authorities, also well established and clear.  I hold that no reasonable prospect of success has been shown under these two grounds.

(b)    Ground 3 is concerned with whether the Plaintiff has made out a prima facie case that Mr Tsang (D1) was in control of Billion Express when, in the action before Fung J, she had advanced the contrary plea.  I took the view that in the circumstances of Mr Tsang’s conduct, as complained of by the Plaintiff, it was proper for her to put the first action aside and bring this action and obtain the injunction from Chu J to prevent the further selling of Yue Kong’s assets.  It seemed to me that this then fell to be resolved as a matter of case-management by consolidating the two actions and then resolving the issue of control as a preliminary issue which would decide which of the two actions would have to fall away.  As presently constituted therefore the consolidated actions represent, in substance, pleas in the alternative which a party is perfectly legitimately able to put forward.  Accordingly, I do not think that this ground raises any reasonable prospect of success.

(c) Ground 4.  It is said that I employed the “plain and obvious” test which in the circumstances was the wrong test to apply.  For my part, I consider that I applied a “prima facie” test.  It seems to me that the issue raised under this ground could not be resolved summarily.  These matters require to be fully investigated within the trial itself and for this reason I do not consider that the Defendant is entitled to leave to appeal.

(d)    Finally, ground 5.  The matters raised under this head are not one’s that can be resolved in this way.  These are questions of real substance raising difficult and novel points of law.  It would not be right to drive a Plaintiff from the judgment seat by this summary procedure.  Again, I am not able to say that this ground has a reasonable prospect of success.

Conclusion

9.  Accordingly, I refuse leave to appeal with costs and a certificate for two counsel.  This order will be an order nisi.