STEPHENSON HARWOOD (A FIRM) v. FANG ANKONG aka FANG AN KONG

HCA 191/2023 &
HCMP 1614/2022

[2023] HKCFI 1230

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 191 OF 2023

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AND

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1614 OF 2022

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D E C I S I O N

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1.  Mr Fang Ankong (“Mr Fang”) owns and controls HWH Holdings Limited (“HWH”), his corporate vehicle incorporated in BVI. Since 2015, HWH and Mr Fang had been involved in a series of hostile litigation with Mr Fang’s joint venture partner. HWH and Mr Fang engaged Stephenson Harwood (“SH”) to provide legal services to them in 3 Hong Kong actions and two BVI actions, which lasted for years.

2.  The Hong Kong actions were tried by Coleman J in a 15-day trial in July 2021, wherein SH was the firm of solicitors on record for both HWH and Mr Fang.

3.  As HWH and Mr Fang failed to pay legal fees when they fell due, SH applied and was granted leave to cease acting for HWH and Mr Fang on 21 September 2022.

4.  About a month later, HWH commenced HCMP 1614/2022 (“OS”), seeking leave to tax 94 bills issued by SH and addressed to Mr Fang from 31 December 2015 to 10 August 2022.  Mr Fang chose not to become a co-plaintiff in the OS.

5.  In HCA 191/2023 (“Writ Action”), SH sues Mr Fang for HK$20,073,503.52 outstanding legal fees.

6.  The parties are in agreement that there should be trial of the following preliminary issues for both sets of proceedings at the same time and by the same judge (“the Trial”).

“Whether as pleaded in paragraphs 4 and 5 of the Amended Statement of Claim in HCA 191/2013 Mr Fang and HWH Holdings Ltd are jointly and severally liable or if Fang is otherwise personally liable to settle any of Stephenson Harwood’s bills as listed in Annex 1 of the Originating Summons in HCMP 1614/2022 dated 18 October 2022 / paragraph 9 of the Statement of Claim in HCA 191/2023 dated 6 March 2023, and if so which, and on what terms.”

7.  The outcome of the Trial will be binding on the parties in both sets of proceedings.

8.  The parties have agreed upon directions. The only outstanding issues are:

(1)  Whether the court should direct cross examination of the deponents at the Trial, failing which the absent deponent’s affirmation shall be excluded from the evidence;

(2)  Whether the Writ Action should be stayed for a longer period beyond the judgment after Trial.  The suggestion is that if Mr Fang is held by the court after the Trial to be personally liable to pay SH’s bills, the Writ Action will still be stayed pending determination of the OS.

(3)  Whether a defence should be filed in the Writ Action. 

9.  On the 1^st issue, the legal principles are not in dispute.  They have been set out by this court in Taihan Electric Wire Co Ltd v Lee Chi Yuen Arctic (unrep., HCA 454/2013, 10 September 2013) at §§2-7. 

(1)  The jurisdiction to order cross-examination on affidavit is a matter of discretion which is unfettered.  The test is: “Would the making of an order result in justice being achieved; conversely, if an order were not made, would there be injustice?”

(2)  What constitutes good and sufficient reason must be considered in the “light of the purpose of the proceedings” for which such need is said to have arisen. 

(3)  The power to order cross-examination of a deponent is more often exercised where a final order is to be made or where the substantive relief sought has an element of finality.

(4)  The court may consider the delay and expense that will arise as a result of the need to cross-examine a deponent. 

10.  HWH and Mr Fang accept that a decision on the preliminary issue will be final and binding on the parties in both sets of proceedings. However, they query the need for cross-examination.  They say that the case is essentially one built on correspondence and inferences to be drawn.  Whether or not Mr Fang had received the engagement matter, why he let SH remain on record in 3 sets of Hong Kong proceedings and raised no objection to SH’s representation, are matters for inferences and submission. 

11.  Further, Mr Fang’s personal belief and intentions regarding his relationship with HWH is plainly irrelevant as a matter of contract law because contract formation depends not on the subjective state of minds of the parties.  The court applied an objective test based upon a consideration of what was communicated between them by words or conduct, and whether that leads to a conclusion that they intended to create legal relations and had agreed upon all the terms which they regarded or the law requires as essential for the formation of legally binding relations: Re MSB International Ltd [2023] 1 HKLRD 386, at § 41, Linda Chan J.  Cross-examination unnecessarily complicates the matter by introducing irrelevant and inadmissible evidence of the parties subjective understanding, which leads to waste of time and costs, and distraction from the relatively straightforward and simple issue of contract formation. 

12.  It is well established that a trial of a preliminary issue is a final matter which will bind the parties.  Under Order 38, rule (1) of the Rules of the High Court, any fact required to be proved at the trial of any action begun by writ by the evidence of witnesses should be proved by the examination of the witnesses orally and in open court.  Although the principles in Taihan Electric Wire are of general application, that case concerned an interlocutory application for injunction.

13.  I am in agreement with Ms Lok that there should be an opportunity for cross-examination to give a fair chance for witnesses to explain matters in dispute.  Whilst SH does not dispute the principles in MSB, SH does not rely on the subjective intent of the parties but the objective utterances and conduct to support an inference of the engagement.

14.  It is not clear whether HWH and Mr Fang would want to cross-examine in the light of the latest affirmation from SH filed yesterday.  I therefore set down 1 day for the Trial but with liberty to HWH and Mr Fang to request for more time after they file the affirmation in reply and the list of issues by 25 May 2023.

15.  As regards the 2^nd issue, it is fair to stay the Writ Action until after judgment in the Trial. That will determine who the proper defendant in the Writ Action should be and the terms of engagement.  There is no point in staying the Writ Action for any longer.  Further directions can be given after judgment on the Preliminary Issue.

16.  As regards the 3^rd issue, Ms Lok, counsel for SH, submits that the defence in the Writ Action should be filed so as to bind HWH and Mr Fang at the Trial.  There should not be much costs involved, since Mr Fang’s case would be in his affirmations anyway.

17.  In my view, it is not necessary at this stage to file a defence.  Mr Fang should not be asked to incur costs on a preparing a defence when the issue of whether he is the right defendant is not yet resolved.  The Preliminary Issue has framed the scope of the Trial and the parties cannot go beyond it.

18.  In conclusion, I direct deponents to attend the Trial for the purpose of cross-examination, failing which the absent deponent’s affirmation shall be excluded from the evidence.

19.  The Writ Action (including the filing of a defence) will be stayed pending judgment in the Trial.

20.  I thank counsel for their assistance.