HJ INNOXCELL LTD v. TEH BOON KHUAN

HCA 1707/2018 & HCA 2835/2018 & HCMP 1402/2020
(Heard together)

[2021] HKCFI 2792

HCA 1707/2018

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1707 OF 2018

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BETWEEN

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AND

HCA 2835/2018

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2835 OF 2018

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BETWEEN

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AND

HCMP 1402/2020

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1402 OF 2020

(Transferred from HCA 1707 of 2018)

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________________________

BETWEEN

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(Heard Together)

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DECISION

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1.  On 3 August 2021, this court ordered the plaintiff to make payment of security for the defendants’ costs in the above actions respectively and pending that, stay of proceedings (“the Orders”). Reasons for decision (together with decision on costs of the applications) were handed down on 2 September 2021 (“the Reasons”).

2.  The plaintiff has since the Orders taken out applications for leave to appeal against the Orders by summons filed on 17 August 2021 (“the Appeal Summonses”) and for stay of execution of the Orders by summons filed on 31 August 2021 (“the Stay Summonses”).

3.  Meanwhile, the defendants also apply for dismissal of these actions by summonses filed on 3 September 2021 (“the Dismissal Summonses”) on the ground that the plaintiff has admittedly failed to comply with the Orders.

4.  All of these applications are now before this court.

5.  For the present purpose, the same definitions and abbreviations in the Reasons are adopted.

Preliminary

6.  When the present hearing commenced, this court enquired and counsel for the plaintiff in these actions confirmed the follows:

(1) The Stay Summonses have nothing to do with O47, r1 of the Rules of the High Court, Cap 4A, contrary to what the summonses on their face suggest. The applications are essentially for stay of execution pending the intended appeals.

(2) It follows from (1) above that the success or not of the Stay Summonses hinges upon the outcome of the Appeal Summonses.

(3) In connection with the Stay Summonses, the plaintiff’s solicitors have filed their affirmations exhibiting the unsworn further affirmation of Kwok. Instead of giving an undertaking to have it duly sworn and filed, the plaintiff opted to leave it as it is, which would effectively be a hearsay statement affirmed by the plaintiff’s solicitors.

(4) Nevertheless, to respond to such further evidence of the plaintiff, the defendants took out their summonses on 7 September 2021 for leave to rely on the further affirmations of Teh. The plaintiff indicated no opposition to that (and hence orders in terms of those summonses accordingly made during the hearing).

The Appeal Summonses

7.  The Appeal Summonses were scheduled to be heard on 3 November 2021. Upon the defendants’ indication of no objection, this court directed the Appeal Summonses to be brought forward to the present hearing when the other summonses would be heard. The preliminary observations set out above explain the logic of that.

8.  The Appeal Summonses did not come with draft grounds of appeal. This may be understandable, as the Reasons were yet to be handed down by the time when the summonses were filed. Draft notices of appeal were subsequently exhibited to the draft further affirmations of Kwok mentioned above. The drafts were subsequently revised, and based on which the Appeal Summonses now proceed.

The principles

9.  Section 14AA(4) of the High Court Ordinance, Cap 4 provides that leave to appeal shall not be granted unless the appeal has a reasonable prospect of success or there is some other reason in the interests of justice why the appeal should be heard.

10.  The principles are trite.

11.  The applicant must show that the appeal is more than merely arguable, although he does not have to demonstrate that the appeal will probably succeed.

12.  When it comes to a challenge against the exercise of discretion of the court, the applicant must show that the decision was plainly wrong or perverse or else the appellate court will not interfere. This is where the judge was wrong in law or based his decision on erroneous finding or inference from the evidence that no reasonable tribunal would have made.

13.  In some cases, even if reasonable prospect of success is demonstrated, the court retains a discretion to refuse leave in the interests of procedural economy and proportionality.

14.  For the above principles, see for instance Wong Kar Gee Mimi v Severn Villa Ltd [2012] 1 HKLRD 887 at §§29-30; First Laser Ltd v Fujian Enterprises (Holdings) Co Ltd [2016] 3 HKLRD 622 at §§6-11; China Art Bank Company Ltd v Xu Zhiqiang HCA2543/2015 (26 July 2017) at §§10-11.

15.  The revised draft notices of appeal essentially suggest the following grounds of appeal:

(1) This court failed to access the plaintiff’s ability to meet adverse costs orders in the future

(2) This court failed to take into account sufficiently that the plaintiff’s shared office arrangement does not show that it would have no sufficient means to meet adverse costs orders if its claims fail.

(3) This Court failed to consider and find that the serious disruption to the plaintiff’s business and its loss of revenue was caused by the defendants.

(4) This Court failed to take into sufficient account that an order of security for costs will stifle the plaintiff’s claim.

(5) The quantum of security is excessive.

Grounds (1) and (2)

16.  The first two grounds could be considered together, as they concern this court’s consideration of the plaintiff’s financial ability to meet an adverse costs order in the event that its claims fail.

17.  The plaintiff criticizes this court for focusing on its present financial situation instead of its alleged improving income prospect, and hence its future ability to meet any adverse costs order.

18.  This court does not see how the above criticism is warranted. This court clearly and specifically considered not only the current financial situation but also the future financial ability of the plaintiff as it suggested. That this court was not convinced by the evidence of the projected financial ability of the plaintiff in the future was a view that this court was entitled to come to, upon consideration of the materials before the court and the submission of the plaintiff’s counsel in court. The suggestion that this court should have come to a view favourable to the plaintiff in this respect, as if this court had failed to consider the “exhibits and events” put forward by the plaintiff, is unfounded. There is no reasonable prospect of convincing the appellate court that such view of this court was plainly wrong.

19.  The argument with reference to the shared office arrangement of the plaintiff is red herring. To begin with, this court clearly and specifically referred to that as part of the argument advanced by the defendants and the plaintiff’s dispute regarding that. Whilst this court expressed scepticism about the plaintiff’s case and evidence in this respect, this court did not labour on that point as one against the plaintiff. Instead, this court turned to the more pertinent question and to consider the evidence in respect of the plaintiff’s net business income from what was allegedly active business operations in such office premises. It is difficult to see how such approach of this court can be faulted. This court considered that the plaintiff failed to substantiate its allegations in respect of its business volume and its net income in any concrete manner. This was what this court was entitled to find on the basis of the materials relied on by the plaintiff. It cannot be said to be plainly wrong.

20.  The plaintiff somehow argues that this court had decided not to consider the factors that caused the Companies Judge to stay the winding up petition presented by the defendants on the basis of one of the overdue assessed costs orders. This court never made such positive suggestion. The fact was this court was not specifically asked to consider attaching weight to what was before and what caused the Companies Judge to stay the petition as factors in support of its resistance to the application for security. Counsel for the plaintiff acknowledged during the present hearing that the materials before the Companies Judge that drove her to make that order were not before this court at the previous hearing. This court also made clear in the Reasons its view of the matter insofar as what were apparent from the circumstances. Such view, including that about the indisputable accrued liability and failure of the plaintiff to pay the assessed costs of the defendants, was permitted by the circumstances.

Ground (3)

21.  Again, it is incorrect to suggest that this court failed to consider the plaintiff’s case that it was the defendants who contributed to its current financial situation and that it would be wrong to allow the defendants to make use of the security for costs to stifle its claim. One just need to read the Reasons to see that the criticism is unfounded.

22.  It is then argued that this court should have appreciated the extent of the defendants’ wrongdoing and its effect on the plaintiff’s business. However, this is no doubt a major factual dispute between the parties in the actions. It would be inappropriate for this court to proceed as if the evidence in respect of such dispute (adduced by the plaintiff) was abundantly clear in pointing one way or the other. Counsel for the plaintiff appearing for the plaintiff at the previous hearing apparently acknowledged that. Further, what the court proceeded to consider was a realistic view of the matter even on the basis of what the plaintiff suggested in this respect. This court fails to see how the criticism now of such view in the peculiar circumstances of this case could be valid.

Ground (4)

23.  This ground was considered in the previous hearing both as a matter of legal principle and the peculiar circumstances of this case. Where the plaintiff’s sources have admittedly funded its prosecution with full force of every step of the legal proceedings but refused to face the costs consequence of such steps, this should not be accepted as genuine inability to provide security for costs. The funding parties consciously chose to pay for the good but not for the bad. In these circumstances, the court should be slow in accepting the contention that ordering security for costs will stifle the claim: see also Vigers Hong Kong Limited v Junsa Development Limited HCA 5173/1998 (28 April 2003) at §§21-22; Hong Kong Civil Procedure 2021 §23/3/14.

Ground (5)

24.  This court fails to see how by any objective standard the amounts of security ordered, as compared to the amounts sought by the defendants, could be criticized as clearly exceeding what sufficient security entails.

25.  The plaintiff seems to suggest that this court ought to have considered differential treatment of the three actions for the purpose of ordering security. The legal basis for that is unclear. Nor is how this argument assists the plaintiff. The plaintiff is not conceding. Any attempt to suggest that the plaintiff would have been able and ready to meet an order for security in respect of any but not all of these actions would be inconsistent with its position in opposition. In any event, no offer of security whatsoever has been made in respect of any action.

Conclusion

26.  All grounds and submissions considered, this court has to agree with the defendants that the plaintiff simply disagrees and attempts an effective re-run of most, if not all, of the arguments advanced in the previous hearing. That would not suffice for the purpose of section 14AA(4). Nor was any of the grounds improved materially during the present hearing. They have no reasonable prospect of success. There is also no other reason why the intended appeal should be heard.

27.  In the circumstances, the Appeal Summonses have to be dismissed.

The Stay Summonses

28.  The principles on stay of execution pending appeal are settled: Hong Kong Civil Procedure 2021 at §59/13/1.

29.  As acknowledged by counsel for the plaintiff, the basis for stay of execution of the Orders pending appeal, where leave to appeal is refused, would be lacking. The substance of the unsworn further affirmations of Kwok mentioned above in support of the Stay Summonses consist of no more than what the plaintiff seeks to cover in the arguments on its behalf for the purpose of the Appeal Summonses. In the circumstances, the Stay Summonses have to be dismissed as well.

The Dismissal Summonses

30.  When handing down the Reasons, this court varied the Orders in that the automatic dismissal of the actions upon non-compliance with the Orders was changed to become leave to the defendants to restore the proceedings for applying to dismiss the actions with costs. This remains to be the stated consequence of non-compliance with the Orders.

31.  Counsel for the plaintiff did not suggest any basis or reason why the stated consequence should not follow, now that the plaintiff has failed to comply with the Orders.

Order

32.  The Appeal Summonses in these actions are dismissed. So are the Stay Summonses in these actions. Pursuant to the Dismissal Summonses, these actions are dismissed with costs, including any costs reserved, to the defendants respectively. Costs shall be taxed, if not agreed.

33.  Counsel were heard on the appropriate costs order to be made in respect of the summonses before this court. Following the above events, the plaintiff shall pay the respective defendants’ costs of and occasioned by the Appeal Summonses, the Stay Summonses and the Dismissal Summonses in these actions. Costs shall be taxed, if not agreed. For the avoidance of doubt, counsel’s engagement is certified. Contrary to the defendants’ submissions, which have been considered, the costs shall be taxed on the normal party and party basis.