LAU WING YAN AND OTHERS v. JOINT SILVER LTD (in liquidation) AND OTHERS

HCMP 54/2024

[2025] HKCFI 2203

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 54 OF 2024

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DECISION

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1.  This is the Plaintiffs’ Summons (“Summons”) to convert these proceedings, which were commenced by Originating Summons (“OS”), to a Writ action (“Conversion”) or alternatively for the OS to be heard partly on oral evidence and partly on affidavit evidence with cross-examination of the deponents.

2.  This is quintessentially a case management decision made in exercise of the Court’s discretion after taking into account all relevant considerations.  This application is resisted by all 3 Defendants.  The applicable legal principles can be found in the 3 sets of submissions before the Court and are uncontroversial. 

3.  The OS concerns whether a purported assignment (“Assignment”) to the 2^nd Defendant of the 1^st Defendant’s “potential cause of action”, ie, the enforcement of an undertaking as to damages (“Undertaking”) provided by the Plaintiffs to the Court in obtaining an ex parte injunction (on minimal notice) (“Injunction”) against the 1^st Defendant and Mr Chu Kong (“Chu”)[1] is void, invalid and/or should be set aside.

4.  The OS was taken out after the Injunction was discharged by the Court on the ground of material non-disclosure and an application to enforce the Undertaking against the Plaintiffs (“Enforcement Application”) was on foot.  The Enforcement Application is made by the 2^nd Defendant (after Chu was substituted by it) on the strength of the Assignment.   

5.  This application is premised on the allegations that the 3^rd Defendants had failed to exercise their power in good faith in respect of the Assignment; keys aspects of their evidence filed in these proceedings are contradicted by contemporaneous documents and undisputed facts; and such serious allegations cannot be fairly resolved without Conversion and cross-examination.

6.  The 1^st and 3^rd Defendants oppose this application on the bases that (a) there are no genuine, substantial disputes of fact that are central to the Court’s determination of the OS; and (b) further significant delay to the resolution of the OS and the Enforcement Application will be caused.  The Enforcement Application had been adjourned pending the disposal of the OS.  In turn, the OS had been adjourned to a date to be fixed after the determination of the present application.  The 1^st and 3^rd Defendants say that this application is designed to cause further delay to the resolution of the Enforcement Application. 

7.  The 2^nd Defendant says that the factual disputes raised by the Plaintiffs do not concern it.  However, it is highly concerned about the delay which will be caused to the resolution of the OS and the Enforcement Application if this application is granted. 

8.  It appears from the submissions of Mr Nip SC, who appears with Mr Lau for the Plaintiffs, that there are broadly 4 grounds in support of the OS.  First, the Undertaking was given to the Court and did not constitute a cause of action which could be assigned.  An impressive body of authorities was cited, including one from the CFA.  I agree with Mr Manzoni SC, who appears with Mr Wong for the 1^st and 3^rd Defendants, that this is plainly a matter of law and does not support the Summons.  It should be added that if the Plaintiffs are right on this legal issue, the evidence filed for the purpose of the OS may carry little relevance and the Enforcement Application may have no leg to stand on.

9.  The 2^nd to 4^th grounds are related.  Under this trilogy of contentions, it is said that the 3^rd Defendants had failed to act in the best interest of the creditors (ground 2); the Assignments was to enable Chu to bring abusive litigation against the 1^st Plaintiff (they used to be friends and partners of a successful shipping business[2]) (ground 3); and the 3^rd Defendants acted in collusion with Chu (ground 4). 

10.  Detailed submissions have been made on various aspects of the evidence filed for the purpose of the OS to support grounds 2 to 4.  Inevitably, this Court has to make a tentative assessment of such evidence to evaluate the first basis on which Mr Manzoni opposes this application. Further, this assessment has to be made in light of the high threshold which the Plaintiffs must satisfy before the Court will hold that the 3^rd Defendants were acting in breach of their duties. 

11.  I first deal with ground 3.  It is not one which is easy to understand.  The merits of the Enforcement Application (or whether it is abusive) depend on whether substantial loss had been caused to the 1^st Defendant as a result of the Injunction which was wrongly granted.  There are expert reports which suggest that the Injunction had indeed caused substantial loss to the 1^st Defendant.  This ground is no support for the Summons.

12.  A lot of what have been put forward in support of grounds 2 and 4 may be said to be forensic analyses of the evidence. Answers to these criticisms have been provided by Mr Manzoni in his submissions.  Further, he says that, contrary to the Plaintiffs’ suggestion, the allegations against the 3^rd Defendants had been dealt with in their evidence.  In any case, the Plaintiffs’ criticisms merely show that they disagree with the actions of the 3^rd Defendants and go nowhere to making out a case of misconduct against them.

13.  In his viva voce submissions, Mr Nip referred the Court to 2 examples of the Plaintiffs’ criticisms.  The first concerns the alleged failure of the 3^rd Defendants to explore settlement with the Plaintiffs prior to the Assignment.  I have to say that it is not obvious why settlement with the Plaintiffs would have been a real option given that the Injunction remained on foot and there is no suggestion that the Plaintiffs were going to concede on the discharge of it.

14.  In any case, the 3^rd Defendants’ evidence is that they considered that the likelihood of success was not high enough to be able to convince the Plaintiffs to come to the table to negotiate.  Mr Nip submitted that the Plaintiffs are entitled to cross-examine on that piece of evidence and discovery of the notes and the like made by the 3^rd Defendants on that issue.  With respect, this will be turning a modest point into a mini-trial. 

15.  It should be added that ground 4 is contradicted by (a) an action was brought by Chu against one of the 3^rd Defendants in 2021 accusing her of breaching her duties owed to Ocean Sino Ltd as liquidator; and (b) Chu’s proof of debt in the 1^st Defendant’s liquidation had been substantially reduced by the 3^rd Defendants. 

16.  The seriousness of the allegations made by the Plaintiffs is a matter of concern to this Court in terms of how they are to be resolved fairly.  On the other hand, much if not all of the Plaintiffs’ criticisms have been laid out in Mr Nip’s submissions.  Insofar as the forensic analyses of the evidence are concerned, the parties will be free to make their submissions.  In any case, the 3^rd Defendants have taken the position that they have adequately answered the Plaintiffs’ criticisms and/or that they are irrelevant.  They shall live with the consequences, especially if their evidence is contradicted by incontrovertible evidence. 

17.  The second of Mr Nip’s examples can be used to illustrate the point.  The Plaintiffs say that the 3^rd Defendants’ evidence that experts were instructed not to assess the value of the Assignment but another potential claim of the 1^st Defendant is contradicted by what was stated in one of the expert reports.  The criticism is based on the documents before the Court.  The Court will be able to evaluate the quality of that part of the 3^rd Defendants’ evidence.

18.  I agree with Mr Liu, who appears for the 2^nd Defendant, that this Court should have regard to the fact that the Injunction was granted over 10 years ago.  It was discharged more than 4 years ago.  Regardless of whether fault can be placed on any party for the delay, it is self-evident that further delay in the resolution of the Enforcement Application is highly undesirable.  There can be little doubt that the Conversion or having the OS partly heard with oral evidence will cause substantial delay. 

19.  Mr Liu made a forceful submission that having another Writ action is hardly proportionate.  No less than 10 sets of proceedings had been generated by the Injunction, the committal proceedings which related to it and the winding up of the 1^st Defendant whose business was paralysed by the Injunction[3].  As for the liquidation of the 1^st Defendant, this Court was informed by the parties that the cause of it was complex and not solely attributable to the Injunction. 

20.  The 1^st Plaintiff and Chu are resourceful and highly litigious[4].  There can be little doubt that the 1^st Plaintiff will contest the enforcement of the Undertaking vigorously.  The Court must ensure that its resources are not unfairly deployed by the 1^st Plaintiff and/or Chu to the detriment of other court users.   

21.  For these reasons, I decline this application and I shall hear the parties on costs.