YOICHI KUGA v. SARONIC HOLDINGS LTD

HCMP 1180/2018

[2023] HKCFI 1966

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1180 OF 2018

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D E C I S I O N
(On Variation of Costs Order Nisi)

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Introduction

1.  This Court handed down a decision on 18 April 2023 in relation to three summonses, two regarding interrogatories served by P without order, and an earlier summons issued by D for an inquiry as to damages suffered by D as a result of its undertakings obtained by P in these proceedings (“Decision”). I shall adopt herein the same abbreviations and nomenclature in the Decision, unless otherwise indicated.

2.  All 3 summonses arose out of section 21M injunction proceedings commenced by P in August 2018 against D, in aid of the Luxembourg Proceedings brought by P against D (amongst others) concerning the beneficial ownership of shares in POH held in the name of D.

3.  D succeeded in all three summonses.

4.  In the Decision, I ordered:

(1)  costs of the Interrogatories Summonses, including of all reserved costs, be paid by P to D, to be taxed if not agreed, on party and party basis, with certificate for two counsel;

(2)  As for D’s Inquiry Summons to enforce P’s Cross Undertaking, P to pay D’s costs of the determination of the Question, including any reserved costs, to be taxed if not agreed, on party and party basis, with certificate for two counsel (“Order Nisi”)

5.  On 26 April 2023, D issued a summons to vary the Order Nisi and to seek the two sets of costs be summarily assessed on an indemnity basis (or such other enhanced basis as the Court deems fit) with certificate for two counsel and be paid within 14 days of summary assessment; and in the alternative, such costs be taxed if not agreed, on an indemnity basis (or such other enhanced basis as the Court deems fit) with certificate for two counsel (“Variation Summons”).

6.  This was opposed by P who sought a final order in terms of the Order Nisi.

D’s grounds for variation

7.  In relation to the two Interrogatories Summonses:

(1)  the Interrogatories were wholly without merit and should never have been served on D, in that they related to the parties’ substantive disputes and outside the scope of Section 21M proceedings, and in any event completely unnecessary;

(2)  the Interrogatories were abusive in that they related to D’s alleged constructive trusteeship which had already been decided by this Court in the Release Decision but which P sought to re-open without any material change of circumstances.

8.  In relation to the determination of the Question:

(1)  these s21M proceedings were brought on a wholly false basis and should never have been commenced;

(2)  P’s opposition to the Inquiry was abusive, oppressive and wasteful given that

(i)  P’s principal ground of opposition was merely a regurgitation of arguments which had already been considered and rejected by the Court;

(ii)  There was no material change of circumstances to justify P’s re-litigation of this issue;

(iii)  such wasteful conduct was compounded by the abusive and oppressive way in which P ran his case

P’s opposition

9.  Briefly, P’s opposition was based on:

(1)  the constructive trustee argument did have a factual foundation;

(2)  P never made admission or concession as alleged by D in relation to D’s Undertakings being obtained on a false basis and that he was not the UBO;

(3)  D’s allegation that the Interrogatories were taken out to derail the hearing on the Question;

(4)  P could not be said to have engaged in “unreasonable and abusive conduct”;

(5)  D was in fact asking the Court to derogate from its finding that there was no sufficient evidence that D’s Undertakings were obtained by P by fraudulent and improper means;

(6)  This Court did refer to the documents in the hearing bundles for the 8 February 2023 hearing notwithstanding D’s opposition for inclusion on irrelevance.

Discussion

The Interrogatories Summonses

10.  So far as the two Interrogatories Summonses were concerned, as seen in the Decision, I have found that the Interrogatories did not relate to a matter in question between the parties in the present section 21M Proceedings, nor were they necessary either for disposing fairly of the cause or matter or for saving costs.

11.  As set out in the Decision, and to repeat, the primary forum of the litigation was in Singapore, and Suit 1212/2017 was commenced by JTrust against MK and companies controlled by MK including Cougar SG of which the sole shareholder was POH. Cougar SG in turn owned shares in KR Brazil. P claimed that KR Brazil was a member of Kuga Corporation of which P was the President and CEO. P applied to join in Suit 1212/2017 claiming to be the beneficial owner of Cougar SG and POH on 8 May 2019. In light of this, the beneficial ownership of Cougar SG and POH clearly became part of the issues in Suit 1212/2017. As also set out in the Decision, it was found by SGCA that the POH companies (or SG Borrowers) were in fact beneficially owned by MK.

12.  The Transcript showed that D had already answered similar questions asked of him during the trial of Suit 1212/2017 as in the Interrogatories. There was no basis for P to serve the Interrogatories on D, and that it was clear that the identity of the UBO of POH was not known to D prior to the determination in Suit 1212/2017, and as said P already had those answers.

13.  So far as the constructive trustee issue was concerned, the issue had already been decided by this Court as seen in the Release Decision. As for the significant change of circumstances alleged by P, it was argued by P that despite the determination of SGCA, D had not returned the POH Shares to MK. As found by this Court in the Decision, the argument was misconceived, as it should be MK who should be making such argument against D who was found by SGCA to be the UBO. In any event, this Court found there was no material change of circumstances.

14.  In light of all said above, and that it was found by this Court in the Decision that all the documentary evidence supported the finding of the SGCA that MK was/is the UBO of POH, I am of the view that the Interrogatories were wholly without merit and should never have been served on D and that they were also abusive in that they all related to D’s alleged constructive trusteeship which had already been decided by this Court and that this Court had found there was no material change of circumstances. They were also served, in my view, to cause a delay to the hearing of D’s Inquiry Summons.

15.  Having considered all the circumstances of this case, I order P to pay D’s costs of the two Interrogatories Summonses on indemnity basis, with certificate for two counsel.

The determination of the Question

16.  As set out in the Hong Kong Civil Procedure 2023, Vol 1, 29/1/25 and 29/1/26, on an application to enforce an undertaking as to damages, there are two separate points to consider: first, as a matter of discretion, should the court order that the undertaking be enforced? Secondly, if so, what loss has the defendant suffered in terms of money, was it caused by the injunction and was it too remote. It is further set out that in a case where it is determined that the injunction should not have been granted, the court is likely to enforce the undertaking if asked to do so, though the court still retains a discretion not to do so.

17.  Thus, the burden was on D to satisfy this Court that P’s Cross Undertaking should be enforced.

18.  The Court has in the Decision stated that it is not satisfied that P knowingly procured D’s Undertakings by fraudulent or improper means. However, it was argued by Ms Sit that, first, P clearly could and should have discovered that he was not the UBO before launching the present action and even if P had not discovered that as the evidence emerged it became clear that the UBO was not P, P ought to have discontinued this action then and there, rather than pursuing it all the way to end. Second, P’s opposition to the Inquiry was abusive, oppressive and wasteful given that is principal ground of opposition being that D was allegedly a constructive trustee.

19.  However, in my view, with or without P’s opposition, D would still need to satisfy this Court that the Court should exercise its discretion to enforce P’s Cross Undertaking, and that in any event, this Court would have to determine the Question.

20.  In the above circumstances, I do not find that indemnity costs should be ordered against P. I maintain the Order Nisi, save as stated below.

Whether summary assessment

21.  In relation to the three summonses, they were all interlocutory and stand alone applications, I accept Ms Sit’s submission that the costs should be summarily assessed.

Conclusion

22.  In light of all above said, I am prepared to vary the Order Nisi and grant an order in terms of paragraph 1(a) of the Variation Summons, save that I allow P 28 days to pay upon summary assessment. As for paragraph 1(b) of the Variation Summons, the Order Nisi be varied only to the extent that the costs are to be summarily assessed and be paid by P within 28 days upon summary assessment.

23.  I would roughly apportion the time spent on the Interrogatories Summonses and the determination of the Question 50/50.

24.  As for the costs of the Variation Summons, P only succeeded partially on opposing the variation of the Order Nisi relating to the determination of the Question. I order P to pay 75 % of the costs of the Variation Summons, to be summarily assessed on party and party basis with certificate of two counsel and be paid within 28 days upon summary assessment.

25.  D to lodge statements of costs within 14 days and P to lodge lists of objections within 14 days thereafter.