LAU WING YAN v. THE OWNERS AND/OR DEMISE HARTERERS OF THE SHIP OR VESEEL “BBG GLORY”

HCAJ 77/2017

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ADMIRALTY ACTION NO. 77 OF 2017

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HCAJ 78/2017

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ADMIRALTY ACTION NO. 78 OF 2017

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HCAJ 79/2017

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ADMIRALTY ACTION NO. 79 OF 2017

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HCAJ 80/2017

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ADMIRALTY ACTION NO. 80 OF 2017

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DECISION ON COSTS

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1.  This is the hearing of the Defendants’ application for the costs of their strike out Summonses (Summonses) filed on 21 July 2017 against the Writ in each of the 4 sets of proceedings before the court.

2.  These proceedings involve 2 Vessels, namely, “BBG Hope” (Hope) and “BBG Clory” (Glory).  The Summonses were taken out by the Defendants, the owners of the Vessels (Hope Ltd and Glory Ltd) and the mortgagee of the Vessels (Lohas).  Lohas has not made any application to intervene in these proceedings.  Since the issuance of the Summonses, Hope and Glory had been sold.  In so far as Hope Ltd and Glory Ltd (and Lohas) are concerned, these proceedings are academic and hence this costs application.

3.  Of the 4 set of proceedings, HCAJ 77/2017 (HCAJ 77) and HCAJ 80/2017 (HCAJ 80) are concerned with Glory.  The former is a personal action by the Plaintiff (Lau), whilst the latter appears to be a derivative action by Lau suing on behalf of himself and the shareholders of 3 companies (3 Companies).  HCAJ 78/2017 (HCAJ 78) and HCAJ 79/2017 (HCAJ 79) are mirror proceedings relating to Hope. 

4.  The background to these proceedings is a bitter dispute between Lau and Mr Chu Kong (Chu) who are 50-50 shareholders in Ocean Sino Ltd (a BVI Company) (Ocean Sino), which is the holding company of a chain of companies (including the 3 Companies) all the way down to Hope Ltd and Glory Ltd.  Serious allegations are made by Lau and Chu against each other concerning their actions. 

5.  On one part, Lau says that Chu had abused his control of the companies and purported to mortgage the Vessels to a related entity and sold them at undervalue.  On the other hand, Chu maintains that the mortgages were legitimate, and these proceedings constitute an abuse of process designed to frustrate the enforcement of the mortgages by Lohas by way of sale of the Vessels.

6.  For the present purpose, it is unnecessary and not possible to resolve these grave allegations.  The issue in this application is whether these proceedings are sustainable, and if not, the Summonses were properly brought and therefore costs should be awarded in favour of the Defendants. 

7.  In my view, the personal actions (HCAJ 77 and HCAJ 78) are plainly unsustainable.  It is alleged in the Indorsements of Claim that Lau has a claim over the ownership of the Vessels in respect of which he paid for part of the purchase price in about July 2011.  Therefore, Lau seeks “a declaration that he has legal or equitable ownership of the [Vessels] or the ownership of any share therein and/or to rectify the register of the [Vessels] …”.

8.  It is undisputed that the Vessels were respectively registered in the name of Hope Ltd and Glory Ltd.  Lau might have provided a shareholder’s loan to facilitate the purchase of the Vessels.  It is, however, difficult to see why a shareholder of the holding company (Ocean Sino) can have a share in the ownership of the assets of Hope Ltd or Glory Ltd.  Any such proposition is against the fundamental principles of company law.  Further, in Re Resource I (2000) 3 HKCFAR 187 at 195G to 196D, it was held that the registration of a vessel is normally conclusive over its ownership. 

9.  I am unable to see that HCAJ 77 or HCAJ 78 contains any sustainable cause of action.  It was therefore proper for the Defendants to have taken out the strike out applications.  It is appropriate to depart from the general rule that a party who has withdrawn his application should bear the costs of the other side (see Uni-Creation Investments Ltd v Secretary for Justice, HCMP 2166/2015, 30 June 2017, §§9 and 10).  I award the costs of and occasioned by those strike out applications to the Defendants.

10.  In respect of the derivative actions, I regret to say that they are very difficult to understand as they are plagued by various deficiencies, eg, the wrongdoers, namely, Chu and Lohas are not joined as parties, and the Indorsements of Claim suggest that Lau is claiming against Hope Ltd and Glory Ltd when he is seeking to sue on their behalf to recover loss they suffered.  However, it appears from the material before the court that there is substance in Lau’s grievances, and I believe that the deficiencies can be cured with appropriate amendments.  I am informed that the Plaintiff intends to take these actions further.

11.  On the other hand, it was reasonable for the Defendants to have taken out the strike out applications in light of the difficulties with HCAJ 79 and HCAJ 80.  I am of the view that the Defendants should have their costs of and occasioned by the strike out applications up to and including this hearing. 

12.  I also award the Defendants the costs of the Plaintiff’s application for leave to file further evidence, which was declined at the beginning of this hearing.

13.  For completeness, I should mention, firstly, that I accept that the Defendants behaved reasonably to have instructed senior counsel to attend the first hearing of the Summonses on 26 July 2017 given that these proceedings put at risk the impending sale of the Vessels.

14.  Secondly, there is no application by Lohas for the costs of the Summonses.  

15.  Finally, given that the Vessels had been sold, there is no reason for these actions (if they continue) to remain in the Admiralty List.  I make an order that they be removed from such list and transferred to the General List.