KWOK HIN CHEUNG AND ANOTHER v. KWOK HIN TAK AND OTHERS

CACV 413/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 413 OF 2006

(ON APPEAL FROM HCMP 448 OF 2006)

______________________

______________________

____________________

J U D G M E N T

____________________

Hon Stock JA :

1. Sakhrani J will deliver the first judgment.

Hon Sakhrani J :

2. This is an interlocutory appeal against the order of Kwan J made on 8 November 2006.  The judge was dealing with two applications.  The first was the summons issued by the 1^st to 3^rd respondents to strike out the originating summons in HCMP No. 448 of 2006 (“HCMP 448”).  The other was a summons issued in HCMP 448 by the applicants for :

(1)     leave to discontinue HCMP No. 3156 of 2004 (“HCMP 3156”);

(2)     leave to add Ken Tak Investment Company Limited (“the Company”) as the 4^th respondent; and

(3)     an order that the proceedings be continued as if begun by writ, and that the applicants do file and serve a statement of claim within 21 days.

3. On the summons to strike out, the judge dismissed the respondents’ application with costs of the application to be paid by the respondents to the applicants in any event.

4. On the applicants’ summons, the judge rightly held that it was procedurally incorrect for the applicants to issue a summons in HCMP 448 for leave to discontinue the proceedings in HCMP 3156.  The summons for leave to discontinue should have been issued in HCMP 3156.  The judge accepted an undertaking from the applicants’ counsel that a proper summons would be issued in the proper proceedings for leave to discontinue HCMP 3156.  The judge gave leave to add the Company as the 4^th respondent.  She also directed that the proceedings be continued as if begun by writ and that the applicants are to file and serve a statement of claim within 21 days.   The judge also ordered that the costs of the applicants’ summons be costs in the cause of the proceedings.

5. The appeal is only in relation to the order made on the respondents’ strike out application.  There is no appeal on the order made on the applicants’ summons.

6. After the hearing and pursuant to the undertaking given by the applicants’ counsel to issue a summons in HCMP 3156 for leave to discontinue HCMP 3156, a summons was filed on 8 November 2006 by the applicants’ solicitors for leave to discontinue HCMP 3156.  This application was heard by Kwan J on 8 December 2006 when she made an order granting the applicant’s leave to discontinue HCMP 3156.  There is no appeal from this order.

7. The background is sufficiently set out in Kwan J’s judgment of 8 November 2006 at paragraphs 7 to 9 as follows:

“ 7.     The two applicants and the 1^st and 2^nd respondents are the shareholders of the Company.  70% of the shares are held by the applicants, 30% by the 1^st and 2^nd respondents.  The 1^st applicant, and the 1^st to 3^rd respondents are the directors.  The Company holds 70% of the shares of a company incorporated in China called Quanzhou Ken Tak Real Estate Development Company Limited.  The 1^st applicant was the legal representative of this company in China.

8.     The originating summons was issued to challenge two resolutions passed in two directors’ meetings held on 10 November 2004.  By the first resolution, 16,800,000 additional shares were issued and allotted to the 1^st respondent, increasing his shareholding in the Company from 20% to 91.4%.  By the second resolution, the 1^st respondent was appointed the legal representative of the business and investments of the Company in China, he was to have sole authority and discretion to enter into investments, to manage the business, to appoint and remove directors, to allocate profits and approve the transfer of shares.

9.     The applicants claimed that they had not received notice of any board meeting or general meeting to be held on 10 November 2004.  There was no ordinary resolution in any general meeting to authorize the directors to allot shares in the Company.”

8. The respondents complain that there were three identical proceedings taken out by the applicants against the respondents namely, HCMP 3156, HCMP 291 of 2006 (“HCMP 291”) and HCMP 448.  However, as the evidence shows, on 6 December 2004 the applicants issued the originating summons in HCMP 3156 but this was never served on the respondents.  As the judge observed, on 22 December 2004 the respondents’ solicitors wrote to the applicants’ solicitors stating that they have instructions to act for the respondents in HCMP 3156 and seeking clarification as to whether the originating process had been served as they were instructed that the respondents had not been served.  They also instructed the applicants’ solicitors not to take any action in the proceedings pending their reply.

9. As no reply was received, there were further letters from the respondents’ solicitors chasing for a reply from the applicants’ solicitors.  It was also pointed out that the originating summons had not been served.

10. On 21 November 2005 a notice of change of solicitors for the applicants was filed in HCMP 3156.  The new solicitors wrote to the respondents’ solicitors on 2 December 2005 informing them of the change and sought confirmation as to whether the respondents’ solicitors still had instructions to accept service.

11. On 5 December 2005 the validity period of the originating summons in HCMP 3156 expired.

12. Although the originating summons had not been served on the respondents’ solicitors, they nevertheless filed a notice to act in HCMP 3156 on 22 December 2005.

13. On 8 February 2006 the applicants’ solicitors served the originating summons on the respondents’ solicitors notwithstanding that the validity period of the originating summons had expired.  The next day, on 9 February 2006, the applicants’ solicitors wrote to the respondents’ solicitors informing them that the service of the originating summons on the previous day was irregular due to the expiry of the validity period.  They stated that the originating summons should be renewed before service could be effected and asked the respondents’ solicitors not to take any further action in the proceedings.  They also asked for the return of the sealed copy of the originating summons.

14. On 10 February 2006 the respondents’ solicitors replied stating that they had already advised the respondents that service was irregular and that they had taken steps to proceed to apply to Court for an order setting aside the service and/or declaring that the originating summons has not been duly served.  They also reserved their right to oppose any application for renewal of the originating summons.  It seems that no application was taken out by the respondents’ solicitors to set aside the irregular service. 

15. On 14 February 2006 the applicants issued the second originating summons seeking identical relief this being in HCMP 291.   After the third originating summons was issued namely, in HCMP 448 on 8 March 2006, the applicants’ solicitors filed a notice of discontinuance of HCMP 291. 

16. As the chronology shows, on 22 March 2006 the applicants filed a notice of appointment to hear the originating summons in HCMP 448.  There was no application to extend the validity of the originating summons in HCMP 3156 and the originating summons in HCMP 3156 was not proceeded with.

17. On 30 March 2006 the respondents filed an acknowledgement of service in HCMP 3156 and also in HCMP 448.

18. Also on 30 March 2006 the respondents issued the summons to strike out the originating summons in HCMP 448.

19. On 2 May 2006 the applicants’ solicitors wrote to the respondents’ solicitors stating that they had instructions to stay the originating summons in HCMP 3156 and to apply to Court for an order to continue the originating summons in HCMP 448 as if begun by writ.  They thereby made it plain that they were not proceeding with the originating summons in HCMP 3156.  They also invited the respondents to withdraw the strike out application.

20. Ms Lau, for the respondents, submitted that there was a continuation of two identical proceedings i.e. HCMP 448 and HCMP 3156 which was oppressive and an abuse of the process of the Court.  She submitted that the judge should have exercised her discretion in the respondents’ favour by striking out the originating summons in HCMP 448.

21. I am unable to accept that in reality there was ever going to be a continuation of two sets of identical proceedings.  As the judge rightly said at paragraph 39 of her judgment, so long as only one originating summons was being pursued, the Court should not dictate to the applicants which originating summons should be withdrawn or discontinued.  The applicants’ counsel gave an undertaking to the judge which she properly accepted that a summons seeking leave to discontinue the proceedings in HCMP 3156 would be taken out.  That was taken out subsequently and the judge on 7 December 2006 gave leave to the applicants to discontinue HCMP 3156.

22. In the circumstances I am unable to accept that there was any oppression to the respondents or that there has been an abuse of the process of the Court. 

23. In my judgment the judge was perfectly entitled to exercise her discretion by dismissing the respondents’ summons to strike out and her decision cannot be faulted.

24. It was also submitted that the judge was wrong to order the respondents to pay the costs of the strike out application.  It was submitted that it was only on 6 November 2006, which was two days before the hearing, that the summons for leave to discontinue was taken out albeit in the wrong proceedings.  Ms Lau submitted that prior to that day on the correspondence the applicants were only prepared to stay HCMP 3156 rather than discontinue it and that the judge should have ordered the costs of the application to be borne by the applicants.

25. I am also unable to accept this submission of Ms Lau.  It should be borne in mind that the strike out application was on two main grounds i.e. on the merits and on abuse of process.  Quite apart from holding that there was no abuse of the process as only one originating summons was being proceeded with, the judge also rightly held that on the merits this was not a plain and obvious case for striking out the originating summons primarily because there were factual disputes which could not be resolved on affirmation evidence.   That being so, it was right for the judge to dismiss the strike out summons.  I see no reason why costs should not follow the event and the order for costs reflects this.

26. I would dismiss the appeal.

Hon Stock JA :

27. For the reasons given by Sakhrani J I too would dismiss the appeal and it is accordingly dismissed.