SINOSTATE ENTERPRISES LTD AND OTHERS v. KINGS PARADISE LTD AND OTHERS

HCA 1664/2020

[2024] HKCFI 1903

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1664 OF 2020

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D E C I S I O N

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1.  I thank the parties for their submissions on the 2^nd Defendant’s application (supported by the 3^rd to 5^th Defendants) for lifting the automatic stay imposed in these proceedings as result of Mr Kao’s application for legal aid.

2.  In my view, any appeal against my order (the Unless Order) that, unless the Plaintiffs cause legal representatives to file a Notice to Act in these proceedings, the Plaintiffs' claims against the 2^nd to 5^th Defendants be struck out without further order, is bound to fail. Given RHC Order 5, Rule 6, it is simply not possible for the Plaintiffs to conduct their action without legal representatives or permission from the Registrar to be represented by a director.

3.  I am also of the view that any appeal by Mr Kao against my refusal to grant him leave to initiate a statutory derivative action, is bound to fail. One cannot circumvent RHC Order 5, Rule 6 by way of a statutory derivative action. That is not the purpose of a statutory derivative action.

4.  The two prospective appeals would therefore fail regardless of whether Mr Kao is granted legal aid. In those premises and given the proximity of the September trial dates, there is no point in maintaining a stay pending the outcome of Mr Kao’s application for legal aid. Accordingly, the stay due to Mr Kao’s legal aid application is lifted with immediate effect.

5.  The costs of the application to lift the stay will be in the cause.

6.  The Unless Order gave the Plaintiffs until 4.30 pm on Tuesday 16 July 2024 to cause legal representatives to file a Notice to Act. Given the time lost because of the stay that has just now been lifted, I will extend the deadline in the Unless Order by 7 days from today to Wednesday 24 July 2024. Thus, the Unless Order is revised to read as follows:

“Unless the Plaintiffs cause legal representatives to file a Notice to Act in these proceedings by 4.30 pm on Wednesday 24 July 2024, the Plaintiffs' claims against the 2^nd, 3^rd, 4^th, and 5^th Defendants will be struck out without further order, with the costs of the Plaintiffs’ actions against the 2^nd, 3^rd, 4^th and 5^th Defendants to be paid by the Plaintiffs to the aforesaid Defendants.”

7.  Mr Kao suggests that, if legal representatives are not appointed by the deadline, the trial dates should simply be vacated, and a stay of the Plaintiffs’ action be granted pending the possible appointment by the Plaintiffs of legal representatives at some future date. I do not think that such an order is appropriate. It would not be right for an action (especially one alleging fraud) to be in limbo or abeyance for an indefinite period, with no certainty at all whether and (if so) when it will be revived.

8.  I am fully aware that, if the Plaintiffs’ claims are dismissed because of non-compliance with the revised Unless Order, there will have been no substantive hearing of the merits of the action. I say nothing, and draw no conclusion here, on whether a dismissal of the Plaintiffs’ claims by reason of non-compliance with the revised Unless Order would or would not give rise to a res judicata or issue estoppel. If the Plaintiffs should mount a similar action in the future, such question may have to be one for the judge hearing the matter to determine.

9.  There is also an application by the 2^nd Defendant for leave to appeal against my order refusing security for costs. I do not think that an appeal against my decision on security for costs has any prospect of success. That decision was a discretionary one which concerned the appropriate and fair procedure to be taken for the proper management of this case. I do not see any basis for the Court of Appeal interfering with the decision. The application for leave is therefore refused.

10.  The 2^nd Defendant is to bear the Plaintiffs’ costs of the application for leave to appeal.