RICCO (INTERNATIONAL) CO LTD v. LIU SIU FOON, the Administrator of the estate of CHAN KWOK HUNG, deceased AND ANOTHER

HCA 1856/2016

HCA 1858/2016

(Heard together)

[2021] HKCFI 534

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1856 OF 2016

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 LIMITED     

AND

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1858 OF 2016

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J U D G M E N T

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1.  This is an application made by the plaintiff in action numbers HCA 1856/2016 and HCA 1858/2016 to stay both sets of proceedings, together with the counterclaim which is made in HCA 1858 pending the payment by the 2nd defendant of costs orders which have been made against that 2nd defendant and in favour of the plaintiff in two different sets of proceedings, namely HCMP 1808/2016 and HCCW 229/2018.

2.  There is not a great deal of dispute between the parties as to the applicable principles concerning a stay and they have been addressed in various authorities, perhaps most recently by K Yeung J in China Forestry Holdings Co Limited v Top Wisdom Overseas Holdings Limited and Others [2020] HKCFI 526 at paragraphs 19 to 22.  Without repeating what the judge said in that case, one should start with the basic principle that the court looks at what would serve the ends of justice between the parties to the litigation and the administration of justice.  Where a claim has been started as of right, a plaintiff should not be deprived of the opportunity to carry on those proceedings unless a very good reason exists to the contrary. 

3.  The exercise of the discretion involves balancing between, (1), possible wastage of court time and resources and also parties’ time and costs if there is no stay on the one hand, and (2), possible delay of the proceedings for a time if there is a stay on the other.  The court will always bear in mind the underlying objective is to increase cost-effectiveness of court proceedings and ensure that a case is dealt with as expeditiously as is reasonably practicable.  The court will promote reasonable proportion and procedural economy. 

4.  It is relevant to note that both HCA 1856 and HCA 1858 are well advanced in preparation and I am told that they are both ready to be set down for trial.  So the question ultimately becomes where does the balance of justice lie, having regard to the various factors that are relevant.

5.  The plaintiff notes that it is really seeking to stay proceedings that it has commenced and that therefore the usual principles may be modified to reflect that.  This is not a case, it says, where a defendant is seeking to stay proceedings against it.  I am not entirely convinced that is correct because at least in HCA 1858, there is a counterclaim and the plaintiff is also seeking a stay of the counterclaim. 

6.  Mr Cheung, on behalf of the plaintiff, has accepted that if I were to take the view that the counterclaim should nonetheless proceed, then he would not seek a stay of his own claim within that action.  However, he does stress that he would nonetheless seek a stay in action HCA 1856. 

7.  The concern which the plaintiff expresses is that by refusing, or at least failing, to make payment of the various costs orders that have been made against it, the 2nd defendant has identified a risk that it will not, or at least may not, honour any judgment that this court grants.  Therefore, the plaintiff does not wish to press ahead to obtain what will, it considers, in effect become an empty judgment. 

8.  The defendants, on the other hand, do not agree.  They accept that it is unfortunate that the 2nd defendant has not paid the costs orders but they are of the view that the plaintiff is in fact seeking a rather different advantage by the stay.  According to the defendants, the plaintiff remains in control of two valuable companies through the current ownership structure of the shares in those companies.  It is that issue which will have to be resolved at least in action HCA 1858, and therefore, they say the plaintiff has every reason and incentive to defer and delay the proper resolution of the proceedings whilst she remains in control and enjoys the fruits of success of both of those two companies to the detriment of the defendants. 

9.  The plaintiff has issued a petition to wind up the 2nd defendant as a result of its failure to pay the costs orders.  The 2nd defendant applied to have that petition struck out on an abuse‑of‑process ground because it said that service of the statutory demand was defective and presentation of the petition was premature and that the plaintiff was seeking to misuse the winding-up procedure to obtain an advantage in the proceedings in which the costs order was made (HCMP 1808/2016). 

10.  Deputy High Court Judge Abraham Chan, SC, refused to strike out the petition in a judgment, [2020] HKCFI 201, on 22 January 2020 and he directed that the 2nd defendant be barred from filing, without further order, any additional evidence to oppose the petition and that the petition be restored for substantive argument on a day to be fixed in consultation with counsel’s diaries with three hours reserved.  It is not clear to me what has subsequently happened to that petition but I take it that it has for some reason not yet been heard. 

11.  In my view, it would not be appropriate to stay either of these sets of proceedings pending payment of the debt which appears, at least on the face of it, to be clearly owed by the 2nd defendant. I find it most unfortunate that the 2nd defendant has not paid the debt and that behaviour is not to be condoned in any sense by the court and no doubt will be taken very seriously at the time when that issue is before the court if it were ever to happen.  However, the plaintiff has commenced these proceedings nearly five years ago.  They are almost ready for trial.  Substantial costs are likely to have been incurred by both sides towards the resolution of the proceedings and no doubt substantial court resources and time have also been incurred.  

12.  The court cannot proceed upon the assumption that parties will refuse to comply with the court’s orders.  The court must proceed on the assumption that parties either will comply with their orders or will ultimately be forced to comply with their orders pending contempt proceedings. 

13.  The court should not, in my view, act as an arbiter of the economic benefits of proceeding or not proceeding insofar as one party is concerned.  Yet, that is what the plaintiff is asking the court to do.  It wishes not to incur further investment in these proceedings because it fears that it may be false investment because the 2nd defendant will not honour whatever the court does.  The court cannot proceed on that assumption and cannot support the plaintiff in that assessment.  There must be other reasons beyond the mere economics from one party’s perspective before a stay can be justified. 

14.  The plaintiff’s application takes no account of the economics from the court’s perspective, in other words, the costs and value of the court resources that have been incurred.  It takes no account of the economics from the defendant’s perspective and it takes no account of the proposition that the defendant makes, namely that the plaintiff is simply seeking to continue to enjoy the fruits of the shareholding and defer any resolution. 

15.  In all the circumstances, I do not think that the master was wrong when he refused to grant a stay in his decision of 7 October 2020.  To the contrary, I think he was entirely correct and I refuse to grant the stay which has been requested. 

(Discussion re costs)

16.  Insofar as costs are concerned, in the light of my decision on the substantive applications, the 1st and 2nd defendants have applied for their costs.  The plaintiff resists those applications on the basis that it was the refusal of the 2nd defendant to pay other costs orders in the other actions which have caused this application.  The plaintiff therefore seeks either that costs should be in the cause or that there should be no order for costs. 

17.  Costs is a broad discretion and the court can use costs in a way which it considers reflects the justice of the position.  I understand the defendants’ contention that the plaintiff, being in control of Ricco, has effectively denied the defendants any real means of paying the costs and has denied the defendants the fruits of the successful companies for a considerable period of time. 

18.  I also understand the plaintiff’s contention that the ability to pay costs lies in the control of the 1st defendant who ultimately, at least at present, controls the 2nd defendant.  I also recognise that I should be slow to take questions from other proceedings into account when assessing costs in these proceedings and therefore there is some force in Mr Yuen’s proposition that I should look at these proceedings on a stand‑alone basis. 

19.  In my view, taking into account all of those factors, the appropriate costs order is that the defendants’ costs should be in the cause and that will reflect that the plaintiff will not have her own costs paid on any basis.  But if the defendants win ultimately in the action they will have their costs paid.  That seems to me to be a fair and reasonable resolution. 

20.  Costs are to be taxed if not agreed. 

(Discussion re costs)

21.  There is also an order that the defendants’ own costs be taxed in accordance with the Legal Aid Regulations.