STEADFAST INTERNATIONAL LTD v. TUENBO CO LTD AND OTHERS

HCA 2095/2016 and HCA 566/2019

[2022] HKCFI 3251

HCA 2095/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2095 OF 2016

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BETWEEN

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AND

HCA 566/2019

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 566 OF 2019

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BETWEEN

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D E C I S I O N

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A. INTRODUCTION

1.  The Plaintiff is part of the New World Group acting through its project company (“Steadfast”). The 2^nd to 4^th and 6^th to 7^th Defendants in the 2095 Action and the 1^st to 4^th Defendants in the 566 Action are collectively called “Tuenbo Parties”. The 1^st Defendant (“TCL”) is a limited company joined for it to be bound by the Court orders.

2.  There are 4 summonses before the Court. Two summonses, “566 Summons” and “2095 Summons” respectively, filed on 17 May 2021, seek directions as to trial of the 2 Actions. The other two Summonses, filed on 12 April 2022 in each Action, are to amend the first two Summonses. The amendments are not contested and so I proceed on the bases of the 566 Summons and 2095 Summons as amended. In essence, the Tuenbo Parties seek an order, in order of preference:

(i) To stay HCA 566/2019 pending the determination of HCA 2095/2016 which will resolve the authority to sue issue (“the Authority Issue”);

(ii) For trial of a preliminary issue on the Authority Issue in HCA 566/2019 and have it tried together with HCA 2095/2016; or

(iii) To have both Actions tried together.

3.  In mid-2016, Steadfast purported to enforce a Share Charge (by which the Tuenbo Parties charged their shares in TCL to Steadfast), and appointed Steadfast’s nominees to the board of TCL in the place of the Tuenbo Parties (“Purported Board”).

4.  HCA 2095/2016 was commenced by Steadfast for declarations to confirm the validity of its purported enforcement of the security. The Tuenbo Parties deny that there was valid enforcement and contend that they are entitled to redeem the security and hence regain control over TCL’s Board.

5.  HCA 2095/2016 was commenced by the Purported Board purportedly on behalf of TCL against the Tuenbo Parties, seeking recovery of TCL’s books and records. Given their stance in HCA 2095/2016, the Tuenbo Parties dispute the authority of the Purported Board to commence HCA 566/2019.

6.  In the present applications, the Tuenbo Parties contend that the Authority Issue is a common major issue in both Actions, which justifies the directions sought in paragraph 2 above.

7.  In sum, the grounds in opposition of TCL and Steadfast are that:

(1) Tuenbo Parties’s challenge to TCL’s authority to sue has been dismissed by DHCJ Stock SC. It is an abuse of process for the Tuenbo Parties to seek to relitigate the Authority Issue by the route of a preliminary issue or a main trial to be heard with HCA 2095/2016;

(2) No preliminary issue should be ordered; and

(3) In any event, the 2 Actions are separate and should not be tried together, which would result in resolution of HCA 566/2019 being significantly delayed.

B. BACKGROUND

B1. General background

8.  The underlying dispute between the New World Camp and Tuenbo Parties concern a secured loan arrangement arising out of a joint venture to develop residential properties in the Mainland known as the Golden Lake Project.

9.  TCL is a company established by the 1^st and 2^nd Defendants in 1977 and has at all material times been the corporate vehicle of the Tuenbo Parties. Until 21 July 2016, the 1^st to 3^rd Defendants were the former directors of TCL, and the 4^th Defendant its former company secretary.

10.  In September 1989, TCL and Zhongguo Guangzhou Bairun Properties Company (“Bairun”) incorporated a PRC company abbreviated as “GLRN” to hold the development interest in the Golden Lake Site.

11.  In 1992, the New World Group (of which Steadfast is a member) entered into collaboration with the Tuenbo Parties over the Golden Lake Project. As a result, a series of agreements including Shareholders’ Agreement (“SAs”) and Share Charges for Phases I and II of the Great Lake Project were entered into.

12.  In broad terms, Steadfast would enter into a joint venture with TCL, whereunder Steadfast would provide funding for the construction costs of the Golden Lake Project and manage the construction. On completion, the units of the Golden Lake Project would be sold offshore through 2 sole agents (Holicon and Jorvik) for each of Phases I & II. Proceeds received by Holicon and Jorvik would then be distributed, first to repay Steadfast for the “Shareholders’ Loans” together with interest; then to pay taxes, imposts, levies or duties; and the balance was to be distributed to Steadfast and TCL in equal shares.

13.  More specifically, Steadfast agreed to advance 4 loans to various entities as follows, namely, an “Initial Loan” to TCL of HK$50,000,000; a “Further Loan” to TCL of HK$50,000,000; and a “Shareholder’s Loan” to each of Holicon and Jorvik.

14.  At all material times, Steadfast has been in control of the construction and the management of the Golden Lake Project.

15.  As security for Steadfast’s funding, the Tuenbo Parties executed 2 Share Charges over their shares in TCL in favour of Steadfast, respectively in 1992, as security for, amongst others, the due and punctual payment to Steadfast of the “Indebtedness”. It was the 2^nd Share Charge which Steadfast has purported to enforce. Indebtedness was defined to mean all money payable by TCL and all parties to whom, at TCL’s request, Steadfast has advanced money under any of the Agreements. On Tuenbo Parties’s case, advances by Steadfast to Holicon and Jorvik did not constitute lending at the request of TCL. Thus in practical terms, what constituted the “Indebtedness” were the Initial Loan and the Further Loan but not either Shareholders’ Loan (“Secured Amount”).

16.  Apart from “Indebtedness”, the 2^nd Share Charge also secures “Obligations”, including the obligation of TCL to pay any shortfall under Phase I should the proceeds be insufficient to cover the Shareholders’ Loans, taxes, imposts, levies and/or duties, and the Initial and the Further Loan (“Deficit”).

17.  Given the priority in distribution of the proceeds, if the Project was sufficiently profitable so that there was no Deficit, it would follow that there would be no Secured Amount. In issue at the trial would be whether there was any outstanding secured liability or Deficit.

18.  The SAs expressly provided for the equity of redemption.

19.  The 2^nd Share Charge was enforceable upon occurrence of an Event of Default as defined in the SAs.

B2. HCA 2095/2016

20.  On 18 May 2016, Steadfast purportedly declared an Event of Default under the SAs on the basis that TCL and Bairun have failed to extend the operation period of GLRN; and subsequently purported to exercise its rights under the 2^nd Share Charge to convene an EGM of TCL.

21.  On 21 July 2016, at a purported EGM of TCL (“EGM”), Steadfast purportedly resolved to remove the 2^nd, 3^rd and 7^th Defendants from the board of TCL and appoint 2 representatives of Steadfast in their place (collectively, “Resolutions”). Such Resolutions, if valid, would seize TCL away from the Tuenbo Parties altogether.

22.  On 11 August 2016, Steadfast commenced HCA 2095/2016 seeking, amongst others, declarations confirming that the EGM was validly convened and the Resolutions were validly passed. Steadfast also sought a permanent injunction restraining the Tuenbo Parties from asserting or acting as directors of TCL.

23.  On 19 August 2016, Steadfast obtained an interlocutory injunction in HCA 2095/2016 from DHCJ Wilson Chan (as he then was) to restrain the Tuenbo Parties from, amongst others, holding themselves out as directors of TCL until judgment (“the Injunction”). The effect of this Injunction is that the entire Golden Lake Project has become wholly under Steadfast’s control, whether at the TCL, Holicon, Jorvik and/or GLRN level.

24.  In their defence, the Tuenbo Parties pleaded, amongst others, that:

(a) There was no Event of Default;

(b) Steadfast was not entitled to convene the EGM. Steadfast’s enforcement was not in good faith to preserve the value of its security (as demonstrated by the fact that the net assets of GLRN upon liquidation, after expiry of its operation period, was sufficient to repay any Secured Amount to Steadfast) but to gain absolute control of TCL and appropriate profits accruing from Phases I and II to the exclusion of the Tuenbo Parties.

(c) Steadfast had committed a multitude of wrongful acts against the Tuenbo Parties, but for which any outstanding Secured Amount on 18 May 2016 would have been much less than what was alleged to be owed. Steadfast could not rely on its own wrongs to justify the enforcement of the 2^nd Share Charge.

(d) The Tuenbo Parties counterclaim for, amongst others, declarations and injunctions that are effectively the diametrical opposite to those sought by Steadfast; an account from Steadfast and redemption of the Charged Shares.

(e) Further, the Tuenbo Parties contend that after taking into account the sales proceeds received upon the sale of the properties in Phases I and II in 2019 and 2020, there is currently no longer any outstanding Secured Amount. In the premises, the Tuenbo Parties are further entitled to redeem the Charged Shares and Steadfast is liable to pay TCL a substantial dividend.

25.  The Tuenbo Parties took out a partial summary judgment application before Wilson Chan J for the redemption of the Charged Shares but failed as the learned judge did not consider the matter appropriate for summary judgment: judgment dated 11 March 2022.

B3. HCA 566/2019

26.  About 3 years after commencement of HCA 2095/2016, the Purported Board commenced HCA 566/2019 purportedly on behalf of TCL, seeking recovery of TCL’s books and records from the Tuenbo Parties. Steadfast is not a party to this action.

27.  In their statement of claim, the Purported Board pleaded the background to the cooperation between the 2 camps as set out above, including the EGM and the Resolutions. Given the underlying dispute as to validity of appointment of the Purported Board and the Resolutions, the issue of whether HCA 566/2019 was commenced and/or is maintained with the proper authority of TCL arose.

28.  Accordingly, on 13 August 2019, the Tuenbo Parties issued a summons to strike out HCA 566/2019 on the ground that the Action was commenced without authority of TCL (“Strike-out Summons”). The Strike-out Summons was dismissed by a Master on 30 September 2020.

29.  The Tuenbo Parties’s appeal against the Master’s decision was dismissed by DHCJ Stock SC, from which there has been no further appeal.

30.  At the hearing before DHCJ Stock SC, the Tuenbo Parties proceeded on one summarily determinable point for the purpose of the Strike-out Summons concerning appointment of the Purported Board. The Tuenbo Parties assumed that an Event of Default had occurred (“Assumption”) and expressly reserved their right to rely on other non-summarily determinable points (“Reservation”), which overlapped with those taken in the HCA 2095/2016, to be ventilated on another occasion, such as a trial of a preliminary issue. See §§13 and 14 of DHCJ Stock SC’s Decision dated 11 June 2011 in HCA 566/2019 (“Decision”).

31.  Also by the same Decision, DHCJ Stock SC granted the interlocutory relief sought by TCL (under control of the Purported Board) and ordered the Tuenbo Parties to produce for inspection and copying certain of its books and records (§98). DHCJ Stock SC observed that:

(a) The Court must surely proceed on the basis that it was desirable for TCL to comply with its statutory obligations in respect of the profit tax returns, and with the requests and requirements of the Inland Revenue Department in this regard (§79);

(b) In view of the Injunction, the position arrived at in HCA 2095/2016 at that juncture was that the Purported Board was left to control TCL for the time being. Maintaining the status quo, the task of submitting TCL’s profit tax returns should lie with TCL under the control of the Purported Board, as a ring-holding measure (§91-92).

32.  The 566 Summons and 2095 Summons now before me first came before DHCJ Leung for directions (see [2021] HKCFI 2742). They were then stayed before DHCJ Stock SC. Upon dismissal of the appeal by DHCJ Stock SC, the Tuenbo Parties restored the two Summonses so that the non-summarily determinable points on the Authority Issue could be properly determined. The basis for their application is that the Authority Issue in HCA 566/2019 needs to be resolved (and resolved first) and that Issue engages precisely the same issues as those raised in HCA 2095/2016.

C. LEGAL PRINCIPLES

33.  The present Summonses are taken out under the inherent jurisdiction of the Court, Order 4, rule 9 and Order 33, rule 3 of RHC. Order 4 rule 9 provides that: where two or more causes or matters are pending, and if

(a) some common question of law or fact arises in both of them;

(b) the rights to relief claimed therein are in respect of, or arise out of the same transaction or series of transactions; or

(c) for some other reason it is desirable to make an order under that rule,

the Court may order those matters to be tried at the same time.

34.  Under Order 33, rule 3 of RHC, the Court may order any issue arising in a cause to be tried before, or after the trial of the cause and may give directions as to the manner in which the issue shall be stated.

D. COMMON ISSUE OF FACT AND LAW

35.  The Authority Issue is the common issue on the pleaded cases in both Actions. However, that Issue has been definitively determined by the Decision in HCA 566/2019, on the principles of the leading case of Kammy Town v Super Glory Corporation Ltd, HCA 3524/2003, 14 January 2015, §§11-19, 21 and 35, A Cheung J (as the Chief Justice then was), cited with approval by the Court of Appeal in Mok Mei Ling Rekei v Lau Muk Fat [2021] HKCA 706, §37. It is an abuse of process for the Tuenbo Parties to re-open the Authority Issue.

36.  Mr Man contends to the contrary. He relies on the Assumption and the Reservation. He also contends that, DHCJ Stock SC had expressly rejected the submission that the Authority Issue had already been determined in the Purported Board’s favour:

“64. …TCL argued that the dismissal of Ds’ Appeal on strike-out should result in the grant of the injunctive relief sought, without any need to consider the balance of convenience.

65. That was because, said TCL, the correct procedure for Ds to ventilate their complaint of lack of authority was at the outset of proceedings and by way of strike-out summons: see Kammy Town v Super Glory Corporation Limited (supra). It was not open to Ds to issue a strike-out summons, but reserve for later determination by preliminary issue a raft of other matters going to authority, should the summons fail. Further, Ds’ attempt to do so was an abuse of process since it entailed inconsistent positions, and vexing TCL twice on the same matter in these proceedings.

66. Accordingly, said TCL, if Ds’ strike-out summons was dismissed, that entailed the conclusive determination of Ds’ complaint of lack of authority for the purposes of these proceedings; with the result that TCL should plainly be entitled to its books and records.

…

68. However, for present purposes – and without of course deciding those summonses [i.e. the original Summonses now before this Court] – I am not attracted to TCL’s said position.

69. Given the approach and rationale in Kammy Town Limited, there would not seem to be anything objectionable in a defendant taking out a summons to strike-out for want of authority, on the basis that some of the points run are summarily determinable, but others would require directions for oral evidence. Once that is accepted, the complaint appears to lie only with Ds’ intended formula – which Ds flagged at the outset – of using the Order 33 procedure (trial of a preliminary issue) rather than an adjourned strike-out summons with directions, for the resolution of any such points which are not summarily determinable.

70. But, as Mr Man submitted, that appears to be a difference of form only; particularly given the special character of strike-out proceedings contemplated in Kammy Town within which oral evidence may be received and factual disputes determined.

71. Accordingly, I proceed for present purposes on the basis that, notwithstanding the dismissal of Ds’ Appeal, the entirety of Ds’ authority objection in these proceedings [ie HCA 566/2019] has not, necessarily, been resolved against Ds.”

(underlines added)

37.  With respect, I do not accept Mr Man’s contentions for the following reasons:

38.  Firstly, the Decision (without appeal) is final in determining TCL’s substantial right, ie authority to sue: Qiyang Ltd & Ors v Mei Li New Energy Ltd & Ors (CACV 146/2016, 11 April 2017), §9, Lam VP (as he then was); 惠陽市新墟合興製衣廠 v Elbex Video (Hong Kong) Ltd (HCMP 2432/2015, 5 November 2015) at §10, Poon JA (as he then was). There is either authority to sue or there is not: Kammy Town, §21. It is inappropriate for the Court to dismiss the application on the basis that it is not a plain and obvious case of lack of authority: Kammy Town, §§11-19 & 35.

39.  In the present case, once DHCJ Stock SC dismissed the Strike-out Summons, TCL must be taken to have authority to sue on all aspects of HCA 566/2019. It could not be that TCL has authority on some aspects of the case, at some stage, but not on others.

40.  In fact, the Tuenbo Parties’ own intention to have the Authority Issue decided once and for all was clear. It took out the Strike-out Summons on 13 August 2019. The present 2095 Summons and 566 Summons were only taken out on 17 May 2021, 8 months after the hearing before the Master and a week before the hearing before DHCJ Stock SC.

41.  Secondly, the Court should consider and decide for itself whether an authority issue raised by the applicant can be summarily disposed of on the affidavit evidence and, if not, how the objection can be determined, giving the necessary directions for cross-examination of a deponent or for trial of preliminary issue: Kammy Town at §§14, 18 , 35-37.

42.  The Tuenbo Parties have divided the issues relevant to the Strike-out Summons into summarily determinable and non-summarily determinable ones, but consciously reserved the latter for another occasion instead of seeking directions for oral evidence. That approach went against established authorities. In the end, DHCJ Stock SC did not just adjourn the Strike-Out Summons for oral evidence but proceeded to dismiss it without giving liberty to restore.

43.  Thirdly, as a matter of general principle, it is the duty of every litigant to bring forward his whole case at once and not to bring it forward piecemeal as he found out the objections on his way: Citic Pacific Ltd v Secretary for Justice [2012] 2 HKLRD 701 at §90 per Hartmann JA (as Hartmann NPJ then was); and Chan Chi Wai v Chan Sau Wah [2019] 3 HKLRD 330 at §27 per Kwan VP.

44.  Where the relevant authority challenge could or should have been raised but consciously not taken in a strike-out application, it is an abuse “to raise this issue again at the beginning of the trial in the guise of a preliminary issue when as a matter of law it could not have raised this issue by way of defence”. It is not necessary for the plaintiff to show further prejudice in objecting to the issue being raised again: Liquidation Committee of Foshan Hongda Development Ltd v East Legend Investment Ltd, [2009] 1 HKLRD 169, §§19, 22 per Cheung JA.

45.  It is simply not permissible for the Tuenbo Parties to re-open the Authority Issue in HCA 566/2019 under the guise of a preliminary issue or to deal with non-summarily determinable issues.

46.  Fourthly, having made an attempt to reserve an issue despite having the opportunity to put it forward but chose not to do so, a litigant is not permitted afterwards to put the issue before another tribunal: SCF Finance Co Ltd v Masri & Anor (No 3) [1987] QB 1028, 1049C, Ralph Gibson LJ.

47.  Accordingly, the Reservation could not legitimize the abuse of process of the Tuenbo Parties.

48.  Fifthly, a litigant cannot proceed on an assumed basis, obtain a decision for or against him, and then proceed to raise a matter inconsistent with that assumption in a subsequent proceeding. In Berthier Godown Ltd v E Wah Realty Ltd [1986] HKC 8, Mortimer J (as he then was) had this to say at p.14A-C; H-I:

“Here, the plaintiffs have made a fundamental assumption that they were not entitled to remain in occupation of the premises and therefore, they applied for a vesting order. They have now obtained such an order in separate proceedings. It is not open to them to seek in these proceedings to raise a matter inconsistent with the assumptions and the approach which they made then. Nor can they raise new legal issues in these proceedings which could have been raised and still can be raised in those other proceedings. It is undoubtedly the law that a person who takes proceedings must take all the points that are available to him in those proceedings and not in other proceedings…

… if the party seeks to raise new matters in separate proceedings or seeks to reverse a previous assumption that has been the basis of earlier proceedings in new proceedings, that amounts, first of all, to an abuse of the process and second, he is estopped from doing so.”

49.  Accordingly, the Assumption, likewise, could not legitimize the abuse of process of the Tuenbo Parties.

50.  Sixthly, the Purported Board instituted and maintains HCA 566/2019 whilst the Injunction was and is in force. The Tuenbo Parties’ application to discharge the Injunction was dismissed. Their challenge to the authority of the Purported Board in commencing and maintaining HCA 566/2019 is a collateral attack upon the Injunction, which is an abuse of process: Ms Yuen Oi Yee Lisa v Mr Ngai Ngok Leong [2022] HKCFI 1828, HCMP 1936/2021, 16 June 2022, §12, Au-Yeung J.

51.  Seventhly, §66-71 of the Decision cited above do not advance the Tuenbo Parties’ position. DHCJ Stock SC was aware of the stay of the 566 Summons and 2095 Summons (§68). §71 was placed in the context of deciding the proper merits threshold for granting mandatory relief, not re-litigation of the Authority Issue. All that §71 meant was that the underlying dispute that gave rise to the Authority Issue could still be fully ventilated in HCA 2095/2016. That was quite different from the situation in Tremendous Success Holdings Ltd v Sinosoft Technology Group Ltd, HCA 2345, 1613, 2423/2013, 11 July 2016, DHCJ Anita Yip SC, where it was held that the subsequent stay application that could have been taken out earlier on had merits. The plaintiffs there should not profit by shutting the defendants out on grounds which have not been previously determined and merely as a result of the defendants’ failure to bring them within one summons. In fact, neither Steadfast nor TCL have ever advanced the position that the Decision bars the Tuenbo Parties from pursuing the Authority Issue so in HCA 2095/2016.

52.  For the above 7 reasons, it is an abuse of process for the Tuenbo Parties to raise the Authority Issue again in HCA 566/2019.

53.  Mr Man relies on Mok Mei Ling, which involved 2 related cases like the present. One case, by originating summons (“OS”) involved the plaintiff demanding the defendant to withdraw registration of certain instruments at the Lands Registry; and the defendant challenged the plaintiff’s authority to sue due to the underlying land transactions being allegedly sham and fraudulent (§§ 2, 32(4)). The other case raised squarely the issue as to whether the land transactions were invalid and void for being sham and fraudulent transactions (§§24-25). The Court of Appeal observed that the locus issue under the OS raised substantial factual issues that could not be resolved by affidavits and would require viva voce evidence for proper determination (§57). Accordingly, it ordered that the OS do continue as if the cause had begun by writ, and directed the parties to seek directions on, amongst others, whether and, if so, how the OS should be tried together with the other action (see §58).

54.  However, Mok Mei Ling is distinguishable from the present case in that the Court of Appeal did not rule on the authority issue at all before directing the parties to seek directions from the Court of First Instance. There was no question of abuse of process in Mok Mei Ling.

55.  For the reasons given in Section D, it is an abuse of process to retitigate the Authority Issue in HCA 566/2019. There is no common issue in the 2 Actions.

56.  I now turn to the directions sought by the Tuenbo Parties.

E. STAY OF HCA 566/2019 PENDING DETERMINATION OF HCA 2095/2016

57.  The Court has power to stay proceedings where it thinks it fit to do so, including staying the whole or part of any proceeding pending resolution of another set of proceedings: Order 1B, rule 1(2)(e) of RHC and section 16(3) of the High Court Ordinance, Cap 4.

58.  Order 4, rule 9, RHC also empowers the Court to stay one of two pending causes or matters until after the determination of the other cause or matter.

59.  In Eastman Chemical Ltd v Heyro Chemical Co Ltd [2012] 2 HKLRD 135 §29, DHCJ Lisa Wong SC (as she then was) set out the relevant principles for stay as follows:

(a) The Court must consider what would serve the ends of justice between the parties to the litigation and the administration of justice generally;

(b) A stay should not cause an injustice to the plaintiff/claimant;

(c) The applicant for a stay must satisfy the Court that continuing the proceedings would be unjust; and

(d) Where a plaintiff commences proceedings as of right, he should not be deprived of the right to continue those proceedings in the absence of very good reasons to the contrary.

60.  Ultimately, the question is a matter of sensible case management, to be decided with the objectives in mind of what is fair and just, balancing, amongst others, possible wastage of time and resources, parties’ time and costs, and possible delay to proceedings: Xiamen Xinjingdi Ltd v Eton Properties Ltd & Others [2018] HKCFI 910, §§24-28, Mimmie Chan J; Poon Ka Man Jason v Cheng Wai Tao [2018] HKCFI 771 §§36-39, Au Yeung J.

61.  Tuenbo Parties’ case is that it would be time and cost effective for HCA 2095/2016 to be determined first because there is an extant Authority Issue in HCA 566/2019 that needs to be resolved first, which should be dealt with in HCA 2095/2016. “Other issues” in HCA 566/2019 (such as whether the books and records sought by the Purported Board exist) that do not overlap with those in HCA 2095/2016 can be resolved by an order for interim relief to hold the ring and resolved on a subsequent occasion if the Authority Issue is determined in HCA 2095/2016 against the Tuenbo Parties.

62.  With respect, given my analyses in Section D above, the existence of the Authority Issue in HCA 566/2019 falls away. Stripped of the Authority Issue, there is not much left in the HCA 566/2019. The suggested “other issues” are not really issues as the Tuenbo Parties have purportedly complied with the Injunction and the books and records do appear to exist. However there is a strange paper for equitable or common law damages.

63.  More importantly, the issues in the 2 Actions are different:

(1) HCA 2095/2016 is a complex commercial dispute with multifarious issues. It will involve investigation of the whole relationship between the 2 camps, including management of the Great Lake Project, sale of properties, application of sale proceeds, construction costs, a series of alleged wrongdoings of Steadfast, complicated calculations predicated upon the parties’ different counterfactuals, in order to arrive at a conclusion of whether the security has been discharged.

(2) HCA 566/2019 is only a claim by TCL as a company for the return of its books and records from its former directors and company secretary. Regardless who should remain in the Board after trial of HCA 2095/2016, it would still be the company, TCL, which will be entitled to those books and record: Unimax Property Consultancy Ltd v Ng Lai Ching [2019] HKCFI 45, §7, DHCJ William Wong SC. Meanwhile, in view of the Injunction, the Tuenbo Parties are not entitled to hold onto the books and records.

64.  For the reasons given above, there is reason for saying that staying HCA 566/2019 may cause injustice to TCL in delaying quick disposal of that Action.

65.  That said, one can see that the main dispute of the parties is the HCA 2095/2016 and it is always good to decide the main dispute first to avoid satellite litigation that diverts the parties’ attention. In respect of HCA 566/2019:

(1) It is not clear what sort of investigation is called for in respect of the claim for equitable and common law damages in HCA 566/2019. Given the size and complexity of the claim in HCA 566/2019, those damages could not be the real focus of the parties’ battle.

(2) The books and records sought are in fact historical records of the period when the Tuenbo Parties were on the Board of TCL. For 6 years since the EGM in 2016, the Purported Board has taken over management of TCL.

(3) TCL had wanted the books and records in order to discharge its duties to file profits tax return and employer’s return of remuneration and pensions; and to discharge its statutory duty of keeping the statutory records at its registered office. To meet that need, there is already an interim order for preservation of the books and documents for inspection and copying by TCL.

(4) There is little prejudice shown from failure of TCL to keep the historical books and records at its office.

66.  As a matter of case management, it would meet the ends of justice and avoid possible wastage of Court time, efforts of the parties and costs to deal with the main dispute first, staying HCA 566/2019 pending outcome of HCA 2095/2016. Given the interim order of DHCJ Stock SC to preserve the books and records, it is in the interest of the Tuenbo Parties to be compliant with that order or else TCL can come back on a liberty to apply provision to uplift the stay. I therefore order a stay with a liberty to apply provision; the findings in HCA 2095/2016 shall bind the parties in HCA 566/2019.

F. ORDER PRELIMINARY ISSUE IN HCA 566/2019 AND HAVE IT TRIED TOGETHER WITH HCA 2095/2016

67.  The general rule is that all disputes should be tried together, and an order for separate trial for separate issues should only be made in exceptional circumstances or on special grounds. An “issue” which involves dealing with the whole subject-matter of the action without any evidence (or, in my view, even with evidence) is not a preliminary point and should not be ordered to be tried as such. See Ng Fuk Shing v Ng Fuk Nam [2018] HKCFI 2528, §36, DHCJ Marlene Ng (as she then was).

68.  No exceptional circumstances or special grounds have been shown for trial of a preliminary issue.

69.  Applying Foshan, it is an abuse of process to disguise the Authority Issue (which has been finally determined) as a preliminary issue.

70.  In any case, the Authority Issue virtually deals with the whole subject matter of HCA 566/2019. Applying Ng Fuk Shing, the Court would not direct trial of such a core issue separate from other issues.

71.  Mr Lin further submits that granting the direction sought by Tuenbo will create a substantial practical difficulty as to how the trial can be properly conducted with different plaintiffs in the 2 Actions represented by 2 different law firms and TCL as the plaintiff in HCA 566/2019 but a defendant in HCA 2095/2016: Lewis v Daily Telegraph Ltd (No2) [1964] 2 QB 601, at 620-621, Pearson LJ.

72.  I do not consider that to be a practical difficulty as the Tuenbo Parties are not seeking an order for consolidation. TCL is only a nominal party in the HCA 2095/2016, not expected to take an active role or incur substantial cost. Its major role in the trial together, if ordered, will be in the HCA 566/2019.

73.  For the reasons given in Section F, I decline to order a preliminary issue to be tried together with HCA 2095/2016.

G. HAVING BOTH ACTIONS TRIED TOGETHER

74.  The relevant principles for ordering separate proceedings to be heard together have been set out in Re Winscore International Ltd [2021] HKCFI 3563 §§11-12, Recorder Dawes SC:

(a) The Court has a wide and unfettered discretion under O.4 r.9. There is no hard and fast rule on how this discretion ought to be exercised, but the Court should take a practical and common sense approach to ensure justice is best served.

(b) Even though the Court’s discretion should be exercised flexibly, it must be satisfied that it would be proper and expedient to make such an order, having regard to all the circumstances. It should consider, amongst other things, that the objective of the rule is to save time and costs, and where there is a substantial overlapping of issues and parties, it is desirable to resolve the disputes in different actions on one occasion before the same judge.

(c) Following the Civil Justice Reform, the emphasis is on ensuring the efficient and just resolution of disputes before the Courts.

75.  Given that the 2 Actions involve substantially different issues as described in paragraph 63 above, Steadfast should not be unnecessarily dragged into HCA 566/2019; and I decline to so order. I decline to make an order for trial together.

H. CONCLUSION

76.  It is an abuse of process to have the Authority Issue relitigated in HCA 566/2019. There are no exceptional or special grounds to order trial of a preliminary issue. As the issues in the 2 Actions are different, ordering them to be tried together is inappropriate. But staying HCA 566/2019 pending trial of HCA 2095/2016 will serve the ends of justice.

77.  Accordingly, I order as follows:

(1) There be leave to amend the Summonses dated 17 May 2021 as per the Summonses dated 12 April 2022.

(2) Pursuant to the Amended 566 Summons, all further proceedings in HCA 566/2019 be stayed pending resolution of HCA 2095/2016.

(3) Findings in HCA 2095/2016 shall bind the parties in HCA 566/2019.

(4) Liberty to apply.

78.  As the Amended Summonses involve a case management matter with each party succeeding on some but not all arguments, I make an order nisi that costs should be in the cause of both Actions with certificates for 2 counsel.

79.  I thank counsel for their assistance.