ZHANG RUI KANG AND ANOTHER v. TUNGHSU GROUP CO LTD

HCA 1391/2021

[2023] HKCFI 2451

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1391 OF 2021

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D E C I S I O N

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1.  On 21 July 2023, I handed down a decision (“the Decision”), in which I dismissed the Company’s Summons in HCA 1391/2021. By a summons dated 4 August 2023 (“the Leave Summons”), the Company seeks leave to appeal from that decision. A draft notice of appeal (“the Notice of Appeal”)  is annexed to the Leave Summons.

2.  I directed that the Leave Summons be determined on paper without an oral hearing.  The Company lodged its written submissions first, and then Z&L lodged their written submissions.  Thereafter, the Company lodged its written reply submissions, in which the Company mentioned that an application for leave to amend the Leave Summons (“the Amendment Application”)  had been made at the time of filing the written reply submissions.  A draft amended notice of appeal (“the Amended Notice of Appeal”)  has been put in by the Amendment Application. After seeing the Company’s written reply submissions, I directed that the grounds as set out in the Amended Notice of Appeal would be considered by this court, but no other ground would be considered in the Company’s application for leave to appeal.  I also granted leave to the parties to put in supplemental written submissions.  

3.  For ease of reference, the abbreviations used in the Decision are adopted herein.  Further, a copy of the Amended Notice of Appeal is annexed hereto.

The principles

4.  An appeal is against the order made by the court, not against the reasons given by the court.[1]

5.  Leave to appeal would only be granted if the appeal has a reasonable prospect of success (which means that the prospect of success is reasonable and more than fanciful, without having to be probable), or there is some other reason in the interests of justice why the appeal should be heard.[2]

6.  What is required is a reasonably arguable appeal.  Merely showing that an appeal is “arguable” and “not fanciful” is insufficient.[3]

No reasonable prospect of success

7.  In the Decision, the reasons for ruling against the Company are set out in [34] and [37].  There is no challenge as to the reasons as set out in [37]. The grounds as set out in the Amended Notice of Appeal are focusing on [34] of the Decision.

8.  In order to obtain leave to serve out of the jurisdiction, the plaintiff would only have to show a good arguable case of jurisdiction, which (a)  is one more than barely capable of serious argument[4]; and (b)  can be established on the basis of plausible (albeit contested)  evidence.[5]

9.  As rightly summarized by Mr Chua for Z&L, in the Decision, I concluded that there is a real prospect of a legitimate benefit to Z&L if leave to serve out of jurisdiction is granted.  The two types of “legitimate benefit” involved are as follows:

(1)  a benefit arising from a real prospect of assets in Hong Kong (“the Asset Limb”); and

(2)  a benefit which is not monetary or tangible in nature, and can be indirect or prospective (“the Non-Asset Benefit Limb”)

10.  As to the Asset Limb:

(1)  In the Decision, I have made findings and concluded that there is a real possibility of the Company’s assets being in Hong Kong, whether now or in future.  See Decision, [34(1)] to [34(3)], [34(5)] and [34(9)].

(2)  Findings of facts made by a first instance judge based on evaluation of facts, as in appeals against judges’ exercise of discretion, would not be overturned by the Court of Appeal so long as they are within the degree upon which different judges can legitimately differ.[6] With respect, having considered the grounds as set out in the Amended Notice of Appeal (including [3(2)] to[3(8)]thereof)  and the Company’s written submissions, I am of the view that the Company has failed to demonstrate a justifiable basis upon which the Court of Appeal may interfere with the findings of facts made by me in [34] of the Decision.  Merely regurgitating the arguments already made and rejected by me in the Decision would not suffice.

(3)  The Company has raised a new argument in [3(1)] of the Amended Notice of Appeal, which is as follows:

“In assessing the evidence relating to the Company’s present or future assets, the learned Judge did not consider what effect of allowing HCA 1391/2021 would be on the asset position of the Company in Hong Kong.”

(4)  Mr Lai for the Company has clarified that in that paragraph, the Company is not saying that it would dissipate its assets in Hong Kong to frustrate any judgment that may be granted.  The Company’s position is that the Company never had any assets in Hong Kong to dissipate in the first place.  In [3(1)] of the Amended Notice of Appeal, the Company is merely making the point that the Company has no assets in Hong Kong and will not have any assets in Hong Kong in the future.

(5)  As submitted by Mr Chua, the Company is not entitled to rely upon the point as set out in [3(1)] of the Amended Notice of Appeal in the intended appeal, for that point has not been put forward in the hearing before me.  Without prejudice to this preliminary position, there is also no substance in that point.  If the Company indeed has no assets in Hong Kong and will not have any assets in Hong Kong in future, the presence or absence of HCA 1391/2021 would not have any impact on the asset position of the Company.  The point in [3(1)] of the Amended Notice of Appeal cannot be a valid ground of appeal.

11.  As to the Non-Asset Limb:

(1)  My ruling concerning the Non-Asset Limb is in [34(4)], and [34(6)] to [34(9)] of the Decision.

(2)  As to [1(1)] of the Amended Notice of Appeal, as submitted by Mr Chua, this point would only have merit if the investigation point could be invariably raised in any case, regardless of the facts.  I have not said at anywhere in the Decision that the investigation point could be a ground in support of an application for leave to serve out in any case.[7] What I said in the Decision[8] is on the facts of this case, the investigation point constitutes a real prospect of legitimate benefit.  With respect, the Company has not identified any basis upon which the exercise of my discretion (based upon the facts in this case)  may arguably be said as being plainly wrong, so that intervention by the Court of Appeal is justified.

(3)  At to [1(2)] of the Amended Notice of Appeal, the authorities in fact show that the possibility of investigating and locating assets through oral examination satisfies the requirements of gateway (m).

(a)  In Fonu v Demirel[9], Sir Anthony Clarke MR said:

“There is a further consideration. If [the plaintiff] obtains a judgment in England it can properly make use of the various methods of and aids to enforcement, including an oral examination of the judgment debtor as to the nature and whereabouts of his assets at the time, which is not of course now but when the English judgment is obtained (if it is)” (Emphasis added)

(b)  In Caterpillar Financial Services (Dubai)  Ltd v National Gulf Construction LLC[10], DHCJ Julia Dias QC said:

“It is not in dispute that if the judgment is enforced, his client will be able to use the Part 71 procedure to cross-examine the third and fourth defendants as to their own assets in connection with the enforcement of the judgment against them…” (Emphasis added)

(4)  As to [2(1)] of the Amended Notice of Appeal, it is clear that the requirement of a real prospect of a legitimate benefit is akin to the second core requirement to wind-up a foreign company.[11] Further, contrary to the Company’s submission that the concept of commercial leverage has a very specific meaning on the facts of Shandong Chenming Paper Holdings Ltd v Arjowiggins HKK 2 Ltd[12], the Court of Final Appeal in that case in fact has made clear that “leverage is always in the background of any instance of civil litigation”.[13] Thus, it can constitute a legitimate benefit in appropriate cases where “some useful purpose will be served”.[14]

(5)  At to [2(2)] of the Amended Notice of Appeal, this cannot be a valid criticism against [34(8)] of the Decision.  The point made in [34(8)] of the Decision is that the directors of the Company would be forced to abide by an examination order granted by the Hong Kong Court because of the commercial leverage.

12.  In order to obtain leave to serve the proceedings out of the jurisdiction, Z&L would only need to show a good arguable case under the Asset Limb or the Non-Asset Benefit Limb.  Unless the Company is able to demonstrate a reasonable prospect of success in overturning my rulings under both limbs, there is no reasonable prospect of success in the Company’s intended appeal.

13.  In my judgment, the Company has failed to show a reasonable prospect of success in the intended appeal.

Leave to appeal refused

14.  There is no reasonable prospect of success in the Company’s intended appeal.  For the sake of completeness, I also do not see any reason to grant leave under the “some other reason in the interest of justice” limb.  Leave to appeal is refused.

Disposition

15.  I allow the Amendment Application.  Costs of the Amendment Application be to Z&L forthwith and be summarily assessed at HK$1,040.

16.  I dismiss the Company’s application for leave to appeal.  Costs of the leave application be to Z&L forthwith, with a certificate for 2 counsel. Those costs be summarily assessed.  There be leave to Z&L to file and serve a bill of costs for summary assessment within 14 days from the date of this decision, and leave to the Company to file and serve a written reply to the said bill within 14 days thereafter.

17.  Taking the public holidays in late September and in October 2023 into account, I would allow the Company to have 35 days from the date of this decision to file and serve its Defence in this case.  I so order.

18.  I thank all counsel for the very helpful assistance provided to the court.