CONVOY COLLATERAL LTD v. CHO KWAI CHEE (also known as CHO KWAI CHEE ROY) AND OTHERS

HCA 399/2018

[2022] HKCFI 3406

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 399 OF 2018

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AND

HCA 463/2021

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 463 OF 2021

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(Heard together)

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D E C I S I O N

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A. Introduction

1.  This application concerns two pieces of litigation in the Convoy litigation saga:

(1)  HCA 399/2018, in which the plaintiff (“CCL”)  claims against the 1^st defendant (“Cho”)  and the other defendants, seeking remedies arising from various transactions in which all or some of the defendants were involved.

(2)  HCA 463/2021, in which Cho as plaintiff claims in defamation against the 1^st defendant in that action (“Convoy”)  – the indirect parent of CCL – and the other defendants (all, together, “463 Defendants”).

2.  By summons dated 1 June 2022, CCL and the 463 Defendants seek orders that: (1) HCA 463/2021 be tried immediately after the trial of HCA 399/2018 before the same judge or to be directed by the trial judge; and (2) the evidence in HCA 399/2018 be admissible in the trial of HCA 463/2021.

3.  Whilst most of the other parties take a neutral position, the application is opposed by Cho.  His opposition is formally put forward in HCA 463/2021, and he has been excused from attending the hearing in HCA 399/2018.

4.  The application requires a case management decision, based on the application of settled principles which can be briefly canvassed below, but which ultimately to seek to ensure the efficient and just resolution of disputes before the Court.

5.  At the hearing, CCL and the 463 Defendants were represented by Mr Tom Ng of Counsel, and Cho was represented by Mr CY Li SC leading Mr Jonathan Tai of Counsel.

6.  This is my Decision.

B.  The Competing Stances

7.  In broad terms, the contest on this application is as follows.

8.  On behalf of CCL and the 463 Defendants, Mr Ng submits that the actions should be tried one immediately after the other before the same judge because:

(1)  there is a high degree of overlap in the issues between the two actions;

(2)  the two actions have progressed to a similar stage, so that case management considerations point to the proposed order; and

(3)  the proposed order would avoid any inconsistent findings, so as to avoid argument on whether findings in one action are binding on the other.

9.  On behalf of Cho, Mr Li submits that:

(1)  there is very limited overlapping of issues in the two actions;

(2)  the limited overlapping does not bear sufficient importance in proportion to the rest of the subject matter of those actions, so that the proposed order cannot be shown to save time and costs;

(3)  the proposed order would bring undue complexity and overloading of issues to the trials of the action; and

(4)  the proposed order would cause substantial and undue delay in HCA 463/2021, which is unfair to Cho.

10.  Therefore, so as to resolve the appropriate case management directions, it is helpful to look at the issues in the two actions and the degree of overlap, and the practical benefit or detriment in hearing one action immediately after the other (or, perhaps, of staying one action pending the other).

C.  Applicable Principles

11.  The application is made under RHC Order 4 rule 9(1), which provides that:

Where two or more causes or matters are pending, then, if it appears to the Court –

(a)  that some common question of law or fact arises in both or all of them, or

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

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

the Court may order those causes all matters to be consolidated on such terms as it thinks just or may order them to be tried at the same time, or one immediately after another, or may order any of them to be stayed until after the determination of any other of them.

12.  As already stated, the principles applicable under this rule are well-settled, and probably need no reference to authority. The key principles are that:

(1)  The Court has an unfettered discretion in deciding whether to make a consolidation order, and the power is to be exercised in a flexible way with regard to the particular circumstances of the situation.

(2)  The Court must nevertheless be satisfied that it would be proper and expedient to make the order, having regard in particular that:

(a)  one primary objective of such an order is to save time and costs;

(b)  where there is a substantial overlapping of issues in parties, it is desirable to resolve the disputes in the different actions on one occasion by the same judge;

(c)  the Court is seeking the avoidance of unnecessary delay, undue complexity and overloading of issues; and

(d)  the Court is seeking the avoidance of creating a risk of irreconcilable decisions which would arise from trying actions separately.

(3)  There is no hard and fast rule that, just because the parties are identical and some common question of fact or law is involved in both actions, it would be expedient and proper to order consolidation.

(4)  The Court should take a practical and common sense approach to meet the justice of the particular situation, in light of the underlying objectives in Order 1A of the RHC.

(5)  The emphasis is on ensuring the efficient and just resolution of disputes before the Courts.

13.  It is pertinent to note that, of the four possible options identified within the rule, CCL and the 463 Defendant have in the summons canvassed only the option that one matter be tried immediately after the other (though in his written and oral argument Mr Ng also canvassed the possibility that one matter might be stayed until after the determination of the other).  Cho opposes either option.

14.  Therefore, whilst the authorities frequently deal with the situation of a potential order for consolidation, such an order is not the same as an order for the trial of one action to follow the other, or an order to stay one action pending the trial of another.  Different considerations may apply depending on which potential order is sought or in focus.  This emphasises the flexibility in the consideration, as the Court seeks in the exercise of its discretion to identify the case management decision which promotes the efficient and just resolution of the disputes before it.

D.  The Two Actions

D.1  Principal Action

15.  Before turning to a description of the two actions relevant to the current application, mention should first be made of HCA 2922/2017, which has been defined as the “Principal Action”.  Cho is the 1^st defendant, and there are now (I think, following various amendments)  38 defendants.

16.  According to Convoy’s pleaded case in the Principal Action, Cho was the mastermind in Convoy who engineered a scheme (“Cho’s Scheme”)  – which included but was not limited to (a) an open offer made by Convoy on 6 February 2015, (b) an allotment or placing of Convoy shares on 29 October 2015, and (c) a circular financing arrangement by which CCL and CSL (another subsidiary)  advanced loans and margin finance to enable and/or assist the placees to subscribe for the allotted shares – for the improper motives of (1) entrenching his secret control in Convoy, (2) causing price manipulation of Convoy’s share price resulting in loss and damage to Convoy and its legitimate shareholders, (3) allowing himself and his associates to subscribe shares of Convoy with Convoy’s money, and (4) secretly securing the control of Convoy for his own and his associates’ benefits (together “Improper Motives”).

D.2  HCA 399/2018

17.  As stated, HCA 399/2018 is an action commenced by CCL against Cho and others, seeking remedies arising from various transactions in which all or some of them were involved.

18.  A broad description of CCL’s claim and Cho’s defence is set out in the introductory part of the Court of Appeal (“CA”)  judgment granting a Mareva injunction on 16 June 2020 (“CA Judgment”): see §§1-6, which can be read but need not be recited in this Decision.

19.  Amongst the allegations made by CCL in the action, Mr Ng has sought to emphasise the following points:

(1)  Cho assumed the role of de facto and/or shadow director of CCL and Convoy and manipulated the corporate affairs of the Convoy Group and other listed companies for the benefit of himself and/or his associates.

(2)  Further, capitalising on his wealth and influence on the stock market, Cho actively hid his control and/or ownership of assets and shareholdings behind elaborate nominee arrangements and complex corporate structures.

(3)  In breach of his fiduciary duties, Cho caused and/or procured CCL to enter into five highly problematic transactions (“399 Transactions”).

(4)  On 25 June 2019, CCL took out an inter partes summons seeking a worldwide Mareva injunction against Cho.

(5)  The CA Judgment, when the CA found a real risk of unjustified dissipation of assets on Cho’s part, on the basis of his low commercial morality and CCL’s good arguable case on its substantive claims against him.  The worldwide assets restrained were up to the value of approximately HK$770 million.

20.  Mr Ng specifically drew my attention to the Section C in the Amended Statement of Claim in HCA 399/2018, which is headed ‘Roy Cho’s Control over CCL as de facto and shadow director’, comprising §§25-37.  Particular reference was made to §26(3)  which pleads (bold and italics in original):

Procuring Convoy to make open offer for Quincy Wong and Mark Mak (D14)  to profit – In February 2015, Roy Cho caused Convoy to make an open offer to its shareholders, the effect of which was to allow (i) Quincy Wong to turn his shareholding in Convoy worth HK$12,940,671.24 as of 1 April 2015 into cash proceeds of HK$3,643,820.59 and a new shareholding in Convoy worth HK$72,535,867.54 as of 11 May 2015; and (ii) Mark Mak (D14)  to turn his shareholding in Convoy worth HK$12,277,388.08 as of 1 April 2015 into cash proceeds of HK$4,933,515 and a new shareholding in Convoy worth HK$68,817,991.08 as of 11 May 2015.  Relevantly, on the basis of these matters, Convoy is seeking an account of profits against Quincy Wong and Mark Mak (D14)  in HCA 2922 of 2017 [i.e. the Principal Action].

21.  Mr Ng also took me to that part of the pleading in the claim which identifies the claim against other defendants on the basis that they well knew or turned a blind eye to or were recklessly indifferent to the fact that Cho had substantial control over CCL as its de facto and/or shadow director.

22.  Mr Ng also took me to Cho’s Defence, which includes: (1) at §2, the categorical denial of any suggestion that he was able to direct or control his alleged associates, nominees and/or agents or that he acted as they facto or shadow director of Convoy, CCL or CSL; and (2) at §30.3, the non-admission to §26(3)  of the claim, save to deny that Cho caused Convoy to make an open offer to its shareholders, and to aver that Cho did not have the power to make any decisions to offer or in fact allot shares to Convoy’s shareholders.

23.  Reference was also made to CCL’s Reply to Cho’s Defence, Section II of which is headed ‘Particulars on Roy Cho’s Control and/or Influence over Convoy, CCL and CSL’, and which includes the denial of the pleading in §30.3 of the Defence.  On the basis of these pleadings, Mr Ng submits that an issue as to the control by Cho is definitely raised.

24.  For his part, Mr Li has sought to emphasise (1) the nature of the claim in HCA 339/2018 by reference to the five particular 399 Transactions, where the claim is based upon alleged breaches of fiduciary duties, and (2) the point that CCL does not plead that any of the 399 Transactions was entered pursuant either (a) to Cho’s Scheme or (b) to the Improper Motive pleaded in the Principal Action.

D.3  HCA 463/2021

25.  HCA 463/2021 is a claim by Cho in defamation, the subject matter being an announcement published by Convoy on 3 or 4 January 2021 (“Announcement”)  on the websites of the Stock Exchange of Hong Kong Ltd and Convoy.  The defendants to the action are Convoy and the members of the Board of Directors which authorised and/or made the Announcement.

26.  The pleaded defamatory words (“Words”)  found in the Announcement are set out in the Schedule to the Statement of Claim.  In essence, the Words are Convoy’s summary of its case against Cho in the Principal Action – namely that he had behaved dishonestly/unlawfully by engineering the Cho Scheme – and the summary given of the CA Judgment in §9(g)  of the Announcement.

27.  The ‘sting’ alleged in the meaning of the Words is that the CA made findings in the CA Judgment against the conduct of Cho, namely that (1) the CA was critical of his conduct and (2) the CA acknowledged or confirmed that Cho had dishonestly and fraudulently committed serious wrongdoings against Convoy and other listed companies and also the shareholders of those companies.  Cho pleads that the Words are false in that (1) in the Principal Action, Cho has already denied Convoy’s claims based on the alleged Cho’s Scheme, and (2) on a correct reading of the CA Judgment, the CA has not made the alleged court findings.

28.  Mr Ng has sought to emphasise that the part of the pleading relating to the natural and ordinary meaning of the Words specifically includes a reference to (part of)  the Improper Motives, namely of entrenching Cho’s secret control of Convoy to conceal and enable his wrongdoings.  He also points to §7(e)  of the claim which references the CA Judgment, which was of course on an appeal from a decision in HCA 399/2018.

29.  As to defences, the 463 Defendants plead defences of justification and fair comment, and also rely on qualified privilege.  In response, Cho asserts malice.

30.  In relation to the defences of “justification” and “fair comment”, the 463 Defendants plead that they will rely on the facts pleaded in the Re-Re-Re-Amended Statement of Claim in the Principal Action and the Statement of Claim in HCA 399/2018.  In his Reply, Cho pleads that “in so far as is necessary” he will rely on his Defences filed in those two actions.

31.  On the face of the pleadings, the other issues in HCA 463/2021 are not otherwise related to the subject matters of the Principal Action and HCA 399/2018.

E.  Degree of Overlap

32.  Mr Ng submits that it is at least common ground that there is a common question of law and fact involved in both HCA 399/2018 and HCA 463/2023, namely whether or not the facts pleaded by CCL in the Statement of Claim in HCA 399/2018 provide justification to the publication of the Words in issue in the Announcement.  He also says (in a summary of his Annex 1)  that if the allegations in HCA 399/2018 are found to be true:

(1)  Cho’s reliance on his Defence in HCA 463/2021 will fall away;

(2)  the falsity of elements (in so far as the Announcements refer to facts found in HCA 399/2018)  will fall away;

(3)  that would reinforce the argument that Convoy had the duty or interest to inform its shareholders and the investing public of the matters stated in the Announcement, giving rise to a defence of qualified privilege;

(4)  the premise of Cho’s malice plea will fall away (in so far as the Announcement referred to facts found in HCA 399/2018), and where “malice” is a subjective test;

(5)  there would or could be an impact on the quantum of any damages payable to Cho to compensate for his alleged loss, because (even if a defence of justification cannot be established on proved sufficient facts)  a defendant may be able to rely on such facts as he has proved to reduce the damages, perhaps almost to vanishing point.

33.  Mr Ng also submits that Cho has himself acknowledged the relevance of HCA 399/2018 by including the pleadings and the CA Judgment from that action in his List of Documents in HCA 463/2021. However, I agree with Mr Li that is only an acknowledgement of the relevance in the discovery sense, and does not of itself identify any significant degree of overlap.

34.  There is perhaps more force in Mr Ng’s submission that, by Cho’s statement in his timetabling questionnaire in HCA 463/2021, Cho has in effect acknowledged that the determination of the sustainability of the liability of the claims in HCA 399/2018 is necessary for the Court in HCA 463/2021.

35.  On the other hand, Mr Li submits that the degree of overlap between the actions is in fact very limited.  He says that:

(1)  the two actions concerned different and distinct transactions;

(2)  CCL does not plead in HCA 399/2021 that Cho’s Scheme or the Principal Action’s Improper Motive is material in support of CCL’s claim relating to the 399 Transactions, which are rather based upon breaches of duty (or dishonest assistance)  by reference to commercial irrationality of the transactions;

(3)  not only are the core transactions and material facts in support different in the two actions, the alleged wrongdoers in causing those transactions are not the same;

(4)  out of over 100 pages of the Amended Statement of Claim in HCA 399/2018, CCL and the 463 Defendants are able to identify references to the alleged Cho’s Scheme in only two insignificant sub-paragraphs (both of which themselves refer to various examples, suggesting that the Cho’s Scheme is independent and distinct from CCL’s case on the 399 Transactions);

(5)  in the Announcement, HCA 399/2018 is referred to in only two sub-paragraphs;

(6)  in any event, the real issue in HCA 463/2021 relates to the truth or falsity in the description in the Announcement of the CA Judgment, and the veracity of CCL’s claim in HCA 399/2018 is not an issue to be resolved in HCA 463/2021.

36.  Mr Li further submits that the Court has to look at all the issues raised in both actions as a whole, and determine the practical implications of hearing the trials one after the other.  So far, it remains unclear whether and to what extent the facts pleaded in HCA 399/2018 would be relevant to HCA 463/2021, and they would at best be relevant only to the particular defences of justification and fair comment.  Mr Li submits that the overlapping issues suggested by Mr Ng are not really very overlapping when properly understood in the context of the defamation claim.

37.  More importantly, Mr Li submits, any degree of overlapping – which is primarily limited to the damages point in HCA 463/2021 – is not of sufficient importance in proportion to the rest of the subject matters of the actions to show that hearing one trial after the other would save time and costs.

F.  Analysis

38.  I agree with Mr Li that it is telling that CCL and 463 Defendants have not identified the names and numbers of any suggested common witnesses between the two actions, and the nature and volume of any common documents.  This may in part be a reflection that, despite been commenced more than four years ago, HCA 399/2018 does not appear to have proceeded even as far as discovery by lists of documents, and there is certainly no indication as to the identity or scope of likely evidence from any particular witness.  In HCA 463/2021, the 463 Defendants have not identified the name of any witnesses, and have also been so far unable to find a list of documents.

39.  As a result, Mr Li is correct when he says that the Court cannot realistically assess the true degree of commonality, or how the use of witnesses and documents could save time or costs by the proposed order.  That seems to me to identify that the application is either premature, or one which simply cannot be made good.

40.  There is also force in Mr Li’s submission that the proposed order might bring further complexity and overloading of issues to the trials of the two actions.  There is further some potential inconsistency in Mr Ng’s assertion that there is significant overlapping between the two actions, with the further suggestion that it would not be necessary for the defendants in HCA 399/2018 to participate in the trial of HCA 463/2021.  I note that the application (perhaps unusually)  seeks only that the evidence in HCA 399/2018 stand as evidence in HCA 463/2021 – and not vice versa.

41.  I take into account Mr Li’s submission that HCA 463/2021 as a defamation action, in which one or both parties might elect a jury trial.  Though, as I understand it, any such election would not bind a Court to hold a jury trial, the simple fact is that neither party has yet made an election one way or the other.  If there were to be a jury trial, which must remain at least a possibility, that would seem to me to give rise to at least potentially significant further difficulties, of the sort identified and taken into account by Poon J (as the CJHC then was)  in Chui Pui Kun v Chui Wai Kwan (unreported, HCA 2339/2009, HCMP 438/2010, HCMP and 97/2010, 7 July 2011), at §23.

42.  I further take into account that, ordinarily, a claimant in a defamation action would prefer to seek an early trial and court judgment, to clear his name, and (if successful)  to lessen the damage caused by the defamatory words until that judgment.  In this particular case, on the order proposed by CCL and the 463 Defendants, the relevant trial would be delayed until whenever the trial in HCA 399/2018 can be brought on (in proceedings which have so far proceeded at almost glacial pace).  I note that Mr Ng himself recognises that, if the two actions are not somehow joined together, it would probably be expected that HCA 463/2021 would come to trial before HCA 399/2018.

43.  The strongest point for any procedural linkage between the two actions seems to me to be in relation to the quantum of damages in HCA 463/2021.  I accept, and I think it is common ground, that the quantum of any damages might be affected by findings on matters which are in issue on HCA 399/2018.  But that degree of overlap does not seem to me to be sufficiently substantial to justify an order at this stage that there be a trial of HCA 463/2021 immediately after the trial in HCA 399/2018. Nor does it seem to me to justify an order at this stage either that (a) there should be a stay of HCA 463/2021 pending the trial in HCA 399/20 2018 or (b) there should be some split trial direction given in HCA 463/2021, to hive off the question of any damages.

44.  I have not forgotten the risk of inconsistent decisions, where the same or similar questions might arise for determination in two or more than two actions.  But, even factoring that risk into account, I am not persuaded that it tips the balance in favour of the proposed order.

45.  My view on this point is not significantly affected by Mr Li’s submission which was made strictly as a legal point (and was expressly not made on instructions, and was not intended to be a concession by Cho)  that there will or may be an issue estoppel between at least Convoy/CCL and their privies and Cho arising from any action between them which goes to a trial and judgment.  Therefore, it does not seem to me to be necessary to decide whether Cho should or should not have offered an undertaking to be bound by findings in one action for the purposes of the other.

46.  In conclusion, I am not satisfied that it is appropriate at this stage to make the proposed order as sought by the application.  I expressly do so without prejudice to any future case management directions which may be felt appropriate on circumstances as may in future arise (see, further, below).

47.  I dismiss the application.

G.  Costs

48.  I see no reason why costs should not follow the event of the dismissal of the application.  On that basis, I order CCL and 463 Defendants to pay Cho’s costs of and occasioned by the application, to be taxed if not agreed, but without a certificate for two Counsel.

49.  However, as I indicated at the hearing, I make that order in the first instance on a nisi basis.  The order will become absolute if no party makes any variation application within 14 days.  Any variation application will be dealt with on paper submissions.

H.  Postscript on Further Case Management

50.  I have looked at matters expressly in the context of how they appear “at this stage”.  I have also done so in light of the wider potential case management questions which I canvassed with the parties at the hearing.  In particular, the relevant degree of overlap between actions seems likely most impactful by reference to the Principal Action. Indeed, it is probably fair to say that the central allegations in the Principal Action relating to the Cho’s Scheme and the Improper Motives provide at least context for many of the cases in what I have described above as the Convoy litigation saga.

51.  To that end, I think it is probably unhelpful – or, at least not sufficiently helpful – for there to be consideration of case management questions only by reference to one or two out of the total number of cases, and in particular if divorced from what seems to me to be properly described as the Principal Action.

52.  Where the Convoy litigation has in effect become docketed to a single judge, it seems to me appropriate that the judge (who is expected to have some overall knowledge of and oversight of those various cases)  should at least consider some overall case management for those cases.  Where large-scale multi-action litigation of this nature makes a potentially significant call on judicial and other resources, the Court is justified in taking a more active case management role.  To that end, it seems to me that it might be useful for there to be a multi-action case management hearing.

53.  Therefore, I direct Convoy (and any relevant subsidiary)  and Cho to seek to agree, and provide to the Court within 21 days, a list of all relevant Convoy litigation by reference to (a) the action number, (b) the parties, (c) a brief description of the claim and defence(s), and (d) the stage of proceedings reached.  I will then consider directing a combined case management hearing for such of those cases as seems to me to be appropriate in light of that information.  Though I do not direct it, I am also content to receive suggestions as to which cases might be usefully managed as a group.

54.  Though further thought can be given to the types of case management orders open to consideration, it may be that an appropriate approach to the various pieces of litigation is to identify a series of issues which might be tried.  In other words, appropriate case management may involve a trial or trials of specific issues across a number of actions, rather than trials of actions as a whole.