CORNELIS PIETER ALEXANDER v. KD CONCEPT LTD AND ANOTHER

DCCJ 5717/2021

[2025] HKDC 394

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 5717 OF 2021

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REASONS FOR DECISION

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Background

1.  On 2 August 2024, I handed down my decision in respect of the Defendants’ application by summons dated 31 January 2024 for security for costs (the hearing of which took place on 30 July 2024), whereby I ordered (“the Security Order”) that:

(1)  The Plaintiff was to pay as security for costs HK$540,000 into Court within 60 days of the decision, i.e. by 2 October 2024; and

(2)  The Plaintiff was to pay the Defendants’ costs of the application, with certificate for counsel, to be summarily assessed.

2.  On 9 August 2024, the Plaintiff’s solicitors wrote to the Defendants’ solicitors asking for a copy of the 1^st Defendant’s register of members (“the Register”), on the basis that the 1^st Defendant’s position on the issue of share allotment “now appears to have been clarified by counsel’s submissions” at the hearing held on 30 July 2024.

3.  On 15 August 2024, the Defendants’ solicitors replied stating that pursuant to the Security Order, all proceedings in this action had been stayed pending payment of the security for costs by the Plaintiff and therefore the Defendants were not yet in a position to deal with the request. Notwithstanding this indication, the Plaintiff’s solicitors imposed a deadline of 4 September 2024 by which the Defendants were demanded to provide a copy of the Register, failing which the Plaintiff would to apply for discovery of the same.

4.  On 5 September 2024, the Security Order was sealed.

5.  On 12 September 2024, the Plaintiff’s solicitors wrote to the Defendants’ solicitors seeking their agreement for the Plaintiff to be allowed to provide the security by way of a bank guarantee on terms approved by the Registrar. This was not acceded to by the Defendants, on the ground that there is no justification for changing the mode of providing the security, and the Plaintiff had not objected to the originally suggested mode for providing security during the hearing on 30 July 2024, as eventually set out in the Security Order.

The applications before the court

6.  By summons dated 30 September 2024 (“the Summons”), the Plaintiff then sought the following orders:

(1)  An order that the manner in which the Plaintiff is to provide security for costs pursuant to paragraph 1 of the Security Order be varied to be by way of a bank guarantee on terms to be approved by the Registrar (“the Variation Application”);

(2)  Time for the Plaintiff to provide the aforesaid security by bank guarantee be extended to 23 October 2024 (“the Extension Application”); and

(3)  The 1^st Defendant shall permit the Plaintiff to inspect its current register of members (“Register”) within 7 days from the date of the Order to be made (“the Discovery Application”).

7.  After hearing the parties, I dismissed the Summons with costs ordered against the Plaintiff on an indemnity basis. The following are the reasons for my decision.

The Variation Application

8.  By the Summons, the Plaintiff sought to vary the Security Order so as to allow him to provide security by way of a bank guarantee instead of payment into Court as previously ordered.

9.  The Defendants submitted that the Variation Application is fundamentally misconceived and should be dismissed for the following reasons.

10.  First, the Security Order was made following a hearing of the Defendants’ application for security for costs, and has since been drawn up and sealed. This Court is therefore functus officio in relation to that application.

11.  While the provisions in Order 23, rules 1 and 2 of the Rules of the District Court, Cap 336H (“RDC”) confer upon the Court the power to order security on such terms and conditions as it deems fit, they do not give the Court the power to reopen or vary an order for the provision of security which has already been made, perfected and sealed.

12.  As the Court of Appeal held in Andayani v Chan Oi Ling [2000] 4 HKC 233 at 237C-G (per Keith JA):

“There must, of course, come a time in any proceedings when the court must be regarded as having completed its task. When that time is reached, the court is said to be functus officio. Once that stage has arrived, the court has no further jurisdiction over the case. But when does that stage arrive? The answer given by the common law is when the judge’s order has been drawn up, entered or otherwise perfected…” (underline added)

13.  In Nguyen Quang Hien v Torture Claims Appeal Board / Non-Refoulement Claims Petition Office [2022] HKCA 1704, Au JA also observed at paragraphs 23-26 that a Judge who has already dismissed a leave application on the merits is functus officio and has no power to reconsider the merits of the same application. See also: Zhu Kuan Co. of Zhu Hai Sez v Brickell Ltd, unrep, HCCL 42/1995, 18 June 1998 where Stone J had held at paragraph 13:

“Mr Kerr recognises the evidential difficulties, I think, because he argues forcefully that the rationale of the Court of Appeal case of Gordano Building Contractors Ltd. v. Burgess and Another [1988] 1 WLR 890, which says that the judge has a discretion to consider whether there was a material change of circumstances and if so, whether the order should be varied or set aside, does not apply where that which is being requested is not the return of the monies but the variation of the mode of supplying security. Whilst I recognise the creativity of the argument, I decline to accept it. It seems to me that a variation is a variation, whether it goes to reduction or to increase of amount, or indeed to alteration of mode, and I do not think that anything can be gained by semantic hair-splitting.” (underline added)

14.  The Plaintiff has relied on Wing Fai Construction Co Ltd (in liq) v Fitzroya Finance Co Ltd [2006] 1 HKLRD 224, but that decision is distinguishable from this case on the facts. The security order in that case was made by consent and the parties were given “liberty to apply” for a variation of the mode of provision of security. In contrast, the Security Order only gives “liberty to apply for further security for costs”, which is a far narrower provision allowing the Defendants, but not the Plaintiff, to seek additional security above and beyond the security which has already been ordered. This provision does not give the Plaintiff liberty to apply to vary the Security Order itself.

15.  I therefore agree with the Defendants’ submission that the Variation Application is bound to fail in limine.

16.  Second, the Variation Application is an abuse of process in the Henderson sense[1], that is abuse in the “wider” sense, in that the mode of security could have been and should have been argued at the hearing on 30 July 2024. It is not open to the Plaintiff now to raise the very same issue in a new application when there has been no material change of circumstances. It is well established that the doctrine of Henderson abuse applies to interlocutory applications – see the Court of Appeal’s decision in Compania Sud Americana De Vapores SA v Hin-Pro International Logistics Ltd [2015] 2 HKLRD 458, at paragraphs 16-17.

17.  Further, as Popplewell J put it in Orb a.r.l. v Ruhan [2016] EWHC 850 at paragraph 82, a party must bring forward in his arguments all the points available to him at the hearing. To allow him “to take them serially in subsequent applications would permit abuse and obstruct the efficacy of the judicial process by undermining the necessary finality of unappealed interlocutory decisions”.

18.  As the Defendants have pointed out, the the assertion that the Plaintiff would come under financial strain if he were ordered to pay security for costs was already made in his affirmation in opposition to the application for security. It was open to the Plaintiff to argue at the hearing held on 30 July 2024 that if security were to be ordered against him then it ought to take the form of a bank guarantee instead of payment into Court. Yet no such point was made by the Plaintiff until well after the Security Order was made by this Court and sealed, and no explanation has been given now as to the reason why such a point was not taken earlier. In any event, the Plaintiff has not adduced any evidence to show what disruption would be caused to his cash flow. Having said that, it would appear that even on the Plaintiff’s own case, he is able to provide the security, but simply does not want his business in Thailand to be affected in terms of cash flow.

19.  For the foregoing reasons, I agreed with the Defendants that the Variation Application was devoid of merit and dismissed the same.

The Extension Application

20.  By the Summons, the Plaintiff also sought an extension of time for him to provide security pursuant to the Security Order. Given my ruling on the Variation Application, the Extension Application too should be dismissed. In any event, this application is wholly misconceived for the following reasons.

21.  First, paragraph 1 of the Security Order is an “unless” order imposing an automatic sanction, namely the automatic dismissal of the Plaintiff’s claims without further order, which was already triggered on 2 October 2024, upon the Plaintiff’s failure to pay the security into Court. An unless order is peremptory in nature in that it directs a party or parties to perform some requirement by a certain date and specifies the consequences of default. An order specifying that the default in compliance will result in the automatic dismissal of the action is an unless order (see Lee Sai Nam v Li Shu Chung, unrep, HCA 1711/2009, 31 May 2013, DHCJ Marlene Ng (as she then was) at paragraphs 68-69). As such, the Plaintiff cannot simply apply for an extension of time without seeking relief from sanction. Order 2, rule 4 of the RDC provides as follows:

"Where a party has failed to comply with a rule or court order, any sanction for failure to comply imposed by the rule or court order has effect unless the party in default applies to the Court for and obtains relief from the sanction within 14 days of the failure."

22.  Rule 5 further provides that:

“(1) On an application for relief from any sanction imposed for a failure to comply with any rule or court order, the Court shall consider all the circumstances including—

(a) the interests of the administration of justice;

(b) whether the application for relief has been made promptly;

(c) whether the failure to comply was intentional;

(d) whether there is a good explanation for the failure to comply;

(e) the extent to which the party in default has complied with other rules and court orders;

(f) whether the failure to comply was caused by the party in default or his legal representative;

(g) in the case where the party in default is not legally represented, whether he was unaware of the rule or court order, or if he was aware of it, whether he was able to comply with it without legal assistance;

(h) whether the trial date or the likely trial date can still be met if relief is granted;

(i) the effect which the failure to comply had on each party; and

(j) the effect which the granting of relief would have on each party.

(2) An application for relief must be supported by evidence.”

23.  P cannot circumvent the automatic sanction by simply seeking an extension of time – see the observation by Chow J (as he then was) in Waddington Ltd v Chan Chun Hoo Thomas [2018] HKCFI 1113 at paragraphs 17 and 21:

“17. On behalf of the 5^th Defendant, Mr Law submits that the present application is misconceived, because the sanction imposed by paragraph 2 of the March 2018, which is in the nature of an "unless order", has already taken effect under Order 2, rule 4 of the Rules of the High Court, Cap 4A. Accordingly, unless relief from sanction is sought and granted by the court, the application for an extension of time to comply with paragraph 2 of the March 2018 is doomed to failure. References hereinafter to orders and rules shall, unless otherwise expressly indicated, be to the Rules of the High Court. …

21. It is thus clear that the Plaintiff cannot avoid the automatic consequence of default provided for in paragraph 2 of the March 2018 simply by seeking an extension of time for compliance...” (underline added)

24.  As at the date of the hearing, no application for relief from sanction has been made by the Plaintiff.

25.  In any event, as I mentioned above, even if assuming the Court could consider the merits of the application in the circumstances, the Court cannot and will not allow an extension of time on the basis simply that the Plaintiff would prefer another method of providing security, without even explaining whether the Plaintiff’s non-compliance with the Security Order was due to his inability or difficulty to pay the security ordered despite his efforts made.

26.  Further, as the Defendants have pointed out, any extension of time would almost necessarily derail the trial which was then fixed to commence on 15 January 2025, not to mention that the Pre-trial Review, which was originally fixed to be take place on 13 November 2024, already had to be adjourned because of the Summons and could not be refixed until the scope of the trial becomes clear. This, as pointed out by Mr Chan for the Defendants, has led to a waste of judicial resources and prevents the trial judge from managing the case properly, and has seriously prejudiced the Defendants in their preparation for the trial.

27.  For the above reasons, I also dismissed the Extension Application.

The Discovery Application

28.  By the Summons, the Plaintiff also sought an Order that the 1^st Defendant shall permit the Plaintiff to inspect the current Register within 7 days.

29.  First, this application was also bound to fail as the Plaintiff’s failure to comply with the Security Order by 2 October 2024 has already led to the dismissal of the Plaintiff’s claim. The Plaintiff is not entitled to seek specific discovery in support of his claims when his claim had already been dismissed, upon which the Register was also no longer relevant to any disputed issue. In this regard, it is trite that specific discovery will only be ordered if, among other things, the document is relevant to a disputed issue – see Order 24, rule 7A(3)(b) of the RDC. By reason of the dismissal of the Plaintiff’s claim, the Register is no longer relevant to any disputed issue[2].

30.  In any event, the Discovery Application would not have been allowed as it was taken out extremely late (the trial of the action having been fixed to commence on 15 January 2025). In this regard, pursuant to the Order of Master Maurice Lam dated 27 September 2023, the parties were ordered to take out all interlocutory applications (if any) on or before 22 November 2023. Notwithstanding that order, the Plaintiff has failed to take out the Discovery Application before the prescribed date without proffering any valid justification. The issue concerning whether the shares in question had been issued or allotted to the Plaintiff was already discernable from the pleadings, and was at the latest already expressly identified by the parties as one of the disputed issues for determination at trial in the Joint Statement of Issues in Dispute dated 25 January 2024. There is no valid explanation given for delaying the application until September 2024 when the Summons was issued.

28.  In his timetabling and listing questionnaires dated 21 November 2022 and 9 January 2024 respectively, the Plaintiff had expressly indicated that he did not intend to make any interlocutory applications.

29.  For the reasons stated above, I therefore also dismissed the Discovery Application.

Conclusion

30.  For the foregoing reasons, I am of the view that the Summons was fundamentally misconceived and constituted an abuse of the process of the Court. I therefore dismissed the Summons, with costs awarded against the Plaintiff on an indemnity basis[3].

31.  In view of the imminent date of commencement of the trial on 15 January 2025, with the prompt assistance of the parties, directions were also made for the preparation of the trial, without having to restore the hearing of the Pre-trial Review that has been previously adjourned.