CHOW TING HSING, RAYMOND v. CHOY TUK SANG, PETER

HCA3373/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.3373 OF 2000

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(HEARD TOGETHER)

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REASONS FOR DECISION

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Introduction

1. This is an appeal by Mr Raymond Chow Ting Hsing ("Mr Chow"), who is the defendant in HCA3373 of 2000 ("the first action") and the plaintiff in HCA1132 of 2001 ("the second action") from the order of the master dated 27 May 2002 dismissing Mr Chow's application that the two actions be tried at the same time. On 20 September 2002, I allowed the appeal, set aside the master's order and ordered that two actions be tried at the same time with the second action stands as the counterclaim to the first action.

The actions

2. In March 2000, Mr Peter Choy ("Mr Choy") commenced the first action against Mr Chow claiming essentially for a declaration that Mr Chow holds 40 million shares of Golden Harvest Entertainment (Holdings) Limited ("Golden Harvest") in trust for him. Mr Choy alleges that :

(1) some time before the listing of Golden Harvest, it was agreed amongst Mr Choy, Mr Chow and one Mr Ho Kwong Cheong that Mr Choy would be issued 8% , i.e., 40 million shares;

(2) that Mr Choy agreed, upon Mr Chow's request, to place 40 million shares under Mr Choy's name;

(3) that Mr Chow signed a document dated 1 October 1994 acknowledging that for valuable consideration received and declaring himself the trustee of 8% of shares to be issued; and

(4) that he had provided consideration for the shares.

3. Such consideration, Mr Choy, alleges, arose in this way. Mr Choy was given 50% of the shares in Dooston Investment Corporation ("Dooston") and Golden Reserves Limited ("Golden Reserves") to induce him to undertake the work of managing these companies in film production, distribution and circuit acquisition other than those already carried on by the group and during the reorganisation, Mr Choy transferred all his rights and interests in the shares in those companies in favour of other corporate vehicles in order to facilitate listing.

4. In his defence, Mr Chow denies the alleged agreement to issue shares to Mr Choy. Further, he denies that he had never signed the 1 October 1994 document and avers that if he did, it was procured by deception. In answer to the allegations about Mr Choy's interest in the shares of Dooston and Golden Reserves, Mr Chow avers that he had an understanding with Mr Choy that Mr Choy would be allowed a 50% share of the profits of these companies. But in September or October 1993, i.e., the time of reorganisation, he paid Mr Choy HK$60 million in lieu of issuing any share to him in Golden Harvest and in return for Mr Choy giving up whatever interest he held in the Golden Harvest Group.

5. Mr Choy admits receipt of HK$60 million from Mr Chow in October 1993. But he alleges that this payment was made purely out of Mr Chow's own initiative and for his share of the proceeds of sale of a library of 401 films from the Golden Harvest Group to Star TV in about 1993 and reward for work done and to be done by him to deal with copyright problems in respect of these films. He further avers that in addition to being involved in film distribution and exhibition, building and leasing cinemas, organising and operating the Gala Circuit and Panasia Circuit, he personally produced 70 to 80 films of which 37 films were amongst the 401 film library.

6. It is not in dispute that Mr Choy asked to be paid a further sum of more than HK$29 million, being profits in Dootson and Golden Reserves up to 31 August 1993 and that he was in the event paid 60% of that sum in November 1993. The 40% balance was paid to a company called Forever Best held by Mr Chow and Mr Choy equally in January 1994. As will be seen in a moment, an issue arises as to their respective contribution to Forever Best, which has a direct bearing on the nature of payment of HK$5 million by Mr Chow to Mr Choy, the subject matter of the second action.

7. It is also Mr Choy's case that Mr Chow had paid him dividends attributable to the 40 million shares on three separate occasions. Mr Chow does not dispute these payments but avers that they were paid pursuant to Mr Choy's request for financial assistance. Mr Chow further alleges that in April 1997, he paid the sum of HK$5 million to Mr Choy again upon his request for financial request. This Mr Choy denies.

8. Mr Chow commenced the second action in March 2001 to recover the payment of HK$5 million. Mr Choy in his defence denies that it was a loan. He avers that half of the payment was Mr Chow's contribution to Forever Best or a repayment to him for what he had earlier contributed to Forever Best. The other half was part payment of the producer's fee that he was entitled to.

Why the actions should be heard together

9. Mr Yu, SC, for Mr Chow advanced three reasons why the two actions should be heard at the same time.

10. First, Mr Yu submitted that it is plain and obvious that both actions would be decided upon the court's assessment of the credibility of the main protagonists, Mr Chow and Mr Choy. It is inevitable that all the issues ventilated in both actions will have to be gone into their evidence for there to be a proper assessment of their assessment. Mr Wong, for Mr Choy, did not seem to me to have disagreed with this point. Indeed, the parties have already covered quite a number of substantial and similar points in the witness statements filed in both actions.

11. Mr Yu next submitted that the background to the relationship between the two gentlemen is going to relevant when the court attempts to resolve the conflict in their evidence. Both of them have gone into detail in the witness statements in both actions. It would be a tremendous waste of time and costs if these have to be gone over in two separate trials. I agree.

12. Lastly, Mr Yu submitted that there are specific issues raised which are common in the actions, namely, their respective contributions to Forever Best, whether Mr Chow gave any financial assistance to Mr Choy as alleged, and whether Mr Choy was a producer as alleged. Mr Wong submitted that the overlap of issues is of marginal significance. With respect, I disagree. Having considered the pleadings and witness statements for both actions, I agree with Mr Yu that the common issues are of considerable significance.

13. Mr Wong further submitted that if the actions were consolidated, the progress of the first action, which is no doubt the more complicated one, would be delayed. There is no evidence before me to suggest that Mr Chow is delaying or attempting to cause delay to the progress of the first action or that he intended to delay the same by joining the second action. Further, from what I was told in connection with the progress of the two actions, the only outstanding interlocutory matter in connection with the first action is a specific discovery application which will be heard in December 2002. There is no outstanding interlocutory application in the second action. Even if such application may arise, there is no indication that the same cannot be resolved by the end of this year. Accordingly, I reject Mr Wong's submission in this respect.

Conclusion

14. In my view, the two actions should be heard together. It is certainly desirable to do so in order to save time and costs and more importantly to avoid the risk of inconsistent findings in the two actions. For these reasons, I made the order as summarised in paragraph 1 above.

15. On the question of costs, I saw no reason why costs should not follow the events. Mr Wong urged me not to disturb the costs order made by the master on the ground that the materials then available before him supported his decision. I agreed with Mr Yu's observation that the issues in the two actions before the master were just the same. I did not agree that the materials then available to the master justified his decision. I therefore ordered costs of the appeal and below against Mr Choy.