YIFUNG DEVELOPMENTS LTD v. LIU CHI KEUNG RICKY AND OTHERS

CACV 118/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 118 OF 2016

(ON APPEAL FROM HCA NO. 1341 OF 2014)

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J U D G M E N T

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Hon Lam VP :

1.  I respectfully agree with the judgment of Cheung JA. In respect of the argument of Ms Chan SC on conflict of interest, I would add that, for my part, I am unable to see how the solicitor could seek any indemnity from Mr Fok and Mr Gronow. It was the duty of the solicitor to examine carefully the question of authority before the commencement of the action. They should have done so in light of the provisions in the articles of association. There is no suggestion that Mr Fok and Mr Gronow had done anything to mislead the solicitor or to conceal from them any material facts. Even assuming there were uncertainties as to their status, the solicitor should have verified if one of them was a Lender Director by calling for the relevant instrument appointing them as such before the solicitor deemed fit to act on the basis that they were so. Hence, there is simply no nexus between the potential liability of the solicitor for costs and the position of Mr Fok and Mr Gronow in consenting to the board resolution of 31 July 2015.

Hon Cheung JA :

I.  Introduction

2.  The 1^st defendant (‘Ricky Liu’) applied by summons (‘the authority summons’) to strike out the plaintiff’s (‘YDL’) action on the ground that the plaintiff had failed to observe its Articles of Association and was therefore incompetent to commence the action.  After the summons was issued, YDL passed a board resolution dated 31 July 2015 (‘the Board Resolution’) to ratify the omission.  Au-Yeung J held that the relevant provisions of the articles were not observed but the omission was ratified by the Board Resolution and dismissed Ricky Liu’s authority summons.  Ricky Liu now appeals.

II.  Background

3.1  The background is succinctly summarised by the Judge which I would gratefully adopt. 

3.2  YDL is a BVI company.  By this action it claims against the defendants, its ex‑directors, for injunctions restraining them from holding themselves out as directors and to deliver up YDL corporate records and assets.

3.3  YPL and Wonder Earn are the shareholders of YDL.  They pledged their shares in YDL to secure a loan from MSC to YDL.  YDL owns a valuable company known as WFOE in the Mainland.

3.4  YDL defaulted in repayment of the loan.  MSC declared an event of default and appointed Mr Fok and Mr Gronow as Receivers of the YDL shares.  MSC exercised its rights by completing pre-signed resignation letters, causing the defendants to ‘resign’ and appointing Mr Fok and Mr Gronow as directors of YDL.  Despite the appointments, the YDL shares have remained registered in the names of YPL and Wonder Earn to date.

3.5  On 18 June 2014, Mr Fok and Mr Gronow purported to commence proceedings in the name of YDL in the Mainland against WFOE and its incumbent officers (including Ricky Liu) (‘the Mainland proceedings’) for delivery up of WFOE’s assets.  The Mainland court has not yet granted any relief as of the date of hearing of the authority summons.

3.6  YDL commenced the present action on 16 July 2014.  An interim injunction has been granted against the defendants.

III.  The relevant articles

4.1  Regulation 8.4 of YDL’s articles provides that MSC has a right to nominate a Lender Director (as defined in the articles) to YDL’s board.  While the Lender Director has limited participation rights in the executive management of YDL, Regulation 9.8 provides that the specific prior written consent of the Lender Director is required before YDL can undertake certain ‘restricted matters’ prescribed in Regulation 13.  ‘Restricted matters’ include the commencement of material litigations which cannot be undertaken without the ‘prior specific written consent of the Lender Director’ (Regulation 13.1(t)) :

‘ 13.1 Notwithstanding any other provisions in the Memorandum or the Articles, the shareholders and the directors of the Company shall procure that the Company shall not (and the directors (and any committee of the directors) and the shareholders may not) resolve, pass any resolution with respect to, approve, undertake, action or do any of the matters described below in respect of the Company without the prior specific written consent of the Lender Director :

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(t) Commencement or settlement of any material litigation or arbitration or other proceedings.’

4.2  Regulation 10.4 provides for a restricted meeting :

‘ 10.4   ... if any resolution in respect of any of the matters described in Regulation 13 is to be considered at a meeting of the directors (each such meeting being a ‘Restricted Meeting’), the agenda of each Restricted Meeting shall be available to all directors at least ten (10) Business Days before such Restricted Meeting is held.’

4.3  Regulation 10.6 provides that the quorum for a board meeting at which the board resolves to commence legal proceedings (i.e. a restricted meeting) is two directors, one of whom must be a Lender Director. 

4.4  Regulation 14.3 provides that where the directors have conflict of interests, they can only vote after disclosure of such interest and with prior approval of a Restricted Meeting. 

4.5  Regulation 9.2 provides that YDL’s directors shall not act in contravention of the articles, and can only exercise their powers for a proper purpose and in the interest of YDL.

IV.  Ratification

5.1  That Regulation 13.1(t) had not been observed by YDL before it commenced the present action is no longer in issue.  The argument in this appeal focuses on the Judge’s decision on ratification and the application of the Duomatic principle (Re Duomatic Ltd [1969] 2 Ch 365).

1)  Board Resolution

5.2  The resolution is as follows :

‘	YIFUNG DEVELOPMENTS LIMITED
	Incorporated in the British Virgin Islands
	Company No. 1037871
	(the Company)
	Unanimous written resolutions of the directors of the Company

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Background

1. On 24 June 2014, the Company commenced (and continues to advance) legal proceedings under reference (2014) 陽城法民二初字第388號 in the People’s Court of Jiangcheng District, Yangjiang City, Guangdong Province, the People’s Republic of China (the ‘PRC Proceedings’).

2. On 16 July 2014, the Company commenced (and continues to advance) legal proceedings under reference HCA 1341/2014 in the Court of First Instance of the High Court of Hong Kong SAR against (1) Liu Chi Keung Ricky, (2) Rebecca Choy Siu Fung and (3) Ho Sing Chung Robert (together, the Former Directors) seeking (amongst other things) delivery of various documents and records relating to the Company’s business and affairs (the Hong Kong Proceedings and together with the PRC Proceedings, the YDL Proceedings).

3. The Former Directors have applied to strike out the Hong Kong Proceedings on the basis that the proceedings have not been duly authorised because no consent had been obtained from the ‘Lender Director’ (there was no ‘Lender Director’ at the time the PRC Proceedings or the Hong Kong Proceedings were commenced).

4. Notwithstanding the fact that the directors of the Company are fully satisfied that YDL was and is properly authorised to commence and carry on the YDL Proceedings, out of an abundance of caution :

(a)  Manchester has issued a notice to YDL formally nominating John Howard Batchelor to be appointed as ‘Lender Director’ pursuant to Regulation 8.4 of the Company’s articles of association and John Howard Batchelor has provided a written consent to be appointed as a director of the Company;

(b)  John Howard Batchelor has been formally appointed to the board of directors of the Company by a resolution of the directors dated 31 July 2015; and

(c)  as a purely precautionary measure, the board of directors (including John Howard Batchelor as ‘Lender Director’) now wishes to ratify and confirm all antecedent actions.

Resolutions

5. IT IS HEREBY RESOLVED THAT :

(a)  each and every action taken by either (1) Nicholas James Gronow, or (2) Fok Hei Yu, or both or either of them in their capacity as directors for and on behalf of the Company since 4 June 2014 be and are hereby irrevocably adopted, ratified, confirmed and approved;

(b)  without prejudice to the generality of foregoing, the commencement and carrying on of and all other steps in connection with each of the Hong Kong Proceedings and the PRC Proceedings by and/or on behalf of the Company be and are hereby specifically adopted, ratified, confirmed and approved; and

(c)  further and alternatively, the Company does hereby adopt each of the Hong Kong Proceedings and PRC Proceedings as principal being proceedings commenced by (1) Nicholas James Gronow, and/or (2) Fok Hei Yu as agents of the Company.

6. For the avoidance of doubt, the signing of these written resolutions by John Howard Batchelor shall also constitute his irrevocable consent to each of the foregoing resolutions as ‘Lender Director’ for the purposes of Regulation 13.1 of the articles of association of the Company and for any other purposes required by law.

Miscellaneous

7. These written resolutions may be signed in any number of counterparts, all of which taken together constitute one and the same document, and the written resolutions are effective when the last signatory signs them.

2)  How an omission can be ratified

5.3  The Judge correctly identified the principle of ratification :

‘ 55. Danish Mercantile v Beaumont [1951] 1 Ch 680] explains the wide powers of ratification of an action commenced (in that case by a director) without authority of the company:

“… it is open at any time to the purported plaintiff to ratify the act of the solicitor who started the action to adopt the proceedings, to approve all that has been done in the past, and to instruct the solicitor to continue the action. When that has been done, then, in accordance with the ordinary law of principal and agent and in accordance with the ordinary doctrine of ratification, in my view, the defect in the proceedings as originally constituted is cured; and it is no longer open to the defendant to object on the ground that the proceedings thus ratified and adopted were, in the first instance, brought without proper authority.” (per Jenkins LJ, at 687-688)’

5.4  The point taken by Ms Linda Chan SC (together with Mr David Chen) for Ricky Liu is that :

(1) In all the authorities where the courts held that a plaintiff was entitled to ratify and adopt legal proceedings which had been commenced without proper authority, the constitution of the company concerned did not contain any express restriction on the power of the directors to cause the companies to commence the actions.  See e.g. Danish Mercantile Co Ltd v. Beaumont [1951] 1 Ch 680 at 687 per Jenkins LJ; Airways Ltd v. Bowen [1985] BCLC 355 at 361d-g per Kerr LJ; Kammy Town Ltd v. Super Glory Corporation Ltd (HCA 3524/2003, 14 January 2005) at paragraph 19 per A Cheung J (as he then was).

(2) In these cases, in holding that the commencement of the actions was ratified by the subsequent resolutions passed by the directors, the courts recognised the fact that the directors had the power under the constitutions to pass the resolution to authorise the commencement of the actions and the ratification was to give effect to the exercise of such power. In giving effect to the ratification, the courts did not have to re-write or ignore the express terms of the constitutions of the companies concerned.  The principle has no application to YDL, where the power of all the organs, including the shareholders and directors to resolve, approve, undertake or do any of the ‘restricted matters’ could only be exercised with the ‘prior specific written consent’ of the Lender Director, which was never obtained.

(3) The ratification principle applies only where the company could have, within its own powers, validly authorised the proceedings when they were first commenced.  The ratification principle cannot salvage legal proceedings which the company could not, on the facts, have validly authorised when they were first commenced.

(4) Further, ratification should not be allowed where its effect would be to allow a party to re-write or circumvent the express terms of the articles.  This accords with the principle that the articles cannot be supplemented by implied terms and in construing Regulation 13.1(t), the five requirements adopted in Kensland Realty Ltd v Whale View Investment Ltd & anor (2001) 4 HKCFAR 381 at paragraphs 59 to 60 remain valid considerations (see paragraphs 24 to 30 of Judgment).

(5) Regulation 13.1 expressly requires the Lender Director’s prior specific written consent before YDL could commence the action.  Since YDL had no Lender Director when the writ was issued, it was impossible for any shareholders, directors or YDL to validly authorise the commencement of the action in July 2014.  Nor was it open to the directors to retrospectively approve the commencement of the action by passing the Board Resolution, as they could not ratify what YDL had no power to do in the first place.

(6) The situation would be different if, under the articles, the Lender Director’s prior consent was not required.  Mr Fok and Mr Gronow, in their capacity as ordinary directors of YDL, could have passed a resolution to authorise the commencement of the action.  YDL could then pray in aid the ratification principle to ratify what it could have done but did not do.

5.5  In my view the matter has to be approached on principle.  In Danish Mercantile Co. Ltd., Jenkins LJ at 687 described an action commenced without authority as a ‘nullity’.  Yet he held the omission can be ratified.  The fallacy of the argument advanced on behalf of YDL is that the non compliance in this case is so unique that it is not capable to be ratified.  But we are not concerned with, for example, the situation of the directors acting against the interest of the company but rather the procedural requirements for the commencement of the action had not been complied with.  I do not see why ratification cannot be applied to cure such an omission so long as the prescribed procedure is observed by the act of ratification.  The distinction drawn by Ms Chan between this case and other cases of an action commenced without authority is not of substance.  It begs the question why, given proper observation of the prescribed procedure, ratification should not be effected?  Non compliance may take different forms due to different terms of the articles adopted by different companies and the result is that the action has no legal effect but nonetheless in an appropriate case ratification will come to aid and cure the omission.  It will be pedantic to argue otherwise.  What is important is the application of the principle in a given situation rather than whether that situation has or has not been canvassed before in the precedents.  Hence I do not accept the omission in the present case by reason of the lack of the ‘specific prior written consent’ of the Lender Director will take the case from the realm of ratification.

5.6  Further this argument is similar to the ‘lack of competent principal’ argument raised in Alexander Ward & Co v Samyang Co [1975] 1 WLR 673, an appeal to the House of Lords from the Scottish Courts. 

5.7  The facts are summarised in the headnote of the judgment.  The pursuers were a limited company registered in Hong Kong and the defenders a limited company registered in South Korea.  The action was initiated by [Ward] and [Irons] who, acting without the pursuers’ authority took out a summons and warrant for the arrestment of a ship belonging to the defenders lying in a Scottish shipyard, that alone giving the Scottish courts jurisdiction to try the issues between the parties.  At the time the pursuers had no directors.  They subsequently went into liquidation and, a liquidator having been appointed, he was joined as a party and ratified the proceedings previously taken.  The Second Division of the Court of Session having upheld the ratification, the defenders appealed to the House of Lords.  Lord Hailsham of St Marylebone at 678 held that :

‘ Clearly, if and in so far as the company could ratify the acts of Ward and Irons, the company has done so by adopting the proceedings, and, on the general principle governing the law of ratification, “Omnis ratihabitio retrotrahitur et mandato priori aequiparatur,” the ratification dates back to the acts ratified, and so to the time when the arrestments were laid, and the summons issued.

 The appellants’ counsel relied, however, basically on the contention that none of these acts can be ratified by the company as, he urged, the second of the three conditions laid down by Wright J. in Firth v. Staines [1897] 2 Q.B. 70, 75, viz, that “at the time the act was done the agent must have had a competent principal” had not been fulfilled, because the respondent company had neither appointed directors nor held a general meeting and so was incapable of instructing solicitors or other agents to do the acts  alleged to have been ratified.  Thus, it was contended, the company was not a competent principal within the meaning of the requirement.

  With respect, however, this argument is a non sequitur which would only become cogent if one adopted a false and question-begging meaning to the word “competent.”  In my opinion, at the relevant time the company was fully competent either to lay arrestments or to raise proceedings in the Scottish courts.  The company could have done so either by appointing directors, or, as I think, by authorising proceedings in general meeting, which in the absence of an effective board, has a residual authority to use the company’s powers.  It had not taken, and did not take, the steps necessary to give authority to perform the necessary actions.  But it was competent to have done so, and in my view it was therefore a competent principal within the meaning of the second of Wright J’s three conditions...’

5.8  In that case, it was the lack of directors and the lack of a general meeting which led to the ‘absence of a competent principal’.  In this case although the challenge was the lack of the specific prior written consent of the Lender Director, in essence it is another way of expressing the same argument.  The lack of specific prior written consent of the Lender Director resulted in the lack of a competent principal.  By adopting the same reasoning of Lord Hailsham, YDL was fully competent at the time of proceedings because it could have done so by appointing a Lender Director and by securing his written consent to commence the action.  YDL was a competent principal and the ratification principle applies.

5.9  Lord Hailsham at 679 specifically stated that there was no distinction between that case and Danish Mercantile Co. Ltd. :

‘ In my view this part of the present case is indistinguishable from Danish Mercantile Co. Ltd. v. Beaumont [1951] Ch. 680; and appellants’ counsel was only able to draw a distinction between that case and the present by pointing to the fact that that was a case of deadlock between directors and not of absence of any directors. In my view, as I have said, that is a distinction without a relevant difference, and, if that case was rightly decided, which I consider it was, the appellants’ case on this part of the argument falls to the ground.’

5.10  The Judge was clearly correct in holding that the ratification by the Board Resolution cured the omission and there is no question of rewriting the articles.

3)  Duomatic principle

5.11    The Judge also held that the Duomatic principle applies by taking into account the two shareholders’ resolutions that approved of the commencement of action against the defendants, namely,

(1)    YDL’s shareholders’ resolution dated 31.7.2015

5.12  This resolution was passed by the shareholders (with MSC as attorney and proxy for YPL and Wonder Earn).  It specifically referred to the action and the Board Resolution of the same date.  It, amongst others, ratified, confirmed, approved and adopted the action from the date of its commencement.

(2)    YDL’s shareholders’ resolution dated 7.9.2015

5.13  YPL and Wonder Earn (through the Receivers) passed this resolution adopting, approving, ratifying and confirming the commencement of this action and the PRC Proceedings.  It referred specifically to this action, the Board Resolution appointing Mr Batchelor and ratifying the action.  It also referred to BVI law under section 66 of the BVI Business Companies Act 2004 and the two powers of attorney.  It resolved to ratify, confirm approve and adopt (i) the action, (ii) all acts of Mr Fok and Mr Gronow and Mr Batchelor in purported exercise of their powers as directors in connection with the action; and (iii) the Board Resolution.

5.14  Although the Judge held these two resolutions were not proper resolutions for the purpose of ratification, nonetheless she held that :

‘ 95. However, one should not lose sight of the bigger picture. The Court can have regard to the outcome of the shareholders’ resolutions in July and September 2015 to ascertain the wishes of YDL. Those 2 shareholders’ resolutions involved all stakeholders, ie all the shareholders (votes exercised by MSC), MSC (as Mortgagees invoking the PoAs), the Receivers, the Lender Director and all the directors. There was unity of purpose amongst them in ratifying the Action. No stakeholder could have been prejudiced by the purported ratifications. According to Ms Chan SC, the only entity who might have been prejudiced was YDL, who would otherwise be spared from having to pay costs of the various interlocutory orders.

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106. The board resolution and 2 purported shareholders’ resolution passed after the authority summons was issued involved all stakeholders, ie all the shareholders, MSC (as mortgagees invoking the PoAs), the Receivers, the Lender Director and all directors.  There was unity of purpose among them and no stakeholder could have been prejudiced by the purported ratifications.’

5.15  Mr Bartlett SC for YDL argued that specifically on the question of prior consent of the Lender Director, Re Torvale Group Ltd [1999] 2 BCLC 605 is a case where the Duomatic principle was upheld even though ‘previous sanction’ in accordance with the article was not obtained in the first place.

5.16  Having held that ratification is valid, it is not necessary to address the Duomatic principle and its application to the facts of this case.

4)  Evidence of specific prior written consent

5.17  Ms Chan maintains that in respect of the Board Resolution, there is no evidence that specific prior written consent by the Lender Director has been given before that resolution was passed on the same day.  She argued that the express wordings used in Regulations 9.8 and 13.1 require YDL to follow the procedure precisely and which could not be ignored.

5.18  I disagree.  The Board Resolution was made in response to Ricky Liu’s challenge on authority.  Clause 6 of the Board Resolution which specifically stated that the signing by the Lender Director shall constitute his irrevocable consent to the resolutions as Lender Director for the purpose of Article 13.1 clearly constitutes the best evidence that the Lender Director has given his prior written consent to sign that resolution in accordance with Regulation 13.1.

V.  Conflict of Interest

6.1  Ms Chan argued that the Judge failed to take into account the directors were in a position of conflict when they passed the Board Resolution to ratify the action.  The argument runs like this : if the action was not ratified, it would be struck out.  YDL’s solicitors would be personally liable for costs for breach of the implied warranty that they were authorised to represent YDL (Grand Field Group Holdings Ltd v. Tsang Wai Lun Wayland & Ors [2010] 5 HKC 441 at 444F per Poon J (as he then was)). Acting rationally, YDL’s solicitors would either invoke the indemnity against YDL under the contract of retainer or to recover the costs ordered to be paid to the defendants against Mr Fok and Mr Gronow for damages for breach of implied warranty to instruct them to commence the action.  Since the dismissal of the action may result in Mr Fok and Mr Gronow being personally liable in damages, any reasonable, right-minded observer would conclude that their decision to ratify the action would be coloured by their self‑interest to avoid such personal liability, thereby attracting the application of the ‘no conflict’ rule (Bhullar v. Bhullar [2003] 2 BCLC 241 at 252d-253h per Jonathan Parker LJ).  Further Mr Batchelor was also in a position of conflict.  He is a senior Managing Director of FTI Consulting (the same firm as Mr Fok and Mr Gronow) so his decision was coloured by his personal interest in minimising his firm’s exposure to any potential liability.

6.2  This is an extremely strained argument.  The personal liability for costs by the directors and Lender Director will only occur if Ricky Liu succeeds in his authority summons which has not happened.  In any event, this so called potential conflict of interest is generated by Ricky Liu himself in bringing the authority summons.  This is not a case where the directors and Lender Director had done things for their personal interest contrary to the interest of YDL and sought to ratify their own misdeed.  What they did by this action is to seek to recover what is due to YDL.  The Judge had in effect ruled there was no conflict of interest.  Although she said that, for the proceedings it was assumed that the directors may face personal liability on costs, she went on to hold that the assertion of potential conflict of interest is more theoretical than real. The Judge was correct.

VI.  Locus of Ricky Liu

7.  This issue is closely related to the conflict of interest issue.  The Judge held Ricky Liu had the locus to issue the authority summons by reason of his position as a defendant but he did not have the locus to raise conflict of interest because he was only a former director and not even a shareholder of YDL.  With the challenge on conflict being rejected, there is no need to discuss whether Ricky Liu has the locus to rely on conflict of interest based on the terms of the articles which are only enforceable by the members of YDL.

VII.  Respondent’s Notice

8.  Mr Bartlett referred to the Respondent’s Notice and submitted that the ratification is also supported by the irregularity principle, whereby the lawfulness of a general meeting or a board decision cannot be questioned for mere irregularity if the intention is clear and there is no evidence that the decision of the meeting would have been different had the correct procedure been followed.  He also submitted that the situation can be viewed as a waiver by MSC or an election by MSC to waive the Lender Director protections afforded to it by the articles.  Having upheld YDL’s case on ratification, it is not necessary for us to address these arguments.

VIII.  Costs appeal

9.1  The Judge made the following costs order nisi :

1) Ricky Liu should have costs of the authority summons up to and including 31 July 2015 [i.e. the date of the Board Resolution].  Solicitors for YDL are to show cause as to why they should not bear such costs within 14 days from the date of this judgment.

2) Half of the costs of the authority summons from 1 August 2015 onwards shall be paid by Ricky Liu to YDL. 

3) Costs reserved under the strike out decision dated 19 October 2015 shall be paid by the defendants to YDL.

9.2   Ricky Liu applied to vary the first two items of the costs order nisi.  The Judge refused.  Alternative to YDL’s solicitors’ potential costs liability, Ricky Liu further asked for YDL’s directors (i.e. Mr Fok, Mr Gronow and Mr Batchelor) to pay his costs.

9.3  In a subsequent decision, the Judge held that YDL’s solicitors should not be asked to bear costs.  She further held that the two directors should not be held personally liable for costs.  She made the costs order absolute and ordered Ricky Liu to pay the costs of the application to vary.

9.4  Ricky Liu now asks that he should be awarded costs of the hearing below.  Alternatively he asks for the following orders :

‘ 1) The 1^st defendant [Ricky Liu] should have costs of the authority summons up to and including 31 July 2015, and costs of the hearing on 20 and 29 January 2016. Solicitors for YDL are to show cause as to why they should not bear such costs within 14 days from the date of this judgment. Alternatively, the directors of YDL do pay such costs.

2) Save as aforesaid, half of the costs of the authority summons from 1 August 2015 onwards shall be paid by the 1^st defendant to YDL.

3) Costs reserved under the strike out decision dated 19 October 2015 shall be paid by the defendants to YDL.’

9.5  Ms Chan argued that YDL’s commencement of the action without proper authority (as found by the Judge) and its misrepresentation to the PRC court that its directors were ‘Lender Directors’, led to the present application.  YDL’s conduct caused both parties to incur unnecessary costs :

1) YDL refused to accept that the action was commenced without proper authority, even after 6^th Ricky Liu was filed on 21 July 2015 (six months before the hearing).

2) YDL adopted a ‘kitchen sink’ approach, filing lengthy affirmations containing a wide range of allegations, most of which are frivolous.  YDL’s costs of adducing such disingenuous evidence should not be visited upon Ricky Liu’s doorstep.

3) YDL never made reasonable proposal to Ricky Liu to withdraw the application, e.g. by offering to pay his costs up to and including 31 July 2015 being the date of the Board Resolution.

4) YDL continued to adopt its ‘kitchen sink’ approach at the hearing, raising numerous unmeritorious arguments (e.g. construction of articles, ratification by shareholders’ resolutions, abuse of process), all of which were rejected by the Judge.

9.6  Ms Chan submitted that the alternative costs order represents a fair apportionment of costs between the parties.

9.7  In my view the costs appeal is a hopeless one.  The Judge has dealt with the dispute of the parties over a substantial period of time.  Apart from the dismissal order, she had also given judgments on an injunction application on 17 November 2014 and a strike out application on 19 October 2015.  She heard the present application over two days.  It has simply not been demonstrated that the Judge had committed any error in her decision on costs.

IX.  Conclusion

10.  The appeal is accordingly dismissed.

X.  Costs

11.  YDL is to have costs of the appeal on a nisi basis save that the costs of YDL’s summons to adduce new evidence which we dismissed should be paid by YDL to Ricky Liu.

Hon Kwan JA :

12.  I agree with the judgment of Cheung JA