WU YANG v. DAYUAN INTERNATIONAL DEVELOPMENT LTD AND OTHERS

HCCW 103/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING‑UP) NO 103 OF 2015

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AND

HCMP 2934/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2934 OF 2015

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AND

HCMP 2456/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2456 OF 2015

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AND

HCA 2295/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2295 OF 2015

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(HEARD TOGETHER)

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D E C I S I O N

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1.  The petitioner and the 2^nd, 3^rd, 5^th and 6^th respondents (“New Bright parties”) have issued summonses which came on before me for hearing on 19 July 2016:

(i) The petitioner sought to strike out various paragraphs in Defence of the New Bright parties in the unfair prejudice Petition HCCW 103/2015.

(ii) The New Bright parties seek to stay the Petition pending determination of HCA 2295/2015, HCMP 2934/2015 and HCMP 2456/2015 (together “Rectification Proceedings”), which concern rectification of the Company’s share register and removal of the petitioner as a member of the Company, which is the 1^st respondent in the Petition, with the consequence that he would no longer have locus to pursue the Petition.

(iii) The petitioner seeks to strike out HCA 2295/2015.

(iv) The petitioner seeks to strike out HCMP 2456/2015.

(v) The petitioner seeks to strike out HCMP 2934/2015

2.  Shortly before the summonses were due to be heard solicitors for the New Bright Parties wrote to my clerk at the instigation of counsel suggesting that rather than deal with the principal application, namely, the Petitioner’s strike out applications, which they suggested following filing of submissions by the parties (including counsel for the 4^th Respondent), were obviously unsuitable for summary determination, the court make directions for a speedy trial of the Rectification Proceedings.

3.  The one thing that the parties agreed in their voluminous submissions was that the test for striking out paragraphs of the Defence and the three actions was that it was “plain and obvious” that they are unsustainable. My preliminary view having read the written submissions and the most relevant evidence was that it was not obvious that the actions would fail; which is not to say that I thought the New Bright parties’ case was strong.  This was partly because of the complexity of the issues and also because it was my preliminary view that given certain unusual features of the background to the business venture that the Company undertook it was probably necessary to hear evidence before the defences could be safely and properly adjudicated.

4.  When the hearing commenced I indicated this to counsel and asked whether the petitioner would be content with directions for a speedy trial of both the Petition and the Rectification Proceedings.  This was the subject of some debate in particular in relation to whether or not it was better to deal only with certain of the issues of liability only at a first trial, which the New Bright parties, supported by Mr Jat for the 4^th Respondent, suggested would be quicker and more efficient.  The hearing was adjourned for the parties to consider this further.  Having heard the parties further on this subject I am not satisfied at this stage that it is advantageous to divide up the issues on liability in an attempt to separate the narrower issues raised in the Rectification Proceedings from the complaints of unfair prejudice, because I consider that, insofar as I can assess the matter at this stage, some of the latter factual issues may inform the determination of the Rectification Proceedings. 

5.  I will make the following directions for the further conduct of the various proceedings:

(i) The Rectification Proceedings be heard with the Petition (the proceedings I shall refer together as “Proceedings”).

(ii) There be no order on the New Bright Parties’ summons to stay the Petition.

(iii) There be no order on the Petitioner’s 4 strike out summons.

(iv) The parties exchange lists of documents in their possession, custody or power relevant to the issues in the Proceedings by 5:00pm on 28 October 2016.

(v) There be inspection 14 days thereafter or within such other period as the parties agree in writing.

(vi) The parties exchange witness statements by 5:00pm on 27 January 2017.

(vii) The parties exchange reply witness statements by 5:00pm on 24 March 2017.

(viii) The parties exchange expert reports on matters relating to issues of the Law of the People’s Republic of China or accounting issues by 5:00pm on 28 April 2017.

(ix) The experts meet to agree evidence and areas of dispute by 5:00pm on 12 May 2017.

(x) The experts finalise a joint report identifying (a) matters and issues that they agree and (b) matters and issues in dispute with a brief summary of their respective positions in respect of each relevant matter and issue by 5:00pm on 16 June 2017.

(xi) The trial be set down for hearing commencing 11 September to 29 September 2017 (3 weeks), 9 October to 20 October 2017 (2 weeks) and 30 October to 17 November 2017 (3 weeks).

(xii) There be liberty to apply

6.  So far as costs are concerned the New Bright parties were content for the costs of their application to be costs in the cause of the Rectification Proceedings, which given how matters have developed I consider fair and I so order.  The 4^th Respondent was not a party to that application.

7.  The costs of the strike out applications were more contentions.  Both the New Bright parties and the 4^th Respondent ask for their costs of the applications.  They say that although the strike out applications have not been determined it is clear that they should not have been brought and it is not appropriate to leave the liability for those costs to be dependent on the outcome of the Rectification Proceedings. 

8.  I have not determined the strike out applications and any view I express in respect of them is preliminary and based on my reading of submissions and evidence without the benefit of hearing counsel.  However, what is clear is that applications to strike out pleadings or actions fall to be assessed by reference to a clear and high test: whether it is plain and obvious that the case attacked is unsustainable[1]. This test connotes that not only can a summary determination be made summarily about the prospects of success, but that the answer is fairly obvious.  Any application which produces a 3 or 4 day time estimate, lengthy submissions and citation of over 50 cases invites the suggestion that the one thing that is plain is that the answer is not obvious.  I accept that there may be cases that are at their heart straightforward, but that in order to understand them it is first necessary to understand their context and dispose of peripheral arguments.  But that being said if a test that involves assessing whether a claim or defence is plainly and obviously unsustainable is to be applied in a way consistent with its language, it necessarily involves, in my view, an initial common sense assessment of whether it is suitable for a strike out application.  It seems to me that it is doubtful that this one was.  As I explained at the outset, in addition to its general complexity I have reservations about whether or not the issues can be determined on affirmation evidence alone.

9.  I accept that a certain amount of the work done for the hearing will not be wasted as the arguments I should have heard will have to be addressed at the trial.  It seems to me that viewed in the round a fair costs order is that the costs of the strike out applications be the 2^nd to 6^th respondents costs in the cause of the Rectification Proceedings.

10.  The 1^st, 2^nd and 7^th respondents costs of attendance in respect of all the applications shall be costs in the cause.