YOUNG CRYSTAL LTD AND OTHERS v. HANG SENG BANK LTD

HCA 1710/2021

[2024] HKCFI 2022

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1710 OF 2021

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REASONS FOR DECISION

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1.  This application by summons dated 8 May 2024 (“the summons”) was taken out by Young Crystal Limited, Golden Dragon Prosperity Limited and Fujian Sanko Mining Limited (collectively, the “Plaintiffs”) for leave to appeal against the direction given by this Court on 24 April 2024 that the hearing of the Plaintiffs’ appeal from the order of Master Isaac Chan dated 30 October 2023 (the “Chan Order”) fixed for 9 May 2024 be vacated.

2.  At the conclusion of the hearing, the Court refused to grant leave and dismissed the summons for the reasons set out below.

Procedural history

3.  On 26 July 2023, the Plaintiffs took out a summons (the “Plaintiffs’ Summons”) to expunge the witness statements of Lee Ming Kong (“LMK”) and Ip Pun Nang and to strike out the Defence pursuant to RHC O 25 r 6(3)(b) on the ground that Hang Seng Bank Limited (the “Defendant”) had failed to comply with the order made by Master Hui dated 22 May 2023 (“Hui Order”) to exchange witness statements.

4.  On 30 October 2023, Master Isaac Chan dismissed the Plaintiffs’ application to expunge the witness statements and to strike out the Defence (the “Chan Decision”).

5.  Meanwhile, on 27 October 2023, the Defendant had taken out a summons to strike out the Plaintiffs’ statement of claim (“the Defendant’s strike out summons”).

6.  On 13 November 2023, the Plaintiffs filed a notice of appeal (“the Plaintiffs’ NOA”) against the Chan Decision, with the appeal fixed for hearing on 9 May 2024 (“the scheduled appeal”).

7.  On 22 February 2024, after hearing the Defendant’s strike out summons, Master Alexander Tang

(i)  dismissed P3’s action against the Defendant;

(ii)  struck out the Plaintiffs’ SOC;

(iii)  gave P1 and P2 of the Plaintiffs liberty to apply to file a fresh statement of claim on or before 4 pm on 21 March 2024; failing which

(iv)  the Plaintiffs’ action be dismissed in its entirety, with costs to the Defendant to be taxed if not agreed

(the “Tang Decision”).

8.  On 6 March 2024, the Plaintiffs filed a notice of appeal against the Tang Decision (the “Tang Appeal”).

9.  On 7 March 2024, the Defendant filed a notice of appeal against sub-paragraphs (iii) and (iv) of the Tang Decision.

10.  Upon P1 and P2’s failure to file a fresh statement of claim on or before 4 pm on 21 March 2024 as required by the Tang Decision, on 21 March 2024, Master Tang ordered that the action be dismissed in its entirety (the “Dismissal Order”).

11.  On 24 April 2024, after considering letters from those representing the parties, this Court vacated the hearing of the scheduled appeal, directing that the appeal against the Chan Decision should not be heard given the Dismissal Order (the “April Direction”).

Whether the Plaintiffs can show a reasonable prospect of success

12.  It is incumbent on the party seeking leave to appeal to show that he has a reasonable prospect of success or there is some other reason in the interests of justice why the appeal should be heard: High Court Ordinance (Cap. 4) s 14AA(4) and Hong Kong Civil Procedure 2024 at §59/2A/4.

13.  In essence, Ms Lydia Leung, counsel for the Plaintiffs, submitted that this Court should have allowed the scheduled appeal to be heard. In other words, the April Direction (which vacated the scheduled hearing) was wrong and should not have been made.

14.  The reasons discernible from the Plaintiffs’ written submissions are the following:

(a)  the Chan Decision was earlier in time than the Defendant’s strike out summons;

(b)  when the Defendant’s strike out summons came before Master Tang the scheduled appeal was pending;

(c)  the April Direction deprived the Plaintiffs of the opportunity to challenge the Chan Decision and to fully canvass their reasons as to why the scheduled appeal should be heard;

(d)  whether the Chan Decision stands could affect an application to strike out the Plaintiffs’ SOC since the Tang Decision did refer[1] to LMK’s witness statement;

(e)  the April Direction should not have been made because it effectively determined the case altogether when the scheduled hearing was pending, and in circumstances where there was also an appeal against the Tang Decision to strike out the Plaintiff’s SOC and even when the Defendant itself disagrees with the Tang Decision; and

(f)  any unfairness in not having the appeals heard fell on the Plaintiffs alone.

15.  At the hearing, Ms Lydia Leung, counsel for the Plaintiffs, submitted that the April Direction foreclosed the determination of an important underlying issue in the case which is whether a bank can freeze the assets belonging to its client without a restraint order. She submitted that the Court’s wide case management powers under Order 1B should be exercised to allow the Plaintiffs the opportunity to have the point determined.

16.  Quite apart from the fact that this point was not raised in the correspondence between the parties placed before the Court when it gave the April Direction, it is an entirely new point that did not even surface in the Plaintiffs’ written submissions. It will not be entertained. As will become apparent[2] it is a question for ventilation in the Tang Appeal which struck out the Plaintiffs’ SOC for disclosing no reasonable cause of action.

17.  Ms Celeste Chan, counsel for the Defendant, referred to the statement in Chung Sau Chu Rosanna v 魯珉軒 at §8 that

“in respect of case management decisions, the appellants face (sic) a very high hurdle and has to show that the court below had gone clearly wrong, citing Kar Kee Wong Hung v Severn Villa Limited [2012] 1 HKLRD 887.”

18.  Applying that test, she submitted that the Plaintiffs are unable to show that as a case management decision, the April Direction was clearly wrong.

19.  Ms Chan advanced 3 reasons in support of her submissions.

20.  First, it is common ground that the Dismissal Order which took effect on 21 March 2024 had the effect of dismissing the entire action. Hence, any appeal against the Chan Decision had been rendered academic.

21.  Thus, vacating the scheduled appeal in those circumstances was no more than a case management discretion. The Plaintiff’s’ complaint of procedural unfairness is misplaced:

(a)  The Dismissal Order was the natural consequence of non-compliance with the ‘unless order’ contained in the Tang Decision. As explained in Sun Focus Investment Limited v Tang Shing Bor [2009] HKCFI 980 at §§32-36, when the court strikes out a statement of claim without dismissing the action, it is to give the plaintiff one opportunity to cure the defect.

(b)  Not only did the Plaintiffs fail to comply with the ‘unless order’, they also did not apply for relief from sanction. Dismissal is imposed automatically on non-compliance: Blackstone’s Civil Practice (2023) at §48.8.

(c)  As the Plaintiff’s accept, unless the court otherwise directs, an appeal does not operate as a stay of the order appealed against. Hence, the service of a notice of appeal and setting down the appeal do not have any effect on the right of the successful party: HKCP 2024 at §59/13/1.

(d)  Unless and until the Tang Decision is set aside, the action remains dismissed.

22.  The April Direction did not involve any summary determination of the Plaintiffs’ appeal against the Chan Decision. That occurred when the Plaintiffs’ SOC was struck out pursuant to the Tang Decision upon non-compliance with the ‘unless order’. The April Direction was nothing more than a case management decision.

23.  Ms Chan submitted that the appropriate time for ventilating the underlying issue would be at the hearing of the Tang Appeal. However, the Plaintiffs for reasons best known to themselves have not proceeded with the Tang Appeal.

24.  Second, in so far as the Plaintiffs submit that their applications were first-in-time, based on their allegation[3] that the Defendant’s strike out summons was taken out after the Chan Decision, that claim is unsustainable. As is clear from §§3 and 4 above, it is factually wrong.

25.  It is also not evident why Master Tang should not have heard the Defendant’s strike out summons before the appeal against the Chan Decision had been heard[4] when there is no stay of the Defendant’s strike out summons.

26.  Further, as the Defendant submitted, while a court order carries legal effect, a summons or a notice of appeal does not. The Plaintiffs’ first-in-time argument appears to elide that distinction, rendering the concept of a stay nugatory. I respectfully agree.

27.  Third, the Plaintiffs submitted that had their appeal against the Chan Decision been successful and the witness statements expunged as a result, that fact would have affected the Tang Decision.

28.  That submission is unsustainable because the striking out of the Plaintiffs’ SOC was on the ground that it disclosed no reasonable cause of action which is a question of law. Witness statements (which go to facts) are irrelevant to that issue and can have no impact on the outcome of the Defendant’s strike out summons.

29.  Since whether a pleading discloses no reasonable cause of action is judged on the basis of the Plaintiffs’ case alone, the Defendant’s case (of which the Defendant’s witness statements form part) is wholly irrelevant.

Conclusion

30.  The Plaintiffs have no answer to the 3 matters the Defendant has legitimately raised. In my view, they do pose insurmountable hurdles in the way of the Plaintiffs being able to show that their appeal has reasonable prospects of success.

31.  Accordingly, leave to appeal was refused and the summons dismissed with costs to the Defendant.

Costs

32.  The Defendant made an application (a) for costs to be awarded on an indemnity basis; and (b) for such costs to be borne by the Plaintiffs’ solicitors personally pursuant to Order 62, r 8.

33.  Directions were given for the application to be dealt with on the papers.