奧斯特企業有限公司 v. 向永順

HCA 1745/2019

[2020] HKCFI 2935

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1745 OF 2019

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BETWEEN

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DECISION

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1.  This is an appeal against the decision made by Master Sabrina Ho (“the Master”) on 6 August 2020. In the hearing on 6 August 2020, there were two summonses before the court:

(1) the plaintiff (“P”)’s summons filed on 19 December 2019 (“P’s summons”) for an order striking out the defence or alternatively various paragraphs of the Defence which the court deems fit;

(2) the defendant (“D”)’s summons filed on 6 January 2020 (“D’s summons”) for an order striking out the statement of claim. 

2.  After hearing submissions from the parties, the Master ordered that both P’s summons and D’s summons be adjourned sine die with liberty to restore, and costs be reserved (“the Decision”).  This is the Decision now being challenged by D in the appeal.

3.  The essential facts relating to this appeal are as follows:

(1) D is contending that no due authority has been given to P to allow P to commence these proceedings against him.  D says so by reason of the following:

(a) He and Hero Union Int’l Ltd (“Hero”) are the only shareholders of P.

(b) Article 10(a) of P’s Memorandum and Articles of Association requires that the quorum for the transaction of business at any general meeting be two members present in person or by proxy.

(c) Being a shareholder, D did not receive any notice of the extraordinary general meeting held on 11 April 2019 (“the EGM”) and did not attend the EGM.

(d) No resolution for removing D and appointing James Ou as a director of P could be validly passed in the EGM.

(e) Accordingly, James Ou would not have the authority to procure P to commence this action against D.

(2) By the order of Registrar Kwang made on 22 May 2020, the hearing of D’s application shall take place before P’s application.

(3) In the hearing on 6 August 2020, the Master was told by P that D had commenced HCMP 711/2020 (“the MP Proceedings”) on 27 May 2020 seeking inter alia declarations that the EGM was not validly held and all the resolutions passed in the EGM were invalid.  The Master was also told by P that an interlocutory hearing in the MP Proceedings had already been fixed for substantive argument on 25 September 2020 for resolving P’s application for security for costs against D (being a foreign plaintiff therein).

(4) The Master in the hearing briefly ascertained from D on the real issues in MP Proceedings and the progress of which so far.  D then produced a copy of the Originating Summons in the MP Proceedings for the Master’s perusal.

(5) The Master was of the view that the declarations sought in MP Proceedings were essentially the same finding of facts that D invited her to find.  The Master gave the following as her reasons for the Decision in the hearing on 6 August 2020:

“…… But I note that by [the MP Proceedings], [D] took out an application under section 42 of the Companies Ordinance for the purposes of, inter alia, determining the validity of [the resolution removing D from directorship and appointing James Ou as a director]. The subject resolution would have a direct impact on the plaintiff’s authority to bring and pursue the present action. It also has a direct impact on the defendant’s striking out summons in the present case.

The defendant, being the party who took out the originating summons, claims that there is a possibility of the originating summons being stayed or dismissed as a result of the plaintiff’s security for costs application. Later on, the defendant, through counsel, proposed undertaking, including that the originating summons be stayed pending determination of the defendant’s striking out summons in the present action. However, at the moment, the originating summons is still in existence and it has not been disposed of one way or the other.

In such circumstances, I will exercise my case management power to ensure that any issues arising from the originating summons, whether procedural or otherwise, would be sorted out within the originating summons.  So I order that the defendant’s striking out summons and the plaintiff’s striking out summons be [adjourned] sine die with liberty to restore.  The parties are advised to take steps in relation to the originating summons as soon as possible.  And as for the cost of the defendant’s striking out summons, and the plaintiff’s striking out summons, they be reserved.”

(6) Eventually, the Master made the Decision.

(7) On 20 August 2020, D lodged this appeal. In the notice of appeal, it is stated that the Decision includes an order that there shall be cross-examination of the deponents of the affidavits/affirmations that have been filed by the parties in relation to P’s summons and D’s summons.  However, this is not correct.  As recorded in the sealed order dated 6 August 2020, the Decision is the one as out in [2] above, no more and no less.

(8) On 9 September 2020, D (who is the applicant in the MP Proceedings) filed a notice of discontinuance in the MP Proceedings.  By that notice of discontinuance, D has abandoned the MP Proceedings.  

4.  It is clear that the Decision is a case management decision made by the Master.  The Master has not made determination on D’s summons and P’s summons.  Save and except adjourning the two summonses sine die with liberty to restore, the Master has also not given any direction concerning the two summonses.  The Master has given reasons for doing so, ie the two summonses should only be dealt with after the outcome of the MP Proceedings is known.

5.  By the appeal, D is seeking an order to set aside the Decision and an order in terms of D’s summons.  For the reasons set out below, in my view, the appeal must be dismissed.

6.  P submits that in respect of an appeal from an order made by a master to a judge in chambers, there are two different approaches depending on whether it was a Master’s decision on merits or a Master’s discretion.  P refers me to the decision of DHCJ Marlene Ng (as she then was) in Smart Trike MNF Pte Ltd and Others v Chiu Sui Chun and Others (HCA 847/2013, 16^th March 2018), in which learned judge said:

“59. Appeal from Master’s decision It is trite that an appeal from the master to Judge in chambers is dealt with by an actual rehearing of the application which led to the order under appeal, and the Judge treats the matter as though it came before him for the first time. The Judge will give the weight it deserves to the previous decision of the master; but he is in no way bound by it.

60. Appeal against discretion A decision/order for leave to amend a statement of claim is a case management decision, and in considering an appeal from a master, “[the] master has a wide discretion in case management matters which the appellate court will not interfere, unless the master has erred in point of law” (applying Choy Bing Wing v Hong Kong Institute of Engineers (HCA 309/2015, 29 September 2015), [8] and [12])”

7.  Adopting either approach, I would dismiss the appeal.

(1) At the time of the hearing before the Master, the MP Proceedings were still on foot.  For the reasons given by the Master, the Master has exercised her discretion properly.  I do not have any reason to interfere and set aside the Decision.

(2) Even if I approach the matter afresh as if the matter came before me for the first time, I do not think there is any reason to set aside the Decision now.  By now, the MP Proceedings have been discontinued. Either P or D may take any step in their respective striking out applications. The existence of the order made by the Master on 6 August 2020 would not prevent D from taking any step to bring his striking out application to a conclusion.

8.  The Master has not determined D’s summons on merits.  It is wrong in principle to seek an order in terms of D’s summons by an appeal against the Master’s decision.

9.  With respect, D’s appeal is misconceived and must be dismissed.  I dismiss the appeal.

10.  I take this opportunity to give directions on the future conduct of D’s striking out application.  I am of the view that the court may have to hear live evidence and to resolve some factual disputes in order to make a final determination in that application.  I make the following directions on D’s summons:

(1) Leave to D to file and serve points of claim within 14 days;

(2) Leave to P to file and serve points of defence within 14 days thereafter;

(3) Leave to D to file and serve a reply within 14 days thereafter;

(4) Within 28 days after the filing of the reply, the parties shall jointly propose further directions to the court for the disposal of D’s summons, and in the absence of an agreement between the parties, each party shall provide its or his proposed directions to the court;

(5) Liberty to apply.

11.  Costs should follow the event.  Costs of the appeal be paid by D to P forthwith and be summarily assessed at HK$120,000.

12.  I thank counsel for the assistance provided to the court.