AKAI HOLDINGS LTD (IN COMPULSORY LIQUIDATION) v. EVERWIN DYNASTY LTD AND OTHERS

HCCL 42/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO. 42 OF 2005

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REASONS FOR DECISION

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The applications

1. At a hearing on 20 December 2008 at 9.30 am there were before this court two applications made by the 4^th defendant in these proceedings, Mr James Ting; these applications were in the following terms :

(1)	by a Summons dated 10 December 2007 (‘the 1st application’), Mr Ting made application for an Order that within 14 days of the date of the Order to be made that he have leave to file an application for a stay of proceedings against him in this action pending  determination of his appeal against the Judgment made against him in Bermudan Action Civil Jurisdiction No 312 of 2006;
(2)	by a further Summons dated 18 December 2007 (‘the 2nd application’), Mr Ting applied to vacate his 1st application and made an immediate application for a stay of all proceedings against him in this action pending the determination of his appeal to the Bermudan Court of Appeal in the Bermuda proceedings (and, if applicable, for a stay to enable him further to appeal to the Privy Council).

2. When these applications were called on, Mr Ting’s solicitor, Mr Andrew Ng, asked to pursue the 2^nd application only, and accordingly the Court granted leave to the 4^th defendant to vacate his 1^st application, with the costs of that summons to be to the plaintiff in any event, such costs to be taxed if not agreed.

3. At the conclusion of argument upon the 2^nd application, which then had become the only ‘live’ application before the court, the court ordered that the substantive application for a stay of proceedings pending the 4^th defendant’s appeal to the Bermudan Court of Appeal be dismissed, and that the costs of the summons and of the application be to the plaintiff in any event, such costs to be taxed if not agreed.

4. Upon the dismissal of the 2^nd application as aforesaid, Mr Ng then made a further oral application that there be an interim stay of the dismissal of the substantive stay application pending an appeal to the Court of Appeal by the 4^th defendant against such dismissal.

5. This interim stay application itself was dismissed, and this court then proceeded to make procedural directions for the filing of the 4^th defendant’s Defence in the proceedings herein; in this context the specific direction thus made was that the time for the filing of the 4^th defendant’s Defence to the Points of Claim be extended to 4 pm on Monday, 21 January 2008.

The factual background

6. This case is one of several cases with which this court is concerned arising out of the winding up of Akai Holdings Ltd. (‘Akai’) which I am told ranks as one of the largest corporate insolvencies in Hong Kong.

7. The action herein originally was commenced by the liquidators of Akai on 8 December 2005; initially the first three defendants were named on the writ, but on 14 March 2006, pursuant to leave granted by this court, the writ was amended, and Mr James Ting, formerly Chairman of Akai, was joined as 4^th defendant in this action.

8. In reliance upon a ‘Settlement Agreement’ dated 30 December 2002 which Mr Ting had made with the Akai liquidators, Mr Ting applied by summons dated 5 June 2006 to stay all further proceedings in this action against him on the ground that clauses 3 and 9 of the Settlement Agreement prevented the liquidators from pursuing any claim against him, and that in any event the Court of Bermuda was the more appropriate forum in which to hear any action against him.

9. At the same time Mr Ting also commenced an action in Bermuda, in Civil Jurisdiction Action No 312 of 2006, against the liquidators of Akai (‘the Bermudan proceedings’), wherein he sought a declaration that by reason of the Settlement Agreement the liquidators were not entitled to mount any claims against him; in addition, he sought injunctive relief to restrain the liquidators from pursuing further claims against him in relation to the affairs of Akai.

10. At this stage, therefore, two jurisdictions, that is, Hong Kong and Bermuda, were seized with litigation between the liquidators and Mr Ting.

11. On 12 February 2007, this court gave procedural directions relating to Mr Ting’s stay application pursuant to his summons of 5 June 2006, although in the event this application never was heard; by a Consent Order dated 4 April 2007, entered a week before the hearing of the stay application in this court, then designated for 11 April 2007, it was agreed that this action, in so far as it related to Mr Ting, the 4^th defendant therein, was to be stayed “pending the determination” of Bermudan Civil Jurisdiction Action No 312 of 2006, and that the costs of the 4^th defendant’s summons dated 5 June 2006 would be to the 4^th defendant in any event, to be taxed if not agreed.

12. The trial of the Bermudan proceedings as brought by Mr Ting against the liquidators of Akai took place in Bermuda from 22 to 29 October 2007 before Chief Justice Ground.

13. On 5 December 2007 Ground CJ handed down his judgment.

14. The result was that Mr Ting’s claim for declaratory and injunctive relief was dismissed, and at the same time the learned Chief Justice granted a declaration in favour of the liquidators whereby it was declared that the claims in this action, and any other claims founded upon alleged breaches by Mr Ting of his fiduciary of statutory duties to Akai, were not subject to the Settlement Agreement.

15. Consequent upon this judgment, by fax dated 8 December 2007, the solicitors acting for Mr Ting, M/s Andrew WY Ng & Co., wrote to the liquidator’s solicitors, M/s Johnson, Stokes & Master, and stated that Mr Ting intended to appeal against the Bermudan judgment of Chief Justice Ground, and asked if consent would be forthcoming until 17 December 2007 in order to permit the filing of a further stay application and/or Defence.

16. By letter dated 13 December 2007 in response, JSM provided Mr Ting’s solicitors with a copy of the Bermudan judgment of Ground CJ, and stated that any application for a further stay should be filed by 17 December 2007.

17. On 17 December 2007 Mr Ting filed an appeal against the Bermudan judgment, and on 18 December he filed his ‘2^nd application’, the purpose of which was to replace the ‘1^st application’ originally filed on 10 December 2007.

18. As earlier indicated, both this further application for a stay, and the consequent oral application for an interim stay, were dismissed, for reasons to be given.

19. I now give those reasons.

The argument

20. The stay application now before the court was backed by a short Affirmation of Mr Andrew Ng, Mr Ting’s solicitor, dated 18 December 2007.

21. Mr Ng rehearsed the background to this further application for a stay of the proceedings herein against his client, and indicated that it was anticipated that not only was Mr Ting to appeal to the Bermudan Court of Appeal against the judgment of Chief Justice Ground, but that also, if such proved necessary, it was anticipated that a further appeal would be made to the Privy Council in an attempt to overturn a judgment which, suggested Mr Ng, contained errors of principle.

22. In this regard, said Mr Ng, Senior Counsel had been instructed to draft a Notice of Appeal to the Bermudan Court of Appeal very shortly after the judgment of Ground CJ had been received, and that such Notice of Appeal against that judgment had been filed in Bermuda on 17 December 2007.

23. Mr Ng stated that if a stay were now not to be granted by this court, the appeal in Bermuda “will be rendered nugatory or moot or academic” in view of the nature of the judgment of the Chief Justice.

24. When pressed by the court as to the timetable for such appeal to the Bermudan Court of Appeal, Mr Ng was not in a position to be definitive.  No such information as to a possible time-table was vouchsafed within his Affirmation, but nevertheless, absent any such evidence, Mr Ng did his best to assist from his own knowledge from the bar table.

25. His understanding, he said, was that the Bermudan Court of Appeal functioned essentially as a circuit court, and that the appellate circuit visited Bermuda every 3 to 4 months. 

26. He thought that there was a possibility that Mr Ting’s appeal, as now filed, would be entertained during the next sitting of the appellate court, although he was frank enough to indicate to this court that the docket for the coming Bermudan appellate sitting may already be fully listed, and thus that it may well be several months before the appeal of his client could be heard, after which it was possible that further time would elapse before judgment could be handed down in determination of that appeal.

27. Nevertheless, he asked that this court exercise its discretion in his client’s favour, and further to stay the present Hong Kong action against his client, who did not wish to delay, but who nevertheless did wish to obtain appellate consideration of the judgment of Ground CJ which his client believed to be flawed.

28. On behalf of the plaintiff liquidator(s), Mr Rimsky Yuen SC firmly opposed Mr Ting’s application for a further stay of these proceedings.

29. The thrust of his submission, which was set out in full in a useful written skeleton argument, was that Mr Ting now has had his day in court, and that this has resulted in a firm, and closely argued, decision from the learned Chief Justice of Bermuda wherein the arguments raised as to the binding nature of the Settlement Agreement were carefully considered, and wherein Mr Ting’s submissions on the issue were rejected.

30. Counsel argued that the current position is very different from that which had pertained in April 2007, when the issue of a stay pending decision by the Bermudan court was very much alive; since at that stage the matter had yet to be ventilated before the Bermudan court, the liquidators had taken the view that there should be a stay to allow this process to occur, with the proviso (as now has proved to be the case) that the Bermudan trial would be determined with reasonable expedition. 

31. Thus, said Mr Yuen, the initial consent to a stay as earlier vouchsafed by the liquidators was not, and should not be considered to be, ‘open-ended’, and thus effectively now had been ‘spent’, and absent knowledge of the date of the proposed appeal by Mr Ting to the Bermudan Court of Appeal, the case in Hong Kong now should be permitted to progress in normal course.

32. Mr Yuen further submitted that the documentation in support of Akai’s case against Mr Ting in the present Hong Kong action had been available to, and had been placed before, Ground CJ, who came to the view that the liquidators have a good arguable case against Mr Ting.

33. Moreover, he asked the court to note that Mr Ting had not applied to the Bermudan court for any stay in respect of this Bermudan First Instance judgment, and commented that such an omission was both “extraordinary and telling”, perhaps the more so since Mr Ting himself had not given evidence at the trial of his Bermudian action, but instead had relied entirely upon the evidence of his solicitor, Mr Ng, in support of his case.

Reasons for Decision

34. In all the circumstances of this case, I had little hesitation in accepting the submissions of Mr Yuen SC, on behalf of the liquidators of Akai.

35. I bear in mind that, save for generalized assertion as to the perceived incorrectness of the decision of Ground CJ, that Mr Ting has put nothing before this court to suggest that any appeal against the Bermudan judgment has any chance of success; there is, for example, no opinion from leading counsel suggesting that such may be the case.

36. In fact, it is evident from reading the judgment of Ground CJ that he had accepted the liquidators’ case and had held that the principal liquidator, Mr Borelli, was a witness of truth (see Judgment, paragraph 20), which finding was in the context of the key issue for decision, which was whether the liquidators of Akai had had knowledge of the wrongful acts of Mr Ting in the governance and running of Akai at the time when the Settlement Agreement was made between the liquidators of the one part and Mr Ting of the other.

37. Whilst naturally this court has no intention of anticipating the result of Mr Ting’s Bermudan appeal, as and when any such appeal is able to be brought before the appellate court, suffice it to say that the judgment of Ground CJ is, with respect, closely reasoned, and in light of the finding of fact as to the veracity of Mr Borelli, on general principle it seems fair to observe that any advocate faced with the task of upsetting the judgment of the Chief Justice will, at the least, face an uphill task.

38. In deciding this application in the manner that I did, that is, in dismissing the application for a further stay, this court was required judicially and fairly to exercise its discretion in light of all the available relevant material, which itself required the court to perform that which is often referred to as a ‘balancing exercise’ between the interests of the opposing parties.

39. In performing such exercise, I took into account the absence of any suggestion of irreparable prejudice to Mr Ting if and in so far as any appeal against the Bermudan judgment ultimately were to succeed; perhaps it is unsurprising that no such suggestion was made, because in considering this question (which was not raised in argument by Mr Ng) I am able to perceive no such prejudice.

40. If, as now has been ordered to the case, there is to be no further stay of the current Hong Kong proceedings, this present Hong Kong action, which is in its infancy, will continue in normal interlocutory course, and in any event, even with the most favourable following wind, in my view it is highly unlikely that this action will get to trial before the hearing of Mr Ting’s appeal against the judgment of Chief Justice Ground, which appeal no doubt will take place at some stage during 2008; it thus follows that there is no question of his appeal being rendered “nugatory”, as Mr Ng has submitted.

41. To the contrary.  In the event of a successful appeal, the worst case scenario would be that a certain amount of costs would have been unnecessarily incurred by Mr Ting in defending the Hong Kong action against him, a factor which no doubt could be remedied by an appropriate order for costs.

42. On the other hand, from the viewpoint of the plaintiff liquidator in this case, it is clearly in the interests of Akai, or, more precisely, the numerous creditors of that insolvent company, that this action now be progressed and not further delayed; as Mr Yuen SC pointed out, there has already been a delay of some 8 months since April 2007, and given that Akai was compulsorily wound up in 2000, clearly it is in the public interest that appropriate consequential litigation be permitted to take its usual course.

43. In addition, given the importance of Mr Ting within the pre-liquidation operations of Akai, in my view it is also far preferable and very much in the interests of justice to ensure that any action brought by the liquidators in which Mr Ting is named as a defendant – as is the situation in the present case – should proceed with all relevant defendants before the court, which would not be the case if Mr Ting were now to be granted the further stay of proceedings which he has sought.

44. Accordingly, after considering all the circumstances, and after weighing the relevant factors in the appropriate balance, I concluded that Mr Ting’s ‘2^nd application’ should be dismissed, and I so ordered.

45. As to Mr Ng’s consequential oral application for an interim stay pending an appeal to the Hong Kong Court of Appeal against this court’s dismissal of Mr Ting’s stay application, I also dismissed this application, on the basis that, with respect, I was unable to perceive any valid analytical argument against the exercise of my discretion in terms of the decision as made, and I took the view that, if and in so far as an interim stay was to be granted, this should be a matter for application to the Court of Appeal before whom Mr Ting’s appeal against the substantive dismissal of the stay application is to be mounted.

46. It is for the foregoing reasons, therefore, that this Court made its Orders at the conclusion of the hearing on 20 December 2007.