General Nice Resources (Hong Kong) Ltd v. Ningbo Iron and Steel Co., Ltd

HCA 854/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 854 OF 2015

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DECISION

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Introduction

1.This is an application of Ningbo Iron and Steel Co., Ltd. (“NIS”) by its summons dated 31 May 2016 (“the Summons”) for leave to appeal my decision handed down on 17 May 2016 (“the Decision”) whereby its application to strike out the malicious prosecution claim of General Nice Resources (Hong Kong) Limited (“GNR”) in this action was dismissed and the application of GNR to file and serve its Amended Statement of Claim was allowed.

2.By the Summons, NIS also applies for a variation of the costs order nisi madein the Decision. In light of the 2^nd Corrigendum issued by this court, such an application is not necessary and NIS abandons this part of the Summons.

3.The background facts were sufficiently narrated in the Decision and I shall make no repetition here. I also adopt the abbreviations used in the Decision.

Applicable legal principles

4.There is no dispute about the applicable principles. Leave to appeal should not be lightly granted. Section 14AA(4) of the High Court Ordinance, Cap.4A requires the court be satisfied that the appeal has a reasonable prospect of success or there is some other reason in the interests of justice why the appeal should be heard before granting leave: SMSE v KL [2009] 4 HKLRD 125 per Le Pichon JA at §17.

5.A draft Notice of Appeal is annexed to the Summons and it contains 8 grounds. Whilst I have examined each of them in turn, I shall only focus on the major grounds.

Proposed grounds of appeal

6.The first ground is that I erred in holding that the outcome of the Petition was arguably favourable to GNR when NIS agreed to discontinue the Petition only after receiving the Outstanding Sum. Ms Chark, for NIS, submits that NIS rather than GNR should be treated as the winner in the Winding-up Proceedings because it managed to recover the Outstanding Sum, which was the foundation for the Petition. This is a new argument and is the major ground advanced by Ms Chark in this application.

7.Ms Chark principally relies on three authorities. First, she refers me to Re Lucky Ford Industrial Limited [2013] 3 HKLRD 550. There, some shareholders of a company filed a petition for a buy-out order and alternatively a winding-up order. At last, the respondent shareholders agreed that the company should be wound up and therefore a winding-up order was made by consent. The petitioning shareholders asked for costs whilst the respondent shareholders maintained that there should be no order as to costs.

8.In arriving at the conclusion relating to costs, Harris J had this to say,

“In my view having regard to O.1A r.1, the correct approach to determining costs in cases which do not involve the court granting substantive relief is for the court first to consider the terms of settlement and assess whether the petitioner has obtained substantially what he sought in his petition. If he did it will not be necessary or appropriate for the court to consider evidence and arguments directed to the merits of the case and whether or not the petitioner would have been successful if the petition had gone to trial. The petitioner will be treated as having been successful and entitled to costs.”

9.Ms Chark further relies on another decision of Harris J in Re HNA Group Co Ltd [2014] 4 HKLRD 463. At §21, Harris J, after referring to Re Lucky Ford Industrial Limited, said this,

“Generally, if a petitioner is successful in recovering the debt which is the foundation for the petition the court will not be interested in an investigation into the underlying merits of the claim or the way in which the proceedings have been conducted. The petitioner will have his costs of the proceedings.”

10.Lastly Ms Chark relies on Tibbs v Islington Borough Council [2002] EWCA Civ 1682. There, the defendant recovered an amount in access of £2,000 though the amount he claimed as supporting creditor in the bankruptcy petition against the claimant was £54,482.74. The Court of Appeal held that the claimant in his proposed action for malicious prosecution had no real prospect of success because the defendant still succeeded in his recovery of a sum substantially exceeding the threshold of £750 required to launch a bankruptcy petition. Thus, the prosecution of the bankruptcy petition was not determined in the claimant’s favour.

11.Ms Chark submits that, by the same token, the recovery of the Outstanding Sum from GNR indicates that the Winding-up Proceedings were determined in the favour of NIS rather than GNR.

12.I do not think these authorities assist NIS. I have no problems with the analysis there but they dealt with very different questions.

13.The facts here are clearly distinguishable and I have to set them out here to understand the full circumstances under which the Outstanding Sum was paid.

14.NIS filed the Petition on 2 April 2015. GNR issued a summons to strike out the Petition on 13 April 2015. GNR offered to pay NIS the Outstanding Sum on 20 April 2015 on condition that NIS agreed to withdraw the Petition forthwith. NIS accepted the proposal save that it demanded GNR to pay its costs as well on the same day. GNR commenced the present action in which the bona fide of the Winding-up Proceedings was under challenge on 21 April 2015. On 22 April 2015, the next day, GNR issued a summons in the Winding-up Proceedings for the dismissal or discontinuance of the Winding-up Proceedings.

15.On the following day, i.e. 23 April 2015, NIS sent a consent summons to GNR in the following terms:

1. GNR pays the Outstanding Sum to the Client Account of the solicitors for NIS;

2. Upon receipt of the Outstanding Sum, NIS has leave to discontinue the Petition;

3. Costs of these proceedings including the summons taken out by GNR on 13 April 2015 be in the cause of this action.

16.Apparently GNR accepted the terms of the consent summons. However it appears that GNR sent another consent summons to NIS for its approval. With the approval of NIS, GNR filed its consent summons signed by NIS on 24 April 2015. Harris J approved the same on paper and made a consent order on the same day. The consent order consisted of the following terms:

1. GNR’s summons dated 22 April 2015 be dismissed;

2. NIS has leave to discontinue the Petition forthwith;

3. Costs of these proceedings including the summonses taken out by GNR on 13 and 22 April 2015 be in the cause of this action.

17.The parties did not invite Harris J to decide on the question of costs of the Winding-up Proceedings as in the two cited decisions of his Lordship. Instead, they have expressly reserved the question of costs pending the determination of GNR’s claim in this action.

18.It is obvious that in paying NIS the Outstanding Sum on 23 April 2015 despite the alleged Varied Payment Schedule, GNR did not, and could not be taken to, abandon his malicious prosecution claim in this action. Quite on the contrary GNR made it clear that it would proceed with the claim attacking the propriety of the Winding-up Proceedings. GNR could not be taken to accept that discontinuance of the Petition upon payment of the Outstanding Sum would mean that the Winding-up Proceedings were determined in the favour of NIS and hence his claim must be defeated. I cannot accept Ms Chark’s submission. I do not agree that my conclusion that the outcome of the Petition was arguably in the favour of GNR is plainly wrong.

19.The second ground is that I erred in holding that the Petition was filed without reasonable or probable cause in that (a) Harris J refused to accede to the application of GNR to strike out the Petition on 17 April 2015 and (b) NIS only consented to discontinue the Petition upon receipt of the Outstanding Sum.

20.I see no merit in this ground, which was not argued on the last occasion. The hearing of the summons was merely adjourned sine dine with liberty to restore at the first hearing of the Petition. In making this disposition, I cannot accept that Harris J made any assessment of the merit of GNR’s striking out application at all. Nor can I accept Ms Chark’s submission that this order of Harris J could be taken to negative the existence of the Varied Payment Schedule.

21.Clearly my view is that if the Varied Payment Schedule did exist, which I find to be an arguable matter at this stage, NIS could not have a genuine belief of the insolvency of GNR and should not petition for an order to wind up GNR on that basis. This is the reason why I hold that it is arguable that the Winding-up Proceedings were instituted without reasonable and probable cause. The fact that NIS only agreed to discontinue the same with full payment of the Outstanding Sum is irrelevant.

22.Ms Chark then goes on to complain about my conclusion that it is arguable that the Varied Payment Schedule existed. She submits that this court should find it plain and obvious that GNR can never prove the Varied Payment Schedule. For the reasons given in the Decision and in particular in light of the established legal principles relating to striking out applications, I am unable to agree with her.   

23.The remaining grounds mostly concern the element of malice. It is noted in the Decision that in the proposed amendments, GNR relies on the Arbitration Clause and the Varied Payment Schedule to establish malice. This court only accepts that the latter may lend support to the allegation of malice.  I have come to the conclusion that arguably the particulars supplied in the proposed amendments can be sufficient to establish malice.

24.Mr Chung, for GNR, confirms that it no longer relies on the Arbitration Clause in this connection. I need not deal with Ms Chark’s submission on the Arbitration Clause.

25.Ms Chark pertinently refers to Jacob v Vockrodt [2007] EWHC 2403 (QB) (at §42) to remind this court that malice can include not only spite or ill will but improper motive in the presentation of the petition. Absence of reasonable or probable belief will not of itself amount to malice: see also Hicks v Faulkner (1878) 8 QBD 167, at 175.  

26.Ms Chark impresses upon this court that the Outstanding Sum had long been owing to NIS and NIS merely presented the Petition to recover the undisputed and overdue indebtedness. Indeed due to the Petition, GNR agreed to make full repayment at long last. She further refers to the affirmation evidence of NIS to explain the motive in its presentation of the Petition. She submits that there could be no malice.

27.In the Statement of Claim, it is pleaded that the Winding-up Proceedings were commenced despite the agreement of NIS to the Varied Payment Schedule and with a dominant intent to injure the business image, credit rating of GNR and its subsidiaries.

28.In the proposed amendments containing the particulars of malice, it is averred that NIS well knew that the 1^st instalment under the Varied Payment Schedule was not due when it filed the Petition. It therefore could not have an honest belief in the alleged insolvency of GNR. Further complaints were made about the adverse effect of the Petition on the business of GNR.

29.In my view, in light of the alleged Varied Payment Schedule, the existence of which I cannot rule out at this stage, it is at least arguable that NIS indeed harboured an improper motive in commencing the Winding-up Petition shortly after it had agreed to the Varied Payment Schedule and when the 1^st instalment thereunder (to be paid by 25 April 2015) was not yet due and payable. This is so despite the overall indebtedness was not disputed by GNR. 

30.I am unable to come to a clear conclusion that the plea of malice of GNR with all the particulars pleaded is bound to be rejected. I cannot strike it out now.     

31.Bearing in mind the extreme nature of striking out a claim, this court has formed the view that GNR should be allowed to pursue its plea of malicious prosecution albeit amendments are badly needed. Nothing advanced by Ms Chark for the purpose of this application can sufficiently cause me concern about the correctness of the Decision.

Conclusion and Order

32.In the premises, I conclude that NIS cannot meet the threshold of section 14AA(4). This application falls to be dismissed.

33.There is no reason why the usual rule of costs following the event does not apply here. I make an order nisi that NIS do pay GNR its costs of and occasioned by the Summons, to be taxed if not agreed.

Mr Hylas Chung, instructed by Huen & Partners for the plaintiff

Ms Brenda Chark of Brenda Chark & Co. for the defendant