Celerity Special Situations Fund I, L. P. (Formerly Known As Donglin Special Situations Fund I, L. P.) v. China Linkage International Ltd
Read the full judgment text of HCA 2993/2016 on BabelCite. This High Court CFI judgment was delivered on 27 March 2018.
1. By summons dated 21 February 2018 (“ the Summons ”), the plaintiff seeks, pursuant to section 52A(2) of the High Court Ordinance, Cap 4 and Order 62, rule 6A of the Rules of the High Court, Cap 4A:
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HCA 2993/2016 [2018] HKCFI 815 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 2993 OF 2016 ______________
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__________________________ REASONS FOR DECISION __________________________ The application 1.By summons dated 21 February 2018 (“the Summons”), the plaintiff seeks, pursuant to section 52A(2) of the High Court Ordinance, Cap 4 and Order 62, rule 6A of the Rules of the High Court, Cap 4A:
Two-stage process 2.I have considered section 52A(2) and Order 62, rule 6A. I have also considered Sun Focus Investment Ltd v Tang Shing Bor [2012] 5 HKLRD 853 and the authorities cited therein, including Robertson ResearchInternational Ltd v ABG Exploration BV [1999] CPLR 756, Anstalt v Hayek [2005] EWHC 2435 (Ch) and Symphony Group plc v Hodgson [1994] 1 QB 179. I have also considered paragraph 62/6A/5 of Hong Kong Civil Procedure 2018. Whilst section 52A(2) endows upon the Court the wide power to make an order for the payment of costs by a non-party if it “is satisfied that it is in the interests of justice to do so”, such an order will always be exceptional, and any application for one should be treated with considerably caution. Such an application involves a two-stage process. During the first stage, that person must be joined as a party to the proceedingsfor the purposes of costs only. The Court should refuse the joinder only if it was plain and obvious that the application amounts to an abuse of process, by reason of delay or other misconduct on the part of the application, or because the application can be seen to be manifestly and fundamentally misconceived as to be an abuse by the applicant. It is not necessary, and indeed inappropriate, to have a preliminary assessment at the first stage. Ifthe joinder is allowed, then, at the second stage, that person must be given a reasonable opportunity to attend a hearing at which the Court shall consider the matter further. But even at the second stage, the assessment is a summary one. 3.We are at the first stage of this two-stage process. Service of the Summons 4.I have read and considered the affirmations of service of Yuen Nault For, Lam Hoi Cheung and Chan Doi Chuen. I am satisfied that all relevant papers have been posted to Zhu, Yun, China Asia Strategic and Yangat addresses gleaned variably from documents that have been filed with the Companies Registry or affirmations which some of them had previously filed in these proceedings. 5.None of Zhu, Yun, China Asia Strategic and Yang appeared during the hearing. I have considered Order 32, rule 5. I took into account the fact that the Summons and the supporting affirmation had been sent to them. I also bore in mind that, should I grant leave for the joinder and should they want to, they would have the further opportunity to be heard during the second stage. I in the circumstances deemed it expedient to proceed with the first stage of the application in their absence, which the Court did. The facts 6.I will be brief. 7.On 16 November 2016, the plaintiff commenced the present action against the defendant for repayment of HK$40 million under a loan agreement. On 18 November 2016, the plaintiff obtained a Mareva injunction against the defendant, which was on 25 November 2016 ordered to be continued. On 3 March 2017, no Acknowledgement of Service having been filed, a default judgement (“the Judgment”) was entered against the defendant. On 18 April 2017, a winding up petition was presented against the defendant on the strength of the Judgment (“the Winding-Up Proceedings”). On 29 May 2017, provisional liquidators were appointed. Subsequently, China Asia Strategic as the opposing contributory sought an order for the termination of their appointment. That hearing came before A Chan J on 16 October 2017, who on the same day dismissed the application and ordered the appointment of the provisional liquidators to continue. 8.Amidst all these, on 17 July 2017, the Setting Aside Summons was taken out. It was taken out in the name of the defendant. Both Zhu and Yang filed affirmations in support of that Summons. The summons came before Deputy Judge Le Pichon for hearing on 31 January 2018. By her Decision handed down on 7 February 2018, Her Ladyship dismissed the application with an order nisi of costs in favour of the plaintiff. By this Summons, the plaintiff is seeking an order that the 4 non-parties should bear the costs of and occasioned by the Setting Aside Summons. The basis of the application 9.The basis of the plaintiff’s application is that the 4 Non-parties were collectively nominees of a company by the name of Gemini Asset Management Ltd (“Gemini”). The plaintiff avers that shortly before the winding-up petition was presented, it discovered from the Company Registry that Gemini had registered with the Company Registry a Charge on Assets (“the Charge”) of all assets of the defendant. The Certificate of Registration of Charge was dated 22 February 2017. The Charge are in the following terms (“Party A” being the defendant and “Party B” being Gemini):
10.It is the plaintiff’s case that the circumstances surrounding the creation and registration of the Charge were suspicious, that the 4 Non-parties’ active participation in the Winding-Up Proceedings was part and partial of their scheme to defraud the creditors of the defendant, and accordingly, they took out the Setting Aside Summons not for the benefit ofthe defendant or its general body of creditors, but to further their own interest. 11.In the circumstances, and relying on Suisse Security Bank & Trust Limited v Julian Francis (in the capacity of Governor of the Central Bank of the Bahamas) [2007] 2 Costs LR 222 and the legal principles summarized at paragraph 62/6A/16 of Hong Kong Civil Procedure 2018, the plaintiff submits that there is a case for an Order that the 4 Non-parties should bear the costs of and occasioned by the Setting Aside Summons. Consideration and disposal 12.I have considered the facts, the authorities cited to me, and the submissions of Mr Chong who appeared for the plaintiff. 13.In the case of Yun, he has not filed any affirmation in support of the Setting Aside Summons. Whilst he was a director of the defendant, there is evidence suggesting that he was appointed by Yang in the hope that he (Yun) could utilize his experience in the capital investment market to handle certain problems which the defendant was facing in about December 2016. Mr Chong in fact accepted that there was before this Court no evidence showing that Yun had taken any part in the proceedings. The mere fact that Yun was a director of the defendant is plainly not a sufficient basis for him to be joined for the purpose of costs. To do so, given the evidence I have summarized above in this paragraph, can be regarded as an abuse. I refuse the application for joinder in so far as Yun is concerned. 14.In respect of Zhu, Yang and China Asia Strategic, bearing in mind the facts summarized above, and in particular their participation in the proceedings, I find that the very low threshold test has been met. I cannot say that joining them would constitute an abuse. I grant the application for joinder in so far as they are concerned. 15.With some consequential changes to the wording of paragraph 4 of the Summons, I also grant paragraph 4 of the same. 16.The costs of this hearing be in the cause of the Summons.
Mr Patrick Chong, instructed by Howse Williams Bowers, for the plaintiff | |||||||||||||||||||||||||||||
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