Acropolis Ltd v. The Hongkong & Shanghai Banking Corporation Ltd and Another

HCMP 1031/2018

[2018] HKCFI 2759

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1031 OF 2018

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DECISION

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Introduction

1.This is the plaintiff’s application by summons filed on 30 July 2018 seeking to vary the order made by Madam Justice Lisa Wong on 13 July 2018 as reserve summons judge (the “variation summons”) in respect of the plaintiff’s applications by originating summons (the “OS”) and interlocutory summons (the “IS”) both issued on 6 July 2018 (collectively, the “summonses”).  The background leading to the present variation application has been set out in the Amended Petition in Acropolis Ltd v W&Q Investment Ltd & Others HCCW 218/2017, Madam Justice Bebe Chu’s judgment in Acropolis Ltd suing on behalf of itself and all other shareholders in Aeso Holding Ltd & Another v W&Q Investment Ltd & Others [1] and Madam Justice Lisa Wong’s reasons for decision[2] in these proceedings given on 13 July 2018. 

2.In brief, the background leading to the variation application isas follows.  The plaintiff, of which Jones Chan is the sole beneficial owner, holds 38.25% of the shares in Aeso Holding Ltd (“Aeso Holding”) which is a company listed on the GEM Board of Hong Kong Stock Exchange. He presented a petition in HCCW 218/2017 in which he seeks certain relief against another camp of shareholders in relation to certain placement of Aeso Holding’s shares.  On 13 July 2017, he issued a summons in HCCW218/2017 seeking third party discovery against Cinda International Securities Ltd (“Cinda”) relating to the share placement.  On 9 January 2018, Mr Justice Harris ordered Cinda to make disclosure (the “Cinda disclosure order”).

3.Eleven days after the plaintiff issued the above summons against Cinda, one of the members of the opponent camp, W&Q InvestmentLimited, issued a writ in HCA 1737/2017 dated 24 July 2017 against JonesChan and his camp, seeking damages for fraud, discovery of Aeso Holding’s corporate and accounting documents and certain injunctive relief.

4.On 4 August 2017, another member of the opponent camp, Zhang, issued an originating summons in expedited form in HCMP 1721/2017 seeking as against the plaintiff and others inspection of corporate and accounting records of Aeso Holding and one of its subsidiary companies, Aeso Limited.  On 7 August 2017, Zhang issued an interlocutory summons pursuant to Order 29, rule 1 of the Rules of the High Court, with   Order 29, ,rule 1 being stated as the only basis in the margin note of that summons.  On 11 August 2017, Madam Justice Lisa Wong allowed the application and ordered some disclosure against Jones Chan (the “Zhang’s disclosure order”).  Despite Zhang’ application was made about three weeks after the plaintiff’s application in the petition, Zhang obtained a disclosure order five months before the plaintiff in his application issued under the petition.  Thus, by using the Order 29, rule 1 procedure, Zhang was able to overtake the plaintiff’s discovery against Cinda made under the petition. 

5.The discovery obtained as a result of the Cinda disclosure order did not disclose the identity of the placees.  To establish their identity, further discovery from The Hong Kong & Shanghai Banking Corporation Limited (“HKSBC”) and Bank of China (Hong Kong) Limited (“BOCHK”) involved in the fund transfer is required.  On 6 July 2018, following the same procedures as adopted by Zhang, the plaintiff issued the OS and the IS seeking third party discovery against HKSBC and BOCHK.  The summonses were listed for hearing also before Madam Justice Lisa Wong as reserve summons judge on 13 July 2018.  Prior to the hearing, HKSBC and BOCHK indicated that their stance was neutral and asked to be excused from the hearing.

6.At the hearing Madam Justice Lisa Wong was concerned why the plaintiff invoked Order 29, rule 1 procedure instead of making the application under HCCW 218/2017.  Her Ladyship raised the following questions with Mr Smith SC, leading counsel for the plaintiff:

(1)   Why did the plaintiff issue fresh proceedings, instead of applying by summons under HCCW 218/2017?

(2)   Why did the plaintiff commence the new proceedings by an originating summons in Form 10 (ie the expedited form), and not the usual Form 8?

(3)   Why did the plaintiff issue an interlocutory summons, citing Order 29, rule 1, for the same orders as sought under the OS?

Not being satisfied with the answer from counsel, Madam Justice Lisa Wong refused to make the order sought in the summonses and ordered the summonses to be adjourned to a date to be fixed in consultation with counsel’s diary with one hour reserved and that there be no order as to costs (“the Order”). 

7.On 16 July 2018, Madam Justice Lisa Wong delivered her reasons for decision (the “Decision”).  In her Decision, she quoted the above three questions which she posed to Mr Smith SC and said that the plaintiff’s procedural manoeuvre was inexcusable.  She was of the view that the plaintiff was trying to squeeze his application into the list of the summons judge on the next available summons day so as to get a quick disposal by indorsing on the margin of the summons with a reference to Order 29, rule 1.  She said:

“ 8. An originating summons in Form 10, which gives a fixed return date, can be used only if it is prescribed / authorised / required under a written law: see Order 7, rule 2(1) and (1B). Iam not aware of any such written law in respect of an application under s 21 of the Evidence Ordinance. Hence, even if proper reasons had existed for the commencement of fresh proceedingsby originating summons, the plaintiff should have used Form 8 (which gives no fixed return date) and in due course issued a separate notice of appointment to obtain a hearing date (see Order 12 rule 3(1)). Paragraph 1 of Practice Direction 5.8 (Originating summonses set down for hearing by judges) cautions practitioners to comply with Order 7 rule 2 which specifies the form of originating summons to be used. Non-compliance may delay the proceedings or result in the summons being dismissed. It may also have costs consequences.

9. What I find most objectionable is that not only has the plaintiff improperly obtained a fixed return date by the unauthorised use of a Form 10 originating summons, it further secured a hearing before the summons judge on the next available summons day. The Friday summons day is reserved for the hearing of summonses for interlocutory injunctions,including those where injunctions have been granted ex parte. See paragraph 1.1 of Practice Direction 5.3 (Listing and hearing of summonses for interlocutory orders and injunctions). An originating summons (even one in Form 10) for orders of the type sought by the plaintiff would never have been listed before the summons judge. The OS was so listed only because the plaintiff saw fit to issue the Summons purportedly under Order 29 rule 1 at the same time.

10. As far as I can see, the Summons serves no substantivepurpose. The orders applied for thereunder overlap completelywith the orders sought under the OS. The inference that I draw is that the plaintiff took out the Summons solely to squeeze its application onto the list of the summons judge on the next available summons day so as to get a quick disposal. It did so by indorsing the margin of the Summons with a reference to Order 29 rule 1 when none of the orders applied for is within the scope of Order 29. The citation of Order 29 rule 1 is misleading, and I say, deliberately so.

11. Such procedural manoeuvre is inexcusable. There is nourgency in the application. The availability of the information/ documents sought by the plaintiff is not going to be prejudiced by the normal waiting time for a hearing. The petition in HCCW 218/2017 has not yet been set down for trial.

12.   No doubt the plaintiff has anticipated the Banks to adopt a neutral stance and hoped that the court would somehow overlook the procedural irregularities.  This kind of mentality should be discouraged. That the plaintiff may eventually obtain the information / documents it desires is neither here nor there.  It is wrong as a matter of principle to allow a party to retain, or benefit from, an advantage that it has obtained solely through abusing the process of the court, especially where the abuse appears to be intentional.”

8.Mindful of the adverse views formed by Madam Justice Lisa Wong, the plaintiff’s solicitor, Mr Michael Titus, filed an affirmation on 30 July 2018 to explain the situation.  On the same day, the plaintiff took out a summons seeking to vary the Order so that the summonses will be heard on an early date and to have costs of the hearing on 13 July 2018 provided for.  However, when filing the variation summons, the plaintiff’ssolicitor was informed that the earliest hearing day on Madam Justice LisaWong’s diary which could accommodate Mr Smith SC was 31 October 2018.  Wary of being seen as another procedural manoeuvre, the plaintiff did not seek to withdraw the variation summons to get another early date, instead the plaintiff chose to write to the court on 30 July 2018 to seek the court’s indulgence for the matter to be disposed of on paper, pursuant to paragraph 6(5) of Practice Direction 5.2. 

9.As Madam Justice Lisa Wong became unavailable, the matterwas referred to me for disposal on 23 October 2018.  The plaintiff was clearly wrong to have invoked the Order 29, rule 1 procedure.  In his affirmation, Mr Titus admitted that the procedure adopted was irregular.  The directionsfor the further conduct of the proceedings contained in the Order was a case management decision of the judge who had conduct of the proceedings.  These directions and costs order which the plaintiff seeks to vary are solely within the discretion of Madam Justice Lisa Wong, which not even the Court of Appeal will interfere.  In Asia-Pac Infrastructure Development Ltd v Ing Yim Leung Alexander[3], Stone J held that a court of co-ordinate jurisdiction has jurisdiction to make the necessary variation of a previous order to suit a change of circumstances or for the purpose of managing the case and furthering the underlying objectives set out in Order 1A.  I agree with that proposition and should add that such jurisdiction has to be carefully exercised and that the judge exercising that jurisdiction has to put himself in the shoes of the judge whose order is sought to be reviewed.  I was not sure reading Mr Titus’ affirmation and the plaintiff’s solicitors’ letter dated 30 July 2018 that such jurisdiction ought to be exercised.  Hence, I invited a round of submission from the plaintiff and BOCHK, which has raised some practicality issues which it wanted to argue.

Mr Titus’ affirmation

10.Upon reading the Decision, the plaintiff and his legal team adopted a very serious and responsible attitude.  Mr Titus filed a ten-page affirmation setting out the background leading to the issue of the summonses and proffered an explanation to the three questions raised by Madam Justice Lisa Wong.

11.In answer to the first question Mr Titus proffered two reasons.  Firstly, the information sought to be obtained by the summonses will likely be relevant not only to HCCW 218/2017 but also to HCA 1496/2017.  Secondly, when tracing into the source of funds through bank accounts, there is a real possibility that further rounds of disclosure orders may have to be sought.  The plaintiff is a party to both actions.  While the defendants in the two actions may be different, they appear to be personal defendants belonging to the same camp of opponent shareholders in Aeso Holding or their corporate vehicles.  To start a new proceeding, rather than issuing a summons out from HCCW 218/2017, may in the long term save costs and unnecessary argument on restriction as to the use of the information obtained.  It will also reduce the possible risk of overloading the proceedings in HCCW 218/2017.  I accept that as a satisfactory answer to the first question.

12.As for the second question, Mr Titus, in essence, accepted that it was irregular to commence the new proceedings by an originating summons in expedited Form 10 and not the usual Form 8.  He apologized unreservedly for the inadvertent oversight in using Form 10.  In his written submission, Mr Smith SC added a further reason, i.e. Form 10 was used to mirror the procedure adopted by Zhang in HCMP 1721/2017 (the “mirror argument”), which led to some disclosure being ordered without criticism by Madam Justice Lisa Wong.  I have no doubt that, given his experience, Mr Titus knew he should not have used the expedited form.  In fact, he did not use the expedited form in the application taken out in HCCW 218/2017 which led to the issue of the Cinda disclosure order.  As his apology was by way of affirmation, I accept it as a sincere apology.  But I do not accept the second reason given by Mr Smith SC.  That reason is also advanced as an answer to the third question.  I shall deal with it in the next paragraph.

13.Mr Titus also offered two reasons in answer to the third question.  Firstly, while accepting that the application under the summonses is not ofsuch urgency that would warrant a hearing before the duty judge, he argued, based on some judicial comments in related proceedings, that the disclosureshould be sought as soon as possible.  This is especially so as Aeso Holding is now under provisional liquidation.  The comments he referred to were those from Madam Justice Bebe Chu’s judgment in HCA 1496/2017[4] dated 31 August 2017 and Deputy High Court Judge Le Pichon’s judgment in HCCW 218/2017 dated 31 May 2018.  In my view, those comments were only directed at the plaintiff as a reminder that he should take prompt actions to prosecute his case and not a licence to cut corners and adopt irregular procedures to save time.

14.Secondly, Mr Titus said that the plaintiff’s opponents in HCCW 218/2017 are seeking leave to appeal against the judgment of Deputy High Court Judge Le Pichon on appointment of provisional liquidators which was fixed to be heard on 13 September 2018.  The disclosure sought against HKSBC and BOCHK may be relevant to the issue whether provisional liquidators ought to be appointed and/or continued.  By the scheduled hearing date of 31 October 2018, this reason was spent.  Mr Smith SC did not address me further on this reason in his skeleton submission.  I assume this reason has no bearing at all.   

15.I now turn to Mr Smith SC’s mirror argument.  There is no doubt that the procedure was irregular but Zhang succeeded.  It may even be said that Zhang’s legal team succeeded in misleading the court.  Both sides were represented by senior counsel and strong legal teams at the hearing of the application.  In such a case, a judge may be less alert to any procedural irregularity and may focus on the substance of the application.  Mr Smith SC and his junior were present at the hearing.  They raised no objection to the procedural irregularity.  The application attracted no criticism from Madam Justice Lisa Wong.  In the present case, as the defendants were excused, in her judicial instinct in protecting the interest of an absentee defendant, Madam Justice Lisa Wong may be more alert to procedural issues.  As I have said, the procedure was irregular, the mistake cannot be defended, though it may be excused as being inadvertent and not deliberately committed for the purpose of obtaining a speedy disposal. Zhang’s application cannot be used as a precedent for the present case, otherwise our rules and practices, once broken, may be ignored forever. 

16.I have no doubt that Mr Titus knew the correct procedure.  He adopted it in the initial application under HCCW 218/2017 and obtainedthe Cinda disclosure order.  While I do not find favour with Mr Smith SC’s mirror argument, I accept Mr Titus’ apology and his explanation that the mistake was inadvertent.  That lends support to his assertion that neither the plaintiff nor its legal team ever thought or sought to deliberately adopt irregular procedure or abuse the court processin order to obtain a speedy disposal.  I accept the mistake was not deliberate.  While that vindicated the plaintiff’s legal team, it does not, as such, justify a variation of the Order.

Discussion and conclusion

17.The variation sought by the plaintiff are an early hearing date in consultation with counsel’s diary and variation of the costs order.  As I have said, a court of co-ordinate jurisdiction has jurisdiction to vary a previous order to suit a change of circumstances or under Order 1B, rule 1(2)(b), if appropriate.

18.Mr Smith SC was unable to refer me to any changes in circumstances which would justify a variation.  The only reason advanced by Mr Smith SC is “the way HCMP 1721/2017 was dealt with”, which I understand to mean the mirror argument.  In substance, Mr Smith SC’s argument is that because “my opponent adopted irregular procedure and obtained a benefit without criticism, I should also be permitted to do the same.”  If the plaintiff’s opponent obtained a benefit because the plaintiff’s legal team was not alert to the procedural irregularity, the plaintiff only had himself or his legal team to blame.  His opponent was fortunate.  That does not mean the plaintiff was unfortunate.  It is the plaintiff’s and his legal team’s duty to prosecute the case using proper rules and procedures.  He received what he should receive according to the rules and procedures.  That his opponent got away with an advantage by procedural irregularity is not a reason why the court should “level off” by giving him some benefit in compensation.  If the plaintiff adopted the wrong procedure and occasioned delay, there is no duty on the court to invoke Order 1B rule 1(2)(b) to advance the hearing to make good his loss.  This is not the way our rules and procedure work.

19.Here, Madam Justice Lisa Wong actually granted indulgence to the plaintiff by allowing the application to proceed without dismissing it altogether for procedural irregularity.  She gave directions for the further conduct of the application as if the correct procedure had been used.  The plaintiff suffered no loss in time for using the wrong procedure.  He asked for a hearing date in consultation with counsel’s diary.  That was granted.  What he did not get was an early date.  As the matter then stood and now stands, no trial date has been fixed for HCCW 218/2017.  There is no urgency to advance the hearing date.  The directions are the type of directions which he would get had there been no procedural irregularity.  I do not see any reason for varying those directions.

20.Furthermore, in my view, there is no particular need for the adjourned hearing to be fixed in consultation with counsel’s diary.  HKSBC will not contest the application and will abide by any decision of the court.  BOCHK may have some practicality issues to argue but in principle is neutral.  The plaintiff had all along been represented by senior and junior counsel.  If the plaintiff is really so mindful about time, he could dispense with the luxury of having the services of senior counsel.  There is no reason to doubt junior counsel’s competency in an application of this nature. Had the plaintiff adopted this course instead of seeking to vary the Order, the application would have, by now, been disposed of.  Probably, the practicality issues could be resolved much more speedily by agreement instead of by argument with senior counsel before the court. 

21.As for the plaintiff’s application to vary the costs order, it mustbe borne in mind that the issue of costs is within the discretion of the judge who had conduct of the proceeding.  The hearing on 13 July 2018 was essentially a direction hearing and hearing of the IS.  Since the plaintiff adopted the wrong procedure and the IS served no purpose, there is no reason why if he succeeds in HCCW 218/2017, the respondents in that case should bear these costs.  It is appropriate that he should be deprived of his costs of thehearing on 13 July 2018.  Mr Smith SC’s mirror argument has no merit.  Anyway, in HCMP 1721/2017, Madam Justice Lisa Wong reserved costs.  What was lost in that case was not lost forever.  When the occasion comes for argument on costs, the plaintiff may have strong grounds based on procedural irregularity to resist Zhang’s application for costs.  In any event, what costs order was awarded in another case has no bearing on the costs order to be made in this case.  What the court has to do is to make a costs order which is proper and appropriate.  In my view, the costs order made by Madam Justice Lisa Wong is proper and appropriate and one which the Court of Appeal will not interfere.  I would also have made the same order myself were I in her shoes.  There is no reason to vary the costs order.

22.For the above reasons, the plaintiff’s variation summons is dismissed with no order as to costs.  BOCHK filed a skeleton submission.  As the submission is more related to the discovery issue and has little bearing on the variation application, it would be more appropriate to reserve the issue of BOCHK’s costs.

Mr Clifford Smith SC and Mr Kerby Lau, instructed by Titus, for the plaintiff

Mr Keith Lam Shing Loi, of Keith Lam Lau & Chan, for the 2^nd Defendant