Sunni International Ltd v. Kao Wai Ho Francis and Others

HCA 1884/2018
HCA 2380/2018
& HCCW 121/2013
[2021] HKCFI 2472

HCA 1884/2018

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1884 OF 2018

_________________

BETWEEN

_________________

HCA 2380/2018

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2380 OF 2018

_________________

BETWEEN

_________________

HCCW 121/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP PROCEEDINGS NO 121 OF 2013

_________________

_________________

BETWEEN

_________________

Before: Hon Ng J in Chambers (open to public)

Date of Hearing: 19 August 2021

Date of Decision on Costs: 27 August 2021

____________________________

DECISION ON COSTS

____________________________

Introduction

1.By summons dated 27 October 2020 (“Summons”) filed in HCA 1884/2018 (“HCA1884”) and HCA 2380/2018 (“HCA2380”) (collectively “HC Actions”), the Plaintiff applies for specific discovery and production of documents pursuant to RHC O24 rr 7(1) and 11(2) against the 1st, 3rd, 4th and 5th Defendants in HCA1884, the 2nd Defendant in HCA2380 as well as Alex Lo, Respondent in HCCW 121/2013 (collectively “Defendants”). The Summons is supported by the Second Affirmation of Fung Chi Keung dated 27 October 2020 (“Fung 2”). In the Schedule to the Summons, the Plaintiff seeks a wide range of documents from the Defendants comprising 33 or so categories[1]. A copy of the Schedule is annexed hereto for ease of reference. 

2.The Summons was originally fixed to be heard by this court on 2 March 2021. On the application of the parties by consent summons dated 23 February 2021, this court ordered by consent on 24 February 2021 that leave be granted to the Plaintiff to withdraw the Summons and that the question of costs be dealt with on paper. Subsequently, this court directed that there be an oral hearing which is now before this court.

Deliberation

3.The applicable principles are not seriously in dispute. They are neatly summarised in Uni-Creation Investments Limited v Secretary for Justice, unrep, HCMP 2166 of 2015, 30 June 2017, Au-Yeung J at [9] - [11]:

“9. As a general rule, an applicant or appellant has to pay the other side’s costs if he decides to withdraw an application or appeal: To Wai Chan Henry v Aon Services Hong Kong Ltd [2015] 1 HKLRD 811 at §24, G Lam J; Best Joint Investments Ltd v Kagani Ltd (unrep, HCA 2608/2006, 20 June 2008) at §§8-9, Chung J.

10. To persuade the court to depart from the general rule, the minimum an applicant has to do is to show that the discontinuance is for reasons other than an acknowledgment of defeat or likely defeat. The most direct way of proof is to show that the applicant would have succeeded if the application had been proceeded with: see Coqueen Co Ltd v Chui Wai Kwan & ors (unrep, HCMP 438/2010, 8 December 2015) at §40, To J.

11. Even if the applicant had behaved ‘reasonably’ in making the application, he would still have to pay the costs of such application to the respondent. …”

4.Relying on the principles set out above, the Defendants submit that they are entitled to the costs of and occasioned by the Summons. 

5.The Plaintiff, on the other hand, seeks to justify a departure from the general rule by reference to the following events which took place after the issue of the Summons.

6.First, two of the Defendants have filed further supplemental lists of documents on 11 January 2021. Second, Francis Kao, Alex Lo and 4 corporate Defendants have filed 3 affirmations in opposition on 11 and 18 January 2021 respectively:

(1) The 2nd Supplemental List of Documents of the 3rd Defendant ie Win Harvest.

(2) The 2nd Supplemental List of Documents of the 4th Defendant ie Unicorn. 

(3) The 5th Affirmation of Francis Kao (“Francis Kao 5”).

(4) The 3rd Affirmation of Alex Lo (“Alex Lo 3”).

(5) The 2nd Affirmation of Philip Kao (“Philip Kao 2”) on behalf of Win Harvest, Unicorn, Big Plan and Famewell.

7.The Plaintiff submits that having regard to the said further supplemental lists of documents and affirmations, it considered that it was no longer necessary to further pursue the Summons. 

8.By letter dated 8 February 2021, the Plaintiff informed the Defendants of the decision not to further pursue the Summons and suggested in a draft Consent Summons attached thereto that “costs of and occasioned by the Summons be in the cause”. In response, the Defendants insisted that costs of and occasioned by the Summons be paid by the Plaintiff. The inability of the parties to agree on costs cumulated in the consent summons and consent order referred to in paragraph 2 above.

9.As far as the supplemental lists of documents are concerned, the Plaintiff has identified what have been disclosed and compared them with the Schedule, but only in very general terms, in paragraph 20 of its main skeleton submissions as follows[2]:

“20. By the 2^nd Supplemental Lists of Documents:-

20.1 Win Harvest has disclosed further documents, being some of the documents for which discovery was sought under some Items of the Schedule to the Discovery Summons:-

	Further Documents discovered in Win Harvest’s 2nd Supple LoD [Item]	Item in Schedule to Discovery Summons
(1)	Credit Suisse account statements [122]	Item (2)(e)
(2)	Credit Suisse account statements of investments [123]	Item (2)(f)
(3)	Book movement [124]	Item (2)(a)(v)
(4)	Journal entries [125]	Item (2)(a)(iii)

20.2 Unicorn has also disclosed numerous further documents allegedly in relation to its alleged animation film projects and/or other transmedia projects, in Items [37] to [122] of Unicorn’s 2^nd Supplemental List of Documents. Those apparently being documents for which discovery was sought under Item (3)(g) of the Schedule to the Discovery Summons.” (emphasis added)

10.As far as Win Harvest is concerned, the request in the Schedule is for documents either from the date of incorporation ie 3 August 2009 to date or 1 January 2013 to date. Whereas the further documents discovered encompassed only a very limited duration ie January to October or November 2010 and January to April 2011. 

11.As for Unicorn, it is accepted by Mr Scott SC that, broadly speaking, all but one of the further documents discovered relate to (3)(g) in the Schedule. The only exception is item 120 in its 2nd Supplemental List of Documents consisting of 5 HSBC bank statements from January to May 2011. Contrast that with (3)(e) of the Schedule which seeks all bank account statements, not just from HSBC, from the date of incorporation ie 7 September 2009 to date.

12.As far as Francis Kao 5 is concerned, the bulk of his affirmation is to oppose the discovery application on the ground that it “was attempting to impermissibly fish for evidence”, “wholly unnecessary either for disposing fairly of the cause or matter or for saving costs” etc. Only a small part of it is to explain why, owing to the lapse of time, he no longer keeps the documents sought or is unable to locate them.

13.As for Alex Lo 3, the Plaintiff seeks only 1 category of documents from him in the Schedule and it is correct that he did confirm that, owing to the lapse of time, he no longer keeps the documents sought or is unable to locate them.

14.Lastly, Philip Kao 2 filed on behalf of Win Harvest, Unicorn, Big Plan and Famewell. The bulk of it is to oppose the discovery application on the ground of irrelevance, oppressiveness, fishing etc. It is only in relation to Big Plan that Philip Kao 2 confirms that it does not have in its possession, custody or power the documents specified in (4)(b), (e), (g) or (h) of the Schedule out of the 8 categories of documents sought from it. 

15.To conclude, there has only been very limited further discovery given by Win Harvest and Unicorn after the issue of the Summons. As for Francis Kao, Alex Lo and Big Plan, their confirmation that they no longer keep the documents sought or are unable to locate them relates to a very small number of the documents covered in the Schedule. In other words, a large part of the documents sought in the Schedule were still outstanding. In these circumstances, it is very difficult for this court to accept the Plaintiff’s submission that it considered that it was no longer necessary to further pursue the Summons by reason of the said further supplemental lists of documents and affirmations.

16.Mr Scott SC asks rhetorically: if the discovery application had good merits, as the Plaintiff now claims, why would it agree to withdraw the Summons, knowing full well that, under the general rule, it is likely to be liable for the other side’s costs? This court cannot see any credible answer to that question from the Plaintiff. 

17.On the merits of the application, this court has also considered Fung 2 in which he has only spent a few paragraphs ie 37 - 42 in explaining the relevance of the documents sought in the Schedule and the necessity of their disclosure.  The explanation is in the broadest and most general terms.  Apart from bare assertions like, at paragraph 39, “the documents sought are highly relevant to the question of whether there is in existence the alleged ‘Restructuring Scheme’ and whether the misappropriations of the Company’s funds and assets were in fact the so-called ‘intra-group transfers’ allegedly carried out pursuant to the purported ‘Restructuring Scheme’”, Fung has made no attempt to explain the relevance and the need to obtain each of the 33 or so categories in the Schedule.  On such evidence, it is difficult for this court to even come to a preliminary view on the merits of the application, let alone to the view that the Plaintiff has good merits. 

18.To conclude, the Plaintiff has failed to show that the withdrawal of the Summons is for reasons other than an acknowledgment of defeat or likely defeat. If so, this court should apply the general rule that the Plaintiff should bear the Defendants’ costs.

Disposition and costs

19.There shall be an Order that costs of and occasioned by the Summons be to the 1st, 3rd, 4th and 5th Defendants in HCA1884, the 2nd Defendant in HCA2380 and Alex Lo, to be taxed if not agreed, and paid by the Plaintiff forthwith, certificate for counsel.

20.As for the costs of this hearing, the parties agree that costs should follow the event. There shall be an Order that costs of this hearing be to the 1st, 3rd, 4th and 5th Defendants in HCA1884, the 2nd Defendant in HCA2380 and Alex Lo, to be taxed if not agreed, and paid by the Plaintiff forthwith, certificate for leading counsel.

Mr Edward Chan, SC and Mr Lee Tung-ming, instructed by Anthony Siu & Co, for the Plaintiff in HCA 1884/2018 and HCA 2380/2018

Mr John Scott, SC, Mr Lincoln Cheung and Mr Terrence Tai, instructed by Chiu & Partners, for the Defendants in HCA 1884/2018 and HCA 2380/2018 and the Respondent in HCCW 121/2013

The Applicant in HCCW 121/2013 was excused from attendance

Schedule of Documents

In this Schedule, the abbreviations used in the Amended Statement of Claim in HCA 1884 of 2018 and in the Statement of Claim in HCA 2380 of 2018 are adopted :-