Myers Management Consulting Ltd v. Topmix (International) Co Ltd

DCCJ 3051/2014
DCCJ 3052/2014
DCCJ 3053/2014
DCCJ 3054/2014
(Heard together)

[2022] HKDC 410

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3051 OF 2014

--------------------

BETWEEN

--------------------

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3052 OF 2014

--------------------

BETWEEN

--------------------

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3053 OF 2014

--------------------

BETWEEN

--------------------

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3054 OF 2014

--------------------

BETWEEN

--------------------

Before: His Honour Judge MK Liu in Chambers (Open to Public)

Date of Hearing: 6 May 2022 (Remote Hearing)

Date of Decision: 6 May 2022

--------------------

DECISION

--------------------

1.By Summonses filed on 21 June 2021 (“the Summonses”), the Interveners applied for Mr Ng Chun Kai (“Mr Ng”) to be joined to these proceedings and for a non-party costs order to be made against him such that he would be personally liable for the Interveners’ costs in these proceedings.

2.On 11 October 2021, Master Maurice Lam dismissed the Summonses with costs to Mr Ng. On 22 October 2021, the Interveners lodged an appeal against the Master’s decision in each of the captioned cases. This is the hearing of the appeals. In this hearing, the Interveners are represented by Mr Terrence Tai, and Mr Ng is represented by Mr Dixon Co, both of counsel.

Background

3.Myers Consulting Management Ltd (“Myers”) is the plaintiff in all these cases. Myers is a company incorporated in the British Virgin Islands. Mr Ng is and was at all material times its sole shareholder and director.

4.Myers was specifically incorporated for the purposes of taking on consultancy work with Topmix (International) Company Ltd and Topmix Industrial Ltd (“TICL” and “TIL”, collectively “the Companies”).

5.On 8 August 2014, Myers commenced these proceedings against TICL and TIL. It is Myers’ case that:-

(1) Myers entered into consultancy agreements with TICL and TIL in December 2011 and April 2013 (“the 2011 Agreements” and “the 2013 Agreements”, collectively “the Consultancy Agreements”). Under the 2011 Agreements, Myers would receive HK$150,000 per month from TICL, and HK$150,000 per month from TIL. Under the 2013 Agreements, Myers would receive HK$15,000 per month from TICL, and HK$15,000 per month from TIL.

(2) In providing consultancy services to TICL and TIL, Myers engaged the services of Mr Lam Kwok Kin (“Mr Lam”) and Mr Tse Wing Hong (“Mr Tse”) (Myers engaging the service of Mr Tse through Xing Fu Securities Limited (“Xing Fu”)) and had to pay Mr Lam and Xing Fu monthly fees of HK$120,000 and HK$80,000 respectively.

(3) TICL and TIL defaulted in paying fees to Myers in accordance with the Consultancy Agreements.

6.After TICL and TIL failed to file any notice of intention to defend, Myers obtained default judgments against the Companies on 10 November 2014 (“the Default Judgments”).

7.The Interveners are and were the shareholders of TICL and TIL. According to the Interveners, since March 2006, Mr Chan Yuk Lung and Mr Chan Yuk Wai (“the Chan Brothers”) have been the only directors of the Company, and the Interveners became the minority shareholders in the Companies.

8.The Interveners said that they learned about these proceedings and the Default Judgments after they learned from the Official Receivers on 12 January 2015 that Myers sought to wind up the Companies in HCCW 1 & 2/2015 (“the Winding Up Proceedings”).

9.The Interveners are of the view that the Consultancy Agreements and the circumstances leading up to the Default Judgments and the Winding Up Proceedings are highly dubious. They take the view that all these were procured or caused by the Chan Brothers.

10.On 6 March 2015, the Interveners took out an application in each of the captioned cases to intervene and to set aside the Default Judgments. The applications were based upon the Interveners’ right at common law, invoking the common law derivative action regime.

11.On 9 June 2015, the Interveners commenced HCA 1265/2015 (“the HC Derivative Action”) against, among others, the Chan Brothers (as the 1^st and the 2^nd defendants in the HC Derivative Action) and Mr Ng (as the 7^th defendant in the same action).

12.On 23 June 2015, DDJ Ludwig Ng allowed the Interveners to intervene and set aside the Default Judgments (“the Setting Aside Decision”).

13.On 14 August 2015, Myers obtained leave to appeal against the Setting Aside Decision.

14.On 25 August 2015, the Interveners’ solicitors wrote to Myers and requested security for costs for both these proceedings and for the appeals.

15.On 10 September 2015, the Interveners applied for security for costs in the appeal case for the sum of HK$816,500.

16.On 6 January 2016, the Court of Appeal ordered Myers to provide a total of HK$400,000 as security for costs for the appeals.

17.In early February 2016, Myers failed to provide the security ordered and the appeals were dismissed as a result.

18.On 15 April 2016, the Interveners requested security for costs in these proceedings.

19.On 7 July 2016, the Interveners applied for security for costs in these proceedings in the sum of HK$679,500. On 29 December 2016, DDJ S.H. Lee allowed the applications and ordered Myers to pay security in the sum of HK$320,000. The learned judge also made costs orders nisi requiring Myers to pay costs of the applications for security for costs to the Interveners. On 28 March 2017, the costs orders nisi were varied as a result of the applications made by the Interveners.

20.On 13 April 2017, Myers’ claims in these proceedings were dismissed as it did not pay any security as ordered.

21.On 8 June 2017, the Interveners’ solicitors wrote to Myers’ solicitors to invite for an agreement on the amount of costs, but no response was given.

22.The 1^st Bill of Costs was filed on 7 March 2018 and the 2^nd Bill of Costs was filed on 20 March 2019. The allocaturs were issued on 22 June 2020.

23.On 5 May 2021, the Interveners’ solicitors for the first time served a written notice on Mr Ng, requiring Mr Ng to bear the costs and interests owed by Myers to the Interveners personally. The total of the costs and interests as set out in the written notice is more than HK$1.6 million.

24.On 21 June 2021, the Interveners took out the Summonses. On 11 October 2021, the Summonses were heard and dismissed by the Master.

The principles

25.The applications made by the Summonses are applications for joinder of a non-party as a party for the purpose of a costs order against him (“a Non-Party Costs Order”) pursuant to s.53 of the District Court Ordinance and Order 62 rule 6A of the Rules of the District Court. There is no dispute that for an application of this nature made in the High Court, the governing statutory provisions are s.52A of the High Court Ordinance and Order 62 rule 6A of the Rules of the High Court. There is no material difference between the statutory provisions governing applications for Non-Party Costs Orders in the High Court and the statutory provisions governing the applications of the same kind in the District Court.

26.Subject to what has been said by the English Court of Appeal recently in Goknur Gida Maddeleri Enerji ve Sanayi AS v Aytacli^[1], the relevant principles can be found in Big Island Construction (HK) Ltd v Wu Yi Development Co Ltd and Another^[2]. In that case, Au-Yeung J said:-

“3. Section 52A of the HCO confers a wide discretion on the court to determine “by whom and to what extent” costs of and incidental to the proceedings before the court are to be paid. The court only has to be satisfied, in the exercise of its discretion, that it is in the interests of justice to make an order to award costs against a non-party. See Sun Focus Investment Ltd v Tang Shing Bor [2012] 5 HKLRD 853 at §23 per Mimmie Chan J.

4. This is a summary procedure involving a 2-stage process, ie to first consider if the party should be joined and, second, to give him a reasonable opportunity to attend a hearing at which the court shall consider the matter further: Order 62, rule 6A; Sun Focus at §12 and Hong Kong Civil Procedure 2016, Vol 1, §62/6A/5.

5. An applicant for such an order would normally be expected to explain the nature of the claim which he has against the intended party and the purpose to be served by joining that party. If the applicant is not able to do so, then the court might very well dismiss the application. PR Records Ltd v Vinyl 2000 Ltd [2008] 1 Costs LR 19, at §34, Morgan J.

6. At the first stage, the court will only refuse the joinder if it is plain and obvious that it amounts to an abuse of process: Sun Focus, §19:

“At the first stage of the hearing, when the court considers whether to join a non-party in the proceedings, the court should refuse the joinder only if it is plain and obvious that the application amounts to an abuse of process, by reason of delay or other misconduct on the part of the applicant, or because the application can be seen to be manifestly and fundamentally misconceived as to be an abuse by the applicant. Arguments and documents for the first stage of the hearing should be limited to those which are considered to be necessary to enable the court to determine whether non-parties should be joined in the proceedings. It is only at the second stage that the court considers whether the costs order should be made against the non-party, the overall consideration always being whether it would be in the interests of justice to do so pursuant to s 52A of the Ordinance.” (emphasis added)

7. At the first stage, the applicant does not need to show an “arguable” case: Anstalt & ors v Hayek & ors [2005] EWHC 2435 (Ch) at §§35, 53 per Etherton J; PR Records at §44. Nor is it open to the non-party to challenge the application on the ground that it has “no real prospect of success”.

8. Where the non-party not merely funds the proceedings but substantially also controls or at any rate is to benefit from them, justice will ordinarily require that, if the proceedings fail, he will pay the successful party’s costs. He is regarded as “the real party” to the litigation. Dymocks Franchise Systems (NSW) Pty Ltd v Todd & ors [2004] 1 WLR 2807, §§25(3) and 29; cited by the Court of Final Appeal in The Liberty Container (2007) 10 HKCFAR 256, at §§28 & 30, per Bokhary PJ.

9. A non-party costs order can be made against a director of an insolvent company if he fell within the Dymocks principle. See Sun Focus, §27; BE Studios Ltd v Smith & Williamson Ltd [2006] BCC 832 at §18 per Evans-Lombe J.

10. The courts have emphasized the importance not to allow directors or a controlling director of a one-man company to be made personally liable too readily. Metalloy Supplies Ltd v MA (UK) Ltd [1997] 1 BCLC 165 (CA), Millett LJ, at p 172; Taylor & anor v Pace Developments Ltd (1991) BCC 406, CA (decided before Dymocks).

11. In Metalloy Supplies, Millett LJ held, at p 172 that:

“It is not an abuse of the process of the court or in any way improper or unreasonable for an impecunious plaintiff to bring proceedings which are otherwise proper and bona fide while lacking the means to pay the defendant’s costs if they should fail. Litigants do it every day, with or without legal aid. If the plaintiff is an individual, the defendant's only recourse is to threaten the plaintiff with bankruptcy. If the plaintiff is a limited company, the defendant may apply for security for costs and have the proceedings dismissed if the plaintiff fails to provide whatever security is ordered.

The court has a discretion to make a costs order against a non-party. Such an order is, however, exceptional, since it is rarely appropriate. It may be made in a wide variety of circumstances where the third party is considered to be the real party interested in the outcome of the suit. It may also be made where the third party has been responsible for bringing the proceedings and they have been brought in bad faith or for an ulterior purpose or there is some other conduct on his part which makes it just and reasonable to make the order against him. It is not, however, sufficient to render a director liable for costs that he was a director of the company and caused it to bring or defend proceedings which he funded and which ultimately failed. Where such proceedings are brought bona fide and for the benefit of the company, the company is the real plaintiff. If in such a case an order for costs could be made against a director in the absence of some impropriety or bad faith on his part, the doctrine of the separate liability of the company would be eroded and the principle that such orders should be exceptional would be nullified.” (underline added)

12. Metalloy Supplies has been considered in Dymocks, at §§28 & 29. It has not been overruled but subsequent authorities have held that it was not necessary for the judge to find that the case was “exceptional”: Systemcare (UK) Ltd v Services Design Technology Ltd & anor [2012] 1 BCLC 14, CA. A non-party costs order can be made against a director even if he had acted in good faith and without impropriety: Goodwood Recoveries Ltd v Breen [2006] 1 WLR 2723 at §59 per Rix LJ.

13. Predominantly, these cases in paragraphs 10-12 above may be relevant to the second stage but there is nothing in those cases to prevent the court from applying them in clear and obvious circumstances to the first stage.”

27.Mr Tai and Mr Co have agreed that both the first stage and the second stage should be considered in this appeal hearing.

28.In The Liberty Container^[3], the Court of Final Appeal has considered the issue of non-party costs order. At [28] and [30], Bokhary PJ cited with approval the Privy Council’s decision in Dymocks^[4]. The following matters are mentioned in Dymocks:-

(1) Non-party costs orders are to be regarded as exceptional, in the sense that it is outside the ordinary run of cases where parties pursue or defend claims for their own benefit and at their own expense. The ultimate question is whether in all the circumstances it is just to make the order.^[5]

(2) Metalloy Supplies Ltd v MA (UK) Ltd^[6] was cited, which was to the effect that it is not sufficient to render a director liable for costs that he was a director of the company and caused it to bring proceedings which he funded. Where the proceedings are brought bona fide and for the benefit of the company, the company is the real plaintiff.^[7]

(3) It is not to say that orders will invariably be made in cases where a non-party funds an insolvent company, particularly where the non-party is himself a director who can realistically be regarded as acting rather in the interests of the company (and more especially its shareholders and creditors) than in his own interests.^[8]

29.I am grateful to counsel for drawing my attention to the various authorities mentioned in their respective submissions. With no disrespect to counsel, I am not prepared to cite all those authorities in this decision. Suffice for me to say that after reviewing all those authorities, I agree with Mr Co that the most recent position is the one set out by the English Court of Appeal in the Goknur case. In that case, Coulson LJ said[9]:-

“40. Without in any way suggesting that these authorities give rise to a sort of mandatory checklist applicable to a company director or shareholder against whom a section 51 order is sought, I consider that the relevant guidance can usefully be summarized in this way:

(a) An order against a non-party is exceptional and it will only be made if it is just to do so in all the circumstances of the case.

(b) The touchstone is whether, despite not being a party to the litigation, the director can fairly be described as “the real party to the litigation”.

(c) In the case of an insolvent company involved in litigation which has resulted in a costs liability that the company cannot pay, a director of that company may be made the subject of such an order. Although such instances will necessarily be rare, section 51 orders may be made to avoid the injustice of an individual director hiding behind a corporate identity, so as to engage in risk-free litigation for his own purposes. Such an order does not impinge on the principle of limited liability.

(d) In order to assess whether the director was the real party to the litigation, the court may look to see if the director controlled or funded the company’s pursuit or defence of the litigation. But what will probably matter most in such a situation is whether it can be said that the individual director was seeking to benefit personally from the litigation. If the proceedings were pursued for the benefit of the company, then usually the company is the real party. But if the company’s stance was dictated by the real or perceived benefit to the individual director (whether financial, reputational or otherwise), then it might be said that the director, not the company, was the “real party”, and could justly be made the subject of a section 51 order.

(e) In this way, matters such as the control and/or funding of the litigation, and particularly the alleged personal benefit to the director of so doing, are helpful indicia as to whether or not a section 51 order would be just. But they remain merely elements of the guidance given by the authorities, not a checklist that needs to be completed in every case.

(f) If the litigation was pursued or maintained for the benefit of the company, then common sense dictates that a party seeking a non-party costs order against the director will need to show some other reason why it is just to make such an order. That will commonly be some form of impropriety or bad faith on the part of the director in connection with the litigation.

(g) Such impropriety or bad faith will need to be of a serious nature and I would suggest, would ordinarily have to be causatively linked to the applicant unnecessarily incurring costs in the litigation.”^[10]

30.As submitted by Mr Co, it would not escape the English Court of Appeal’s attention that if a company obtains any benefit, its shareholders will also benefit indirectly as shareholders. Yet, the English Court of Appeal, after reviewing the authorities including Dymocks, still stated that if a litigation is pursued or maintained for the benefit of the company, there has to be some other reasons in support of a non-party costs order. Hence, benefit to the company is not to be invariably and automatically equated with personal benefit of the shareholder.

31.Mr Tai relies upon DNA Productions (Europe) Ltd v Manoukian^[11] and submits that the key question is whether the “director in question is the real litigant in the sense that the Court can be satisfied that without his initiative and finance the litigation would not have been pursued by the company, and who stood, albeit with other including creditors to benefit materially from its success”^[12]. However, as submitted by Mr Co, DNA Productions should be read in context. In that case, the company would still be “substantially insolvent even had the claim succeeded in full”^[13]. In other words, the company would have been insolvent anyway. Absent any personal desire, a company normally would not expend resources or effort in defending a litigation which has no impact on its collapse. This is an important factor affecting the exercise of the court’s discretion in that case.

32.Mr Tai submits that it would not be correct to characterize the making of a non-party cost order as “piercing the corporate veil”. Counsel relies upon the dictum of Lewison LJ in Threlfall v ECD Insight Ltd^[14]:-

“If a non-party costs order is made against a company director, it is quite wrong to characterise it as piercing or lifting the corporate veil; or to say that the company and the director are one and the same. As Mr Shaw has demonstrated, the separate personality of a corporation, even a single-member corporation, is deeply embedded in our law. But its purpose is to deal with legal rights and obligations. By contrast, the exercise of discretion to make a non-party costs order leaves rights and obligations where they are. The very fact that the making of such an order is discretionary demonstrates that the question is not one of rights and obligations of a non-party, for no obligations exist unless and until the court exercises its discretion. Moreover the fact that the discretion, if exercised, is exercised against a non-party underlines the proposition that the non-party has no substantive liability in respect of the cause of action in question. Of course, it is not enough merely to say that Mr Whitney was a director of ECD, but in deciding whether or not to make such an order, the court is not fettered by the legal realities. It is entitled to look to the economic realities. It is in this sense that many of the cases pose the question whether the non-party is “the real party” in the case.”

33.As submitted by Mr Co, the rationale in the Threlfall case is that it is not dealing with rights and obligations. The order is discretionary. No obligation on the shareholder or the director exists before the exercise of the discretion. It would not be right to say that all shareholders or directors who fund a company’s litigation would be made liable for costs. Otherwise, it would not be a matter of discretion. The discretion has to be exercised by looking at all the circumstances, but not mechanically and automatically upon mere funding, control and benefit qua shareholder or director.

34.Mr Tai has drawn my attention to JustMake Inc v Smirnova^[15]. Mr Tai submits that this case is on all fours with JustMake.

(1) In that case, Ms Smirnova, the defendant, applied for a non-party cost order against Mr Windsor. The claim arises in the context of a claim by the claimant company against Ms Smirnova. In that action, the claimant company was ordered to provide security for costs. It did not do so and so the claim was struck out.

(2) The claimant company is insolvent and has no other assets save for the alleged debt from Ms Smirnova. The action was promoted and funded by Mr Windsor for his own financial benefit, who is the sole director and sole shareholder with unlimited authority to act for the claimant company. Mr Windsor has made all the witness statements served by the claimant company and was in reality the real party to the litigation.

(3) Teare J noted that the case was not tried on the merits but that it was struck out because of a failure to provide security for costs. However, his lordship was of the view that this would not make it unjust for a non-party cost order to be made. Ultimately, such order was made against Mr Windsor because he was the real party to the litigation, has funded the action and would have benefited from the company’s success.

35.Mr Co submits that to the extent that it is suggesting that mere funding, control and benefit qua shareholder (even sole shareholder) is sufficient, JustMake should not be followed because of the English Court of Appeal’s decision in Goknur, which is a more recent decision of a higher court dealing specifically with the legal question in relation to directors/shareholders. I agree with Mr Co and accept his submissions.

Preliminary issue – whether an appeal against decision on costs only?

36.It is trite that an appeal from a master’s decision to a judge in chambers is an actual rehearing of the application, and the judge would approach the matter as if the same came before him for the first time. The hearing before the judge is a de novo hearing.^[16] However, if the appeal is an appeal only targeting a costs order made by the master, the judge would not interfere with the master’s decision unless the decision is unreasonable or the master erred in law in making the decision.^[17]

37.Mr Co submits that the appeals lodged by the Interveners are appeals against the Master’s decision on costs, and hence can only be allowed if the Master erred in law or his decision is unreasonable. With respect, I am unable to agree with Mr Co on this point. The decision made by the Master is not a decision on costs only, but is a decision refusing to join Mr Ng as a party in these proceedings and make him liable for the costs payable to the Interveners. In my view, I should treat the appeal hearing as a de novo hearing of the Interveners’ applications made by the Summonses.

Stage One – Delay and Lack of Prior Warning

38.By reason of delay and lack of prior warning as explained below, I would exercise my discretion against the Interveners at Stage One and dismiss the applications.

39.Joinder may be refused if the application amounts to an abuse of process, by reason of delay or other misconduct on the part of the applicant.^[18]

40.The English Court of Appeal has considered the issue of prior warning to the person to be joined in Symphony Group Plc v Hodgson^[19], in which Balcombe LJ said:-

“Even if the applicant can provide a good reason for not joining the non-party against whom he has a valid cause of action, he should warn the non-party at the earliest opportunity of the possibility that he may seek to apply for costs against him. At the very least this will give the non-party an opportunity to apply to be joined as a party to the action under Ord. 15 r. 6(2)(b)(i) or (ii).

Principles (2) and (3) require no further justification on my part; they are an obvious application of the basic principles of natural justice.

…………

It is not suggested by Symphony that it ever warned Halvanto of the possibility that it might seek to make Halvanto liable for costs of its action against Mr Hodgson before 6 July 1992 when the judge delivered his judgment in that action. The result is that Halvanto was neither made a party to the action by Symphony, nor did it have the opportunity to protect itself by applying to be made a party. When Mr Bramley gave his evidence he did so in ignorance of what lay in store for Halvanto, and with the benefit of hindsight it now appears that at least some part of his cross-examination – e.g. that directed to the position of Messrs Walker Morris and their acting for Mr Hodgson – was with a view to this application being made. In my judgment Mr Gibbons was justified in comparing the procedure here of evidence (Mr Bramley) first, and pleadings (the schedule to Symphony’s summons of 14 July 1992) later, to what the Queen said at the trial of Knave in Alice’s Adventure in Wonderland: “‘No, no!’ said the Queen. ‘Sentence first – verdict afterwards.’” – even though Mr Gibbons wrongly attributed this quotation to the King.”

41.The purpose of giving warning at the earliest opportunity is clearly that the non-party could have made decisions differently, which may have an impact on the ultimate result. Although this is not a stand-alone requirement which will operate conclusively against the applicant, it is nevertheless a highly material consideration.^[20]

42.Mr Tai has tried to counter the “lack of prior warning” point by relying upon Deutsche Bank AG v Sebastian Holdings Inc, in which Moore-Bick LJ said:^[21]

“The importance of a warning will vary from case to case and may depend on the extent to which it would have affected the course of the proceedings…. If the third party against whom an order for costs is sought is the real party to the litigation, the absence of a warning may be of little consequence.”

43.However, as submitted by Mr Co, there is a finding in Deutsche Bank AG that the proceedings would not have been conducted in a different way even if prior warning had been given.^[22] The dictum of Moore-Bick LJ in Deutsche Bank AG cited by Mr Tai must be read in that context.

44.Mr Co submits:-

(1) The fact that Mr Ng is the shareholder, director and source of finance of these proceedings has been known to the Interveners no later than April 2015, when Mr Ng filed his 1^st affirmation in these proceedings and stated in which that he was the sole shareholder and director of Myers. Alternatively, Mr Ng mentioned about financing the cases in his affirmation filed on 26 October 2015 for the purpose of dealing with the Interveners’ applications for security for costs in the Court of Appeal.

(2) The impecuniosity of Myers to pay costs must have come to the Interveners’ notice on 4 February 2016, when Myers failed to pay security for costs for the appeals and the appeals were dismissed.

(3) Even if the Interveners did not notice it, it must have been obvious on 13 April 2017, when Myers failed to pay security for costs for these proceedings in the District Court, which resulted in the claims being dismissed.

(4) As said in [19] above, the costs order nisi made on 29 December 2016 were varied on 28 March 2017 by the applications of the Interveners. However, no application for a non-party costs order against Mr Ng was made at the material time.

(5) Shortly after 8 June 2017, when the Interveners asked Myers to agree on costs and received no reply, there could not have been any doubt that Myers would not be able to pay any costs to the Interveners.

(6) However, the Interveners proceeded with taxation of the bills in 2018 without giving Mr Ng any warning that he might be joined as a party for the purpose of costs.

(7) It was not until May 2021 that the intention to join Mr Ng as a party was first communicated to Mr Ng.

(8) Even taking the latest date, 8 June 2017, there was a delay of almost 4 years and no explanation has been offered at all.

(9) The prejudice to Mr Ng lies not only in the fact that interest has been incurred on the costs, but also in that taxation has already been completed and Mr Ng has lost his chance to dispute the quantum.

45.Mr Tai has put forward several arguments to counter the point made by Mr Co. With respect, notwithstanding Mr Tai’s eloquent submissions, I am of the view that Mr Co’s point still stands and unanswered.

(1) First, it is said that it is Myer’s failure to respond in the taxation proceedings that caused the delay. However, this does not explain why Mr Ng was not warned in advance. It also does not explain why an application for joinder could not have been made at that time when the District Court claims have all been dismissed and all the material facts were known to the Interveners.

(2) Secondly, it is argued that there is no prejudice to Mr Ng, for Mr Ng is the real party, and he could have raised objections via Myers, and he must be advised of the possibility of an application of a non-party costs order. However, a non-party costs order is not a matter of course. Without any warning, Mr Ng cannot be expected, as a matter of course or as a matter of obligation, to fund Myers to continue with the taxation proceedings. Had Mr Ng been given a prior warning or been joined at an earlier stage, he could have taken part in the taxation proceedings, which could have made a difference in terms of the quantum for which he is sought to be made liable.

(3) The unexplained delay and lack of warning deprived Mr Ng of such chance, resulting in real prejudice which he would not have suffered had a prior warning been given.

(4) Mr Tai suggests that for the purpose of countering the prejudice to Mr Ng, the taxation proceedings may be reopened. However, there is no reason to adopt this course, when the prejudice to Mr Ng is caused by the Interveners’ unexplained delay and the Intervener’s unjustified failure to give Mr Ng any prior warning.

46.For the reasons above, the Interveners’ applications should be dismissed at Stage One.

Stage Two – No Non-Party Costs Order

47.For the sake of completeness, even if the Interveners’ applications could pass Stage One, I am of the view that those applications should be dismissed at Stage Two. In my view, by reason of the unexplained delay and the unjustified failure in giving prior warning to Mr Ng, and by reason of the matters set out below, the court’s discretion should also be exercised against the Interveners at Stage Two.

48.All the Interveners rely upon in support of the Summonses is the fact that Mr Ng funded, controlled the litigation and would benefit from the litigation as the sole shareholder. No additional element is relied upon in support of the applications.

49.The following matters have to be borne in mind:-

(1) There is no evidence showing that Myers would be insolvent even if it succeeds in these proceedings.

(2) If Myers succeeds in these proceedings, Myers’ creditors, i.e. Mr Lam and Xing Fu, would benefit from the success. According to Mr Ng, if Myers succeeds in these cases, Myers would be able to have fund to pay off all the debts owed to Mr Lam and Xing Fu. This is not disputed by the Interveners.

(3) Comparing the amounts of the consultancy fees due to Myers under the Consultancy Agreements (assuming that Myers’ case in these proceedings is true) and the amounts which Myers ought to pay to Mr Lam and Xing Fu, if Myers succeeds in these proceedings, more than half of the sums recovered from the litigation would be used by Myers to repay those debts. This is also not disputed by the Interveners.

(4) Mr Tai submits that notwithstanding the aforesaid, some of the sums recovered by Myers in these proceedings would go to Mr Ng’s pocket, and hence the litigation is for Mr Ng’s personal benefit.

(5) In my view, bearing in mind the matters set out in subparagraphs (1) to (3) above, applying common and commercial sense, there is sufficient reason for Myers to commence these proceedings for the benefit of Myers itself. That Mr Ng may also derive some personal benefit in the event that Myers succeeds in these proceedings does not detract from the fact that these cases are brought for the benefit of Myers.

50.The Interveners are not alleging any impropriety or bad faith on Mr Ng’s part in connection with these proceedings.

51.Applying the principles in Goknur, bearing the matters in [48] to [50] in mind, there is insufficient reason justifying a non-party costs order against Mr Ng in each of these cases.

Deposition

52.For the reasons set out in the above, I affirm the Master’s decision and dismiss the appeals.

53.Costs should follow the event, with a certificate for counsel. Costs of these appeals be paid by the Interveners to Mr Ng forthwith, and those costs be summarily assessed at HK$60,000.

54.Lastly, it remains for me to thank counsel for the assistance rendered to the court.

Mr Terrence Tai, instructed by Kobre & Kim, for the 1^st and 2^nd Interveners

Mr Dixon Co, instructed by GH Legal, for the Interested Party