China Medical Technologies, Inc. (in Liquidation) and Others v. Wu Xiaodong and Others

CAMP 145/2023, [2023] HKCA 756

On Appeal From [2022] HKCFI 3237

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 145 OF 2023

(ON INTENDED APPEAL FROM HIGH COURT ACTION NOS 3391 OF 2016 AND 1417 OF 2013)

ACTION NO 3391 OF 2016

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BETWEEN

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ACTION NO 1417 OF 2013

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BETWEEN

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(Consolidated by Order of Master Chow dated the 23^rd day of July 2018)

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J U D G M E N T

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Hon Anthony Chan J (giving the judgment of the court)  :

1.This is the 2^nd Defendant’s (“Tsang”)  renewed application for leave to appeal against the Order of Ng J dated 21 October 2022 (“Order”)  whereby Tsang’s security for costs application against the 1^st and 2^nd Plaintiffs (“Plaintiffs”)  was dismissed with costs to the Plaintiffs. On 21 March 2023, Tsang’s application for leave to appeal against the Order was dismissed by the learned Judge with costs to the Plaintiffs.

2.There are 8 grounds of appeal put forward by Tsang[1].  Ground 1 merely laid down the challenge to the central finding by which the Judge rejected the security for costs application, namely, the Plaintiffs’ claim is “genuine and strong”.  Grounds 2 to 5 concern the Judge’s assessment of the merits of the case: (i)  it was inappropriate to consider the Plaintiffs’ claim in light of the complexity of the case (Ground 4); (ii)  the Judge failed to take into consideration the issue over the value of the FISH and SPR Technologies (Grounds 2 and 3); and (iii)  the Judge failed to take a holistic approach to the assessment exercise (Ground 5).

3.Grounds 6 to 8 complain that the Judge took into account irrelevant matters: (i)  Tsang did not disclose his whereabouts and was unwilling to state on oath the facts in support of his defence (Ground 7); and (ii)  Tsang had failed to come back to Hong Kong to purge his contempt and might not come back to testify at the trial (Grounds 6 and 8).

4.All 4 sets of submissions filed by the parties[2] have been considered.

5.The decision below was set out in a 23-page Judgment dated 21 October 2022 (“Judgment”)  in which the merits of the Plaintiffs’ claim and the defence of Tsang were carefully examined based the evidence before the court. 

6.We are unable to agree with Tsang’s contention that the Judge should not have assessed the merits of the case due to its complexity (Ground 4).  First, pursuant to both O.23, r.1 of the RHC and s.905 of the Companies Ordinance, Cap 622, the court was required to have regard to all the circumstances and decide whether it was just to order security for costs.  The strength of the Plaintiffs’ case was a relevant matter for consideration, and it was indeed the central argument advanced by the Plaintiffs to resist the application.

7.Second, whether the case was one which the court was in the position to evaluate its merits was a matter within the discretion of the Judge.  In this case, the Judge was entitled to come to the view that the Plaintiffs’ case was in fact quite simple.  The evidence before the Judge was that Tsang was one of the proposers for the FISH and SPR transactions.  He caused a substantial part of the purchase price, namely, US$355.5 million to be paid to a company set up by him (the 7^th Defendant)  by way of 55 cashier orders.  The money was duly dispersed to other entities, some of which were connected to Tsang and/or the 1^st Defendant.  Tsang himself received US$7.61 million of the 1^st Plaintiff’s money.  The view taken by the Judge cannot be faulted. 

8.We see no merit on the criticisms over the Judge’s assessment of the merits of the case (Grounds 2, 3 and 5).  Tsang’s case in this action was set out in a 17-point “defence/rebuttal” attached to his counsel’s skeleton arguments which was considered by the Judge.  The Judge was entitled to take the view that the rebuttals were insufficient to undermine the Plaintiffs’ case in any substantial sense[3]. 

9.Equally, we find no substance in Grounds 6 to 8.  There was no proper justification for the evidence of Tsang to be given by his solicitor (“Tang”)  instead of himself[4].  The Judge found that Tang’s evidence consisted of bare assertions[5], and failed to response substantively to key allegation of the Plaintiffs that there was no legitimate commercial reason why the 1^st Plaintiff’s money for arm’s length transactions should end up with Tsang[6]. The Judge was entitled to consider the unsatisfactory state of Tsang’s evidence in light of the fact that he had not gone on oath to state the facts in support of his case, and he had failed to state his whereabouts in his witness statements[7].

10.Further, given that Tsang had failed to provide a substantive answer to the Plaintiffs’ case, the Judge was entitled to consider the likelihood of Tsang giving evidence in this action when he had absconded from Hong Kong and there was an extant warrant for his arrest for contempt of court.  He was also a fugitive from the US court and he did not want to return to Hong Kong due to the risk of extradition to the US.

11.On the suggestion that Tsang may apply to give evidence at the trial by video-link, first, no such application has yet been made.  Second, Tsang had previously made such an application for his s.221 examination and it was rejected by the court[8].  Third, the authority of Polanski v Condé Nast Publications Ltd [2005] 1 WLR relied upon by Tsang is a majority decision (3 to 2)  of the House of Lords.  Whether the minority view may be preferred in Hong Kong or whether the case can be distinguished are matters to be ventilated if an application to give evidence by video-link is made by Tsang.

12.Finally, the decision of the court below was one of exercise of discretion.  We are not satisfied that any of the established grounds for interfering with the exercise of discretion[9] has been made out.  

13.None of the grounds advanced in this application has a reasonable prospect of success, and this application is accordingly dismissed.  We shall hear the parties on costs.

Mr Charles Manzoni SC, instructed by Karas So LLP, for the Plaintiffs

Mr Vincent Lung, instructed by P. C. Woo & Co., for the 2^nd Defendant