King Field Shipyard Ltd v. Tai Pak Sea-food Restaurant Ltd and Another

HCA 1494/2022

[2025] HKCFI 560

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1494 OF 2022

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D E C I S I O N

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A.  Introduction

1.Following directions for a ‘speedy’ trial, and subsequent allocation of the case to me, a Pre-Trial Review (“PTR”) has been fixed for 7 May 2025, and trial dates have been fixed for 12 days commencing 28 July 2025. A Case Management Conference (“CMC”) was fixed for and held on 24 January 2025, including to deal with any further interlocutory applications made prior to the cut-off date set.

2.Hence, in addition to the general CMC matters, four summonses (together, “Summonses”) require determination, being:

(1)  the summons dated 20 August 2024 issued by the plaintiff (“P”), for leave to adduce expert evidence on liability and quantum (“Expert Summons”);

(2)  the summons dated 20 November 2024 issued by P, for leave to amend the Statement of Claim (“SOC”) as per the draft (“draft ASOC”) attached to the summons (“Amendment Summons”);

(3)  the summons dated 20 November 2024 issued by P, for an order that the 1^st Defendant (“D1”) produce documents specified in the Schedule to the summons (“Discovery Summons”); and

(4)  the summons dated 20 November 2024 issued by the Defendants (“D1” and “D2”, respectively, together “Ds”) seeking security for costs (“Security Summons”).

3.At the hearing, P was represented by Ms Joyce Leung and Mr Johnathan Tsang of Counsel, and Ds were represented by Ms Sara Tong SC leading Mr Thomas Wong of Counsel. The hearing was conducted with the benefit of prior written skeleton submissions filed by the parties as regard each of the summonses, as well as the CMC matters.

4.At the end of the hearing, I reserved my decision to be handed down on 5 February 2025. This is my Decision.

5.Because the matters raised by the Summonses and the CMC are all matters of case management, my Decision can be expressed in reasonably short terms. However, though I may not refer in this Decision to all of the submissions made to me, or to all of the documents to which reference was made, I have them well in mind.

6.I acknowledge that, with the trial taking place on a milestone date a few months from now, there may be a temptation simply to allow the proposed amendments, expert evidence and disclosure, and leave things to be sorted out at the trial itself. But, a more disciplined approach is appropriate, on the application of well-settled principles – not least in the context of modern case management.

B.  Material Background

7.The necessary material background can be stated quite shortly.

8.D1 is the registered owner of vessels being the “Tai Pak Restaurant Boat”, “Tai Pak Kitchen Boat” and “Tai Pak Fire Separation Barge” (collectively, “Tai Pak Boats”). D2 is the registered owner of the vessel “Jumbo Kitchen Boat”. Together, the four boats (or ships) can be referred to as the “4 Boats”.

9.The 4 Boats were moored at the Aberdeen South Typhoon Shelter (“Shelter”), and were part of the Jumbo and Tai Pak Floating Restaurant fleets, which ceased operations in 2020 and 2018 respectively. At the material times, the 4 Boats held licences issued by the Hong Kong Marine Department (“MarDep”), which allowed them to be permanently moored at the Shelter. It is P’s case that MarDep has confirmed that such licences for a permanent station at the Shelter will no longer be issued.

10.P, D1 and D2 entered into an agreement dated 19 May 2022, written in Chinese but the title of which has been translated as ‘Ship Handling Services Agreement’ (“Agreement”). Under the Agreement:

(1)  D1 and D2 agreed to pay HK$5.4 million to P as the “handling fees” for the 4 Boats, made up as follows:

(a)  D1 and D2 would within 7 working days of the execution of the Agreement pay to P HK$600,000 as deposit for the “handling fees” (“Deposit”); and

(b)  on the day after the transfer of each of the 4 Boats, P was to provide relevant proof to D1 and D2, and within 7 working days of receipt of each such proof of transfer D1 and D2 would pay P HK$1.2 million as an instalment of the handling fees (“Instalment”).

(2)  Transfer of ownership of the 4 Boats from D1 and D2 respectively to P was to be made, with P paying HK$1 as consideration for each of the 4 Boats.

(3)  D1 and D2 were required to assist P in applying for a certificate of ownership of the 4 Boats, and an application for the name transfer for the food licence.

(4)  If delivery and/or transfer of any of the 4 Boats was not effected by the respective deadline stipulated – 31 May 2022 for the Jumbo Kitchen Boat, and 31 July 2022 for the Tai Pak Boats – then the Agreement would be immediately terminated and D1 and D2 would have no further obligation to pay the Instalment(s).

11.Between 20 May 2022 and 26 May 2022, P paid the HK$1 consideration for the Jumbo Kitchen Boat, and D1 and D2 paid the Deposit, and the parties attended MarDep’s offices to lodge the documents required for transferring the Jumbo Kitchen Boat to P.

12.On 31 May 2022 (the deadline stipulated for the transfer of the Jumbo Kitchen Boat), P was informed by D2’s representative (a Mr Chan) that MarDep had approved the documentation for the transfer. Whilst the parties agree that eventually the transfer of the Jumbo Kitchen Boat was not completed, it is not clear what step was missing and there is a dispute as to which party was at fault.

13.Less than one day later, at around midnight of 1 June 2022, Mr Chan notified P that the Jumbo Kitchen Boat had capsized in the Shelter (“Incident”).

14.The transfer of the Tai Pak Boats also did not materialise before the stipulated deadline of 31 July 2022. Shortly prior to that, on 27 July 2022, Ds suggested that the Agreement had already been automatically terminated by reason of its terms, upon the failure of delivery of the Jumbo Kitchen Boat.

15.By writ endorsed with the SOC issued on 7 November 2022, P commenced the present action against D1 and D2, based on the Agreement. It is pleaded that P had purchased the 4 Boats to take advantage of their unique identity and licences, and planned to refurbish them and operate them as restaurants again in the Shelter. P alleges that there is an implied term that Ds shall do all things necessary to enable the transfer of ownership and/or actual ownership of the 4 Boats. It is alleged that D1 and D2 had breached the Agreement in failing to deliver the 4 Boats and to assist P to arrange for the transfer of ownership. P claims specific performance of the Agreement and seeks damages for the alleged breaches. It is also pleaded that Ds are unable to rely on their own wrong to trigger the clause automatically terminating the Agreement, by reason of the ‘prevention principle’.

16.Ds’ case is that the Agreement was not a sale and purchase of the 4 Boats, but rather an agreement for P, a shipyard, to provide disposal services for the 4 Boats at the consideration of HK$5.4 million. The transfer of ownership was only ancillary to the provision of services to enable P lawfully to take control of the 4 Boats, which were regulated for public safety reasons by MarDep. Ds say the Agreement was automatically immediately terminated following the failure to complete the change of registered name of the Jumbo Kitchen Boat by the 31 May 2022 deadline, or further or alternatively the Agreement was discharged by frustration by reason of the Incident. Ds also say that P is not entitled to an order for specific performance, since any losses suffered by P can be adequately compensated by damages and other monetary awards. There is a counterclaim seeking an order for P to execute all necessary documents to return the legal title of the Jumbo Kitchen Boat.

17.On 29 March 2023, P discovered that the Tai Pak Kitchen Boat had disappeared from the Shelter. P was subsequently informed that the same had been towed away much earlier on 7 March 2023 to Zhongshan, Mainland China for repairs, and had been torn down to its bare shell.

18.In around April 2023, D2 began demolishing the Jumbo Kitchen Boat. D2 explained that this was done pursuant to directions from MarDep to raise the capsized Jumbo Kitchen Boat from where it sank at its mooring. However, P argues that MarDep only required the Jumbo Kitchen Boat to be “raised” or “removed”.

19.On 25 April 2023, P issued a Preservation Summons, seeking preservation orders of the “Remaining Hull Parts” of the Jumbo Kitchen Boat, and the Tai Pak Boats.

20.On 28 April 2023, after a contested inter partes hearing, Lisa Wong J granted an ‘interim-interim’ preservation order for the Remaining Hull Parts, pending determination of the Preservation Summons, which was later dealt with at a contested hearing on 7 March 2024.

21.On 8 April 2024, DHCJ Phoebe Man held that a preservation order should be granted in principle, and ordered that the status quo of the 4 Boats be preserved. On 23 September 2024, DHCJ Phoebe Man decided on the form of the preservation order and the amount of fortification to be provided by P, namely HK$3,145,925. That sum has since been paid into court.

22.It can be noted that the Remaining Hull Parts are currently stored on a barge, and there are various photos identifying their condition. There are also photos taken at various times of the Tai Pak Kitchen Boat in Zhongshan.

23.It is also material for present purposes to note that, when granting the preservation order, DHCJ Phoebe Man held that (as she put it):

(1)  It cannot be decided at this juncture which party was in breach of the Agreement. If it is ultimately found that D1 and D2 had deliberately failed to complete their obligation in the completion of the transfer of title of the Jumbo Kitchen Boat on 31 May 2022, the prevention principle might apply so that D1 and D2 cannot take advantage of the automatic termination clause of the Agreement.

(2)  It is arguable that despite the fact that the sale and purchase of the 4 Boats was not the main subject matter in the Agreement, the transfer of the 4 Boats is clearly something that P would have been entitled to under the Agreement, and as such it is open for P to insist on the transfer of the 4 Boats to be specifically performed, as part of the bargain.

(3)  Due to the uniqueness of the 4 Boats and the fact that the licences attached to them are irreplaceable, it is arguable that damages would not be an adequate remedy and specific performance is required.

24.DHCJ Phoebe Man also made a costs order nisi that the costs of the Preservation Summons should be costs in the cause, with certificate for two Counsel, to be taxed if not agreed. There is an outstanding variation application, but no date for argument of it has been fixed.

C.  Amendment Summons

25.Though not issued chronologically first in time, the Amendment Summons logically falls to be dealt with first. This is because matters relating to any potential expert evidence and/or further discovery will turn on the pleaded case. Indeed, much of the expert evidence sought will likely simply fall away if the contested amendments are disallowed.

26.I mention contested amendments because some of the proposed amendments found in the draft ASOC are not controversial. In those circumstances, I allow them. Further, one proposed amendment found in §26(d) of the draft ASOC was contested but was not pursued by Ms Leung at the hearing – wisely, as it seems to me that it was fundamentally misconceived in any event.

27.Focus can therefore now be put on the remaining contested proposed amendments in §25 and prayer §(1)(e) of the draft ASOC. It is first convenient to set out a brief summary of the material applicable principles:

(1)  As a guiding principle, all such amendments ought to be made for the purpose of determining the real question or controversy between the parties to any proceedings or of correcting any defect or error in any proceedings.

(2)  Leave is readily granted to amend before trial, unless it can be shown that the new claim based on the proposed amendment is bound to fail. (This is essentially the obverse of a strike-out application.)

(3)  Absent any real prejudice, technical and procedural rules should not ordinarily stand in the way of allowing parties to raise their real claims or defences before the court for adjudication.

(4)  But an application for leave to amend should not be approached on the basis that a party is entitled to raise an arguable claim, subject to payment of costs by way of compensation.

(5)  The Court should always recognise that the primary aim in exercising the powers of the Court is to secure the just resolution of disputes in accordance with the substantive rights of the parties.

(6)  However, all matters relevant to the exercise of the power to permit amendment should be weighed.

(7)  The underlying objectives in RHC Order 1A include taking into account the situation of the other party as well as the amending party – and costs are no longer simply regarded as sufficient compensation in all circumstances.

28.With the proposed amended parts shown by underlining, the particular paragraphs in the draft ASOC are as follows:

25. The Plaintiff has at all material times been and is now ready and willing to perform its obligations under the Agreement. The Plaintiff therefore claims specific performance of the Agreement. By reason of the damage and/or acts done by the 1^st and 2^nd Defendants to the Jumbo Ship and the Tai Pak Kitchen Boat as pleaded in paragraphs 21A and 21B hereinabove, to enable specific performance of the Agreement, and pending further discovery and/or interrogatories and/or expert evidence, the Plaintiff further claims that the Defendants do reinstate the Jumbo Ship and the Tai Pak Kitchen Boat to the status required for the issuance and/or renewal of their respective licences with the Marine Department.

and

(1) Specific performance of the Agreement by way of:-

…

(e) An order that the Defendants do reinstate the Jumbo Ship and Tai Pak Kitchen Boat to the status required for the issuance and/or renewal of their respective licences with the Marine Department.

29.As is probably obvious, what was pleaded in §§21A and 21B of the draft ASOC was of the matters giving rise to the Preservation Summons.

30.During argument, I pointed out to Ms Leung the apparent incongruity in the phrase “and pending further discovery and/or interrogatories and/or expert evidence” proposed to be added as part of the amendment to §25 – where that phrase might suggest discovery, interrogatories and expert evidence would be sought in order to found the proposed pleading, rather than that any relevant disclosure and evidence would follow on from an already properly pleaded case. Ms Leung signified her willingness for that phrase to be deleted, if otherwise I were minded to allow the proposed amendment to §25.

31.Ms Leung submitted, in summary, that:

(1)  The amendments seek to clarify P’s case on the orders which it will seek if the Court grants specific performance.

(2)  The amendments were necessitated by the acts carried out by Ds on the Jumbo Kitchen Boat and Tai Pak Kitchen Boat.

(3)  The terms of the Agreement included the purchase of licensed vessels – that being the subject-matter of the things to be transferred – and if specific performance is to be ordered it would at least implicitly be for delivery of vessels in a licensable condition.

(4)  Hence, for specific performance to be the full remedy, reinstatement to a position for relicensing should be required. In short, reinstatement is the means to give effect to the specific performance.

(5)  That is not rewriting the contract, where the contract subject matter still exists, even though two of the vessels have changed in part.

(6)  It does not matter that no warranty was given as to the condition of the 4 Boats in the Agreement, when at the time of the Agreement they were as a matter of fact licensed.

(7)  The Tai Pak Kitchen Boat is being repaired/renovated by D1, presumably because D1 thinks it can obtain a renewed license, so the same could be true of the Jumbo Kitchen Boat.

(8)  The proposed amendments do not come anywhere near the threshold of “bound to fail”, especially when DHCJ Phoebe Man has already held that it is still open for P to insist on the transfer of the 4 Boats to be specifically performed.

(9)  Ds’ reliance on the delivery of the ships being “as is” is contrary to well-established authorities holding that an “as is” clause does not preclude the Court from granting specific performance, even though changes had been made to the property since the signing of the Agreement, so long as substantial performance can be given. Whether substantial performance can be given is a matter for trial (and may include expert evidence, relevant and probative to assist the Court in this regard).

32.Ms Tong submitted, in summary, that:

(1)  The Court will not grant an order for specific performance so as to impose upon the parties an agreement which they had not made, or to bind the parties contrary to their agreement.

(2)  Put another way, a Court will not order specific performance in terms that would rewrite the bargain made by the parties.

(3)  The proposed claim for Ds to “reinstate” the Jumbo Kitchen Boat and Tai Pak Kitchen Boat “to the status required for issuance and/or renewal of their respective licences” is unarguable, as that would rewrite the bargain between the parties. It was never an obligation on Ds, where the Agreement required only that Ds deliver the 4 Boats in the condition they were in at the respective times they were to be delivered (or when they were inspected “as is”).

(4)  The proposed amendment does not merely differ from the Agreement in respect of its machinery provisions, and the Court’s ability to depart from the contract terms would not permit going any further than just that.

(5)  In any event, in the case of the Jumbo Kitchen Boat, it is impossible for it to be reinstated to the status required for issuance and/or renewal of the relevant licences, and it is settled that impossibility is a jurisdictional bar to the grant of specific performance (not a discretionary one).

(6)  It is irrelevant that the impossibility might arise as a result of a defendant’s own wrongdoing, and any reliance on the prevention principle is misguided.

(7)  Here, the photos identify clearly that it is impossible for the Remaining Hull Parts – essentially “a heap of severely corroded scrap metals left exposed for more than a year” – somehow to be “reinstated” into a vessel, let alone a vessel in a licensable condition.

(8)  The vague assertions contained in a two-page repair proposal prepared for P, more than 15 months ago, falls far short of showing that reinstatement is realistically possible.

33.Further, Ms Tong emphasised that the context of the amendment application should be seen against the fact that the only pleaded breaches of the Agreement, in §22 of the SOC, are that:

(1)  Ds failed and/or refused to deliver the Tai Pak Boats and/or to assist P to arrange for the transfer of ownership and/or licences of them on or before 31 July 2022;

(2)  Ds failed to maintain the Jumbo Kitchen Boat “in the safely moored status prior to delivery causing the same to be submerged and/or sunk” – though without any particulars being provided; and

(3)  Ds failed and/or refused to deliver the Jumbo Kitchen Boat to P on or before 31 May 2022.

34.There is no allegation of breach relating to the condition of the 4 Boats, which is not surprising in the absence of any warranty about their condition contained in the Agreement, and the fact that the Agreement instead expressly includes a provision that Ds make no undertaking whatsoever as to the quality or condition of the 4 Boats.

35.In broad terms, I accept the submissions of Ms Tong. It seems to me that the proposed amendments in §25 and prayer §1(e) do go further than the terms of the Agreement made between the parties, and so essentially seek an order for specific performance to impose contractual obligations which had not been made or agreed. Whilst it is correct that ownership of the 4 Boats was to be effected when they were licensed – that is, the transfer was to be made during the period of validity of the licences – there was at the same time the clear absence of any warranty that the 4 Boats were or would remain in any status or condition required for issuance and/or renewal of any licence, and instead the express provision was included that Ds made no undertaking whatsoever as to the quality or condition of the 4 Boats.

36.I also accept, from the photographic evidence provided relating to the Jumbo Kitchen Boat, that the vessel (or former vessel) is now essentially constituted by five badly damaged and corroded sections of what used to be a whole, without any of the superstructure as was also part of the vessel. The proposed amendment in effect seeks to run an argument seeking specific performance that, for all practical purposes, would require the Jumbo Kitchen Boat not to be “reinstated”, but rebuilt almost from scratch. The evidence provided by P as to possible “repair” is wholly unimpressive.

37.Therefore, so much of the proposed amendment as is still pursued but contested – i.e. the proposed amendments in §25 and prayer §1(e) – are disallowed.

38.I see no reason why the costs of the application made by the Amendment Summons should not follow the event, so as to be payable by P, with certificate for two Counsel, to be taxed if not agreed.

D.  Expert Summons

39.In an application for leave to adduce expert evidence under RHC Order 38 rule 36, the burden is on the applicant to show that the proposed expert evidence is relevant to the issues in dispute. The court has to examine the pleadings in determining the application. The court retains complete control over the use of expert evidence, the purpose of which is to limit expert evidence to what is reasonably necessary to resolve the issues for determination at the trial.

40.Ms Leung referred to Man King Chuen v Hong Lok Yuen International School Association Ltd [2018] 4 HKLRD 294 at §17, where Recorder Yvonne Cheng SC (as Cheng J then was) gave a helpful summary of the principles on adducing expert evidence (omitting her reference to authority):

(1)  In deciding whether proposed expert evidence should be received, there is a two-stage test.

(a)  First, the evidence has to be admissible as ‘expert evidence’ for the purpose of section 58 of the Evidence Ordinance Cap 8. It will be so admissible in any case where the court accepts that there exists a recognized expertise governed by the standards and rules of conduct capable of influencing the court’s decision on any of the issues which it has to decide, and the witness to be called satisfies the court that he has a sufficient familiarity with, and knowledge of, the expertise in question, to render his opinion potentially of value in resolving any of those issues.

(b)  Second, evidence meeting this test can still be excluded by the court if the court takes the view that calling it will not be helpful to the court in resolving any issue in the case justly. Such evidence will not be helpful where the issue to be decided is one of law or is otherwise one on which the court is able to come to a fully informed decision without hearing such evidence.

(2)  It is for the party seeking to call expert evidence to satisfy the court that expert evidence is available which would have a bearing on the issues which the court has to decide and would be helpful to the court in coming to a conclusion on those issues.

(3)  The court’s discretion as to whether to grant leave to a party to adduce expert evidence is to be exercised within the ambit of the court’s case management powers, exercised in the light of the underlying objectives of the CJR.

(4)  Where the proposed expert evidence is plainly inadmissible or irrelevant, the court ought to exercise its discretion to refuse the admission of such evidence.

(5)  But where the court cannot form a clear view of the relevance of the proposed expert evidence or where it considers that the proposed evidence is clearly relevant, then it should grant leave for the evidence to be adduced at trial.

41.However, between the date of argument and the date of decision in the Man King Chuen case, the Court of Appeal decided Shenzhen Fuhaitong Precision Industry Co Ltd v BYD Co Ltd [2019] 2 HKC 175. Ms Tong referred to §§9-13 of that decision, not least in relation to point (5) above. There, it was emphasised that the giving of expert directions is very much a matter of case management, with the relevant duties imposed on the judge. The Court of Appeal pointed out – in what seems to me to be a more analytically stringent approach – that the Court will not grant leave for expert evidence just because the Court cannot form a clear view of its relevance, or cannot rule out the possibility that such evidence might be relevant and helpful. Rather, if the applicant for expert evidence directions fails to persuade the Court on relevance and necessity of such evidence, the application should be dismissed.

42.These are the principles I adopt.

43.As described by the Expert Summons and by Ms Leung in her submissions, P seeks leave to adduce expert evidence on the following issues:

(1)  in respect of the Jumbo Kitchen Boat:

(a)  A1 – the ‘Cause of Capsize Issue’, namely because of the capsizing of the Jumbo Kitchen Boat in the Shelter; and

(b)  A2 – the ‘Licence Renewal Issue (Jumbo)’, namely whether it is (i) possible for the Jumbo Kitchen Boat to be reinstated with the Remaining Hull Parts, and (ii) possible for the Jumbo Kitchen Boat’s operating licence with MarDep to be renewed, and if so, what other conditions (if any) to the renewal of that licence;

(2)  in respect of the Tai Pak Kitchen Boat:

(a)  B3 – the ‘Exit/Return Issue’, namely whether the Tai Pak Kitchen Boat can depart/exit from Zhongshan/Mainland China and return to Hong Kong without completion of the “full-scale repair” under (i) PRC laws/regulations and (ii) Hong Kong laws/regulations; and

(b)  B4 – the ‘Licence Renewal Issue (Tai Pak)’, namely whether it is possible for the Tai Pak Kitchen Boat’s operating licence with MarDep to be renewed, and if so, what are the conditions (if any) to the renewal of that licence; and

(3)  the reinstatement costs of both the Jumbo Kitchen Boat and Tai Pak Kitchen Boat.

44.The matters in (1) and (2) have been defined as the “Liability Expert Issues”, and the matter in (3) defined as the “Quantum Expert Issues”.

45.However, in light of my ruling on the Amendment Summons, it can be seen items A2 and B4 and the Quantum Expert Issues will fall away.

46.As to item A1, Ms Leung submitted that resolution of this issue would assist the Court in determining whether Ds failed to keep the Jumbo Kitchen Boat in a safely moored state and/or failed to ensure the existing safely moored status of the boat to enable it to be transferred/delivered to P. That, she submitted, would go to the question of the application of the prevention principle, and whether Ds were in breach of the Agreement first.

47.However, in this context, it is necessary to consider what is actually pleaded in the SOC. As already identified above there are no particulars provided of the alleged breach on the part of the Ds to maintain the Jumbo Kitchen Boat in the safely moored status prior to delivery causing it to be submerged or sunk. Indeed, at §14 of the SOC, P pleads the event of the Incident, and then pleads:

In respect of the Incident, including but not limited to its cause, the Plaintiff reserves the right to plead further after discovery and/or interrogatories and/or further and better particulars and/or expert evidence.

48.The words “and/or expert evidence” have been added by an uncontroversial, unopposed amendment under the Amendment Summons (which I have therefore allowed). However, no such further plea (for which the right was supposedly reserved) has since been made – and it is trite that discovery, interrogatories, further and better particulars, and expert evidence flow from the issues identified in a pleading, and not the other way round.

49.Therefore, I accept Ms Tong’s submission that this proposed expert issue A1 travels well beyond the pleaded issues, which are simply (1) whether Ds maintained the vessel in the safely moored status, and (2) if not, whether such failure caused the Incident. I agree with Ms Tong that proposed issue A1 is framed in an imprecise, open-ended manner – I would say, in effect “fishing”. I reject Ms Leung’s submission that, if there is no expert evidence at trial, the Court will be left only with photos and will have to guess as to the cause of the capsize. Whilst P has apparently sought to focus on a hole and a tear in the hull shown in some of the photos of the Remaining Hull Parts, I do not think a desire to investigate those matters arises out of the current pleading. But factual evidence has already been filed on the mooring, and the Court will be able after trial to determine whether the Jumbo Kitchen Boat was in a safely moored status.

50.I also take into account that, in any event, the current condition of the Remaining Hull Parts identifies that the proposed expert issue would be unhelpful and lack probative value. Further, as Ms Tong pointed out, P itself previously accepted that once the bedding of the hull of the boat is destroyed, the cause of wreckage could no longer be ascertained.

51.As to issue B3, on exit/return, I accept that expert evidence was filed by both parties on this issue in the context of the Preservation Summons, when that evidence was relevant to the determination of that summons. But time has moved on, and the Expert Summons is seeking to obtain directions to adduce expert evidence at trial, in the context of the resolution of the trial issues. There is simply nothing in the pleadings relating to whether the Tai Pak Kitchen Boat is or is not precluded by PRC laws/regulations from returning to Hong Kong. That is not a trial issue, and therefore expert evidence on the point could not be relevant or helpful.

52.The Expert Summons is, therefore, dismissed. I see no reason why the costs of this summons should also not follow the event, and so be payable by P, with certificate for two Counsel, to be taxed if not agreed.

E.  Discovery Summons

53.By the Discovery Summons, P seeks disclosure of those 10 documents listed in the Schedule to the summons.

54.Again, there can be little dispute as to the principles governing an application for discovery under RHC Order 24 rule 10. That rule entitles a party to a cause or matter to serve a notice on any other party in whose pleadings, affidavits or witness statements, reference is made to any document requiring him to produce that document. There are two stages to be considered, though in practice they will usually be examined together. First, the party who has referred to the document in a pleading or affidavit bears the burden of showing good cause why an order for production should not be made – and it is ordinarily difficult, as a matter of practicality, for the referring party to contend that the document does not exist, and may also make it difficult to contend that it is not relevant. Secondly, an independent of the first stage, there is a burden on the applicant for an order for production to show the Court that the order is necessary either for disposing fairly of the cause or matter or for saving costs.

55.The items under Requests (1) to (8) in the Schedule are various plans, referred to in an affirmation, or various quotations for repair/renovation work carried out, or intended to be carried out by D1 on the Tai Pak Kitchen Boat. Ms Leung submitted that the plans are necessary, first to understand the scope of works and whether the boat may exit Zhongshan in its current state and return to Hong Kong, in accordance with the relevant PRC and Hong Kong laws. Obviously, that is tied to the exit/return issue, but I have held that is not a pleaded issue which requires resolution at trial. Ms Leung also says the plans (and in particular the general arrangement plan under Request (8)) are necessary for the Court to understand the extent of the approval sought by D1 from MarDep prior to commencing works, and whether such approvals or lack thereof would affect the subsequent renewal of the boat’s licence with MarDep. But, for similar reasons I have given above, I do not think such documents are necessary either for disposing fairly of the cause or matter of saving costs. In essence, there is no dispute as to whether the operating licence of the boat can be renewed.

56.As to the suggested necessity regarding the costs of reinstating the Tai Pak Kitchen Boat to a licensable status, I have already held that P is not entitled to seek any reinstatement order in the form sought by the proposed amendment, which is why I disallowed it.

57.The items under Requests (9) and (10), I also do not think these are necessary for disposing fairly of the cause or matter or for saving costs. I accept Ms Tong’s submissions that the various plans and contracts sought are not suitable to reflect the current status of the boat, were merely points of reference, and the contract documents do not shed any light on the extent of the works done or the sums expended. As to Ms Leung’s submission that the documents would enable the Court to assess D1’s allegation that it would suffer financial hardship if specific performance were ordered, that point (though referenced in a witness statement, or prior affidavit) has not in fact been pleaded. I do not think it appropriate to anticipate or assume that the point will be pleaded by D1, and order disclosure in advance or in case. Disclosure is to be made by reference to the issues as they arise on the pleadings at the time of the application for disclosure and its consideration by the Court.

58.For those reasons, I dismissed the Discovery Summons. I see no reason why the costs of this summons should also not follow the event, and so be payable by P, with certificate for two Counsel, to be taxed if not agreed.

F.  Security Summons

59.Ds’ application for security for costs is made pursuant to section 905 of the Companies Ordinance Cap 622 (“CO”), on the basis that there is reason to believe that P will be unable to pay Ds’ costs if Ds succeed in the action.

60.Again the relevant applicable principles are well established. Again, there is a two-stage analysis. The first stage involves an assessment as to whether there is credible testimony to believe the company will be unable to pay costs. Whilst the burden of showing that the plaintiff is impecunious rests on the defendant, the defendant cannot be expected to produce conclusive evidence of the plaintiff’s lack of means, and it is sufficient to point to the surrounding circumstances or adduce some credible evidence to support the belief. The Court must decide whether a reasonable person with ordinary experience of daily life would consider the plaintiff unable to pay such costs, and it is not necessary to prove the lack of means to pay.

61.The second stage involves the Court considering whether, in all the circumstances, it is fair to grant security for costs. The Court can take into account a wide range of different factors, including whether the plaintiff is using its impecuniosity to put pressure on the defendant, the plaintiff’s prospects of success, whether a security for costs order will stifle the plaintiff’s claim, and delay in making the application. However the Court should not delve into the respective merits of the parties’ case, unless it can clearly be demonstrated one way or the other that there is a high probability of success or failure. Where there is a counterclaim – as in this case – it may be necessary to ask whether the counterclaim is a cross-action or merely operates as a defence. There may need to be identification of the “real attacker” in the proceedings. The substantial position of the parties must be considered, and ascertaining matters is a question of substance and not of formality or pleading.

62.Ms Leung suggests that, in this case, Ds are the true attackers. I disagree, particularly where Ds have confirmed that they abandoned their previously pleaded counterclaim to damages to be assessed. I do not accept that step was taken to disguise themselves as the victim, in order to better their chance in the Security Summons, or to siphon off the damages claim to a second round of litigation.

63.I accept there are clear reasons to believe that P will be unable to pay Ds’ costs if Ds succeed on the action. As previously pointed out by DHCJ Phoebe Man, P is a company with only HK$10,000 in share capital and no known sizeable and liquid assets. Despite doubts raised as to P’s financial standing, and renewed requests made of P to provide evidence of its financial capability, P has not produced any documentary evidence such as bank statements or management accounts that could refute that doubt.

64.Pointing to the fact that P is an ongoing business, rather than a shelf company, does not remove the credible basis upon which to believe that P will be unable to pay costs if it loses. I have taken into the balance the point that Ds chose to enter into the Agreement with P, which was presumably on the basis that Ds regarded P as at least a credible and lawful shipyard in active business, able to handle/dispose of the 4 Boats legally and safely. But that point does not seem to me to have great weight in the overall circumstances to be weighed.

65.Nor does it assist P to point to the fact that it has been able to pay the roughly HK$3.6 million to fortify its undertaking of damages. It seems to me to be quite a different thing for P to provide funds in fortification of the preservation order which it pursued, as opposed to facing a potential costs order if it is ultimately unsuccessful in the main claim/action. What the provision of fortification does evidence, though, is that there may not be any suggestion that ordering security for costs would in some way stifle the claim (a point which is not really pursued by Ms Leung anyway).

66.I also do not think the merits of P’s claim can be said so strong as to point against an order for security of costs.

67.Ms Leung submitted a number of other points which she said weighed against an order of security, but I think they are really matters which go more to the amount of any security as might be ordered. She pointed to Ds’ delay in taking out the Security Summons, having waited over 30 months after 14 September 2023 (the fortification order), and with just over seven months before trial, to renew the request for security – which lateness is another instance of Ds’ oppression towards P. Ms Leung also asserted that the quantum of costs sought by Ds in the Skeleton Bill are both excessive and oppressive, entitling the Court to dismiss the application for security on this ground alone.

68.As I said, these points seem to me to go to the quantum of security to be ordered. But I wholly agree that the claimed security in the total sum of HK$13,571,100 – split roughly in half as to costs expended and those yet to be expended – is excessive. I also agree with the proposition advanced by Ms Leung that the applicant for security should provide a realistic estimate of his costs, and there is no room for any practice of inflating a bill and then settling for less in anticipation of a broad brush discount by the Court. But, I think there is sufficient information available in this case for the Court to identify the appropriate figure for security.

69.In assessing the appropriate sum of security to be provided, I take into account at least following matters: (1) the security to be provided need not be full but should be sufficient; (2) I have disallowed the contested amendment, and the largely connected applications for expert evidence and further disclosure, which will therefore not incur costs; (3) there has been apparent duplication of work between solicitors and Counsel, as shown on the Skeleton Bill; (4) there have been a number of changes in the Counsel team (though the additional costs may not be as great as might otherwise appear, for reasons explained by Ms Tong in her submissions); (5) the overall figure, and a number of the constituent element figures, are at least on the high side and are unlikely to survive the taxation exercise.

70.A difficult feature to weigh in the balance relates to the costs of the Preservation Summons. As I have indicated above, the present order nisi is that those costs are to be costs in the cause. Therefore, if Ds succeed at trial, they will also be entitled to the costs of the Preservation Summons. But the costs order nisi is subject to an outstanding variation application, adjourned to a date to be fixed, albeit that P has apparently not taken steps to fix a date or prosecute the application. Nevertheless, I do not think the correct approach at this stage is either to include or exclude all of the costs. Rather, I take these matters more broadly into the overall discretionary mix.

71.Therefore, I order P to pay into Court the sum of HK$7 million as security for D’s costs incurred, and to be incurred, in this action up to and inclusive of this stage of trial. The security sum must be provided on or before 21 February 2025. All further proceedings in this action are stayed until that security is given. Should P fail to provide that security for costs by that deadline, further proceedings against Ds in this action shall stand dismissed without further order, with costs (including any reserved costs) to Ds, to be taxed if not agreed.

72.For the avoidance of doubt, I do not make the order additionally sought by Ds, to grant Ds liberty to apply for further security for costs, as and when they might consider it necessary.

G.  CMC Directions

73.The appropriate CMC directions are not so controversial. I can make the direction/orders broadly in accordance with the suggestions made by Ms Leung (though I do not think there is any need for filing and service of any updated Listing Questionnaires). In the timetabling, I take account of the public holidays shortly before the PTR hearing.

74.I make the following directions/orders:

(1)  The matter is adjourned to a PTR hearing at 10am on 7 May 2025.

(2)  The bundles used for the CMC hearing, and the four Summonses dealt with on the same occasion, shall be retained for use at the PTR, with any necessary additional documents added.

(3)  The plaintiff shall file and serve skeleton submissions for the PTR by 4pm on 29 April 2025.

(4)  The defendants shall file and serve skeleton submissions for the PTR by 4pm on 2 May 2025.

(5)  All documents in Chinese shall be translated into English and be certified or agreed between the parties at least 28 days before the trial.

(6)  Liberty to apply.

(7)  Costs of the CMC hearing to be in the cause.

75.At the CMC hearing, I also asked the parties to give advance thought to the preparation of an electronic bundle for use at the trial (in accordance with the relevant practice directions for such bundles). Though I have currently directed the PTR to be conducted using the existing bundles, if an electronic bundle is available for use at the PTR, that would also be acceptable. Any further documents can be added to it or extracted from it, insofar as is necessary, for the trial. I respectfully urge the parties to give early thought to how the trial bundle can be prepared, so as to include only such documents as are reasonably required for the conduct of the trial (and not simply throwing in everything that has been prepared throughout the interlocutory processes).

Ms Joyce Leung and Mr Johnathan Tsang, instructed by CFN Lawyers, for the plaintiff

Ms Sara Tong SC and Mr Thomas Wong, instructed by Johnson, Stokes & Master, for the 1^st and 2^nd defendants