Bank of Qingdao Co Ltd v. Ooo Securities (HK) Group Ltd (Formerly Known As Orientiert Xyz Securities Ltd, Amtd Global Markets Ltd and Amtd Asset Management Ltd

HCA 1127/2022 and HCA 1141/2022

(Consolidated)

[2025] HKCFI 775

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1127 OF 2022 and 1141 OF 2022

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BETWEEN

(BY LEADING ACTION)

________________________

BETWEEN

(BY COUNTERCLAIM)

(Consolidated by Order of Master Kent Yee dated the 13th day of October 2022)

________________________

________________________

DECISION

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Introduction

This is an application (“Stay Application”)  made by the Defendant (in the Consolidated Action by Leading Action)  (the “Defendant”)  for stay of execution of paragraphs 2 to 3 of the order I made at the hearing on 23 December 2024 (the “Order”)  that (amongst others)  leave be granted to the Plaintiff (in the Consolidated Action by Leading Action)  (“Plaintiff”)  to amend its Consolidated Statement of Claim (“SOC”). 

Background & procedural history

1.The present dispute arises from an Investment Management Agreement dated 29 December 2015 (“IMA”)  entered into between the Plaintiff as the client and the Defendant as Investment Manager whereby the Defendant would manage certain portfolios of securities on behalf of the Plaintiff.  

2.Relevantly, the Plaintiff claims against the Defendant for breach of its contractual and fiduciary obligations by investing in securities (the “Everglory Securities”)  issued by Everglory Strategic Investment Limited (“Everglory”)  allegedly without authorisation from the Plaintiff and in breach of the applicable Investment Guidelines[1]. 

3.According to its Amended Defence and Counterclaim (“ADCC”), the Defendant admitted that it had invested in the Everglory Securities[2]. Nevertheless, the Defendant claimed that the said investments were justified.  First, it was said that the relevant restrictions in the Investment Guidelines were varied by agreement of the parties[3]. Second, the Defendant claimed that it had specific or general authority to invest in the Everglory Securities[4].

4.The circumstances which give rise to the Stay Application are as follows:-

(i)  By summons dated 19 September 2024 (the “Amendment Summons”), the Plaintiff sought leave to amend the SOC.  The proposed amendments are related to two further or alternative allegations against the Defendant:

(a)  the investment into the Everglory Securities was not made in good faith or in the best interests of the Plaintiff (the “Everglory Amendments”)[5]; and

(b)  the Defendant was in breach of Clause 3.2 of the IMA which (amongst others)  prohibited the Defendant from having custody of the investments.  It is alleged that the Defendant had made false representations to the Plaintiff that the investments were held with Citibank when some of them were in fact directly held by the Defendant[6] (the “Clause 3.2 Amendments”, together with the Everglory Amendments, the “Amendments”).

(ii)  After the Defendant raised an objection to the Amendment Summons on the ground that it was issued in breach of an unless order made by Master S P Yip on 4 June 2024 (the “Unless Order”), the Plaintiff made an application for relief from sanction by summons dated 23 September 2024 (the “Relief Summons”). 

(iii)  At the hearing on 23 December 2024:-

(a)  I found that the Amendment Summons was not barred by the Unless Order. I also allowed the Amendments.

(b)  In light of my finding in (a)  above, I made no order on the Relief Summons. 

5.The Amended SOC which incorporated the Amendments was filed on 24 December 2024. On 6 January 2025, the Defendant filed a Notice of Appeal against the Order which was followed by the Stay Application[7] filed on 23 January 2025 whereby the Defendant sought a stay of the portion of the Order requiring it to plead to the Amendments.  

6.As directed by the Registrar on 22 January 2025, the Stay Application is dealt with on paper after the parties have filed their written submissions. 

Jurisdiction to grant stay

7.The Plaintiff first raised its objection to this court’s jurisdiction to determine the Stay Application by its solicitors’ letter dated 22 January 2025.  In its skeleton submissions, the Plaintiff did not make any further submission but reserved its position to argue further on the issue. 

8.I am satisfied that this court has jurisdiction for the following reasons:-

(i)  The only authority relied upon by the Plaintiff in support is a footnote in Practice Form No 132 of Hong Kong Civil Procedure 2025 which suggests that the power to order a stay of execution may only be exercised by the Judge after a notice of appeal is served.  

(ii)  The correctness of the said footnote from an earlier version of the text was expressly considered and rejected by Anthony Chan J as lacking any logic or reason in Re The Grande Holdings Limited HCCW177/2011 (unreported, 20 July 2017)  at §§6-13.  

(iii)  More recently, in Source View Development Ltd v Tang Kam Cheung [2022] 2 HKLRD 1, the defendant first made an application for stay of execution to a master two days after the filing of the Notice of Appeal, then proceeded to issue a summons for stay to be heard before a judge without waiting for a decision from the master.  Deputy High Court Judge Winnie Tsui (as she then was)  described the practice of first applying for a stay from the master as a “general and well-established” practice[8].

Principles on stay of execution

9.The principles governing the exercise of the court’s power to grant a stay of execution are well-established and need not be repeated at length.  In short:-

(i)  A stay of execution should only be granted if good reasons exist.  There is no exhaustive definition of what would constitute good reasons but the reference is commonly made to whether the stay would render the appeal nugatory and the merits of the appeal. 

(ii)  In relation to the merits, the Court should refrain from going deeply into the merits but should form a preliminary view.  The existence of an arguable appeal with a reasonable prospect of success is the minimum requirement before a court would even consider granting a stay. 

(iii)  It may be sufficient to demonstrate that the appeal would be rendered nugatory if the appellant can show that the failure to grant a stay would have a serious deleterious against it. 

(iv)  Ultimately, the court embarks on a balancing exercise bearing in mind at all times that the starting point is that the successful party is not to be deprived of the fruits of his success. 

See: Star Play Development Ltd v Bess Fashion Management Co Ltd [2007] 5 HKC 84 at §§7-10 per Ma J (as Ma CJ then was); Source View (above)  at §26.

Whether stay should be granted

10.In support of the Stay Application, the Defendant argues that the appeal is at least reasonably arguable and that the appeal will be rendered nugatory in the absence of a stay. 

Merits

11.On the merits of the upcoming appeal, the crucial issues[9] to be determined are as follows:-

(i)  Whether the Amendment Summons was barred by the Unless Order?

(ii)  Whether in any event, should the Amendments be allowed?

12.On issue (i), I am not satisfied that the Defendant has a reasonable prospect of success. 

13.Relevantly, §1 of the Unless Order provides that “…unless the parties take out any other intended interlocutory applications including but not limited to inspection of documents, specific discovery, and amendment of pleadings by 4p.m. on 2 July 2024, the defaulting party shall be debarred from taking out the said any other intended interlocutory applications” (emphasis added). 

14.This issue turns on the construction of the term “intended interlocutory application” as used above, namely, whether the Amendment Summons is one such “intended” interlocutory application. 

15.It is trite that the Unless Order must be construed against the background in which it was made.  As explained by the Privy Council in Sans Souci Ltd v VRL Services Ltd [2012] UKPC 6 at §13:-

“…the construction of a judicial order, like that of any other legal instrument, is a single coherent process. It depends on what the language of the order would convey, in the circumstances in which the Court made it, so far as these circumstances were before the Court and patent to the parties. The reasons for making the order which are given by the Court in its judgment are an overt and authoritative statement of the circumstances which it regarded as relevant. They are therefore always admissible to construe the order. In particular, the interpretation of an order may be critically affected by knowing what the Court considered to be the issue which its order was supposed to resolve” (emphasis added).

16.It is not disputed that the relevant wording of the Unless Order originated from an order by Master D To made on 16 January 2024[10]. As expressly provided in the preamble of the said order, the order was made upon reading the Timetabling Questionnaires filed by the parties where the parties had indicated the interlocutory applications that they “intended”[11] to take out at that juncture. 

17.When the relevant order was made by Master D To, the proceedings were still at a relatively early stage when amendments to the pleadings and further discovery were likely.  They may also in turn prompt further applications.  It is highly unlikely the learned master would have intended at that stage that all applications must be taken out by the parties before the deadline (ie that no further application would be allowed before trial unless relief from sanction is sought). 

18.Against this background, I have no doubt that the term “intended interlocutory applications” must be a reference to those which the parties have expressly indicated as such in their Timetabling Questionnaires and do not cover the Amendment Summons.  

19.For completeness, I disagree with the submission by the Defendant’s counsel that the above construction would turn the Unless Order into a toothless tiger, promote uncertainty or encourage parties to be less honest with the court by not revealing their next steps:-

(i)  The Unless Order served a useful purpose of ensuring that the case would proceed in an orderly manner by stipulating a deadline for which the intended applications expressly indicated by the parties should be taken out. 

(ii)  There is no uncertainty because the meaning of the “intended” applications is clear by reference to the parties’ Timetabling Questionnaires. 

(iii)  I am not concerned that this construction would promote dishonesty given that the parties’ solicitors (who owe their duties as officers of the court)  are expressly required to declare that the answers given in the questionnaires are true and accurate to the best of their information and belief.  

20.For issue (ii), I also take the view there is no reasonable prospect of success. 

21.It is well established that leave to amend pleadings is readily granted before trial unless it is bound to fail.  Amendments ought to be allowed for the purpose of determining the real question in controversy between the parties to any proceedings, see: Natamon Protpakorn v Citibank NA [2009] 1 HKLRD 455 at §§25-26 per Cheung JA; Re Hin-Pro International Logistics Ltd [2016] 1 HKLRD 1367 at §8 per Ng J. 

22.As a starting point, it has not been suggested that the Amendments are bound to fail. 

23.Regardless of whether the Amendments would make any difference to the ultimate result as further/alternative claims, I am of the view that they ought to be allowed as they also serve as material factual allegations which will further facilitate the clarification and resolution of the Plaintiff’s existing claim, namely that the investment into the Everglory Securities was unauthorised, as the Amendments are capable of forming a material part of the factual matrix to show whether the Plaintiff could have consented to the subscription of the Everglory Securities. 

24.I am also not satisfied that the Amendments were so insufficiently particularised that the Defendant would have any serious difficulty pleading to them, given its previous role as the Plaintiff’s investment manager and that it had no difficulty pleading: (i)  the circumstances in which the investment in the Everglory Securities were made; (ii)  the choice of custodian; and (iii)  the relevant discussions between the parties[12]. The Defendant could hardly be handicapped in pleading its factual case as to the propriety of investing into Everglory Securities and the custody status of the investments managed by the Defendant at the material time. 

25.Adopting a preliminary view, I am not satisfied that the merits of the appeal have surmounted the requisite minimum threshold for a stay to be granted. 

Whether appeal will be rendered nugatory if stay not granted

26.For completeness, I will also consider whether the appeal will be rendered nugatory if I refuse to stay the Order as sought. 

27.In my view, the Defendant has failed to make out a case that it would suffer any serious deleterious effect or irreversible prejudice if a stay is refused. 

28.First, as pointed out by the Plaintiff’s counsel in their written submissions, if the appeal is ultimately successful, the Amendments (and any consequential pleas)  can simply be expunged. 

29.Second, the Defendant has not put forward sufficient evidence that it would suffer any serious prejudice if it were to plead to the Amendments:-

(i)  As analysed in §25 above, there should be no difficulty for the Defendant to plead to the Amendments.  The only prejudice that Mr He referred to in the He 3^rd Affirmation was that time and costs would be wasted[13]. However, the wastage of time and costs is almost inevitable in every case where an appeal is successful.  Such prejudice is readily compensated by appropriate costs orders[14]. This can hardly constitute good reason for granting a stay. 

(ii)  Insofar as it is alleged that the Amendments were used by the Plaintiff in support of a fishing expedition, I am not satisfied that this is a material factor for present purposes, given that the relevant discovery application is still pending and no order for discovery has been made.  It is a matter for the master hearing the discovery application (if restored before the appeal)  to decide whether any discovery order (if made)  should be stayed pending the appeal. 

30.Hence, no good reason has been shown to deprive the Plaintiff of the fruits of its success. 

Order & Costs

31.Accordingly, I dismiss the Stay Application. 

32.Having considered the circumstances, I take the view that costs should follow the event.  However, it is not appropriate to grant a certificate for two counsel given that much of the Stay Application involved a rehashing of the argument made at the previous hearing on 23 December 2024.  I therefore make an order that the Defendant do pay to the Plaintiff the costs of the Stay Application on a party and party basis with a certificate for one counsel only, to be summarily assessed and payable forthwith as follows:-

(i)  The Plaintiff do lodge and serve its Statement of Costs on or before 10 March 2025.

(ii)  The Defendant do lodge and serve its statement of objections on or before 24 March 2025.

(iii)  The summary assessment is to be conducted on paper.

Mr Rimsky Yuen SC and Mr Martin Ho, instructed by Zhong Lun Law Firm LLP, for the Plaintiff (in the Consolidated Action by Leading Action)

Mr Danny Tang, instructed by Gibson, Dunn & Crutcher, for the Defendant (in the Consolidated Action by Leading Action)