Golden Tech (Asia) Ltd v. Po Yuen (To's) Machine Factory Ltd
Read the full judgment text of HCA 4517/2001 on BabelCite. This High Court CFI judgment was delivered on 27 May 2004.
1. The plaintiff's claim against the defendant is for the return of various finished/semi-finished die-casting machinery, spare parts and components ("the goods") which were supplied to or stored at the defendant's premises in Tai Po and Dongguan pursuant to five agreements pleaded in paragraph 2 of the Statement of Claim.
Cited by 5 cases
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HCA004517B/2001 HCA4517/2001 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO.4517 OF 2001 ---------------------
---------------------- Coram: Hon Tang J in Chambers Date of Hearing: 18 May 2004 Date of Judgment: 27 May 2004 ------------------------- J U D G M E N T ------------------------- 1.The plaintiff's claim against the defendant is for the return of various finished/semi-finished die-casting machinery, spare parts and components ("the goods") which were supplied to or stored at the defendant's premises in Tai Po and Dongguan pursuant to five agreements pleaded in paragraph 2 of the Statement of Claim. 2.The defendant is a company owned and controlled by the To family. To Chung Yung ("C.Y. To"), the second son of the To family, was until June 2000 a registered shareholder of one quarter of the issued capital in the plaintiff. 3.Ms Cammy Chan Siu King, the majority beneficial owner of the plaintiff, has had connection with the To family going back many years. According to Ms Chan, she was employed by the defendant from 1975 to 1998 when she left to form the plaintiff together with Ms Lau Shiu Ying, Lam Man Kin and C.Y. To. 4.At one time the plaintiff aspired to a listing on the GEM. That was in 2000. That did not come to pass. 5.On 10 July 2001, Ms Lau petitioned to wind-up the plaintiff. That led to the appointment of KPMG as receivers. Eventually this was discharged after Ms Lau's shares were bought by Ms Chan for $1.2 million. 6.Following that, on 22 January 2002, Ms Lau's petition was dismissed. 7.However in March 2002, C.Y. To together with Kwok Tzi Lai Ernest, Cheng Wai Ho brought a minority shareholder's petition to wind-up the company and/or to have their shares bought out (HCCW832/2002). It was, I understand, C.Y. To's case that Kwok and Cheng, to whom he transferred his shares, held those shares in trust for him. Eventually that petition was withdrawn in January 2003. The plaintiff complained that C.Y. To's petition resulted in severe financial impact on the petitioner because it lost the support of its bankers and its accounts were frozen. I tried to ascertain from Mr Cheung who appeared for the defendant the reason for C.Y. To's abortive petition. However, Mr Cheung has no instructions on the matter. 8.In relation to the claim by the plaintiff for the return of the goods, at least part of them has been admitted by the defendant to belong to the plaintiff. The plaintiff puts a value of $605,509.26 on them. There is a dispute over whether it was the plaintiff's or the defendant's fault that delivery of the same had not been taken or given. It is the defendant's case that they are not of any real value. Mr Kwong, an indirect shareholder of the plaintiff who appeared on behalf of the plaintiff, submitted that these goods are valuable and can even now be sold for a substantial sum. I asked Mr Cheung whether the defendant is prepared even now to allow the plaintiff to take delivery. Mr Cheung frankly admitted that whilst there is no reason in principle why the defendant should not allow delivery to be taken, he is not optimistic that it would happen given the relationship between the parties. He believes that it would get bog down into further disputes between the parties. 9.The plaintiff's case is that these goods and others would not be returned because they are being used by a rival business set up by the defendant to compete with the plaintiff in September 2001, that is, a company called 寶弘機械有限公司 referred to in paragraph 36 of the 4th affirmation of Chan Wing Man Arthur. 10.I should also mention that at one time default judgment was entered against the defendant. It was set aside by Deputy Judge Poon on 19 June 2002 with costs against the defendant in any event. At that time the plaintiff was represented by Mr Benjamin Yu, SC. I am told that the total costs paid by the plaintiff amounted to approximately $450,000. Of course the figure would be subject to taxation in due course but this is a factor which I should bear in mind in deciding this appeal. 11.This is an appeal from the decision of Master Levy made on 16 March 2004 when he ordered the plaintiff to provide $500,000 as security for costs. 12.I believe what prompted Master Levy to make the order was that there was no information concerning the shareholders of Golden Tech (BVI) Holding, the immediate holding company of the plaintiff, so he was not satisfied that the plaintiff or a shareholder or a backer was unable to provide security. 13.Further evidence has been put in by the plaintiff. 14.Such evidence showed a complicated corporate structure but, reduced to its essentials, it appears that Ms Chan is the majority beneficial shareholder of the group of which the plaintiff is part. Her husband, Mr Kwong, is also a beneficial shareholder. Ms Chan has been adjudicated bankrupt. Mr Kwong is a retired civil servant living on a monthly pension of $49,125. He has no other assets, he is indebted to the Bank of East Asia in the sum of approximately $297,000 which he is paying off by installment. He has to support an 18-year-old daughter. I am also satisfied that the other minor shareholders cannot be expected to contribute to the security for costs. 15.In passing, I should mention Total Quality International Ltd which is the owner of 266 million shares in Golden Tech International Holdings Ltd (Bermuda) which wholly owns Golden Tech (BVI) Ltd, which in turn owns a 100% of the plaintiff. However the petition of C.Y. To showed that the nominal value of Total Quality shares is $0.1. More importantly, it was his case that none of the companies shown on the corporate chart had any real assets at all. It also appears that the complicated corporate structure was probably the result of the attempt to obtain a GEM listing. On the evidence before me, I am satisfied that the shareholders and/or backers of the plaintiff are not in a position to provide the security ordered. 16.In deciding whether security should be ordered, the matters which I should take into consideration included :
In cases where there may be a risk of stifling a genuine claim, the court has to perform a balancing exercise by weighing the injustice to the plaintiff if prevented from pursuing a proper claim against the injustice to the defendant if no security is ordered and, on the plaintiff's claim failing, being unable to recover the costs incurred in defending its claim. See Hong Kong Civil Procedure 23/3/14. 17.There is no doubt that the plaintiff is impecunious. But I do not think the plaintiff is using its impecuniosity to put pressure on the defendant. The plaintiff has a bona fide claim and I am satisfied that the action is not brought for any ulterior motive. 18.As for prospect of success, it is not possible or desirable to go into the merits in any detail. However this is not a case in which the plaintiff can demonstrate that it has a high degree of probability of success at trial. 19.I believe the plaintiff's case would indeed be stifled because I believe that the plaintiff would genuinely be unable to provide security. 20.As for lateness of application, I accept the submission made on behalf of the defendant that it was only in May 2003 that the defendant discovered the true state of the plaintiff company's finances. The application for security for costs was then taken out in July 2003 after correspondence with the plaintiff for security which was refused by the plaintiff. I do not think there has been any delay on the part of the defendant. 21.This case is nicely balanced. I am not surprised that on the evidence before the Master he made the order he did. But I must exercise my own discretion. I also have the benefit of additional evidence. 22.This is not a straightforward business dispute between two commercial entities. It has some similarity with a shareholders' dispute. 23.One of the plaintiff's complaints is that it was the conduct of the defendant which has put it into a position of impecuniosity. There was the petition by C.Y. To to wind-up the company which was subsequently withdrawn, as well as the establishment of a company to compete with the plaintiff. It is alleged that machineries or parts of machinery belonging to the plaintiff were used by that entity to compete with the plaintiff. 24.I am of course not in a position to express any view on the propriety of the petition brought by C.Y. To. Certainly the petition itself alleged serious misconduct on the part of Ms Chan and Mr Kwong. Nor am I in a position to decide whether machineries or parts of machinery belonging to the plaintiff were indeed used by a company set up by the defendant to compete with the plaintiff. 25.I am really left with a bona fide claim which is not being pursued for any ulterior motive. A claim which would be stifled if security is ordered. I am satisfied that there are no backers or shareholders to pay the security. I take also into account the undoubted hardship to the defendant in the event that it succeeds because on the evidence before me it is quite clear that the plaintiff would not be able to pay the defendant's costs. 26.On the other hand, the defendant is holding valuable assets of the plaintiff. They have a value of $600,000 odd according to the plaintiff. The defendant denies that they are of any real value. But the fact that they are unlikely to be returned by the plaintiff voluntarily shows that such machinery or parts may not be valueless. 27.The plaintiff also has a substantial costs order against the defendant. 28.In all the circumstances, I have come to the conclusion that I would not order any security. Accordingly, I would set aside the order of Master Levy. Costs 29.The costs order made by Master Levy should not be disturbed. On the material before him the order was rightly made and the plaintiff should remain liable to pay such costs, to be taxed if not agreed in any event. Cost of the appeal 30.I believe the cost of the appeal should be paid by the defendant in any event. 31.In my order of 28 April 2004, I gave leave to the plaintiff to file the 4th affirmation of Arthur Chan. I reserved the question whether such costs should be borne by the plaintiff in any event or to be paid forthwith. In all the circumstances, I believe that they should be paid in any event.
Representation: Mr Kwong Kwok Kong, in person, represented for the Plaintiff Mr Anthony P.W. Cheung, instructed by Messrs Norman M.K. Yeung & Co., for the Defendant |
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