Kammy Town Ltd v. Super Glory Corporation Ltd

HCA 3524/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 3524 OF 2003

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BETWEEN

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Before: Hon A Cheung J in Chambers

Date of hearing: 15 December 2004

Date of judgment: 14 January 2005

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J U D G M E N T

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1.This is an appeal from the order of a master to strike out the amended statement of claim and dismiss the present action, on the ground that the writ of summons was issued and the subsequent proceedings conducted without the authority of the Plaintiff, a limited company.

2.Very briefly, the Plaintiff is a private company with two shareholders – Cheung Kam Wah and Cheung Hon Wah (Howard Cheung), each owning 50% of the issued shareholding.  At all material times, they were the only directors of the company.  The two Cheungs are brothers.  They have a sister (Cheung Lai Ming) who was and is the financial controller of the Plaintiff; however she has no shareholding in the company and was not a director of the company at the material times.

3.To cut a long story short, since early 2003, the two brothers have been at loggerheads with each other.  Proceedings were commenced by Cheung Kam Wah against Howard Cheung in April 2003, an injunction was applied for, and various other steps were taken.

4.In this action, it is claimed that the Defendant owes the Plaintiff trading debts.  There is no serious dispute that at all material times when those debts were allegedly incurred, Howard Cheung was a director and shareholder of the Defendant.  Against the acrimonious relationship between the two brothers and the interest of Howard Cheung in the Defendant as background, it is said on behalf of the Plaintiff (or more correctly perhaps, on behalf of Cheung Kam Wah) that Howard Cheung has as director (of the Plaintiff) given his consent to the commencement of the present action by the Plaintiff against the Defendant.

5.The Defendant disputes this proposition.  In gist, the Defendant argues that against the known background, it is quite unbelievable that Howard Cheung would have consented to the bringing of action in the name of the Plaintiff against the Defendant, and those giving instructions in the name of the Plaintiff in the present action are thus put to proof of their allegation.

6.Procedurally, the Defendant’s objection took the form of a summons to strike out the amended statement of claim and to dismiss the action, taken out under the inherent jurisdiction of the court.  Affirmation evidence was filed by both sides pursuant to the direction of a master.  Eventually, the matter was heard by another master who decided the application on affirmation evidence alone.  As mentioned above, he concluded that the present action was commenced in the name of the Plaintiff without its authority.  The amended statement of claim was struck out and the action dismissed.

7.Mr Warren Chan SC, leading Mr Lawrence Ng, both appearing for the Plaintiff in this appeal but not below, asked the Court to allow the appeal, set aside the order made below, and direct that there be a trial on this question of the Plaintiff’s authorisation of the present action.  The appeal was opposed by Ms Alice Mok SC, leading Mr Kam Cheung. 

8.It is common ground that this appeal is a de novo hearing.  It is also common ground that although this is a “strike out” application, it is quite different from an ordinary application to strike out a pleading under Order 18 rule 19.  Familiar principles like the one that the court should not exercise its discretion to strike out a pleading unless it is a “plain and obvious” case to do so has little if any relevance or application. 

9.The nature of an application of the present type has been clearly expounded by the English Court of Appeal in Airways Ltd v. Bowen [1985] BCLC 355, 358f to 361g:

“So far as concerns the practice of applying to strike out the plaintiffs’ name, we were referred to a number of authorities, in particular to the leading decision of the House of Lords in Russian Commercial and Industrial Bank v Le Comptoir d’Escompte de Mulhouse [1925] AC 112.  The relevant passage is in the speech of Viscount Cave (at 130).  He said, in relation to the issue as to the authority of the company’s secretary, Mr Jones, to bring those proceedings in the name of the plaintiffs:

‘My lords, I do not think it is open to the defendants to raise this question by way of defence to the action.  If the defendants desired to dispute the authority of Mr Jones to commence these proceedings in the name of the plaintiff company, their proper course was to move at an early stage of the action to have the name of the company struck out as plaintiff and so to bring the proceedings to an end.’

…

The important point … which the judge must have overlooked is that a contention that an action is not properly constituted, due to lack of authority from the named plaintiffs to bring it, is one which cannot be raised by way of defence.  It must be raised at the outset, and it must therefore be dealt with at the outset.  The only qualification is that even if it is not raised at the outset, but if it then comes to the notice of the court or of the defendants in the course of the proceedings, then it can still be raised as an issue at that stage, but not by way of defence to the action.  In the present case it was properly raised at the outset.  The judge should therefore have borne in mind that this issue had to be decided at the outset, subject only to the possibility of adjourning the application.  Once the issue has been raised, it is, with respect, plainly wrong to decline to decide the issue on the ground that the rights and wrongs as to the control of the company and the propriety of the proceedings may be in doubt, and then to allow the action to go on by dismissing the application without having decided it on the merits.  That, unfortunately, was the course which the judge ultimately took at the end of the lengthy and careful consideration which he gave to this issue, being one with which he may not have been familiar in the ordinary course of his experience.  If the application is dismissed, when it is either clear that the action has in fact been brought without authority or that it is at any rate doubtful whether it was brought with authority, and if the action is thereupon allowed to proceed, which is what the judge decided, then that must be a plainly erroneous conclusion.  The reason is that the defendants will then never have any further opportunity of raising this issue, however well-founded their application may be.

…

Once it is clear, as it was by these concessions, that the action was improperly constituted, this action could not be allowed to proceed.  Whatever the form of the order made in that regard, whether the action is dismissed, struck out or stayed, the effect must be, in the words of Viscount Cave, that the proceedings must be brought to an end.  It then also follows on the authorities, and was not in dispute, that the solicitors who brought the proceedings without authority will themselves be liable to pay the costs thereby incurred.

…

Unfortunately both counsel and the judge, perhaps because none of them had prior experience of an issue of this kind, fell into error in their joint consideration of the Rules of the Supreme Court which they considered to be relevant for this purpose.  In particular, and it does not really matter who first mentioned this as a basis for the jurisdiction of the court, counsel’s submissions were directed to RSC Ord r8, r19(r)(d).  This provides:

‘The Court may at any stage of the proceedings order to be struck out or amended any pleading or the indorsement of any writ in the action, or anything in any pleading or in the indorsement, on the ground that … (d) it is otherwise an abuse of the process of the court’.

What that provision deals with is striking out allegations in pleadings, whether by way of claim or by way of defence.  In that regard it is of course a settled principle, which the judge applied in this case, but which was not relevant in the present context, that allegations in pleadings will only be struck out in plain and clear cases.  The reason is that matters should not be struck out in limine if the factual or legal position is not clear, and where it is therefore right that the party wishing to rely on the pleaded allegation should have an opportunity of doing so at the trial of the action.  Ex hypothesi, however, that cannot apply to an allegation that an action has been brought without authority, since it is settled law that this issue can never be raised again by way of defence in the action.  But it is perhaps understandable that both counsel and the judge were directed to that rule in the present connection, because, as Croom-Johnson LJ pointed out in the course of the argument, in para 18/19/19 of the Notes in the Annual Practice the authorities on the question whether or not there is authority to sue, including the Russian Bank case [1925] AC 112 which I have mentioned, are cited and discussed.  The judge therefore fell into the error of thinking that the decision which he had to make was in some way governed by the discretion which falls to be exercised when considering whether or not an allegation in a pleading should be struck out in limine under this rule, or whether it must be allowed to go to trial.

Similarly, whenever the judge was referred to other considerations which might be relevant to his decision on this issue, he always came back to the question of discretion.  Thus, he was referred to 37 Halsbury’s Laws (4^th edn), para 442, dealing with the court’s inherent jurisdiction to stay an action.  One of the grounds there instanced is that proceedings may be stayed if they are instituted or continued without lawful authority.  The judge thereupon in effect said to himself: ‘That again leads me to the question of how my discretion is to be exercised.  I must err on the side of caution in staying an action when there is dispute between the parties as to whether the proceedings are properly constituted or not’.  In that, again, I think that he overlooked the concessions which counsel for the solicitors (Mr Blackmore) had rightly made and which left no room for the exercise of any discretion by the court.  Again, when the judge was referred to Ord 15, r6, dealing with the power to stay proceedings, he fell into the same error by again referring to the caution which had to be exercised in deciding whether or not to make use of his discretion.

There could not be a clearer case than the present, once it had been conceded that the action was and remained improperly constituted and brought without authority.  In those circumstances the judge should have granted this application at once, with the effect that the action would necessarily have come to an end.  Nothing else was open to him on the facts of this case.

The only qualification, as I mentioned earlier, is that it is of course open to the court in appropriate cases to adjourn an application of this kind in order that an issue may be tried as to whether or not the proceedings were in fact brought with due authority.  That might involve adjourning the action until after a shareholders’ meeting had been held, or proceedings as to the right to call such a meeting had been determined, for the purpose of deciding whether the register, albeit presumed to be correct, in fact represents the true state of affairs concerning the identity of the directors and/or of the controlling shareholders.

Furthermore, as counsel for the solicitors reminded us, if an action is started without authority, that position may nevertheless be cured by subsequent ratification.  The authority is Danish Mercantile Co Ltd v Beaumont [1951] 1 All ER 925, [1951] 1 Ch 680, where an action improperly instituted by a company, which was subsequently would up, was retrospectively and effectively ratified by the liquidator who was thereafter appointed.  It was argued that since the action had been improperly brought at the outset, no subsequent ratification could cure its initial defectiveness.  That was rejected by this court.  That point, however, is wholly irrelevant here, since there has been no such ratification.

It follows that in the present case the only alternative to granting this application and thus putting an end to the action would have been to adjourn the application in order that the issues as to what took place at these alleged company meetings on 8 April 1983 should be tried out between the competing factions, Mr Bowen and Mr Reid on the one side and the Trunkfield faction on the other.  However, at the end of the day neither side wanted any adjournment.  Indeed, the judge said, in one passage in his judgment: ‘Both sides are agreed that the action should come to an end’, and he referred to the fact that the only remaining issue related to costs.”

10.See also Daimler Company Limited v. Continental Tyre and Rubber Company (Great Britain) Limited [1916] 2 AC 307; Russian Commercial and Industrial Bank v. Comptoir D’ Escompte de Mulhouse [1925] AC 1152; Danish Mercantile Co. Ltd v. Beaumont [1951] 1 Ch 680; Re Oriental Gas Co. Ltd [2000] 1 BCLC 209; and Palmer’s Company Law (25^th ed.), vol. 2,  para. 8.803.

11.In short, a point on lack of authority must be taken by a defendant at the earliest opportunity.  It should not be raised as a point of defence, for it is not a defence, and for that reason the matter should not be left for determination at trial.  Furthermore, given the nature of the point, the matter should not be left to be determined at trial together with the substantive issues between the parties, the determination of which issues at trial would become a total waste of time and resources if the point on lack of authority should be upheld at the end of the day.

12.The procedure to raise the point on lack of authority is an application to strike out the plaintiff’s name under the inherent jurisdiction of the court.  Maybe for the sake of convenience, this type of applications is included in the general discussion on striking out applications (of pleadings) under Order 18 rule 19 in Hong Kong Civil Procedure 2004, Vol. 1, para. 18/19/24.

13.However, unlike an ordinary application to strike out a pleading, the present type of striking out applications inevitably requires a definitive determination by the court seised of the application on the point.  In other words, either the action was authorised by the company or it was not.  There is no halfway house.  The point has to be decided according to the burden and standard of proof – the burden lies with those suing in the name of the plaintiff to prove authorization.  Subject to any subsequent ratification (where necessary) of the action by the company, the action will stand or fall depending on the court’s determination of the question of authority.

14.For those reasons, it is not appropriate for a court, seised of the application, to simply say on the affidavit evidence before it that it is not a “plain and obvious” case of a lack of authority, and therefore the application should be dismissed and the action allowed to proceed to trial.  Rather, at the substantive hearing, the court has to see whether the objection raised by the defendant can be summarily disposed of on the affidavit evidence that has been placed before the court for the purpose, and if not, how the objection can be determined and give directions accordingly.

15.An objection of the present type can be dealt with summarily at the substantive hearing before the court seised of the application if, for instance, the objection is plainly bad on the affidavit evidence.  Conversely, if on the affidavit evidence, it is plain beyond reasonable argument to the contrary that even taken to the highest, the affidavit evidence put in by those suing in the name of the company does not support the claim that the action has been authorised, then barring any question of ratification, the court would be quite entitled to summarily determine the objection in the defendant’s favour and strike out the name of the company from the action and thus bring an end to the litigation. 

16.Another possible scenario would be where the affidavit evidence placed by those suing in the name of the plaintiff before the court is such that it is utterly unbelievable (as opposed to that it should not be believed, analogy being drawn with an Order 14 application), in which case the court would be quite entitled to reject the case and evidence of those suing in the name of the plaintiff, and conclude that they have failed to discharge the burden of proving that the action has been commenced with the authority of the company, and strike out the name of the company accordingly.

17.Thus in Daimler, supra, by the time the case reached the House of Lords, evidence had been closed, and their Lordships were in a position to say that they did not find the oral assertion of the secretary of the company to the effect that the action was authorised credible, in the light of the available documentary evidence and circumstances.  In the words of Lord Atkinson (at p. 327):

“Now as to the proof of the delegation.  There is not a scrap of writing of any kind given in evidence in this case to prove that any power to institute actions or give receipts for money recovered was ever conferred upon the secretary.  The only document he referred to as conferring it upon him contradicts every statement made by him on the point.  It seems incredible that he ever was clothed with the power, without consulting his directors or managing directors, to institute in the name of the company any actions of any kind he pleased.  There is no proof other than his own testimony that he ever instituted any action or gave instructions for its institution.  If the directors were in England when he did so, they could, of course, ratify and adopt his act.  Not so now.  The burden of proving that the secretary had power and authority to institute the present action some months after the outbreak of the war rested on the respondent company.  I am clearly of opinion that they have not discharged that burden.  I do not think Lush J had evidence before him sufficient to support his finding on this point”.

18.However, where the court is unable to decide the question of authority – which is in essence a question of fact (or maybe a mixed question of fact and law), the court should not dismiss the application (as would have been the case in an ordinary application to strike out a pleading), nor should it try to attempt the impossible by making a finding of fact on affidavit evidence without cross-examination.  Instead it should adjourn the hearing and give appropriate directions for the determination of the objection at an adjourned hearing, such as the cross-examination of the deponents of the affidavits/affirmations that have been filed by the parties in relation to the objection.

19.As has been pointed out by Kerr LJ in Airways Ltd, one of the possible purposes of an adjournment of the hearing by the court seised of the application would be to allow a meeting of the company to be held to see if the commencement of the action would be confirmed or ratified by either the board or the shareholders (p. 361d to e).  However, I do not agree that there Kerr LJ was setting out the only situation where the court, seised of the application, could properly adjourn the hearing.  In fact, Kerr LJ expressly referred to the adjournment of the application “in order that an issue may be tried as to whether or not the proceedings were in fact brought with due authority” (p. 361d).  In my view, if the court cannot decide the dispute of fact on paper, the proper course to take is to adjourn the hearing, with appropriate directions, to another date when oral evidence will be heard and tested. 

20.In some cases, adjourning the hearing with a direction that a meeting of the shareholders be held to see if the company supports the litigation will be the wise course to take (Palmer’s at para. 8.803).  But in other cases where there is a deadlock amongst the shareholders and it is alleged that there has been passed a resolution to sue prior to the deadlock, which has never been revoked since (particularly because of the deadlock), adjourning the hearing for the purpose of holding a shareholders’ meeting will not resolve the crucial question of whether there has indeed been made such an alleged resolution (that has never been revoked since).

21.In the authorities (and submission of counsel), there was some mention of the requirement for a “clear consent” (Daimler at p. 327) and that the action should not be allowed to proceed if the authority to commence it is “doubtful” (Airways Ltd at p. 359 d/e).  As regards the latter word, in my view, when properly understood, it simply means that if there is any real doubt about the authority to sue, the question must be resolved first, before the case should be allowed to proceed any further; in the determination of the question, the burden is on those suing in the name of the company to establish consent to the commencement of the action, on a balance of probabilities – if the standard of proof is not achieved, then there is no consent and the name of the company must be struck out and the action dismissed.  Put another way, either there was authorization or there was not.  Any adjective like “doubtful” merely places emphasis on the burden and standard of proof.

22.As to the reference to “clear consent” in Daimler, which has crept its way into counsel’s submission, it must not be confused with the consent of the board of the company involved in that case to the bringing of the action in England in the name of the company.  There Lord Atkinson was referring to the finding of Lush J in another case not involving the defendant in the case before the House of Lords in question, and his Lordship was merely saying that as the defendant was not a party to the other action before Lush J, and had not given any “clear consent” to be bound by the decision in that case tried before Lush J, the finding of the judge, which was in any event disagreed with by the House of Lords, was not binding on the defendant.  As I read the case, the House did not lay down an additional requirement that consent to the commencement of proceedings has to be “clear” – of course those suing in the name of the company must discharge the burden of proof, in accordance with the civil standard, in establishing consent or authority.

23.So much for the general principles.  I will in due course return to what has happened before the master below.  However, as this is in substance a de novo hearing, it would be best if I should deal with the substantive merits of the application first.  And I would state my conclusion immediately: I do not find it possible to decide the question of authority, which in the present case is essentially a question of fact, on the affirmation evidence that has been placed before the Court alone.  The question has to be determined at a proper hearing with cross-examination of the deponents of the affirmations, maybe after limited discovery of relevant documents as well.

24.For that reason, I will be fairly brief with my discussion on the evidence that has been placed before the Court thus far.

25.Those suing in the name of the Plaintiff rely on what has been allegedly said or agreed by the two directors at four different meetings held on 14 April 2003, 28 April 2003, 30 June 2003 and 27 November 2003 respectively, as well as the minutes of those meetings, which were all signed by Cheung Kam Wah but not Howard Cheung.

26.In my judgment, taken at their face value, at the very least what was recorded in the minutes of the board meeting held on 28 April 2003 was capable of constituting sufficient authorisation for the commencement of the present action by the board (see paragraph 2 under “other business” in the minutes).  Again, if accepted as true and correct, the account given by the sister (Cheung Lai Ming) of what was said during the meeting held on 30 June 2003 (see paragraphs 6 and 7 of her affirmation dated 29 May 2004) would be quite capable of sustaining a case that Howard Cheung as director had consented to the bringing of the present action.  The minutes of that meeting, depending on how they should be read, are likewise quite capable of supporting that contention.

27.Mr Chan also reminded me that the Plaintiff is a small private company, beneficially owned and controlled by two brothers, with the assistance of their sister.  Matters pertaining to the management and operation of the company, including the holding of directors meetings, the passing of board resolutions and the recording of the same in minutes of the company, are expected to have been conducted in an informal manner. 

28.I have of course carefully borne in mind the most persuasive submission and analysis that has been made by Ms Mok on behalf of her client regarding the quality of the evidence that has been filed in the name of the Plaintiff to prove authority.  In gist, leading counsel submitted that the minutes had not been signed by Howard Cheung, there was no reason for the matter (i.e. of suing the Defendant) to be raised repeatedly in the meetings if authorisation had been given in any one of the earlier meetings, the minutes of a previous meeting were not adopted in a subsequent meeting, the purported resolution allegedly made on 14 April 2003 was not valid in law, the so-called oral consent or agreement of Howard Cheung in the meetings was too vague, it was inherently improbable for Howard Cheung agreeing to the Plaintiff commencing action against the Defendant in which he had or had had a substantial interest, particularly bearing in mind the acrimonious relationship between the two brothers, what Cheung Kam Wah himself had said in paragraph 13 of his affirmation made on 31 May 2004 actually went against his own case, and so forth.  The Court was invited to conclude that on a close analysis of the evidence, and bearing in mind the reality of the situation, Howard Cheung could not possibly have consented or agreed to the commencement of the present action, and there was no “clear” consent or authority given by Howard Cheung as director to the commencement of the same in the name of the Plaintiff.

29.I should say – with as much restraint as possible given the conclusion that I have reached – that these are very powerful arguments.  However, I am unable to go as far as leading counsel did to conclude that the factual case of those suing in the name of the Plaintiff is so unbelievable that it should be rejected offhand without a trial where oral evidence would be heard and tested.  As Mr Chan has submitted in his reply submission, there could be various possible reasons to account for Howard Cheung’s (alleged) behaviour in the meetings.  It is simply impossible, at this stage, to exclude those possibilities and come to a finding of fact, albeit on a balance of probabilities, against the contention of those suing in the name of the Plaintiff.

30.Likewise, Mr Chan has put forward possible scenarios to explain why the same subject (agreement to sue the Defendant) was raised in one meeting after another despite that allegedly authorization to sue had already been obtained in the preceding meeting.  Again this is a matter that cannot be decided on paper.

31.Ms Mok also reminded this Court that strictly speaking the two latter meetings held in June and November 2003 were not board meetings as such, but were merely “enlarged” senior staff meetings.  However, I have also borne in mind Mr Chan’s point that this is a small company and matters are expected to have been conducted in an informal way.  Maybe the demarcation between a board meeting and a senior staff meeting (enlarged or otherwise) was not that clear.

32.As to whether what had been (allegedly) said by Howard Cheung in those meetings or some of them would be sufficient to constitute the necessary consent to the bringing of the present action in the name of the Plaintiff, that is a fact-sensitive question that can only be answered after the relevant findings of fact have been made at the adjourned hearing.

33.I must not be taken to have forgotten the very short affirmation that has been made by Howard Cheung on behalf of the Defendant in support of its application to strike out.  In that short affirmation, Howard Cheung denied that he had ever given any written or oral consent to the commencement of the present action in the name of the Plaintiff.  He did not go into the various meetings or minutes at all in his short affirmation.  Nor did he explain why he was not prepared to ratify the present action by his own company against the Defendant for trading debts allegedly owed by the latter to his own company – Howard Cheung’s refusal to ratify the action (if necessary) in the face of the technical objection taken by the Defendant regarding the lack of authority to sue cannot be seriously denied.  He did not, for instance, say that the Defendant did not owe the Plaintiff the alleged debts, and therefore he was not in favour of commencement of the present action.  Nothing of that sort was mentioned.

34.Howard Cheung’s short affirmation must be accorded the weight, whatever it may be, that it should deserve.  But first, that is not sufficient to tilt the balance in favour of the Defendant on the affirmation evidence; second, the weight of his affirmation evidence (which will have to be tested in cross-examination) will be a matter for the adjourned hearing.

35.For the above reasons, as I said, the Defendant’s objection based on lack of authority cannot be summarily disposed of by this Court on affirmation evidence alone.  My hands are not tied by the order made by the learned master below (see below), as this is a de novo hearing.  I would therefore order that the appeal be allowed, the order of the master below be set aside, and the application of the Defendant to strike out be adjourned for trial (before any judge) on a date to be fixed, and all further proceedings in the present action that are not pertinent to the determination of the Defendant’s present application be stayed in the meantime with liberty to apply to remove the stay on good grounds being shown. 

36.I further direct that the parties shall confer with each other with a view to agreeing on a set of directions for the trial of the issue in question, which can be submitted to this Court for approval by way of consent summons. 

37.I have in my judgment above alluded to some of the more obvious directions that may be required.  I would leave it to the parties to work out all the directions, including the estimated length of the adjourned hearing.  Failing agreement, the parties are at liberty to apply to this Court for directions. 

38.I will now deal with the question of costs, having heard counsel’s submissions on a provisional basis.  It is in the present context that I should say a word or two about the hearing below. 

39.In my judgment, what happened below was that up to the substantive hearing stage, the application of the Defendant by summons was regarded simply as an ordinary application to strike out.  Directions were given for the filing of affirmation evidence.  Apparently no thought was given to the nature of the substantive hearing that was going to be held before the master below.  The same cannot be said, however, at least in relation to the Defendant’s side, when the matter eventually came before the master for substantive hearing.  Some of the authorities referred to above regarding the nature and relevant procedure of an application of the present type were included in the list of authorities of the Defendant.  On the other hand, the Plaintiff’s then counsel’s approach to the Defendant’s strike out application was, so far as I could tell from the record, no different from that of a plaintiff at the receiving end of an application to strike out his statement of claim.  It was argued that the matter was in the discretion of the master (the same mistake made by the judge in the English Court of Appeal case of Airways Ltd discussed above) and analogy was drawn with an Order 18 rule 19 application.  There was no suggestion made to the master that the matter was not capable of determination summarily by the master on the affirmation evidence alone; there was no application for an adjournment of the hearing to another occasion where oral evidence would be adduced or cross-examination of the deponents conducted.  Rather the master was asked to dismiss the Defendant’s application.

40.In those circumstances, in my judgment, the master below cannot really be criticized for having attempted to make a finding of fact on the question of authority on the affirmation evidence that had been placed before him.  Unlike Mr Chan’s approach at the hearing of this appeal (as opposed to the stance taken by the Plaintiff in its notice of appeal which asks for dismissal of the Defendant’s summons to strike out), the master was not asked to adjourn the hearing and give directions for the trial of the Defendant’s objection based on lack of authority.  And looking at the affirmation evidence only, again exercising the same restraint as I have exercised throughout in this judgment, I would simply say that the master’s decision was not one that no reasonable tribunal would have reached on the affirmation evidence that had been placed before him.

41.The upshot of all this is that in my view, the Plaintiff (or those suing in its name) should be held responsible for the costs of the hearing before the master, whereas the present appeal should be regarded as the first substantive hearing of the Defendant’s application.  Furthermore, in relation to the costs of this appeal, in my judgment, the Defendant has through learned counsel mounted a most respectable challenge to the Plaintiff’s case on authority, although at the end of the day I have come to the conclusion that at this stage the Court is unable to accept the conclusion contended for by the Defendant.  In my view, it would not be fair to award the costs of the appeal, which as I said should be treated as the first substantive hearing, to either party without first having regard to the eventual outcome of the Defendant’s objection based on lack of authority – which is not known at this stage.

42.In other words, as regards costs, I order that the costs of the hearing before the master below be paid by the Plaintiff or (as the case may be – if authority to sue is not established) those (wrongfully) suing in the name of the Plaintiff, to the Defendant in any event; that the costs of this appeal be costs in the cause of the Defendant’s application to strike out; that there be a certificate for two counsel for both hearings; and that subject to the above, the costs of the Defendant’s application to strike out be also costs in the cause of the application itself. 

43.I thank counsel on both sides for their helpful assistance.

Mr Warren Chan SC and Mr Lawrence Ng, instructed by Messrs Hui & Lam, for the Plaintiff

Ms Alice Mok SC and Mr Cheung Kam, instructed by Messrs Chiu, Szeto & Cheng, for the Defendant