Civil Action2003

CHINA TREASURE CO LTD v. RICH LONG LTD

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CACV279/2006CHINA TREASURE CO LTD v. RICH LONG LTD

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53547-EN-2006-07-21

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HCA 70/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 70 OF 2003

______________________

BETWEEN

	CHINA TREASURE COMPANY LIMITED	Plaintiff
	and
	RICH LONG LIMITED	Defendant

______________________

Before : Mr Recorder Kwok, SC in Court

Dates of Hearing : 27-30 June 2006

Date of Judgment : 30 June 2006

Date of Reasons for Judgment : 21 July 2006

__________________________________

REASONS FOR JUDGMENT

__________________________________

Orders made

1. On the 2^nd day of trial, I gave:-

(a) leave to the plaintiff to withdraw summons dated 19 June 2006 with costs reserved; and
(b) leave to the defendant to amend witness statement and to file supplemental witness statement with costs reserved.

2. At the end of the 4-day trial, I ordered that:-

(a) the plaintiff's action be dismissed;
(b) the plaintiff do pay 1/3 of defendant's costs, including costs reserved, to be taxed, if not agreed; and
(c) the sum of $1,000,000 paid into court by the defendant on 14 June 2004, together with accrued interest, be paid out to the defendant's solicitors.

3. I said that reasons for my judgment would be handed down.

The million dollar claim

4. I start by giving my reasons for dismissing the plaintiff's claim.

5. The plaintiff is a company registered under the Companies Ordinance, Cap. 32. Mr Huang Ching Yi ("Huang") was a director. The directors were Taiwanese and were seldom in Hong Kong.

6. The defendant is a company registered under the Companies Ordinance. Mr Kao Shih Yi ("Kao") and one Mr Lin ("Lin") were shareholders and directors. Kao, a Taiwanese, was seldom in Hong Kong.

7. The defendant was a service company and provided services to the plaintiff which included filing of statutory documents, paying fees for business registration and arranging preparation and auditing of financial statements.

8. On about 27 December 1996, the plaintiff opened a savings account with Hang Seng Bank Limited. Lin was one of the four authorised signatories. Any one of the authorised signatories signing alone could operate the account provided that he had the plaintiff's company chop.

9. Until October 2002, the business of the defendant was run and managed by Lin.

10. Lin had signed a number of forms in blank. These included Hang Seng Bank's withdrawal slips and telegraphic transfer application forms of Bank of China (Hong Kong) Limited.

11. On about 10 October 2002, Lin was not in Hong Kong and Kao took physical control of the defendant's office.

12. By using telegraphic transfer application forms signed by Lin in blank, 2 applications for telegraphic transfers were made to the Bank of China (Hong Kong) Limited on about 17 October 2002. The bank made the transfers and deducted the amounts remitted from the account of Rich Long Shipping (HK) Limited of which Kao was the controlling and majority shareholder. Particulars of the transfers are as follows:-

(a) $400,000 was remitted to Nan-Hai Chan Li Shin Shoes Material Co. Ltd; and
(b) $600,000 was remitted to南海兆百祥鞋材有限公司.

13. By using a withdrawal slip signed by Lin in blank, the defendant helped itself to $1,000,000 by withdrawing the amount from the Hang Seng Bank savings account of the plaintiff.

14. The plaintiff commenced this action claiming $1,000,000 from the defendant.

15. The parties agreed that the defendant should begin. Kao was the only witness called by the defendant and Huang was the only witness called by the plaintiff.

16. In his testimony, Huang accepted that:-

(a) they were the beneficiary of the $400,000 telegraphic transfer and that they had received $400,000; and
(b) the beneficiary of the $600,000 telegraphic transfer was their supplier and that, not only had the beneficiary not asked for payment of any sum, the beneficiary had informed them that they had received payment for goods.

17. Thus, a total of $1,000,000 had been remitted by Rich Long Shipping (HK) Limited to the plaintiff and the plaintiff's supplier. The plaintiff did not take any point on the remitter being Rich Long Shipping (HK) Limited instead of the defendant. Properly understood, this case is simple and straight forward. All that the defendant has done was to reimburse itself in the sum of $1,000,000, no more and no less.

18. The plaintiff allowed itself to be involved in an internal dispute between the Kao and Lin. Indeed, the plaintiff's solicitors were also Lin's solicitors.

19. The plaintiff's case was that the services provided by the defendant were confined to secretarial services; that Lin was authorised in his personal capacity to handle payments on behalf of the plaintiff; and that Lin was the source of funds for the remittances of $400,000 and $600,000. I rejected the plaintiff's case on the grounds of inherent probabilities and inconsistency with previous conduct and statements.

20. The plaintiff's pleaded case is that the services provided by the defendant to the plaintiff included "arranging accountants to prepare annual audit". The plaintiff made no attempt to explain why it retained the defendant, instead of Lin, to arrange "accountants to prepare annual audit" if Lin, not the defendant, was operating the savings account.

21. By fax dated 25 November 2002, Huang referred to his visit to the defendant's office on 12 November to take away savings account passbook and ledger. The plaintiff made no attempt to explain why Huang collected the ledger from the defendant instead of from Lin if Lin was the person operating the savings account on a personal basis.

22. In a statement made on about 20 December 2002 to the police, Huang stated that the defendant handled collection of money, payment of fees and expenses, retaining accountants and handling company accounts. It is clear from the context of the statement, i.e. collection of money, followed by payment of fees and expenses, that the defendant was handling the plaintiff's trade income and expenses. Moreover, there should be no money for the defendant to collect if the defendant was providing no more than secretarial services as Huang asserted in his amended witness statement.

23. Lin was only one of the shareholders of the defendant which charged the plaintiff an annual fee of $10,000. In my judgment, it is inherently improbable for Lin to agree to handle the plaintiff's trade income and expenses on a personal and complimentary basis. There is no reason why he should agree to be the provider of services when the other shareholders stood to benefit more from his services. Further, Lin would need to have the defendant's facilities and staff to provide the services. More so when Lin was out of Hong Kong.

24. By fax dated 29 November 2002, Huang wrote on behalf of the plaintiff to the defendant asserting that Lin had produced a receipt to demand payment relating to 2 remittances of which the $400,000 remittance was one.

25. In his testimony, Huang identified the telegraphic transfer application form for $400,000 as the document he was referring to in his fax. He retracted the assertion in the fax that Lin had produced a receipt and said that Lin had not produced any receipt.

26. More importantly, if Lin had been the source of funds for the 2 sums totalling $1,000,000 remitted on about 17 October 2002, the inherently probabilities are that Lin would have demanded payment by the time of trial in June 2006. Huang's testimony was that Lin had not demanded payment.

Costs Order

27. I turn now to reasons for my costs order.

28. By Order dated 31 August 2004, Master J. Wong ordered, among others, that:-

"Where any party intends to place reliance at the trial on expert evidence, the party shall within 56 days from the date of Order to be made herein disclose the substance of that evidence to the other party in the form of a written report, which shall be agreed if possible. The number of expert witness shall be limited to two for each party."

29. In the defendant's Check-List dated 30 December 2005, Messrs Peter Mo & Co., solicitors for the defendant, stated that there would be expert evidence at trial; that there would be one witness on factual issues; and that one expert witness would be called.

30. Mr K.M. Chong, counsel for the defendant, signed the "Certificate of counsel for the defendant as to estimation of length of time for trial" dated 30 December 2005 certifying the following:-

" (a) Time for opening; N/A
(b) Time for examination in chief; N/A
(c) Time for cross-examination; 2 days
(d) Time for final submission ½ day"

31. It was stated in the defendant's check-list that there would be one factual witness and one expert witness. Yet Mr K.M. Chong gave "N/A" as the answer to time for examination in chief. Mr K.M. Chong accepted that the defendant should begin. Yet he gave "N/A" as the answer to time for opening.

Fact Finding Report/Expert Report of the Defendant

32. On 25 October 2005, solicitors for the defendant filed a document described by them as "Expert Report of the Defendant". Needless to say, more than 56 days had by then elapsed since 31 August 2004.

33. A copy of this document ("the Document") is at pp 56 – 362 of the Bundle of Pleadings and Witness Statements.

34. The Document is extraordinary in many respects.

35. It is entitled:-

"Fact Finding Report on High Court
case no. HCA 70/03 between
China Treasure Company Limited
and Rich Long Limited
K.K. Chan & Company
Certified Public Accountants
8 January 2004".

36. The Document itself is unsigned but there is a cover sheet stating that:-

" The Fact Finding Report on High Court case no. HCA 70/03 issued by K.K. Chan & Company, Certified Public Accountant dated 8 January 2004 was prepared by Mr. U Wing Tsun Ulfred, Certified Public Accountant.
Confirmed by:
(illegible)
U Wing Tsun Ulfred, Certified Public Accountant
HKICPA Practising Certificate No. ..."

37. The Document starts off with a page described as "Report Index". It reads as follows:-

"Report Index
Argument #1 Background for the operation of Rich Long which act as a HK agent for its Taiwan client to handle fund transfer/settlement, forwarding, custom clearing and other supporting duties in Hong Kong.
Argument #2 Mr. Lin cliam (sic) that handling of China Treasure is on a friendly basis.
Argument #3 Details of how Rich Long paid on behalf of China Treasure for the HK$400,000 and HK$600,000 which justify Rich Long to reclaim the money from China Treasure through China Treasure's bank account which is kept in Rich Long office per client's request. The placing of bank account opened in HK at Rich Long is a common practice as the Taiwan clients actually seldom pass through Hong Kong.
Argument #4 Bank deposit by Mr. Lin through Mr. Lin's personal bank account to Rich Long claimed to be repayment of HK$600,000 and HK$400,000 by China Treasure to Rich Long."

38. The Report Index is followed by a 4-page "Argument point #1 for China Treasure legal case" (pp. 59 – 62). A large number of exhibits follows. I had no joy trying to locate any exhibit. The exhibit number takes the form of something like "Exhibit 3.1.c.1.1.1 p. 1/1". There is no index of the exhibits and solicitors for the defendant did not take the trouble to prepare one. Buried among the exhibits are a 4-page "Argument point #2 for China Treasure legal case" (pp. 164 – 167), a 7-page "Argument point #3 for China Treasure legal case" (pp. 273 – 279) and a 1-page "Argument point #4 for China Treasure legal case" (p. 356).

39. Another copy of the exhibits is reproduced in the Bundle of Documents.

40. Kao stated in paragraph 77 of his original witness statement dated 17 May 2005 that:-

" Subsequently [Messrs. K.K. Chan & Co.] were able to complete an investigation report showing:-
(a) the validity or otherwise of the Plaintiff's claim; and
(b) truth or falsity of the allegations of facts contained in the witness statements of the said Huang, the said Lin and the said Keung from contemporaneous bank documents, accounting records signed by the said Lin and the said Keung."

41. In his original Supplemental Witness Statement, Kao referred to documents by using the exhibit numbers in the Document. I declined to waste any more time trying to locate documents using 10-digit or so reference numbers and told Mr K.M. Chong to revise it using the hearing bundle page reference. Hearing was adjourned for the defendant's legal team to do what they should have done in the first place.

42. The Document seemed to me to be an attempt to usurp my fact finding function. It is a basic principle of our legal system that in a trial by a judge sitting alone, questions of fact are for the judge.

43. I doubt whether any lawyer familiar with the duties and responsibilities of expert witnesses would have sought to produce the Document which excels in the breach of those duties and responsibilities. To quote from the oft-cited passage by Cresswell J. in The Ikarian Reefer [1993] 2 Lloyd's Rep 68 at page 81, these include the following:-

" 1. Expert evidence presented to the Court should be, and should be seen to be, the independent product of the expert uninfluenced as to form or content by the exigencies of litigation (Whitehouse v Jordan, [1981] 1 WLR 246 at p 256, per Lord Wilberforce).
2. An expert witness should provide independent assistance to the Court by way of objective unbiased opinion in relation to matters within his expertise (see Polivitte Ltd v Commercial Union Assurance Co Plc, [1987] 1 Lloyd's Rep 379 at p 386 per Mr Justice Garland and Re J, [1990] FCR 193 per Mr Justice Cazalet). An expert witness in the High Court should never assume the role of an advocate.
3. An expert witness should state the facts or assumption upon which his opinion is based. He should not omit to consider material facts which could detract from his concluded opinion (Re J sup).
4. An expert witness should make it clear when a particular question or issue falls outside his expertise.
5. If an expert's opinion is not properly researched because he considers that insufficient data is available, then this must be stated with an indication that the opinion is no more than a provisional one (Re J sup). In cases where an expert witness who has prepared a report could not assert that the report contained the truth, the whole truth and nothing but the truth without some qualification, that qualification should be stated in the report (Derby & Co Ltd and Others v Weldon and Others, The Times, Nov 9, 1990 per Lord Justice Staughton)."

44. Further, there was the preliminary question of the competency of Mr U Wing Tsun Ulfred, see Phipson on Evidence, 15^th Edition, paragraph 37-46. It would be for me to decide whether he had sufficient knowledge or expertise to qualify as an expert, and there was no need for it to have been acquired professionally, Halsbury's Laws of England, 4^th edition, volume 17(1), paragraph 751, footnote 9. Apart from the claim that he is a certified public accountant, nothing is said about his knowledge or expertise.

45. When Mr K.M. Chong referred to the Document in his opening, I asked him to satisfy me that it was admissible.

46. Not only did he make no attempt to argue that it was admissible expert evidence, Mr K.M. Chong asserted that it was factual evidence. I permit myself to wonder how he felt it proper to make such an assertion.

47. In the course of his submission on costs, he stated that the only reason why he did not call the accountant was that any judicial officer was in as good a position as an accountant to deal with the matter and that the trial was not lengthened as a result of the Document.

48. The only reason why the trial was not further lengthened was that Mr K.M. Chong made no attempt to satisfy me that the Document or the oral evidence of the maker was admissible. What should have been a simple and straight forward case was unnecessarily lengthened by seeking to rely on the Document. The plaintiff had incurred costs dealing with it and had applied by summons dated 19 June 2006 for leave to file the "Expert Witness Statement of Luk Shu Kuen". The defendant must pay for messing around.

49. Taking a global approach and instead of ordering the defendant to pay the plaintiff part of the plaintiff's costs, I ordered the plaintiff to pay 1/3 of the defendant's taxed costs.

50. I should add that time was wasted by numerous red herrings introduced by Mr K.M. Chong and by his reliance on book entries as evidence of actual payment.

(Kenneth Kwok, SC)
Recorder of the Court of First Instance
of the High Court

Mr Kenneth CL Chan & Mr Roland Lau, instructed by Messrs Kong & Tang, for the Plaintiff

Mr KM Chong, instructed by Messrs Peter Mo & Co., for the Defendant

Appeal allowed: see CACV279/2006 dated 13 December 2006

52317-EN-2006-04-28

CHINA TREASURE CO LTD v. RICH LONG LTD

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HCA 70/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 70 OF 2003

____________

BETWEEN

	CHINA TREASURE COMPANY LIMITED （中餘有限公司）	Plaintiff
	and
	RICH LONG LIMITED 　(利祥（商務代理）有限公司)	Defendant

____________

Before: Mr Recorder Edward Chan, SC in Chambers

Dates of Hearing: 28 March 2006

Date of Judgment: 28 April 2006

Date of Handing Down Judgment: 28 April 2006

_______________

J U D G M E N T

_______________

1. This is an appeal by the Plaintiff against the decision of the Master of 3 March 2006 ordering the Plaintiff to give security for cost in the sum of $400,000.00 within 28 days from the order of the Master failing which the Plaintiff’s claim is to be struck out. As the 28 days was about to expire on the date of the hearing of this appeal and since I have decided to reserve my decision, at the end of the hearing of the appeal, I ordered that the Master’s Order be stayed pending my decision of this appeal.

2. The Plaintiff’s claim is for the recovery of the sum of $1,000,000.00, which was transferred out of the Plaintiff’s bank account to the Defendant by the unauthorized acts of the Defendant. The Plaintiff’s case is that the Plaintiff was set up and controlled by persons from Taiwan. Those persons also had business interest in China. It is said in evidence that the role of the Plaintiff was a “buffer” company. It is however not clear from the evidence as to what exactly is a “buffer” company, and what was the exact relationship between the Plaintiff and other companies under the same control. This is not surprising because the evidence of the Plaintiff as a “buffer” company merely came by as a passing introductory history of the Plaintiff in various statements made to the police in circumstances where no one would think that the ability of the Plaintiff to make payment of cost in litigation was ever relevant. What is clear is that definitely the Plaintiff was set up to receive funds and to remit funds to businesses set up by those in control of the Plaintiff in mainland China. In order to facilitate the ease of transfer of funds out of the Plaintiff’s bank account, one Mr Li, a director of the Defendant, was made one of the authorized signatories of the Plaintiff. His signature together with the company chop of the Plaintiff would be a sufficient mandate for the operation of the Plaintiff’s bank account. For this reason, Mr Li was also given custody of a company chop of the Plaintiff as well as the saving account bank passbook of the Plaintiff.

3. The Plaintiff’s case is that Mr Li had signed some bank withdrawal or transfer forms in blank and he left these forms together with the bank passbook and the Plaintiff’s company chop in his drawers in the Defendant’s office. Without the prior knowledge or approval of the Plaintiff or Mr Li, on 4 November 2002, a member of the Defendant company filled up one of the pre-signed form, applied the Plaintiff’s company chop to it, and then made use of it to transfer the sum of $1,000,000.00 to the Defendant.

4. The Defendant did not in fact dispute the basic facts giving rise to the Plaintiff’s claim aforesaid. The Defendant further did not dispute that the mandate to operate the Plaintiff’s account was given to Mr Li and not to the Defendant generally. The Defendant however alleged that part of the services rendered by the Defendant to the Plaintiff was to transfer funds on behalf of the Plaintiff on the instruction of the Plaintiff and that upon receiving such instruction from the Plaintiff the Defendant would transfer the funds out of its own account first and then sought reimbursement of the funds from the Plaintiff’s bank account. The Defendant’s case is that in or about October 2002 the Defendant discovered that Mr Li had been diverting business away from the Defendant and had commenced action against him. In November 2002, the Defendant discovered that the Plaintiff was indebted to the Defendant in the sum of $1,011,529.00. The Defendant thereby caused $1 million to be transferred out of the Plaintiff’s bank account into the Defendant’s account.

5. The Plaintiff’s case is that the contract between the Plaintiff and the Defendant was merely for the supply of company secretarial service and that the remittance arrangement was a private arrangement between the Plaintiff and Mr Li. There was in fact no such debt due to the Defendant and in any case the taking of the money out from the Plaintiff’s account was unauthorized.

6. There was no counterclaim. Although set off had not been expressly pleaded, it is apparent that the only possible defence is that of set off. The Defendant could only succeed if it is able to prove that the Plaintiff was indebted to the Defendant for an amount of $1 million or above.

7. The Plaintiff had applied for summary judgment for the amount claimed and the Master gave the Defendant leave to defend conditional upon the payment of the full amount of the claim into court. Neither party had appealed against the decision. The Defendant duly satisfied the condition.

8. The pleadings were closed in July 2004. On 18 January 2006, the Defendant took out a summons to apply for security for cost. The application was made under section 357 of the Companies Ordinance.

9. The Defendant recognizes that in order to succeed the Defendant would have to show that there is credible evidence that there is reason to believe that the Plaintiff company will be unable to pay the costs of the Defendant if the Defendant should succeed in its defence. Even if the Defendant has succeeded in showing that there is such evidence, whether to order security is a matter of the Court’s discretion which must be exercised in accordance with well established principles.

10. On the question of the reason for believing that the Plaintiff will be unable to pay the cost, the Defendant argued that the evidence adduced by it showed that:

(a) The Plaintiff only has a paid up capital of $10,000.00;

(b) The Plaintiff was a buffer company, and on the Defendant’s contention, the Plaintiff did not have any business and has no assets belonging to itself other than the paid up capital;

(c) The shareholders and directors of the Plaintiff were ordinarily resident in Taiwan.

The Defendant submitted that since it has shown that the Plaintiff only had $10,000.00 paid up capital as its assets, there was good reason to believe that the Plaintiff would be unable to pay the cost if the Defendant should succeed in its defence.

11. The Plaintiff challenged the Defendant’s contention. It was submitted that the burden of showing that there was reason to believe that the Plaintiff would be unable to pay the cost was on the Defendant and the evidence adduced by the Defendant was not sufficient to discharge that burden. In this respect, the Plaintiff also filed an affirmation of its solicitors to challenge the Defendant’s contention that the Plaintiff would be unable to pay the cost.

12. There was no challenge to the suggestion that the Plaintiff only had $10,000.00 paid up capital. It is also common ground that the Plaintiff was a company incorporated in Hong Kong having a registered address in Hong Kong. There was no dispute that although in the form submitted to the Company Registry, the Plaintiff’s shareholders and directors had an address in Hong Kong, that address was the registered address of the Company and was in fact an address of the Defendant. In fact there was no dispute that the shareholders and directors of the Plaintiff were residents of Taiwan.

13. On the point of the contention that the Plaintiff did not have any assets beyond its paid up capital, the Defendant relied on the various police statements made by Mr Huang, a director of the Plaintiff and also the police statements of Mr Li. The background to the making of these police statements was that the Plaintiff lodged a complaint to the police for the Defendant’s wrongful act in taking the $1 million out of the Plaintiff’s account. In these circumstances, it is little surprising that the Plaintiff activities in Hong Kong were mentioned in the statements as part of the background relationship between the Plaintiff and the Defendant and to explain why Mr Li, an officer of the Defendant, was made one of the authorized signatories of the Plaintiff’s bank account.

14. According to the police statement of Mr Huang dated 28 December 2002, the Plaintiff, was set up as a “buffer” company mainly for the transfer of money and the handling of documentation and in fact the Plaintiff did not have any business. There were also a reference in the statement of 20 December 2002 that when the Defendant received money for the Plaintiff, the same would be deposited into the Plaintiff’s bank account. There was also evidence that the Plaintiff did not employ any staff in Hong Kong. The necessary company secretarial services were performed by the Defendant. There was also the suggestion that the Defendant had been employed to handle commercial documentation, filing tax return and renewing business registration. Even though it must be clear that monies were received by the Plaintiff from time to time, there was no information whatsoever as to the exact source of the money received by the Plaintiff. The Defendant wanted to paint a picture that Plaintiff was simply a postal box for passing money between the companies owned by those controlling the Plaintiff in Taiwan and in mainland China. In other words, the Defendant submitted that the monies were received by the Plaintiff simply as agent for the purpose of passing to companies in China or in Taiwan as the case may be. For this reason, it was contended that the Plaintiff did not have any ownership of the monies passing through its bank account.

15. Of course there is no definitive meaning for “buffer” company. A company serving the function of passing on funds between companies in the mainland and those in Taiwan may do so in various ways. It is not impossible that legally, the “buffer” company in Hong Kong may be an independent party contracting to supply the service of the channeling of funds arrangement. If this is the case, it is also not impossible that profits could be made and accumulated in this process.

16. The Plaintiff while challenging the Defendant’s contention that there is credible evidence to show that the Plaintiff will be unable to pay the cost, does not seek to explain why being a buffer company, the Plaintiff would still be in a position to accumulate funds or make profit so that the Plaintiff’s resources would not be just limited to its paid up capital. Instead, the Plaintiff through its solicitors merely filed an affirmation to say that in fact the Plaintiff did have funds in its bank account.

17. In my view, the fact that the Plaintiff had a bank account which at all times had shown a credit would indicate that the Plaintiff had a continuous operation in Hong Kong. The nature of the Plaintiff’s operation as a “buffer” company would obviously mean that the Plaintiff would have an active bank account in Hong Kong. The bank balance may also indicate that those in control of the Plaintiff would have the resources to make substantial payment. Further the fact that the Plaintiff had been in operation for a number of years and had continued to operate since the relationship with the Defendant had turned sour is an indication that those controlling the Plaintiff would consider that the Plaintiff did have a function to serve in Hong Kong. However beyond this, I do not think that any further inference in favour of the Plaintiff could be drawn. In particular, I agree with the Defendant’s submission that it did not show that the monies that went into the Plaintiff’s account were owned by the Plaintiff. While I fully appreciate that the evidence on the Plaintiff lack of any real business or assets beyond its paid up capital being based on some introductory information on the Plaintiff in some police statements is not wholly satisfactory, the Plaintiff having the opportunity to explain the nature of the monies received into its account had chosen not to do so. In the circumstances I am of the view that there is evidence to show that the Plaintiff did not have substantial assets to pay any cost which might be awarded against it.

18. I agree that from the way that the Plaintiff’s bank account had been operated, there is evidence to show that those controlling the Plaintiff would have the ability to cause the Plaintiff to pay any cost which may be awarded against the Plaintiff. However there is nothing in evidence to show that those controlling the Plaintiff would be prepared to support the Plaintiff by, say, lending money to the Plaintiff to meet the Plaintiff’s liability. There is not even a statement whether on oath or otherwise from those in control of the Plaintiff to indicate that in the event that the Plaintiff is ordered to pay the cost of this action, they would support the Plaintiff to provide the Plaintiff monies to satisfy such order. The nature of the activities of a “buffer” company is such that it would be easy for another company to be incorporated to perform the role of the Plaintiff in the event that the Plaintiff is ordered to pay cost in an amount far in excess of the resources and assets of the Plaintiff. Since the evidence is that the Plaintiff would mainly serve its associated companies, there will not be much loss of goodwill involved if another company is formed to replace the function of the Plaintiff. The risk that those in control of the Plaintiff would simply allow the Plaintiff to default in complying with such cost order is a real one.

19. The Plaintiff also relied on a statement made in a letter written by the Defendant’s solicitor to suggest that in fact the Plaintiff had factories in China. Reading the statement in its context, I agree with the Defendant that the statement merely said that the Plaintiff’s mother company had factories in China. In any event, to say the least the statement is ambiguous and if indeed the Plaintiff did own factories in China, it would have been easy for the Plaintiff to produce evidence to support such contention, which the Plaintiff had failed to do. I do not think that I could place any weight on such statement.

20. In relation to the issue of my exercise of the discretion on whether to order security, I have to bear in mind that the Defendant was granted conditional leave to defend only. This would show that the Master would consider that the Defence was weak. Before me the Defendant had attempted to beef up its case by referring to certain accountant’s report, which the Defendant said was not available at the time of the hearing of the summary judgment application. It is not the function of the court to examine in details the merits of the parties’ case in an application for security for cost. Looking at the evidence as a whole but without going into any detailed analysis of the contents of the accounting report, and particularly in the light of the pleadings, my view is that on the whole the Defendant’s case is weak but not hopeless.

21. The Plaintiff also contended that the Plaintiff’s inability to pay cost was caused by the Defendant’s wrongful act in withdrawing the $1 million from the Plaintiff’s bank account. I am not impressed by such contention. If the Defendant was right that the amount taken was for reimbursement of sums paid out by the Defendant on behalf of the Plaintiff, then the Plaintiff would be obliged to repay the Defendant. In any event, it would appear that those in control of the Plaintiff were able to keep the Plaintiff going for years after the Defendant’s withdrawal of the sum from the Plaintiff’s account.

22. Taking all circumstances into account, I come to the same decision as the Master. There is in fact no dispute on the quantum of the security ordered. This appeal is dismissed with cost save that the Plaintiff is to be given 28 days from the date of this order to furnish the security.

(Edward Chan)
Recorder of the Court of First Instance
High Court

Mr Kenneth Chan and Mr Roland Lau, instructed by Messrs Kong & Tang, for the Plaintiff (Appellant)

Mr K M Chong, instructed by Messrs Peter Mo & Co, for the Defendant (Respondent)

(a)	leave to the plaintiff to withdraw summons dated 19 June 2006 with costs reserved; and
(b)	leave to the defendant to amend witness statement and to file supplemental witness statement with costs reserved.

(a)	the plaintiff's action be dismissed;
(b)	the plaintiff do pay 1/3 of defendant's costs, including costs reserved, to be taxed, if not agreed; and
(c)	the sum of $1,000,000 paid into court by the defendant on 14 June 2004, together with accrued interest, be paid out to the defendant's solicitors.

(a)	$400,000 was remitted to Nan-Hai Chan Li Shin Shoes Material Co. Ltd; and
(b)	$600,000 was remitted to南海兆百祥鞋材有限公司.

(a)	they were the beneficiary of the $400,000 telegraphic transfer and that they had received $400,000; and
(b)	the beneficiary of the $600,000 telegraphic transfer was their supplier and that, not only had the beneficiary not asked for payment of any sum, the beneficiary had informed them that they had received payment for goods.

"	(a)	Time for opening;	N/A
	(b)	Time for examination in chief;	N/A
	(c)	Time for cross-examination;	2 days
	(d)	Time for final submission	½ day"

"	The Fact Finding Report on High Court case no. HCA 70/03 issued by K.K. Chan & Company, Certified Public Accountant dated 8 January 2004 was prepared by Mr. U Wing Tsun Ulfred, Certified Public Accountant.
	Confirmed by:
	(illegible)
	U Wing Tsun Ulfred, Certified Public Accountant
	HKICPA Practising Certificate No. ..."

"Report Index
Argument #1	Background for the operation of Rich Long which act as a HK agent for its Taiwan client to handle fund transfer/settlement, forwarding, custom clearing and other supporting duties in Hong Kong.
Argument #2	Mr. Lin cliam (sic) that handling of China Treasure is on a friendly basis.
Argument #3	Details of how Rich Long paid on behalf of China Treasure for the HK$400,000 and HK$600,000 which justify Rich Long to reclaim the money from China Treasure through China Treasure's bank account which is kept in Rich Long office per client's request. The placing of bank account opened in HK at Rich Long is a common practice as the Taiwan clients actually seldom pass through Hong Kong.
Argument #4	Bank deposit by Mr. Lin through Mr. Lin's personal bank account to Rich Long claimed to be repayment of HK$600,000 and HK$400,000 by China Treasure to Rich Long."

"	Subsequently [Messrs. K.K. Chan & Co.] were able to complete an investigation report showing:-
	(a)	the validity or otherwise of the Plaintiff's claim; and
	(b)	truth or falsity of the allegations of facts contained in the witness statements of the said Huang, the said Lin and the said Keung from contemporaneous bank documents, accounting records signed by the said Lin and the said Keung."

"	1.	Expert evidence presented to the Court should be, and should be seen to be, the independent product of the expert uninfluenced as to form or content by the exigencies of litigation (Whitehouse v Jordan, [1981] 1 WLR 246 at p 256, per Lord Wilberforce).
	2.	An expert witness should provide independent assistance to the Court by way of objective unbiased opinion in relation to matters within his expertise (see Polivitte Ltd v Commercial Union Assurance Co Plc, [1987] 1 Lloyd's Rep 379 at p 386 per Mr Justice Garland and Re J, [1990] FCR 193 per Mr Justice Cazalet). An expert witness in the High Court should never assume the role of an advocate.
	3.	An expert witness should state the facts or assumption upon which his opinion is based. He should not omit to consider material facts which could detract from his concluded opinion (Re J sup).
	4.	An expert witness should make it clear when a particular question or issue falls outside his expertise.
	5.	If an expert's opinion is not properly researched because he considers that insufficient data is available, then this must be stated with an indication that the opinion is no more than a provisional one (Re J sup). In cases where an expert witness who has prepared a report could not assert that the report contained the truth, the whole truth and nothing but the truth without some qualification, that qualification should be stated in the report (Derby & Co Ltd and Others v Weldon and Others, The Times, Nov 9, 1990 per Lord Justice Staughton)."