YAN HOW YEE v. YU KIN SANG PAUL AND OTHERS

HCA 1069/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1069 OF 2008

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JUDGMENT

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Introduction

1.  This is an appeal against the order of Master Chow dated 10 November 2015, by which she stayed the defendants’ Bill of Costs and Notice of Commencement of Taxation and awarded to the plaintiff (“P”) the costs of and occasioned by the plaintiff’s taxation strike‑out summons.

2.  I think it appropriate briefly to sketch out the background to that order and, in doing so, I draw liberally on the factual summaries contained in the two skeleton arguments that have been put before the court        .  

3.  P and the 1^st defendant (“D1”) had been business partners from about 1990 until the action herein was begun.  The business was one in the wood and timber trade, in particular the sale of veneer products.  The business was done through the 6^th defendant, Haywood International Development Limited (“the company”).

4.  P and D1 had been the only two shareholders in the company, each holding 50 per cent of its issued capital; they were also the only two directors of the company.

5.  D1 gave notice of his resignation as a director of the company with effect from 12 July 2008 on 15 July 2008.

6.  The 5^th defendant (“D5”) is a Hong Kong company incorporated on 15 May 2008 and at all material times it has been controlled and beneficially owned by D1.  It is undisputed that D5 has carried on the same sort of business as is carried on by the company.

7.  The 2^nd Defendant (“D2”) was an accounting clerk of the company who resigned on 18 February 2008, with effect from 18 March 2008.  On leaving the company’s employment she took up employment with D5.

8.  The 3^rd Defendant (“D3”) was the sales executive of the company.  She resigned on 7 April 2008 with effect from 7 May 2008 and then took up employment with the D5.

9.  The 4^th Defendant (“D4”) was employed by the company as a warehouse worker and messenger until he was summarily dismissed on 2 May 2008.

10.  In her action brought derivately against the defendants [HCA 1069/2008], P’s case was that D1 wrongfully and in breach of fiduciary duty had set up a business competing with the company and that the other defendants had dishonestly participated, in one way or another, in the breaches of fiduciary duty alleged against D1.

11.  The Defence of the defendants appears to be a narrow one.  It is that D1 terminated his directorship of the company in or around mid‑August 2007 and was no longer under fiduciary obligations to the company when the competing business run by D5 was established and began operation.

12.  There was a mediation and at the conclusion of that process a handwritten “agreement” was signed by D1, D2 and D3.  P was of the view that a binding settlement agreement had been concluded and sought to take steps to have that agreement formalised, in which case the original action would be brought to an end.  D1, D2 and D3 insisted that no binding settlement had been concluded.

13.   P then took out a summons in the original action on 25 July 2014 to enforce the alleged settlement agreement.  ‌In effect, P was proceeding on the basis as if a Tomlin order had been made staying the action other than for the purposes of enforcing the terms of settlement.

14.  Doubts were expressed as to whether it was appropriate to seek to enforce the settlement agreement through a summons taken out in the original action and in the result the parties agreed a consent order by which the summons would be discontinued, with the plaintiff bringing a fresh action by writ to enforce the settlement agreement.  The consent order was made on 6 January 2015.  It provided that D1, D2 and D3 shouldhave their costs of the discontinued summons.  The consent order did not provide that the costs were to be taxable forthwith or that there should be a summary assessment as to the costs.

15.  Some months later on 6 October 2015, D1, D2 and D3 began the process of seeking a taxation of the costs awarded under the consent summons.  As I have already indicated, P moved to strike out those costs proceedings.  She relied on Order 62, rule 9D para (1) which provides:

“Subject to paragraphs (2) and (4), the costs of any proceedings shall not be taxed until the conclusion of the action.”

16.  Master Chow took the view that the original action had not been concluded and that accordingly the attempt to tax the costs awarded under the consent order was misconceived.

17.  On behalf of D1, D2 and D3 who now appeal against Master Chow’s order, Mr Peter Yu has submitted that P’s original action, as a matter of practicality and common sense, had been concluded and Master Chow was wrong to find to the contrary.

18.  Mr Yu prayed in aid the decision of Mr Edward Chan SC, sitting as a Deputy High Court Judge, in Sang Hing Mechanical and Electrical Engineering Limited v Arnhold & Co Ltd [2005] 1 HKLRD 540. He drew my attention to paragraph 15 of the judgment in that case where the learned Deputy Judge considered situations in which a case may come to an end for the purposes of interpreting the expression (“costs in any event”) under the former Rules of Court.  In the course of this paragraph, he said                                 :  

“.... The action may be settled with a consent order or judgment. On the other hand, an action may be settled by a Tomlin order in which case, the action is stayed with liberty to apply for the purpose of carrying out the terms of settlement reached betweenthe parties. ‌Likewise in some instances, after the commencement of an action by a plaintiff, a defendant may apply to have the action stayed on various grounds. ‌The existence of an arbitrationagreement is merely one of the instances for application for stayof the action. Other grounds for stay of the action may include forum non conveniens. In all these instances where the action is stayed, the underlying dispute between the parties has not been resolved. It would only be determined by another forum or tribunal. In my view where an action is stayed, the action should be considered as having come to an end for the purpose of deciding whether there is an ‘event’ for the taxation of an order for ‘cost in any event’. In as much as a judgment in an action may be set aside on appeal or on the ground of fraud, the mere existence of a possibility that a stay may be lifted on some special grounds does not mean that the action stayed is still on going so that an order for ‘cost in any event’ should not be taxed. ”

19.  In my judgment, those observations of the Deputy Judge are not applicable to the factual situation before me.  ‌As I have said, the Deputy Judge there was concerned with whether there had been an “event” for the purposes of the previous Order 62 in the Hong Kong Rules of Court.  This appeal is concerned with the meaning and effect of the words “the conclusion of the action” in the current Order 62, rule 9D that is part of a series of new rules dealing with costs.

20.  I am quite satisfied that the original action brought by the plaintiff has not been concluded.  I say this because D1, D2 and D3 are stoutly defending the claim that the action was settled at the end of the mediation.  If that defence succeeds, it is plain that the original action will continue.  It is, in reality, merely stayed pending the outcome of the proceedings to enforce the settlement.

21.  I am in no position to predict what the outcome of the settlement enforcement proceedings will be.  I must proceed on the basis that there is a real possibility that the defendants will succeed in their defence.  The inevitable consequence of that will be that the original action will proceed and, as Mr Yu has realistically accepted, it would be a nonsense in those circumstances for the plaintiff to have to issue fresh proceedings in order to make the self‑same claims which are already pleaded out in the original action.

22.  Mr Yu had a subsidiary argument.  He contended that, even if the action had not been concluded for the purposes of paragraph (1) of rule 9D, the Master ought to have found that there was no likelihood of anyfurther order being made in that cause or matter and, accordingly, pursuant to rule (4) of 9D, she should have allowed the taxation proceedings of the costs order made in the consent order.

23.  In effect for the same reasons that I have concluded that the action has not concluded, I am of the view that the Master was well entitled to form the judgment that there was a likelihood of a further order being made within the original action.  ‌That likelihood was of the same magnitude that the defence to the proceedings to enforce the settlement agreement would succeed.

24.  Accordingly, despite the skilful and persuasive submissions that have been advanced on behalf of the appellant, for the reasons I have given this appeal is dismissed.

HCA 1069/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1069 OF 2008

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J U D G M E N T

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Background

1. This is a derivative action which was commenced by a generally endorsed writ on 4 June 2008.  Between that date and 11 November 2008, interlocutory proceedings for a successful injunction application were pursued by the plaintiff and directions for further proceedings of the action were given.  On 11 November 2008 the plaintiff filed a statement of claim and on 23 December 2008 a defence and counterclaim were filed.  This was followed by an application to strike out the counterclaim, which was heard on 17 June 2009 and finally disposed of in favour of the plaintiff on 4 November 2009.

2. Thereafter, and except for solicitors’ correspondence relating to costs, things went quiet until 5 September 2012 (a period of 2 years and 10 months), when the plaintiff filed a mediation notice, followed by a mediation certificate.  I find that these steps were, in effect, steps taken within this action.  The same were served on the defendants but no reply was received.

3. On 2 January 2013 the plaintiff chased for a reply to the mediation notice and took steps to compel the exchange of witness statements.  This was met by the present application to strike out.

The defendants’ case on strike out

4. In short, Mr Kam Cheung, counsel for the defendants, submits:

(1) the plaintiff has sat on the matter for a long time without showing any real intention to bring the proceedings to a conclusion; and

(2) that the defendants are prejudiced in that

(a) their memory of events is impaired;

(b) their personal integrity has been put in question by this action, which has had an adverse effect on their business activities; and

(c) they have suffered prolonged stress and anxiety. 

Mr Cheung for the defendants, however, conceded this morning that the alleged prejudice is not, in his words, “substantial”.

The plaintiff’s position

5. In short, the plaintiff says the action came to a halt because she was unable to provide the necessary funding, but that she is now able to resume participation in the proceedings because her finances have improved. 

6. In answer to the delay point, Mr Ng, of counsel, whilst accepting the delay is inordinate, points to the CJR which requires all parties to take positive steps to advance proceedings, and notes that the defendants too have done nothing.

7. As to prejudice allegedly caused to the defendants, Mr Ng notes that the 1st, 2nd, 3rd and 5th defendants all made substantial affirmations in opposition to the interlocutory injunction application in 2008, from which they can now readily refresh their memories, and that the issues in the action are of narrow compass.

8. Mr Ng further submits that if there was stress and anxiety or adverse consequences to the defendants’ businesses, the defendants could have, but chose not to advance proceedings themselves.

9. As to the warehousing of claims, Mr Ng relies upon the plaintiff’s impecuniosity and her prior enthusiasm to prosecute this case such that it is not, he says, plain and obvious that the plaintiff intended to permanently warehouse the action.

Discussion

10. The approach the court takes in exercising its discretion is set forth in the decision in Wing Fai Construction Co Ltd v Yip Kwong Robert [2012] 1 HKLRD 589.

11. I remind myself that striking out a claim is a remedy of last resort.  Abuse of the process of the court is the foundation for the exercise of the jurisdiction to strike out for delay.  Mere delay is not sufficient to justify a striking-out order.  The delay must be both inordinate and inexcusable and abuse must be shown.

12. The delay by the plaintiff in this matter is, in my view, inordinate and inexcusable.  It is no justification for a party simply to say that it was unable to provide the necessary funding to continue the litigation.

13. However, I accept Mr Ng’s submissions that no abuse is evident here.  For the reasons he has submitted, I do not think that impairment of memory is in play here. Furthermore, the defendants’ own conduct in not advancing this matter and, in effect, letting sleeping dogs lie, is relevant to my exercise of discretion. Any stress or anxiety or adverse business consequences caused to the defendants could, as Mr Ng submits, have been alleviated by the defendants’ advancing the proceedings themselves.

14. As to any allegation of warehousing this claim, I reject the same.  The plaintiff’s conduct and approach to this litigation are not those of a person who has no intention to bring these proceedings to a conclusion.

15. At the end of the day, the question is whether in applying settled principle, in the circumstances it is just to strike out this action.  I conclude that, in all the circumstances, it would not be just to strike out this action and, in my view, a fair trial is perfectly possible.  I am not persuaded to impose conditions as to security for costs, but I leave this matter open for further application.

16. The defendants’ application is dismissed.

(Submissions re costs)

17. I make an order that the defendants to this application do pay to the plaintiff the costs of and occasioned by this application, to be taxed if not agreed.

(Further discussion re costs)

18. I think this bill appears in all respects to be perfectly reasonable.  I make a discount for the fact that this is an order for party-party costs and not indemnity costs and, looking at the matter in the round, I order a sum of $120,000 in costs to be paid by the defendants to this application to the plaintiff within 28 days.

(Discussion)

19. The orders made are as follows:

(1) the application to strike out is dismissed;

(2) the defendants to this application will pay costs summarily assessed of $120,000 to the plaintiff within 28 days.

I give the following directions:

(1) witness statements will be exchanged on or before 13 November 2013;

(2) thereafter, there be liberty to the parties to issue a CMC summons;

(3) the parties have leave to attempt to conduct mediation on or before 18 October 2013.

   HCA1069/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

   ACTION NO. 1069 OF 2008

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BETWEEN

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J U D G M E N T

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1.  This is a derivative action commenced by the plaintiff on behalf of the 6^th defendant. By the Order of Master Lung made on 24 April 2009, the 1^st defendant’s counterclaim against the 6^th defendant was struck out. This is the 1^st defendant’s appeal against Master Lung’s Order, which raises the question of whether a defendant in a derivative action can counterclaim against the company on whose behalf the claim is made under Order 15, rule 2 or 3.

Background

2.  Since around 1990, the plaintiff (“Madam Yan”) and the 1^st defendant (“Mr Yu”) have been business partners. They jointly own a number of companies, directly or indirectly, in Hong Kong and Mainland China. The 6^th defendant herein (“Haywood”) is one of such companies. Haywood was incorporated in Hong Kong in March 1997 and has since been carrying on trading business in respect of wood products including wood veneers and veneered plywood.

3.  Madam Yan and Mr Yu were at all material times and still are the only shareholders of Haywood, each holding 50% of its issued capital. On 15 July 2008, that is after the commencement of this action and pending the substantive hearing of an interlocutory injunction application made by Madam Yan, Mr Yu gave notice of his resignation as a director of Haywood with effect from 12 July 2008. Until then, Madam Yan and Mr Yu were the only directors of Haywood.

4.  One of the claims in this derivative action is the breach of fiduciary duty on the part of Mr Yu. According to Madam Yan, Mr Yu set up a sole proprietorship business known as Wosland Veneers & Timbers Co. in December 2007 and then the 5^th defendant in May 2008. Both the sole proprietorship business and the 5^th defendant were operated by Mr Yu while he was still a director of Haywood. Not only were their businesses the same as that of Haywood, Madam Yan avers that Mr Yu (with the assistance of the 2^nd to 4^th defendants) diverted the business of Haywood first to the sole proprietorship business and then the 5^th defendant. On this basis, Madam Yan contend that Mr Yu has acted in wrongful breach of his duty as a director of Haywood.

5.  The 2^nd to 4^th defendant are the former employees of Haywood. In short, it is Madam Yan’s case that these former employees dishonestly assisted Mr Yu in his breach of fiduciary duties and had acted in breach of the implied terms of their employment contracts made with Haywood.

6.  In addition, the Statement of Claim pleads the causes of action of passing off, procuring breaches of contract by the 3^rd defendant as well as conspiracy and unlawful interference with Haywood’s business. For the present purpose, it is not necessary to go into the details of these heads of claim. Suffice it to say that the facts relied on in support of these causes of action overlap with those relied on in support of the claims for breach of fiduciary duties.

7.  Since this is a derivative action, Haywood is only a nominal defendant. Haywood was not represented in this appeal, and rightly so.

8.  The 1^st, 2^nd, 3^rd and 5^th defendants filed a Defence and Counterclaim on 23 December 2008. They dispute the claims put forward byMadam Yan on behalf of Haywood. In addition to his defence, Mr Yu lodged a counterclaim against the Haywood (“the Counterclaim”).

9.  This Counterclaim, which is the focus of this appeal, is pleaded as follows :

“26.  By divers orders, the 6^th Defendant had ordered from Legnoquattro veneers and/or veneers related products for the total sum of Euro 170,000 (‘the said Sum’).

27.  Despite repeated requests and demands, the 6^th Defendant has failed and/or unlawfully refused to pay to Legnoquattro the said Sum or part thereof or at all.

28.  The 1^st Defendant has fully settled the said Sum with Legnoquattro from whom all of the rights of Legnoquattro against the 6^th Defendant in their capacity as its creditor were or deemed to have transferred to the 1^st Defendant.

29.  Having been informed of the matter as pleaded in paragraph 28 above, the 6^th Defendant has failed and/or refused to pay to the 1^st Defendant the said Sum or part thereof or at all.

30.  By reason of the matters aforesaid, the 1^st Defendant has suffered loss and damage.”

10.  By her Summons dated 2 January 2009, Madam Yan applied for an Order that the Counterclaim be :

(1)  dismissed on the ground that there is no jurisdictional basis on which Mr Yu can lodge a counterclaim against Haywood;

(2)  struck out or stayed on the ground that it discloses no reasonable cause of action and/or that it is frivolous and vexatious and/or that it may prejudice, embarrass or delay the fair trial of this action and/or that it is an abuse of the court process; and

(3)  struck out or tried separately from Madam Yan’s claims or that all further proceedings on the Counterclaim be stayed until after the trial of Madam Yan’s claims on the ground that the subject-matter of the Counterclaim ought to be disposed of by a separate action and/or the Counterclaim may embarrass or delay the trial of Madam Yan’s claims.

11.  On 24 April 2009, Master Lung allowed Madam Yan’s application and struck out the Counterclaim. By his Notice of Appeal filed on 8 May 2009, Mr Yu lodged this appeal against Master Lung’s Order.

Jurisdictional

basis

12.  The making of a counterclaim and the court’s jurisdiction in respect of a counterclaim are governed by section 16(2) of the High Court Ordinance (Cap. 4) and Order 15, rules 2 and 3 of the Rules of the High Court (Cap. 4A). At the hearing of this appeal, Ms Rita So, counsel for Mr Yu, made it clear that Mr Yu relied on both Order 15, rules 2 and 3 in support of this appeal.

13.  Order 15, rule 2(1) reads as follows :

“Subject to rule 5(2), a defendant in any action who alleges that he has any claim or is entitled to any relief or remedy against a plaintiff in the action in respect of any matter (whenever and however arising) may, instead of bringing a separate action, make a counterclaim in respect of that matter; and where he does so he must add the counterclaim to his defence.” [emphasis added]

14.  Order 15, rule 3(1) reads as follows :

“Where a defendant to an action who makes a counterclaim against the plaintiff alleges that any other person (whether or not a party to the action) is liable to him along with the plaintiff in respect of the subject-matter of the counterclaim, or claims against such other person any relief relating to or connected with the original subject-matter of the action, then, subject to rule 5(2), he may join that other person as a party against whom the counterclaim is made.” [emphasis added]

15.  It is crystal clear from the wording of Order 15, rule 2(1) that a defendant may only make a counterclaim against the plaintiff but not a defendant in the same action. The wording of Order 15, rule 3(1) is equally clear in that it only applies where the defendant makes a counterclaim against both the plaintiff in the action as well as another party or other parties. Order 15, rule 3(1) does not apply if the defendant only intends to make a counterclaim against a co‑defendant in the action but not also the plaintiff. If the counterclaim is not also made against the plaintiff in the action, a defendant would have to have recourse to Order 16. See : Hong Kong Civil Procedure 2010, Vol. 1, para. 15/3/1 (at p. 267).

16.  In the present case, Order 16 is not invoked by Mr Yu and I make no observation as to whether Mr Yu is entitled to invoke Order 16. The Counterclaim is only made against Haywood (as the 6^th defendant). This is put beyond doubt by paragraphs 26 to 30 of the Defence and Counterclaim (quoted in paragraph 9 above) and also the prayer to the Counterclaim. The Counterclaim is not made against Madam Yan. In any event, the Counterclaim cannot be made against Madam Yan in her personal capacity or in her capacity as a shareholder of Haywood since the alleged debt (if it exists, and which I make no finding as it is not necessary to do so) was owed by Haywood to the supplier “Legnoquattro”. Accordingly, the Counterclaim is prima facie outside the scope of Order 15, rule 2 or 3.

17.  Faced with this difficulty, Ms Rita So, counsel for the 1^st defendant, argued that the present derivative action is made on behalf of Haywood and the Counterclaim is in effect a set‑off against Haywood’s claim. Ms So’s argument ran as follows. In all derivative actions, the fruit of the judgment should go to the company on whose behalf the action is brought. Hence, if this derivative action is upheld, Mr Yu would have to pay equitable damages to Haywood and not Madam Yan personally since she is only suing on behalf of Haywood. On the other hand, should the Counterclaim succeed, Mr Yu would be entitled to be reimbursed by Haywood for the sum he paid to Legnoquattro. In such a scenario, argued Ms Rita So, there could be a set-off at the end of the day (at least at the stage of enforcement).

18.  Although not in so many words, Ms So in effect argued that the Counterclaim should be treated as having been made against the real plaintiff since Madam Yan is suing on behalf of Haywood.

19.  At the hearing, I was informed by both counsel that there does not appear to be any direct authority on the question that calls for determination in this appeal. Nor could their research reveal any decided cases where a defendant in a derivative action lodged a counterclaim against the company on whose behalf the claim was made. In the circumstances, I would start from the fundamental principles, viz., what is the nature of derivative action and why is the procedure of derivative action allowed by the court.

20.  In the classic authority of Wallersteiner v Moir (No. 2) [1975] 1 QB 373, Lord Denning MR expounded as follows (at pp. 390A-391B) :

“  It is a fundamental principle of our law that a company is a legal person, with its own corporate identity, separate and distinct from the directors or shareholders, and with its own property rights and interests to which alone it is entitled.  If it is defrauded by a wrongdoer, the company itself is the one person to sue for the damage.  Such is the rule in Foss v Harbottle (1843) 2 Hare 461.  The rule is easy enough to apply when the company is defrauded by outsiders.  The company itself is the only person who can sue.  Likewise, when it is defrauded by insiders of a minor kind, once again the company is the only person who can sue.  But suppose it is defrauded by insiders who control its affairs – by directors who hold a majority of the shares – who then can sue for damages? Those directors are themselves the wrongdoers.  .… Yet the company is the one person who is damnified.  It is the one person who should sue.  In one way or another some means must be found for the company to sue.  Otherwise the law would fail in its purpose.  Injustice would be done without redress.  ….

… The form of the action is always ‘A.B. (a minority shareholder) on behalf of himself and all other shareholders of the company’ against the wrongdoing directors and the company.  That form of action was …. a ‘mere matter of procedure in order to give a remedy for a wrong which otherwise would escape redress’ …. Stripped of mere procedure, the principle is that, where the wrongdoers themselves control the company, an action can be brought on behalf of the company by the minority shareholders on the footing that they are its representatives to obtain redress on its behalf.” [emphasis added]

21.  It is clear from the above passages that a derivative action is no more than a procedure created to enable a shareholder to bring an action against the wrongdoing majority. The rationale of this procedure is to enable the plaintiff shareholder to obtain redress on behalf of the company so as to prevent injustice to the company. See also : Prudential Assurance Co. Ltd v Newman Industries Ltd (No. 2) [1982] 1 Ch. 204 (at p. 211A-B).

22.  That being the rationale, I cannot see any legal justifications for allowing a defendant in a derivative action to make a counterclaim against the company on whose behalf the derivative claim is made. On the contrary, to allow such a counterclaim by treating the company as effectively the plaintiff (despite it is joined as a nominal defendant) will be inconsistent with the very nature of a derivative action.

23.  It is trite that a party cannot be both a plaintiff and a defendant in the same action. See : Hong Kong Civil Procedure 2010, Vol. 1, para. 15/1/3 (p. 262). In a derivative action, it is well established that the company on whose behalf the claim is made should be joined as a defendant (albeit a nominal one) so as to ensure that it is bound by the judgment (thereby preventing it from bringing a subsequent action for the same relief) and that it enjoys the fruit of the judgment. See : Joffe Q.C., Drake, Richardson & Lightman, Minority Shareholders : Law, Practice and Procedure (OUP) (3^rd edn), para. 1.36 (p. 12). Since the company has to be joined as a defendant in a derivative action, it cannot be treated at the same time as the plaintiff simply because the claim is brought on its behalf.

24.  It is necessary to bear in mind that a derivative action is only allowed when the company itself cannot sue as a plaintiff. Hence, putting aside the fact that the company is joined as a defendant, conceptually it is difficult to treat the company as the plaintiff in a derivative action.

25.  For these reasons, I agree with the Order made by Master Lung and rule that Mr Yu could not rely on Order 15, rules 2 or 3 to lodge the Counterclaim. Accordingly, this appeal must be dismissed.

26.  During the hearing of this appeal, both counsel had also briefly dealt with the procedural issues or difficulties that might arise if the Counterclaim were to be allowed to proceed. Mr Alan Ng stressed that Haywood is only a nominal defendant and is not represented in this action. On the other hand, Ms Rita So argued that section 114B of the Companies Ordinance (Cap. 32) can be invoked to resolve the question of who should conduct the defence on behalf of Haywood. Further, there is the possibility of a shareholder (such as Madam Yan) applying for leave to intervene under sections 168BB(1)(c), 168BC(1)(b) and 168BC(3)(c) of the Companies Ordinance.

27.  In my view, my conclusion that Haywood is not and cannot be treated as a plaintiff (and thus no counterclaim can be made against it under Order 15, rule 2 or 3) is sufficient to dispose of the jurisdictional issue. In the absence of an opportunity to properly consider the effect of the said provisions in sections 168BB and 168BC of the Companies Ordinance in detail, I do not find it desirable to express any views on the procedural issues that might arise.

No reasonable cause of action

28.  In addition to the jurisdictional difficulty discussed above, I am also of the view that the Counterclaim as is now pleaded does not disclose any reasonable cause of action.

29.  In law, a person who makes a voluntary payment to settle another person’s debt will only discharge that debt if he acts with that other person’s authority or that other person has subsequently ratified the payment. Hence, if a person pays the creditor without the debtor’s authority and if his payment is not subsequently ratified by the debtor, the person who makes the payment generally has no direct redress against the debtor. There is of course the exception to this general rule, viz., the payment was made under compulsion of law, provided the facts justify the application of this exception. See : Goff & Jones, The Law of Restitution (7^th edn), para. 13-001 to 13-006 (at pp. 379-383).

30.  As can be seen from the quotation set out in paragraph 9 above, the Counterclaim as it is currently pleaded does not contain any averment that the payment said to have been made by Mr Yu was made with Haywood’s consent or authority. Nor is there any plea that Haywood has subsequently ratified the payment. Further, there is no plea that the payment was made by Mr Yu under compulsion of law. In any event, on the evidence placed before this Court, it is difficult to see how Mr Yu can suggest that he made the payment to Legnoquattro under compulsion of law.

31.  At the hearing of this appeal, Ms Rita So confirmed that there would not be any application to amend the Counterclaim. Nor is there any evidential basis to suggest that any amendments can be made to improve this Counterclaim.

32.  In the circumstances, the Counterclaim as it is now pleaded does not disclose any reasonable cause of action. Hence, for this reason as well, this appeal should be dismissed.

Order 15, Rule 5(2)

33.  Lastly, there is the question of whether the Counterclaim, if it could be maintained, should be tried separately or together with the derivative claims made by Madam Yan. This question is raised in paragraph 3 of Madam Yan’s Summons and is governed by Order 15, rule 5(2).

34.  Order 15, rule 5(2) reads as follows :

“If it appears on the application of any party against whom a counterclaim is made that the subject-matter of the counterclaim ought for any reason to be disposed of by a separate action, the Court may order the counterclaim to be struck out or may order it to be tried separately or make such other order as may be expedient.”

35.  Due to the conclusions I have reached above, the question of whether the jurisdiction under Order 15, rule 5(2) should be exercised does not call for determination. Further, in view of what I have said in paragraphs 26 and 27 above, I would prefer not to express any view on this issue. In my view, the question of whether the Counterclaim (if it could be maintained) can be conveniently tried together with Madam Yan’s derivative claim or whether it should be tried separately depends, to a certain extent, on who should be given the conduct of the defence of the Counterclaim.

Conclusion

36.  For the reasons given above, I make an Order that this appeal be dismissed. I would also make an Order nisi that the 1^st defendant (Mr Yu) do forthwith pay the plaintiff (Madam Yan) all the costs of and occasioned by this appeal to be taxed if not agreed. Since the present dispute is separate and distinct from the rest of the parties’ disputes in this derivative action, I find it justified to order the costs of this appeal to be paid forthwith.

37.  Lastly, I wish to express my gratitude to both counsel for their assistance.

HCA 1069/2008

香港特別行政區

高等法院原訟法庭

民事司法管轄權

案件編號2008年第1069號

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HCA1069/2008

香港特別行政區

高等法院原訟法庭

民事司法管轄權

案件編號2008年第1069號

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判案書

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1. 原告人在這案件中提出禁制令的申請，禁制第一至第五被告人，禁制令的內容本席不會再詳細說明。主要來說，原告人甄女士與第一被告人俞先生是第六被告人希活國際發展有限公司(“希活”)的股東及董事，雙方各自持有百分之五十的公司股份。較早前雙方不能在公司的運作上一起合作，原因與本案無直接關係。

2. 根據原告人指稱俞先生動用了公司的資產，內容包括他們的客戶來源的名單、電話號碼，亦在某一段時間開始聯絡以前的客戶，以第二間公司的名義賣同一樣的產品(即第五被告人)，就是“veneer wood”。原告人一直以來用「活士」及「Woodsland」的商標 ，而第一被告人的第五被告人公司則用「活士」，Wosland或Wos，涉嫌有魚目混珠之嫌，但最主要是所賣的產品跟第六被告人公司一起競爭。

3. 在公司法中，第一被告人既然是第六被告公司的股東及董事，他是有「受信責任」(fiduciary duty)因而不應傷害自己的公司，(這個受信責任亦有譯為「誠信責任」)。關於這點，其實是涉及公司的資產，公司在其資產的權利裡是有權防止公司的資產流失，任何是公司的成員、股東、董事亦是有責任保護公司的資產，而不是去傷害公司的資產或與其他人有陰謀(conspiracy)，原告說這個陰謀是指一齊串謀將公司的資產流失。當然這點暫時來說，是原告人在誓章裡宣誓的一個指稱，還未有對方的答辯。但今早從來沒有人說事情完全不是這樣，亦沒有發生這些事。

4. 其中另外一個陰謀指稱是涉及第二被告人黃惠芬女士(Fanny Wong)，是以前希活的會計師(accountant)；第三被告人陳女士(Terence Chan)是希活以前的senior sales executive；第四被告人何先生以前是負責希活貨倉的管理。該指稱是俞先生與這些人聯同，就是在Fanny Wong、Terence Chan及何先生在職於希活，他們協助俞先生的另外業務，內容包括給資料予俞先生、協助俞先生接觸客人等等。他們是在在職時已違反僱傭合約，如果(這裡說如果 ，因為這只是原告人所指稱)俞先生是要求及跟這些人同意違反僱傭合約，這是在侵權法(tort)上引導他人違反僱傭合約，這亦是在法律上在民事訴訟裡其中一個訴因。

5. 代表第五被告人這間香港活士木製品有限公司的鍾大律師要求將案件押後至7 月4 日聽取，對於這點，所有在本席席前各人都沒有異議。今天的異議是由今天開始至7 月4 日，這14 日內法庭應否下一個臨時禁制令，禁制第一至第五被告人在這14 天內不可以做傳票裡所列的事項。

6. 第一被告人今天口頭上所說他也想入誓章，但他問及為何沒有之前原告人的律師信呢？通常禁制令是不會有通知的，是不會通知被禁制者讓他毀滅證據的。本席不是說俞先生會這樣做，本席舉一簡單例子：譬如有人冒可口可樂公司生產了類似可口可樂的飲品，通常是可口可樂公司單方面申請Anton Piller order，即是申請去某一地方，原告人有理由懷疑有人冒認偽造可口可樂之處，所以直接由律師帶同有關人員及法庭搜查令，進去查看有否這些違禁品，該被搜查的人不可說為何沒有律師信通知會控告我的。當然是不會通知的，通知的話，對方便會將所有證據毀滅，本席相信鍾大律師與吳大律師都明白本席所說的是甚麼。故此沒有之前發律師信並非是今天的申請中必要的事情。

7. 其實以原告人在本案的說法，她可以不通知所有的人，單方面申請禁制令，然後將臨時禁制令送達給每個人，她一送達時，每人便根據該禁制令不可做禁制令裡被禁制的事項，直至下一個星期五，由法官聽取雙方的陳詞後，決定是否要繼續禁制令到正審的時候。本席可多說一句，如果她在6 月16 日用她現在的誓章去申請，本席覺得已有足夠資料落臨時禁制令的，在法律上通常會被稱之為非正審禁制令。

8. 當然俞先生方面說，其實本案十分簡單，只是他本人跟甄女士意見不合，所以第六被告人公司要清盤。因公司運作已被鎖著，即我一票對方一票，我投贊成對方投反對，我投反對對方投贊成，大家不能有任何行動，這樣子公司當然要清盤。但清盤歸清盤，不是說一方在大家不能同意時，就出外用公司的資產做一個與公司競爭的業務，這個在法例裡是十分清楚的。

9. 俞先生提出他是有心想回開頭的時候，本席在此建議他可跟原告人律師提出願意雙方調解。香港現時有專業的調解團體，大律師公會的名冊裡亦有一頁寫明那位大律師是合資格的調解員。律師公會亦有一個很詳細的表，列明誰可在訴訟公司法裡可做調解的，但本席是不可介紹調解員，因這是涉及商業上的利益，有些人收費便宜，有些人收費貴，收費便宜的並不表示不好，收費貴的亦不一定是好，一切都是當事人自己選擇。你們如果是去調解的話，本席相信會是一個很好的解決方法。事情已到達這個地步，當然是不可返回以前的，但如果大家可達成一個雙贏的局面，當然是最好不過的。

10. 在今天席前，原告人是有一個強而有力的案件，當然只是聽一面之詞裡，正審時則要聽取雙方面的證據，但今天不是正審，本席只看單方面的指控，印象是原告人是有一個有強而有力的案件，被告一方暫時亦沒有對基本上的事情提出另類的說法，譬如第五被告人不是我的公司、從來沒有做這個行業等。

11. 除了何先生說，他現在根本不是第五被告人公司的職員，俞先生亦不是請他的，他現在根本是失業的，所以下了禁制令對他是無關的。當然有一些另外的指控，是他在受僱時，他曾經做過一個違反僱傭合約的事情，這點他在整件案件中他會否答辯呢？歸根究底還是他自己看過整件案件的指控後才作決定。

12. 為了這點，本席首先指示原告人以後給第四被告人的文件是需要用全中文。至於以前所入的誓章、及已入的傳票，以後所入的申索書、今次的傳票的英文版本及其他所有文件，原告都要譯成中文給何先生看。因為何先生想知道7 月4 日會否答辯，如果他同意原告人所索取的禁制令，他便可以通告法庭他不打算出席。

13. 根據這個強而有力的指控，本席已提出主要是認為第一被告人損毀了這個受信責任，而第二至第四被告人，是幫第一被告人去達成這個損毀受信責任，至於他們自己本身,亦是損毀了自己的僱傭合約，所以本席認為應該頒下臨時禁制令直至7 月4 日。

14. 代表第五被告人公司的鍾大律師，他的陳詞認為不應落這個臨時禁制令，原因有幾點。

15. 第一，他今天的最主要口頭陳述，說如果原告人所說的是對的話，第六被告人公司已是被損毀了的，因為它根本不能繼續運作，因為俞先生是它的sales manager，單原告人一人之力，公司是不能運作的。而公司每年所賺的錢已是不多、希活每年所賺的錢也只是20至30 萬，現在已不能賺錢了，所以它所得的賠償金額會很少。而最終的賠償金額，第五被告人是有能力去支付的。所以鍾大律師他表示被告方會入誓章，證明第五被告人是足以有財力支付該些損毀的金額。

16. 本席認為第一的考慮不是損毀金額裡是否很容易計算出來及第五被告人是否有經濟能力去付賠償金額。第一個考慮理應是原告人在資產法上是否有權力保護她的資產(propriety right)，如果她是有這樣的權力時，便不可以說如果我做的事是錯的，你是已經被我拆毀了的一間空殼公司，所以保留公司沒有用、禁制令亦沒有用，只是對五位被告人有一個傷害。本席認為這樣不是一個法律上可以接受的爭議點。因為假若五位被告人是有做該些行為而第六被告人受到損害。第六被告人公司或該公司的股東是有權保護他們的資產以致不能再有其他傷害。而第六被告人亦是有權在這刻再請另外一些人員繼續運作公司。

17. 今天，本席認為是要頒下臨時禁制令，直至7 月4 日為止。本席現以英文讀一次，禁制令傳票第一至第四段，本席稍後休庭時，翻譯小姐便會詳細的逐句逐句向各位出席的被告人翻譯。

(法庭以英文讀出禁制令的內容)

18. 本席進一步命令如下：

(1) 今天傳票休庭至7 月4 日10 時，由另外一位法官聽該傳票；

(2) 原告方可以在6 月24 日4 時前存檔及送達她進一步的誓章，以致她可以將一些未披露的文件披露出來；

(3) 第一至第五被告人在6 月27 日(下星期五)4 時前送達及存檔一份誓章反對該非正審禁制令；

(4) 原告人有權再入一個最後的答辯誓章，但因時間緊迫，本席指示原告人要在7 月2 日(星期三)的中午之前送達及存檔；(如果被告人在傳票的地址是不方便或是不會立刻收到原告人送達的文件，被告方要通知原告方那一個地址會較為好，免得7 月4 日時被告方說收不到、不在那裡居住、不在那裡工作。特別何先生他說他現在沒有工作，鴻圖道23 號這個其實就是第五被告人公司的註冊地址，所以第四被告人是否用該地址的呢？請陳女士、何先生、俞先生告訴原告人。)

19. 今天的訴訟費是以下次的傳票結果而定。若沒有其他指示，本席暫時休庭以便翻譯小姐將該四段內容解釋給被告人聽，待她解釋完後，本席再開庭看看各位有否其他問題。

20. (休庭後，控辯雙方在聽罷翻譯禁制令內容，都表示沒有其他問題。)