LIN MING v. JOINTA LTD

HCA 866/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 866 OF 2011

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BETWEEN
	LIN MING	Plaintiff
and
	JOINTA LIMITED	Defendant

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Before: Hon G Lam J in Chambers

Date of Hearing: 9 July 2014

Date of Decision: 9 July 2014

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D E C I S I O N

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1.  It seems to me the starting point in this case is that there is an order for security for costs made by Master S Kwang on 5 March 2014 on a summons taken out by the defendant on 20 August 2013. By that order, the master required the plaintiff to pay security in the sum of HK$200,000 into court within 60 days of the date of the order on the ground that the plaintiff is ordinarily resident out of the jurisdiction.

2.  There is no appeal by either party against that order.  The plaintiff did, at one stage, apply for legal aid.  Taking into account the statutory stay of proceedings arising from that application, on the plaintiff’s calculation, the 60-day period imposed in the master’s order lapsed in mid-June 2014.

3.  No security, whether in the form of payment into court or otherwise, has been provided by the plaintiff pursuant to the order. The consequence provided for in that order therefore takes effect, which is that further proceedings in the action be stayed until such time as payment is made, except, however, that the pre-trial review and the trial will not, according to the terms of the order, be adjourned or affected by that stay.

4.  It seems to me it would be contrary to the whole notion of ordering security for costs, if the defendant is required to face the trial without the plaintiff having provided security.  The reason why the master made an order in the form as he did is that, as I read the transcript, he considered that the question of stay of the trial and vacation of the trial dates should be left to the trial judge. 

5.  That appears quite clearly from the transcript of the hearing before the master at page 13 and also from a letter written by the clerk to the master to the parties dated 19 June 2014.  So the master’s intention clearly was not that even if security was not provided, the trial should, in any event, proceed.  The master contemplated that a further application may be made to the court by the defendant if there was default on the part of the plaintiff in complying with the order for security.

6.  And that is the position I am faced with today. The plaintiff has failed to comply with the order for security and the defendant has taken out an application that the pre-trial review and the trial of the action be adjourned sine die and that the trial dates be vacated.  The trial dates are fixed on 26 to 28 August 2014.

7.  As I have already stated, the point of ordering security is to protect the defendant in the event that the plaintiff is unsuccessful and is ordered to pay the defendant’s costs.

8.  The master has already decided that security should be given.  There is no appeal from that decision, so that is not a question I should go into any further.

9.  To say that the trial should nonetheless proceed, in the absence of security being provided, would render the order for security nugatory and negate the protection intended to be given to the defendant.  I think therefore that there is a merit, in principle, in the defendant’s application today.

10.  Mr Leung, who appears on behalf of the plaintiff, complains that the application has been taken late.  The summons was undoubtedly taken out quite late.  It was issued only yesterday, but it was issued at my direction, given pursuant to a letter from the defendant’s solicitors to the court, copied to the plaintiff, effectively making the same application.  The letter was dated 4 July 2014, and was therefore two clear working days before this hearing.

11.  Mr Leung also said that he is placed in some difficulty because those instructing him have not been able to contact the plaintiff.  I do not think that should deter me from dealing with the application now.  First of all, today is the day for the pre-trial review, which has been set down for a long time, with the knowledge of the plaintiff. Further, the plaintiff is the party in default of compliance with the master’s order for security and complaint has already been made by the defendant by letter of 4 July as well as, in fact, a letter to the master dated 17 June, which led to his clerk’s response on 19 June.

12.  We are getting very close to the court vacation and the trial is due to take place in late August this year.  I do not think this matter should be delayed any further because the parties need to be aware of their position in order to prepare themselves for the trial, if necessary. However, I do not think it would be right for me today to make an immediate order that the pre-trial review and the trial of the action be adjourned sine die and to make an immediate order that the trial dates be vacated.  The master has made an order which does not provide for these consequences.

13.  The defendant is effectively seeking an order by way of case management and in order to give effect to the master’s order for security, that as a consequence of the failure to provide security, the trial should be vacated.  In the circumstances, I think it would be fair to order that unless the plaintiff provides security for costs in compliance with the master’s order of 5 March 2014 within 7 days hereof, the trial of this action will be adjourned sine die and the trial dates will be vacated.

(Godfrey Lam) Judge of the Court of First Instance High Court

Mr Kelvin Leung, instructed by M C A Lai & Co, for the plaintiff

Mr Anthony Chan, instructed by JCC Cheung & Co, for the defendant

HCA 866/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 866 OF 2011

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BETWEEN

	LIN MING	Plaintiff
and
	JOINTA LIMITED	Defendant

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Before : Deputy High Court Judge M Chan in Chambers

Date of Hearing : 28 March 2012

Date of Decision : 28 March 2012

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D E C I S I O N

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1.  Mr Lin claims in HCA 866/2011 that he had advanced a sum of Hong Kong $62,248,190 to Jointa Ltd (“Company”). The alleged loan is denied by the Company.

2.  Mr Lin relies on the minutes of a meeting of the board of directors of the Company dated 3 August 2009 (“Minutes”) as evidence of the loan, as well as on the unaudited balance sheets or management accounts of the Company for the year ending 31 December 2009 which refer to the amount due from the Company to Mr Lin.

3.  Lengthy affidavits have been filed by the parties for the purpose of the application made by Mr Lin for summary judgment to be entered against the Company for the sum of US$6,562,500, which Mr Lin claims to be the part of the loan which is clearly evidenced.

4.  I do not consider that this is a case fit for summary judgment.

5.  The Minutes relied upon by Mr Lin as evidencing the alleged loan of HK$62,248,190 is disputed by the Company.  It is claimed that at the time of the alleged meeting which took place, Mr Lin was not a director of the Company.  The Company has produced documents filed at the Companies Registry on 24 December 2009 which record the fact that on 17 July 2009, Mr Lin had ceased to be a director, and that Mr Chen Shu Quan had been appointed in his place.  It is claimed that Mr Lin had no authority to pass the resolution whereby the loan of HK$62 million was acknowledged.

6.  In reply, Mr Lin refers to a series of fraudulent acts perpetrated by Mr Chen and others to remove Mr Lin’s control and beneficial ownership of the Company and other entities within a group, during a period of his imprisonment in China from 27 October 2009 to 22 December 2010.  It is claimed that he had been defrauded into signing documents which eventually divested him of his directorship in the Company, and to the shares in the Company being transferred out of Mr Lin’s control.

7.  In relation to the sum of US$6,562,500, which is the only part of the loan which Mr Lin says he is able to produce documents to support his claim, the Company claims that under a Subscription and Investment Agreement which was signed by Mr Lin, the Company, and other parties on 7 March 2007 (“Agreement”), which was part of an exercise to inject capital and funds into the group of companies in which Mr Lin had an interest, there are restrictions on the Company’s borrowing or entering into contracts with persons connected with the Company and the group such as Mr Lin, which casts doubt on the loan alleged to have been made by Mr Lin to the Company in 2009.

8.  In relation to the unaudited balance sheets or management accounts of the Company which refer to the debt of HK$62 million due to a director, the authenticity of the accounts is called into question by the Company, and the accuracies of the entries are disputed.  On the evidence produced by Mr Lin, it is, first, unclear that the debt of US$6,562,500 is part of the debt of HK$62 million shown in the accounts.  Further, it is unclear how and when the management accounts (ie exhibit LM5) were produced, whether they were compiled by Mr So on 16 May 2011, or earlier.  The Company claims further that the entries in the unaudited statements are unreliable, bearing in mind Mr Lin’s own evidence as to the value of the Company being over 1 billion RMB, contrasted with the negative net asset value of HK$7,542,780 as shown in the unaudited balance sheet (exhibit LM 42) and in exhibit LM 5 itself.

9.  As for the bank statements relied upon by Mr Lin, as the company has pointed out, these do not support or show clearly that the sums were loans made by Mr Lin to the Company.

10.  At this summary stage, it is impossible to decide on the affidavit evidence filed whether Mr Lin’s version of events, or the version of events put forward on behalf of the Company, should be believed in relation to the Minutes and in relation to the accounts.

11.  Having considered the evidence, I am not satisfied that there is sufficient evidence to show that the Company is clearly indebted to Mr Lin for the sum of US$6,562,500 which he claims he had advanced to the Company.  There are triable issues as to whether Mr Lin had indeed advanced the alleged loans to the Company, and whether the debts are payable, which issues can only be determined at trial after cross‑examination of the relevant witnesses and examination of the documents produced.

12.  I will give unconditional leave to the Company to defend the action.  I will make an order nisi that the costs of the Order 14 summons will be in the cause, since the Defence filed on 22 September 2011 essentially contained denials of Mr Lin’s claims and putting him to proof.  I will say however that by the time evidence was filed on behalf of the Company to oppose the application for summary judgment, it should have been clear to those advising Mr Lin that this is not an appropriate case for summary judgment to be entered and that further costs should have been avoided.

[Directions]

(Mimmie Chan) Deputy High Court Judge

Mr Kelvin Leung, instructed by MCA Lai & Co, for the plaintiff

Mr Anthony Chan, instructed by Li & Partners, for the defendant