PANNAM LTD v. GHEORGHE NICOLAESCU AND ANOTHER

HCMP 339/2015 & 374/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 339 OF 2015

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AND

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 374 OF 2016

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D E C I S I O N

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1. What I have to deal with is a summons in each of the two actions for them to be consolidated or tried at the same time or one immediately after the other.

2. The background to HCMP 399/2015 (“the first action”) has been set out in my decision on security for costs dated 9 June 2015 which I need not repeat here.  The background is, of course, familiar to the parties.  The underlying dispute concerns a company, ie the 2^nd respondent in the first action (“the Company”), and an invention.  The intellectual property rights relating to that invention were transferred Mr Nicolaescu (the 1^st respondent in the first action) to the Company by an “Intellectual Property Rights Transfer Agreement” dated 18 February 2014 between Mr Nicolaescu and the Company.  Mr Nicolaescu, however, as sole director of the Company caused it to execute an agreement on about 11 September 2014 with himself to terminate the Intellectual Property Rights Transfer Agreement.

3. The parties to the first action are Pannam Limited (“Pannam”) as applicant and Mr Nicolaescu as the 1^st respondent and the Company as the 2^nd respondent.

4. The first action was begun by originating summons but there being factual disputes, points of pleading were directed to be filed.  Mr Nicolaescu filed a Points of Defence and Counterclaim in June 2015 in which he claimed the following relief by way of counterclaim:

“(i) a declaration that the Termination Agreement is valid, legal and binding upon all parties to the action and their respective directors, servants, agents, associated companies, or otherwise howsoever;

(ii) an injunction restraining the Applicant and its directors, servants, agents, associated companies, otherwise howsoever, from dealing with or engaging in any acts in dealing with the Invention, save and except for the benefit and/or protection of the Invention and in the best commercial interests of the 1^st Respondent, or, unless the act done or the transaction entered into is done / entered into with the written consent of the 1^st Respondent;

(iii) a declaration that the Purported Appointment is invalid, illegal and void;

(iv) a declaration that all the Actions taken by Parshin (subsequent to the Purported Appointment) are unlawful, invalid and unenforceable and an Order that the Applicant nullify the Purported Appointment and rectify the Company records;

(v) a declaration that the Purported Members’ Written Resolution is unlawful, invalid and unenforceable;

(vi) an Order that any license granted to Zeep be immediately revoked; …”

5. In my decision on security for costs in June 2015, I observed at §18 that it is doubtful if Mr Nicolaescu can maintain the counterclaims in (iii) – (v) above which are based on the articles of association of the Company, since he is not a member of the Company.

6. The matter was left there and directions were given for the conduct of the case.  Leave was given on 22 February 2016 for the trial to be set down.  The trial dates which fall on 1 November 2016 for 5 days were fixed on 5 April 2016.

7. On 19 February 2016, Mr Nicolaescu took out a summons to amend his Points of Defence and Counterclaim to add 2 further reliefs, namely:

“(i) a declaration that the IP Rights Transfer Agreement be set aside as being void and unenforceable on grounds of misrepresentation;

(ii) a declaration that the 3^rd MOS [i.e. Memorandum of Shareholders] and the 3 Service Provision Agreements be set aside as being void and unenforceable on grounds of economic duress;”

8. On the same day, Mr Nicolaescu and Framelight Limited (“Framelight”), being his corporate vehicle for holding shares in the Company, issued the originating summons in HCMP 374/2016 (“the second action”) against Pannam, Mr Parshin and the Company, claiming the following relief:

“1. a declaration that the IP Rights Transfer Agreement dated 18 February 2014 be set aside as being void and unenforceable on grounds of misrepresentation;

2. a declaration that the Memorandum of Shareholders dated 27 June 2014 and the 3 Service Provision Agreements dated 1 April 2014 be set aside as being void and unenforceable on grounds of economic duress;

3. a declaration that the Termination Agreement dated 11 September 2014 is valid, legal and binding upon all parties to the action and their respective directors, servants, agents, associated companies, or otherwise howsoever;

4. an injunction restraining the 1^st Defendant (and its directors, servants, agents, associated companies, otherwise howsoever) and the 2^nd Defendant from dealing with or engaging in any acts in dealing with the Invention (as defined in the Order of The Honourable Mr. Justice G. Lam dated 9 March 2015 in the action HCMP 339/2015) (including any transfer of rights in respect of the Invention), save and except for preservation of the status quo in respect of the registered ownership of intellectual property rights of the Invention, or, unless the act done or the transaction entered into is done / entered into with the joint written consent of the 2^nd Plaintiff and the 1^st Defendant;

5. a declaration that the purported appointment of the 2^nd Defendant as a director of the 3^rd Defendant on 27 June 2014 (“Purported Appointment”) is invalid, illegal and void;

6. a declaration that all the actions taken by the 2^nd Defendant (subsequent to the Purported Appointment) on behalf of the 3^rd Defendant are unlawful, invalid and unenforceable;

7. an Order that the 1^st and 2^nd Defendants nullify the Purported Appointment and rectify that the records of the 3^rd Respondent;

8. a declaration that the “Protocol and Resolution in Writing of Extraordinary Meeting of Company Members” in respect of the 3^rd Defendant dated 11 December 2014 is unlawful, invalid and unenforceable;

9. an Order that any license granted to Zeep HK Limited be immediately revoked; …”

9. Also on the same day, Mr Nicolaescu took out a summons for consolidation in the first action, but no similar summons was taken out in the second action.

10. When the two summonses came before me, it transpired that the amendments to the Points of Defence and Counterclaim sought were defective, in part because they sought an order that 3 service provision agreements (entered into between the Company on the one hand and 3 entities on the other respectively) be set aside but those 3 entities were neither joined nor given notice.  In fact the originating summons in the second action suffered from the same defect.  Leave was given for Mr Nicolaescu to withdraw the amendment summons.  The consolidation summons was adjourned sine die. 

11. It was only on June 2016 that Mr Nicolaescu and Framelight took out a summons for leave to amend the originating summons in the second action, proposing to delete the prayer for setting aside the 3 service provision agreements and to add a claim for:

“9A. an account of profits that each of the Defendants have received as a result of the monetisation of the Invention since 11 September 2014, including but not limited to revenue received as a result of the monetisation of the Invention under any licence granted to Zeep HK Limited”

12. On the same day Mr Nicolaescu took out a summons for leave to amend the consolidation summons in the first action, and Mr Nicolaescu and Framelight took out a summons in the second action for consolidation with the first action.  On 28 June 2016, without opposition, I gave leave for the amendments to be made.

13. The two consolidation summonses came to be heard before me yesterday.

14. In my view the summonses must fail because, basically, it is now far too late and far too close to the trial of the first action. While some of the reliefs claimed in the second action may overlap with those in the first action, I agree with Mr Chain, who appeared for Mr Parshin and Pannam, that §2 and §9A of the amended originating summons in the second action raise matters that have not been the subject of any pleaded claim for relief at all in the first action.  While it is true that there are matters related to these two claims mentioned, to varying degrees, in the materials in the first action, to allow those claims for relief to be made is a very different matter.  Unless there is a relevant and potentially viable claim for relief, a defendant may have chosen to ignore certain allegations in the plaintiff’s pleading or evidence as irrelevant, or not to deal with them as fully as he would otherwise have, without taking the trouble to have them struck out.  As Ribeiro PJ said in Sinoearn International Ltd v Hyundai-CCECC Joint Venture (2013) 16 HKCFAR 632 at §30:

“A party must raise all the issues he wishes to raise to be dealt with at the trial. Parties are not entitled to have issues recently thought up dealt with separately and piecemeal. The other party is entitled to know from a clear pleading what is the entire case he has to meet so that he can decide whether particulars should be sought; how he should plead in response; what discovery he is entitled to; what evidence he should adduce to meet it; and what points of law should be taken.”

15. A party’s case supporting the relief he claims is the crucial matter in a pleading.  It is a non sequitur to say that because Mr Nicolaescu has mentioned something in his counterclaim in the first action, then all the relevant evidence must have already been filed by all parties.

16. In this connection the claim for an account of profits in §9A of the amended originating summons in the second action is particularly stark – it is a wholly new claim made by Mr Nicolaescu as holder of the intellectual property rights over the invention.  Many new issues may arise in relation to such a claim – at the very least the defendants to that claim are entitled to a proper opportunity of considering their position and raising such issues as may be appropriate.  In his oral submissions, Mr Kat SC, who appeared for Mr Nicolaescu and Framelight, offered to undertake to apply by summons to remove §9A from the prayer if that is the only obstacle in the way of consolidation.  I do not think that is the only problem with consolidation but in any event, that proposal would simply mean there may yet be a separate claim in a third action – a prospect that runs contrary to applicants’ argument that consolidation would avoid multiplicity of proceedings.

17. This is exacerbated by the fact that the second action has been brought by an originating summons.  There has been no pleading filed.  The consolidation summonses ask for the points of pleadings in the first action to stand as pleadings in the second action.  This seems to me, quite unfairly, to put the burden on the defendants to the second action to sort out what in those pleadings is relevant and not relevant to the reliefs claimed in the second action.

18. Take for example the claim for setting aside the Memorandum of Shareholders dated 27 June 2014 in the second action based on economic duress.  It is true that there is a mention of “illegitimate pressure” in §72 of the points of counterclaim in the first action, but nowhere are the particulars of economic duress given.  Both economic duress and account of profit for infringement of intellectual property rights are causes of action that require careful, fully particularised pleading.  What is being proposed is to tell the defendants in the second action to go through the pleadings in the first action with a view to identifying what the plaintiffs intend to rely on against them, and then be content with their Points of Reply and Defence to Counterclaim and affirmations filed in the first action to stand as their defence and evidence in the second action (subject to any amendments and addition they would have to make in the very limited time before trial).  That, with respect, is quite an untenable proposal.

19. Mr Chain was also correct in pointing out that the alleged threat giving rise to economic duress was said to be made not only by Mr Parshin but also by three service providers.  None of them is being proposed to be called to give evidence at present, against the background that economic duress relating to the Memorandum of Shareholders is not part of the relief sought in Mr Nicolaescu’s counterclaim in the first action.  If a claim for such relief is to be made, as it is now made in the second action, Mr Parshin and Pannam must in fairness be given a proper opportunity of considering what evidence they wish to adduce to defend that claim.

20. The second action is at an early stage.  No directions for its conduct have yet been given.  Mr Parshin’s evidence refers to the possibility of a counterclaim against Framelight, a matter which has not featured in the first action given that Framelight is not a party there.  The prospect of a counterclaim by Mr Parshin and/or Pannam against Mr Nicolaescu has also been raised, given that only Pannam has been named as the plaintiff in the first action and only claims which (on Pannam’s case) fall within s 729 of the Companies Ordinance have been included in the first action.  There is no basis to conclude that the first action exhaustively contains all the claims that Pannam and Mr Parshin may with arguable basis wish to bring against Mr Nicolaescu and Framelight.  Further, the defendants in the second action have also taken out an application for security for their costs, on the ground that Mr Nicolaescu and Pannam are resident overseas.

21. If the actions were to be heard together, there had to be a proper opportunity given for pleadings to be filed in the second action, and for the defendants to consider whether counterclaims should be brought against Mr Nicolaescu and in particular Framelight, whether additional evidence may be needed, and whether particulars and discovery of documents should be sought.  It may be that these steps could possibly have been accommodated during the time taken for the first action to progress to trial, if Mr Nicolaescu and Framelight had started the second action and applied immediately for consolidation after the hearing in June 2015.  But they did not apply until February 2016, and even then the applications were defective, and the defects were not put right until late June 2016, after the first action was set down for trial.  Mr Kat SC criticised Mr Parshin for refusing to accept service of the second originating summons.  But the time taken to serve out of the jurisdiction was much shorter than the delay on the part of the applicants in taking out the applications for consolidation.  Anyhow, irrespective of what the cause of delay was, the fact is that we are now barely a month before the trial of the first action.  Fairness would require more time than that to be given to the defendants in the second action for preparation before a trial of the second action takes place.  The defendants in the second action, who are in the plaintiff’s camp in the first action, should not have had to be distracted from preparation for the trial of the first action in the way proposed. 

22. Consolidation would therefore mean derailing the trial of the first action.  But the trial date is a milestone date and not to be altered without exceptional reason.  I am not satisfied there are exceptional circumstances here.  Nor does either party suggest moving the trial date.  While I recognise the general desirability of avoiding multiplicity of proceedings, I do not think that the circumstances of this case justify acceding to the consolidation application at this late stage and, as an inevitable consequence, vacating the trial date of the first action.

23. The two summonses will therefore be dismissed, with an order nisi that the applicants in the summonses pay the costs of the respondents in the summonses forthwith.

HCMP 339/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 339 OF 2015

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D E C I S I O N

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1.  This is an application for security for costs under Order 23 rule 1 by the 1^st respondent on the ground that the applicant in these proceedings is ordinarily resident out of the jurisdiction.

2.  The applicant is a company incorporated in Belize in 2014, which is wholly owned by one Mr Grygoriy Parshin.  Mr Parshin, via the applicant, and the 1^st respondent Mr Gheorghe Nicolaescu, via his BVI company called Framelight Limited (“Framelight”), each holds 50% of the shares of the 2^nd respondent, a Hong Kong company (“the Company”).

3.  Mr Nicolaescu is the inventor of a method for notifying an intended recipient of a call from the calling party when the calling party does not have sufficient funds on his account to complete the call (“the Invention”).  The notified party would then call back, generating additional revenue for the mobile network operator.  The Invention is potentially valuable because with proper technical implementation, it allows mobile network operators to increase their revenues from their voice call services.

4.  The applicant’s case is that Mr Nicolaescu is not an engineer by profession and has little expertise in the telecommunications industry, whereas Mr Parshin had experience, expertise and business network in the industry.  As a result, they formed a joint venture using the Company as the joint venture vehicle.  The Company was incorporated on 17 February 2014 with the applicant and Framelight as equal shareholders and Mr Nicolaescu as sole director.  On 18 February 2014, Mr Nicolaescu entered into an “Intellectual Property Rights Transfer Agreement” with the Company (“IP Transfer Agreement”) pursuant to which he transferred to the Company all the intellectual property rights related to the Invention.

5.  While Mr Nicolaescu was the sole director of the Company, clause 7 of the Memorandum of Shareholders dated 27 June 2014 provided that should the applicant wish to nominate an additional director one would be immediately appointed.

6.  The applicant states that on 1 April 2014, the Company entered into 3 service provision agreements with two individuals and a company respectively, namely, Mr Mark Shevchik, Mr Vasily Zinovyev and Praxis Limited.  Further, in February to April 2014, the Company had entered into “reseller agreements” with AMT Ventures Pte Ltd, Kontineu LLC and Axelera Limited, whereby over 100 accounts were assigned to the resellers for promotion, marketing and reselling.

7.  Mr Parshin and Mr Nicolaescu soon fell out with each other.  Through the applicant, Mr Parshin complains in this action that Mr Nicolaescu had failed to effect his appointment as an additional director of the Company, failed to register the Company as the owner of the Invention and demanded the cancellation of the IP Transfer Agreement as well as the 3 service provision agreements.  On about 11 September 2014, Mr Nicolaescu procured the Company to enter into an agreement with himself to terminate the IP Transfer Agreement (“the Termination Agreement”) without Mr Parshin’s consent.  It is said that Mr Nicolaescu has approached various network service providers and business partners of the Company notifying them that the Company henceforth had only limited rights with respect to the Invention and that he has thereby usurped the business of the Company.  By the originating summons herein dated 10 February 2015, the applicant seeks, inter alia, a declaration that the Termination Agreement is invalid, null, void and not binding on the Company, and an order that Mr Nicolaescu do procure the registration of the Company as the registered owner of the Invention in various specified territories. 

8.  On Mr Nicolaescu’s case, however, according to his affidavit and Points of Defence, the IP Transfer Agreement was entered into at the end of March 2014 (despite being dated 18 February 2014) as a result of misrepresentations by Mr Parshin.  In particular, it is alleged that in early March 2014 Mr Parshin went to Mr Nicolaescu’s home in McLean, Virginia, USA and told him that the resellers had insisted that he should transfer the intellectual property rights to the Company, that the representation was false in that the resellers had never requested such a condition, and that the representation was made by Mr Parshin fraudulently, recklessly or negligently.

9.  As to the 3 service provision agreements mentioned above and the Memorandum of Shareholders relied upon by the applicant, Mr Nicolaescu alleges that they were signed by him on 27 June 2014 (despite being dated 1 April 2014 in the case of the 3 service provision agreements) under economic duress.  In particular, it is said that Mr Parshin and these service providers told Mr Nicolaescu on that day that if he did not sign the agreements, they would immediately disconnect the software which they had installed for several operators.

10.  Mr Nicolaescu further contends that Mr Parshin and the applicant had failed to honour their part of the bargain under the IP Transfer Agreement to finance the registration of the patents, that the resellers apart from Axelera had failed to bring in any new accounts, and that the service providers had failed to submit reports of any work carried out for the Company.  Mr Nicolaescu believed that there was a scheme by Mr Parshin to take over the intellectual property rights over the Invention and that he was in the circumstances entitled to terminate the IP Transfer Agreement.

11.  Mr Nicolaescu also says that Mr Parshin had in November 2014 invalidly filed a form in the Companies Registry reporting that he had been appointed a director of the Company on 27 June 2014, and that the steps taken thereafter by Mr Parshin to appoint a new company secretary, to call a general meeting to be held on 4 December 2014 (adjourned to 11 December 2014) and on behalf of the Company to grant a licence to Zeep HK Limited are all invalid. 

12.  By his counterclaim, Mr Nicolaescu seeks a declaration that the Termination Agreement is valid, legal and binding on the parties, and an injunction restraining the applicant and its agents (including Mr Parshin) from dealing with the Invention.  He also seeks a declaration that the appointment of Mr Parshin as director of the Company is invalid, illegal and void, that the steps taken by him as such thereafter are invalid and unlawful, and an order that the licence apparently granted by the Company to Zeep HK Limited be revoked.

13.  The principles applicable to an application for security for costs are not in dispute.  While it is not an inflexible requirement, a foreign plaintiff will as a general rule be required to give security: Andersen v Huang Kuang Yuan [1997] HKLRD 1360, 1372G.  The court will have regard to the plaintiff’s prospects of success but it should not go into the merits in any detail unless it can clearly be demonstrated that there is a high degree of probability of success of failure: Wing Hing Provision, Wine & Spirits Trading Co Ltd v Hanjin Shipping Co Ltd [1998] 4 HKC 461, 464D. 

14.  In the present case, Mr Nip accepted that given the factual allegations raised by Mr Nicolaescu, which cannot be tried on affidavit, he cannot ask the court to go into the merits in any depth or dismiss the application for security on the ground of merits.  While Mr Nip asked me to take note that the Termination Agreement was an obvious instance of self-dealing and liable to be set aside, he also fairly recognised that the substance of the matter is whether the IP Transfer Agreement could be impugned for the reasons raised by Mr Nicolaescu.  If it could be impugned, for example because it is ultimately found to have been procured by fraudulent misrepresentation, then Mr Nip accepted, at any rate for present purposes, that the Termination Agreement could be regarded simply as self-help exercised by Mr Nicolaescu effectively to rescind the IP Transfer Agreement.  There is no suggestion from the applicant that, on that assumed finding, the Termination Agreement should be set aside and the IP Transfer Agreement, as it were, resuscitated.

15.  The main point taken by Mr Nip on liability to give security is that there are counterclaims made by Mr Nicolaescu and that he is the real attacker in the dispute between the parties.  Where there is a counterclaim, two questions may potentially arise: first, whether the counterclaiming defendant is entitled to have security for his costs and, secondly, whether he is instead liable to give security for costs.  Here I am concerned with the first question.  The relevant principles on security for costs applicable to the situation where the defendant has made counterclaims are also well established.  Both parties have referred me to Yam J’s summary in Ai Zhong v Metrofond Ltd [2010] 1 HKLRD 213 at §22 to which I have had regard.  It is clear that neither the mere existence of a counterclaim nor the fact that the same issues are likely to arise on both the claim and the counterclaim is sufficient to disentitle a defendant to security for costs.  In the final analysis the question is whether “having regard to all the circumstances of the case, the Court thinks it just” to order the plaintiff to give security: Order 23 rule 1(1).  In determining this question in the present context, the court will look to see if the counterclaim is a cross-action or merely operates as a defence: Hutchison Telephone (UK) Ltd v Ultimate Response Ltd [1993] BCLC 307, 313.

16.  It seems plain to me that Mr Nicolaescu’s counterclaim for a declaration that the Termination Agreement is valid, legal and binding is in reality merely a defence of the applicant’s claim.  The declaration sought is the mirror-image of that sought by the applicant.  Since the Termination Agreement was signed by Mr Nicolaescu as an undisputed director of the Company it was up to the applicant to seek to have it declared invalid and set aside.  The declaration sought by Mr Nicolaescu appears to me to be a mere response rather than an independent claim that he needed to or would have instituted in any event.  As Dillon LJ stated in Hutchison Telephone (UK) Ltd v Ultimate Response Ltd, at 316f:

“The other case, where again a counterclaim may be just the automatic counterpart of the defence, is where there is a claim to establish the plaintiffs are entitled to something, possibly a declaration to that effect, and there is a counterclaim for the opposite declaration, which would be the automatic counterpart of the claim of the plaintiffs failing. There again it would not, I would think, normally be appropriate to order a defendant to give security for costs of such a counterclaim.”

17.  The injunction sought in the counterclaim referred to above seems to me to be merely ancillary to the main issues involved in the claim for declaration.  It has no independent existence but is intended simply to follow the outcome on the declaration.  Neither party has suggested that it raises any different or additional issues.  On this basis, I do not think the claim for injunction is a significant factor in the equation.

18.  As for the counterclaim by Mr Nicolaescu concerning the appointment of Mr Parshin as a director of the Company and the acts consequent upon that appointment, in substance the only basis advanced in support of these acts is clause 7 of the Memorandum of Shareholders dated 27 June 2014, a term the breach of which the applicant complains of in its action (see paragraphs 20(a), 21-23 of the Points of Claim).  One of the three breaches of duties alleged by the applicant in the Points of Claim is the failure to take steps to have Mr Parshin appointed as a director.  And one of the grounds on which the Termination Agreement is said to be invalid is that it was concluded without the consent of Mr Parshin as a director (see paragraph 29 of the Points of Claim).  In riposte, various matters and arguments have been raised by Mr Nicolaescu to impugn the Memorandum of Shareholders and to contend that clause 7 did not have the effect of automatically appointing Mr Parshin as a director of the Company.  In these circumstances it seems to me that these counterclaims do not significantly expand the ambit of the disputes raised by the action and do not render Mr Nicolaescu in substance the real claimant in these proceedings. Moreover, I would add that it is doubtful if Mr Nicolaescu can in law maintain these counterclaims which are based on the articles of association of the Company, since he is not a member of the Company and not party to the contract embodied in the articles.

19.  Mr Bowers further gave an undertaking this morning that the 1^st respondent will not pursue his counterclaims in these proceedings in the event that the applicant fails to provide security for costs and the action is as a result either dismissed or stayed pursuant to the order of the court.  That is of course not conclusive of the question I have to decide, as shown by the case of Bulova Corporation v San Ma Industrial Ltd (HCA 1831 & 1912/2013; 19 January 2015), to which Mr Nip drew my attention, but it is a factor I can and do take into account as fortifying my view that the 1^st respondent is not the real claimant in these proceedings.

20.  Mr Nip has also referred me to the correspondence before action but in my view it sheds no light on the question whether or not having regard to the structure and content of these proceedings the 1^st respondent is in reality and substance the claimant. 

21.  For these reasons, I shall make an order for security for costs.  The bill of estimated costs is fairly general in content. I take into account that the bulk of the affirmation evidence has already been filed and that general discovery does not apply.  I think some of the matters in the 1^st respondent’s affidavit are peripheral in nature and of only slight, if any, relevance to the real issues. I also take into account that the 1^st respondent’s counterclaims about the validity of Mr Parshin’s acts as director of the Company may well lack standing.  It has to be borne in mind that security for costs is often not perfect or complete security.  Looking at the matter in the round, I consider that an order for security for costs in the sum of HK$1.35 million will be just.  I shall give the applicant 7 weeks to provide the security failing which the proceedings will be stayed, with liberty to apply.