NEW ART HOLDINGS CO., LTD. AND OTHERS v. EST-OUEST AUCTIONS CO., LTD AND OTHERS

HCA 325/2024

[2025] HKCFI 4979

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 325 OF 2024

__________________

__________________

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D E C I S I O N

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I.  INTRODUCTION

1.  Before me is the Summons filed by the 1^st and 2^nd Plaintiffs on 16 September 2025 for relief from sanction (the “RFS Summons”) from §13 of my Order made on 7 May 2025 (the “May Order”) ordering the 1^st and 2^nd Plaintiffs to make payment of security of costs in form of cash (or cheques) into Court within 28 days from the date of the Order, that is, 4 June 2025:-

“In default of such security being given by the 1^st and 2^nd Plaintiffs, this action and the 1^st and 2^nd Plaintiffs’ claim as against the Defendants be dismissed without further Order…”

See also §§35-45 of my Decision handed down on 7 May 2025 ([2025] HKCFI 1774) (the “May Decision”).

II.  BACKGROUND

2.  No payment was made on or before 4 June 2025. On 12 June 2025, the 1^st and 2^nd Plaintiffs filed a Summons (the “Variation Summons”) for an order that the form of security be provided by provision of bank guarantees instead of cash or cheques. On 4 July 2025, the Plaintiffs filed another Summons (the “Stay Summons”) for an order to stay costs orders against the Plaintiffs pending the taxation of costs to be paid the 1^st and 2^nd Defendants in a related action HCIP 45 of 2023 (the “HCIP Action”). Both the Variation Summons and the Stay Summons were returned before me on 22 July 2025. At the hearing on 22 July 2025 (the “July Hearing”), in response to the prima facie status that the Plaintiffs’ claim had been dismissed as a result of the sanction for the failure to comply with the May Order, the Plaintiffs’ then counsel raised that the Plaintiffs intended to make an application for relief from sanction. As a result, the Stay Summons and the Variation Summons were adjourned to be heard with the intended application.

3.  What came, however, was not the intended application for relief from sanction. On 28 July 2025, the Plaintiffs’ then solicitors (the “Plaintiffs’ Former Solicitors”) issued a letter to the Court (with other parties copied onto it) (the “Plaintiffs’ Former Solicitors’ Letter”) stating unequivocally that:-

“We are instructed to inform the Court that the Plaintiffs no longer intend to apply for relief against sanction nor pursue their summons dated 12 June 2025 (i.e. for variation of the manner of the payment of security for costs). The adjourned hearing to be fixed will therefore solely be in relation to the Plaintiffs summons dated 4 July 2025.”

4.  The next day, that is, 29 July 2025, the parties attended the Listing Office to fix the date for hearing the Stay Summons. The hearing of 22 September 2025 was thus fixed before me.

5.  On 12 September 2025, the Plaintiffs’ current solicitors (the “Plaintiffs’ Current Solicitors”) filed a Notice of Change of Solicitors. Then, by letter dated 15 September 2025 issued to the Court, the Plaintiffs’ Current Solicitors wrote:-

“3. We have instructions to state on behalf of the Plaintiffs that while they confirm their position not to pursue the reliefs sought in §9 and §10 of the Variation Summons, the [Plaintiffs’ Former Solicitors’’ Letter] is incorrect on the first part about the Plaintiffs having also given instructions not to apply for relief against sanction from the [May Order]. The Plaintiffs did not give such an instructions to [the Plaintiffs’ Former Solicitors].

4. Our clients, more particularly the 1^st and 2^nd Plaintiffs, are aware that by the time of this letter, the time for compliance with the Orders for payment of security for costs under the [May Order] would have been expired, and accordingly the Action would stand dismissed. In that regard, notwithstanding the unfortunate issuance of the Letter or absence of adequate step(s) expected to be taken by [the Plaintiffs’ Former Solicitors], we have instructions to take out an application to seek appropriate reliefs against the sanction imposed by [the May Order].”

6.  On 16 September 2025, the 1^st and 2^nd Plaintiffs filed the RFS Summons.

7.  At the hearing on 22 September 2025, all the Defendants confirmed to me that they could proceed substantively with the RFS Summons without further evidence.

III.  THE PLAINTIFFS’ WITHDRAWAL OF THE VARIATION SUMMONS AND THE STAY SUMMONS

8.  By the time of the hearing before me on 22 September 2025, the Plaintiffs have already had the cheques for payment of security for costs available, and also settled the costs orders under the Stay Summons. Therefore, by the time of the hearing, the Variation Summons and the Stay Summons had been rendered academic, and the Plaintiffs apply for withdrawing these Summonses.

9.  I here grant leave for the Plaintiffs’ withdrawal of the Summonses. I also order the Plaintiffs to pay costs of the Summonses on an indemnity basis given that (1) the Plaintiffs withdrew the Summonses; (2) the Plaintiffs had not obtained anything they applied for under the withdrawn Summonses; and (3) the Plaintiffs had not provided any or any good reasons for changing their position on the Summonses.

IV.  THE RFS SUMMONS

10.  Order 2 rule 5(1) non-exhaustively lists out the factors for consideration in an application for relief from sanction. The burden lies upon the applicant to satisfy the Court that having considered all the relevant factors in this multi-faceted balancing exercise, it should exercise its discretion to grant relief: Re Labrador Nolito Blazado[2018] HKCA 720 at §11 per Barma and Poon JJA. I shall go through the factors one by one first.

V.  INTERESTS OF THE ADMINISTRATINON OF JUSTICE

11.  Under Order 2 rule 5(1)(a) “the interests of the administration of justice”, the merits of the 1^st and 2^nd Plaintiffs’ claim are material.

12.  In relation to the 2^nd Plaintiff, in the judgment handed down on 30 September 2024 upon trial in the HCIP Action (the “HCIP Judgment”) ([2024] HKCFI 2619), Lok J found that the 2^nd Plaintiff has at the material times been the owner of the relevant goodwill: see §58 of the HCIP Judgment, but not others. No defence has been filed yet. But in reading the Affirmations in opposition to the Plaintiff’s Order 14 application which I disposed of in the Decision, namely, the 2^nd Affirmation of So Hin Yee filed on behalf of the 1^st and 2^nd Defendants, the 2^nd Affirmation of the 3^rd Defendant and the 2^nd Affirmation of the 4^th Defendant, they seem to admit that the 1^st Defendant did use the relevant marks in which the goodwill resided, but seem to defend on the ground that the 1^st Defendant’s use was not misuse and/or did not constitute any “meaningful” use and so there was no passing off.

13.  As regards the 2^nd, 3^rd and 4^th Defendants specifically, they rely on my observation in §31 of the Decision that there was no plea of common design or joint tortfeasors against them, and the Plaintiffs’ then counsel’s submissions that the passing-off claim against them was that they themselves passed off the 2^nd Plaintiff’s business. I must, however, stress that my observation made there was made in the context of the Plaintiffs’ Order 14 application, which would require that the Statement of Claim to be complete before the summary judgment could be granted. As to whether the Plaintiffs’ claim against the 2^nd, 3^rd and 4^th Defendants would be struck off as unmeritorious, it would seem to me that on the materials before me, the Statement of Claim is not so irremediable whether for lack of plea of the requisite elements for proper causes of action and/or for lack of particulars. The fact remains that the 2^nd, 3^rd and 4^th Defendants were directors of the 1^st Defendant against which the 2^nd Plaintiff’s passing-off claim is pleaded, and it is not unusual that directors of the passing-off company would be sued individually as joint tortfeasors and/or on common design.

14.  Insofar as there is any suggestion that given that none of the Defendants has filed any defence, it would be inappropriate for me to form any view, even provisional or preliminary view, on the merits of the 2^nd Plaintiff’s claim, I would say that it is reasonable for me to rely upon the Affirmations mentioned in §12 above filed in opposition to the Plaintiffs’ Order 14 application.

15.  Having considered the above, on the materials placed before me at this stage, I would say that the 2^nd Plaintiff’s claim is meritorious. However, merits is not the only consideration in the balancing exercise. I should consider the other factors listed out under Order 2 rule 5(1).

16.  The 1^st Plaintiff’s claim, however, is not the same. The 1^st Plaintiff has not owned the relevant goodwill, and therefore, cannot mount any claim based on passing-off: see §30 of the May Decision. It is not just a matter of defective pleading like the claim against the 2^nd, 3^rd and 4^th Defendants, but goes to the standing of the 1^st Plaintiff. Mr Jason Wong, leading Mr Esmond Wong, counsel for the 1^st and 2^nd Plaintiffs, submits that there would be other claim available to the 1^st Plaintiff, and he raised as an example unlawful interference with business, and further submits that the 1^st Plaintiff has been so intertwined with the 2^nd Plaintiff that any pass-off of the 2^nd Plaintiff’s business would damage the 1^st Plaintiff. In his written supplemental submissions, he also submits that the 1^st Plaintiff was a licencee or franchisee of the 2^nd Plaintiff’s goodwill, and so was entitled to claim on passing-off with the 2^nd Plaintiff. However, as submitted in the 3^rd Defendant’s written supplemental submissions, in the absence of any agreement to the contrary, the general rule is that it would still be the owner of the goodwill to claim on passing-off: see Quantum Advisory Limited v Quantum Actuarial LLP [2024] EWCA Civ 247 at §47. In the present case, there is no draft Re-Amended Statement of Claim despite my comments about the 1^st Plaintiff’s standing to sue on passing-off in the May Decision. There is not even any evidence to support these causes of action now raised by way of counsel submissions, while the 1^st Plaintiff could certainly do so in the Affirmations filed in support of the RFS Summons. The burden lies upon the 1^st Plaintiff to satisfy me why the RFS Summons should be granted, and the burden lies upon the 1^st Plaintiff to adduce all the relevant evidence. On the materials put before me, I am not satisfied that that the 1^st Plaintiff has a meritorious claim against the Defendants at all. Here, it is not like the claim against the 2^nd, 3^rd and 4^th Defendants which is, as mentioned above, not irremediable on the materials before me.

17.  Since the 1^st Plaintiff’s claim is not meritorious, there is no point in granting relief from sanction in relation to the 1^st Plaintiff’s claim. In the circumstances, this alone is sufficient for me to, and so I do, refuse to grant relief from sanction in relation to the 1^st Plaintiff’s claim.

VI.  WHETHER THE APPLICATION FOR RELIEF HAS BEEN MADE PROMPTLY

18.  In relation to Order 2 rule 5(1)(b) “whether the application for relief has been made promptly”, the deadline for complying with the unless order in question was, as mentioned above, 4 June 2025. The RFS Summons was filed as late as on 16 September 2025, more than 3 months after the deadline. The 1^st and 2^nd Plaintiffs’ explanation for the delay is that the Plaintiffs’ Former Solicitors overlooked the need to separately make such an application, apparently relying on the Variation Summons only which they thought were sufficient.

19.  I accept the 1^st and 2^nd Plaintiffs’ explanation. The filing of the Variation Summons and the Stay Summons, in my view, is itself evidence that it was thought that there was no need for a separate application. If it were thought that there was a need for a separate application, it would be unlikely that the Variation Summons and the Stay Summons would still be filed without making a separate application for relief against sanction.

20.  I also accept that it was the thought of the Plaintiffs’ Former Solicitors, rather than of the Plaintiffs themselves, that there was no need for a separate application. I accept this for the simple reason that the Plaintiffs were not legally trained and had to rely on the Plaintiffs’ Former Solicitors.

VII.  WHETHER THE FAILURE TO COMPLY WAS INTENTIONAL AND WHETHER THERE IS A GOOD EXPLANATION FOR THE FAILURE TO COMPLY

21.  Order 2 rule 5(1)(c) and (d) require the Court to consider “whether the failure to comply was intentional and whether there is a good explanation for the failure to comply”. The 1^st and 2^nd Plaintiffs’ explanation for the failure to pay the security for costs before the deadline is that it was running short of fund, it would need the internal approval, and it was seeking finance from the bank, and so instructed the Plaintiffs’ Former Solicitors to make a necessary application. The so-called “necessary” application turned out to be the Variation Summons only. Such explanation, nevertheless, does not give any details about the time. Such explanation stops short of accusing the Plaintiffs’ Former Solicitors of any mis-advice like “there is no need to observe the deadline strictly” (and in any event, it would be inherently improbable that the solicitors would give such advice). In my view, the Plaintiffs’ explanation is inadequate to explain why the Variation Summons was taken out so late after the deadline of 4 June 2025, even assuming that the 1^st and 2^nd Plaintiffs and the Plaintiffs’ Former Solicitors thought that the Variation Summons would be sufficient.

22.  However, inadequacy of explanation does not necessarily, though it usually would, mean that the failure to comply was intentional. One must understand the 2^nd Plaintiff’s claim in context – the 2^nd Plaintiff was actively engaged in the HCIP Action, a related action, and the HCIP Judgment was handed down in the 2^nd Plaintiff’s favour. On the whole, it appears to me that the Plaintiffs’ failure is not intentional, although they did not pay sufficient regard to a Court Order, or were indolent.

23.  Overall, the failure is not intentional, but there is no good explanation for the failure.

VIII.  THE EXTENT TO WHICH THE PLAINTIFFS HAVE COMPLIED WITH OTHER RULES AND COURT ORDERS

24.  The 1^st and 2^nd Defendants highlighted the 1^st to 4^th Plaintiffs’ repeated failure to serve hearing bundles and submissions on time in compliance with the Practice Directions as the Plaintiffs’ failure to comply with other rules and Court Orders under Order 2 rule 5(1)(e).

25.  The 1^st to 4^th Plaintiffs also failed to settle the costs orders promptly on 7 July 2025, but to be fair to the Plaintiffs, on 4 July 2025, they filed and served the Stay Summons. Although the filing of the Stay Summons itself did not operate as a stay, the Stay Summons is the explanation for the delay.

26.  Another failure is of course the 1^st and 2^nd Plaintiffs’ failure to file the RFS Summons on time, now with a delay of more than three months.

27.  Whether such failures are serious has to be assessed against the explanation, a consideration now I turn to.

IX.  WHETHER THE FAILURE TO COMPLY WAS CAUSED BY THE PARTY IN DEFAULT OR HIS LEGAL REPRESENTATIVE

28.  Order 2 rule 5(1)(f) distinguishes between cause of failure by the party in default and cause by the party’s legal representative. As analysed above, the failure to comply with the May Order was attributable to the 1^st and 2^nd Plaintiffs themselves though not intentional, while the failure to file the present RFS Summons on time was caused by the Plaintiffs’ Former Solicitors.

29.  The above considered, I tend to think that the failures are not serious.

X.  WHETHER THE TRIAL DATE OR THE LIKELY TRIAL DATE CAN STILL BE MET IF RELIEF IS GRANTED

30.  The effect on the trial date to be considered under Order 2 rule 5(1)(h) is basically irrelevant here. The proceedings are at a very early stage: the Defendants have not even filed their defence yet. I cannot see any effect on the trial dates or likely trial dates at all.

XI.  THE EFFECT OF THE FAILURE AND GRANT OF RELIEF ON THE PARTIES

31.  The considerations under Order 2 rule 5(1)(i) and (j) are in essence what, if any, prejudice would be caused to the parties.

32.  The effect of dismissal upon the failure on the 2^nd Plaintiff would be to deprive it of the claim which is, on the materials before me, meritorious, while the effect of dismissal upon the failure on the 1^st Plaintiff would be nil, given that its claim is in itself unmeritorious. In respect of the 2^nd Plaintiff’s claim, in theory, the 2^nd Plaintiff could pursue against the Plaintiffs’ Former Solicitors for their mishandling of the May Order. However, practically, such claim against the Plaintiffs’ Former Solicitors would not be easy to pursue. Notably, the relief the 2^nd Plaintiff now makes against the Defendants include injunction, delivery up, assessment of and/or inquiry as to damages. Although the Defendants (in particular, the 1^st Defendant) allege that the use of the relevant marks has stopped, I only have their one-sided evidence. In my view, in the circumstances, the effect of dismissal of the 2^nd Plaintiff’s claim would be disproportional to the merits of the 2^nd Plaintiff’s claim.

33.  The effect of the failure on the Defendants would be that they would gain a windfall in respect of the 2^nd Plaintiff’s meritorious claim, while they would be relieved from incurring costs and time to defend against the 1^st Plaintiff’s unmeritorious claim.

34.  The effect of grant of relief would be that the 2^nd Plaintiff would be able to pursue its meritorious claim, while the 1^st Plaintiff would have to continue its unmeritorious claim, and correspondingly, the Defendants would have to incur time and costs to defend the 1^st Plaintiffs’ unmeritorious claim. However, given the merits of the 2^nd Plaintiff’s claim, I see nothing unjust that the Defendants should do so in respect of the 2^nd Plaintiff’s claim, assuming that they would be compensated by costs.

35.  It is also noteworthy that the Defendants have not filed any defence.

36.  I also note that the 1^st and 2^nd Plaintiffs are ready to pay security for costs, and have settled the costs order under the Stay Summons. Mr Jason Wong, for the Plaintiffs, also sensibly do not make any submissions on the Defendants’ urging this Court to make costs order against the Plaintiffs even on an indemnity basis.

37.  Overall, in terms of effect, in my view, the refuse to grant relief in respect of the 2^nd Plaintiff’s claim would be disproportional.

XII.  ANY OTHER FACTORS

38.  I cannot see any factors in the present case that I have not considered.

XIII.  CONCLUSION

39.  Having considered all the above factors, I find it appropriate to grant relief from sanction in respect of the 2^nd Plaintiff’s claim, but not the 1^st Plaintiff’s claim, with costs to the Defendants on an indemnity basis. Therefore, I make the following order:-

(1)  The 2^nd Plaintiff be relieved from sanction arising from §13 of the May Order and the 2^nd Plaintiff’s claim herein be reinstated (For the avoidance of doubt, the amounts shall remain the same even though now only the 2^nd Plaintiff has to pay the security for costs); and

(2)  Time be extended for the 2^nd Plaintiff to make payment of security for costs in the amounts as directed under the May Order out of time until the expiry of 7 days from today.

40.  As regards costs, the strongest consideration in favour of the 2^nd Plaintiff is the merits of the claim. However, in general, as can be seen above, the explanation for the failures is far from satisfactory, save and except for the explanation for the failure to make the present application promptly. In particular, I found that the 1^st and 2^nd Plaintiffs did not pay sufficient regard to a Court Order and were indolent. In the circumstances, I find it appropriate to order the 1^st and 2^nd Plaintiffs to pay costs (including the costs of the Variation Summons and the Stay Summons) to the Defendants on an indemnity basis. My summary assessments are as follows:-

(1)  The 1^st and 2^nd Defendants’ costs are summarily assessed at HK$130,000;

(2)  The 3^rd Defendant’s costs are summarily assessed at HK$120,000; and

(3)  The 4^th Defendant’s costs are summarily assessed at HK$130,000.

41.  It remains for me to thank counsel for their assistance.

Mr Jason Wong leading Mr Esmond Wong, instructed by Nixon Peabody CWL, for the 1^st to 4^th Plaintiffs

Mr Wong Hok Yan, instructed by H.Y. Leung & Co. LLP, for the 1^st and 2^nd Defendants

Mr Terrence Cheng, instructed by Patrick Mak & Tse, for the 3^rd Defendant

Mr Samuelson Choi, instructed by V. Hau & Chow, for the 4^th Defendant

HCA 325/2024

[2025] HKCFI 2646

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 325 OF 2024

________________________

________________________

________________________

DECISION

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I. INTRODUCTION

1.  Before me is the Plaintiffs’ application to vary my various costs orders nisi made in my Decision handed down on 7 May 2025 ([2025] HKCFI 1774)  (the “Decision”).  In the Decision, I ordered that:-

(1)  On the Defendants’ Summonses, the Plaintiffs shall pay the Defendants costs; and

(2)  On the Plaintiffs’ Order 14 Summons, the Plaintiffs shall pay the Defendants costs.

2.  The Plaintiffs apply to vary the costs orders to be no order as to costs.

3.  There are various grounds advanced by the Plaintiffs in support of the application.  I shall deal with them one by one.

II.  DEFENDANTS SHOULD HAVE INFORMED PLAINTIFFS EARLIER

4.  The first ground is concerning costs on the Defendants’ Summonses.  In this ground, the Plaintiffs contend that after receiving the draft Amended Statement of Claim on 15 April 2025, the Defendants should have informed the Plaintiffs earlier that the Defendants would not pursue the stay application so that a considerable amount of costs and time would have been saved.

5.  I reject such contention because:-

(1)  After receipt of the draft Amended Statement of Claim, it was reasonable for the Defendants to take time to consider the latest development and to take advice from their legal advisers.  This could not be expected to be a matter of hours. 

(2)  Further, from the receipt of the draft Amended Statement of Claim on 15 April 2025 until the hearing on 23 April 2025, 18 and 21 April 2025 were public holidays and 19 and 20 April 2025 were Saturday and Sunday.  Even taking the Plaintiffs’ suggestion to the effect that lawyers in Hong Kong are hardworking during holidays, it does not follow that in the present circumstances, it would be unreasonable for the Defendants to make their stance known only during the hearing.

(3)  Therefore, I think it was not late at all for the Defendants to confirm their stance not to pursue the stay application at the start of the hearing.

(4)  Lastly, I should say that I do not understand why the Plaintiffs would complain about this.  The Plaintiffs, having indicated that they would abandon their claim in their Affirmation filed on 3 March 2025, sat on it for more than a month until 15 April 2025 to come up with the Amended Statement of Claim, and it would be unreasonable for the Plaintiffs then to expect the Defendants to revert within one or two days.

6.  It remains for me to say that the Plaintiffs submit that briefs to counsel were not yet issued on 15 April 2025 (just the day before skeleton submissions would have to be filed and served).  However, the Plaintiffs are not proposing that certificate for counsel should not have been granted, and if they would so propose, I would rightly reject such proposal.  Irrespective of whether counsel were briefed on 15 April 2025 or after that, it is clear to me that counsel would have to be involved in the hearing before me.  Therefore, the Plaintiffs’ such submissions do not take them anywhere.

III.  DEFENDANTS WOULD HAVE PURSUED STAY APPLICATION IN ANY EVENT

7.  The second ground is also concerning the Defendants’ Summonses.  In this ground, the Plaintiffs submit that despite the amendment, the Defendants’ primary position remained that the amendment should not be allowed in the absence of any proper application by the Plaintiffs to lift the Interim Stay. I think there is some truth in it.  Even during the oral submissions, the Defendants’ counsel, though not taking too much time, still advanced the submissions that there should have been an application to uplift the Interim Stay first before there would be any amendment.  Time was indeed spent on this point, and the Defendants lost on this point.  This point was a self-contained point, going only to the proper construction of the Interim Stay Order.  In my view, it is appropriate to apportion 20% of the costs to this issue, and the Defendants should bear this 20% because they lost on this point.

8.  The 3^rd and 4^th Defendants submit that they took less time on this issue.  That may be true in terms of time spent by the 3^rd and 4^th Defendants, but their position was not that it would take totally different reasons for their stance.  It is fair to say that all the Defendants adopted each other’s submissions in this aspect.  The Plaintiffs would still have to spend the same amount of time on this issue jointly raised by all the Defendants.  So, I do not agree with the 3^rd and 4^th Defendants’ submissions that they took less time and so the apportionment for them should be more favourable to them.

IV.  PLAINTIFFS’ WITHOUT PREJUDICE OFFER

9.  The third ground is that by letter dated 8 April 2025, the Plaintiffs made a without prejudice offer to the Defendants that the matter shall be settled by way of a Tomlin Order with no order as to costs, the agreement being that each of the Defendants should undertake to refrain from passing off.

10.  This without prejudice offer did not deal with the Defendants’ Summonses, and insofar as it is suggested that this offer concerned the Plaintiff’s Order 14 Summons, I dismissed the Plaintiffs’ Order 14 Summons.  This means that the Plaintiffs are nowhere doing better than the without prejudice offer.  Further, as I pointed out in §30 of my Decision, the 1^st, 3^rd and 4^th Plaintiffs do not have any locus in the passing-off claim, which has become the only claim after the Plaintiffs’ amendment.  In the circumstances, I do not see why rejecting such offer would be unreasonable.

11.  All in all, I do not see how this without prejudice offer and how the Defendants replied to it would have impact on the costs of the Defendants’ Summonses and the Plaintiffs’ Order 14 Summons.

V.  NO DUPLICATION OF JAPANESE PROCEEDINGS AND HONG KONG PROCEEDINGS?

12.  The fourth ground is concerning the Defendants’ Summonses.  The Plaintiffs take the view that I was wrong in paragraph 16 of the Decision to say that “those parts (except for the claim of passing-off)  the Defendants sought to stay were subject matters of [the] existing Japanese proceedings”. The Plaintiffs explain in the following terms in §29 of their Skeleton Submissions:-

“i. Ps in the present action argue that D2 and D4 owed fiduciary duties to P2, and to P1. They further argue that D2 and D4 acted in breach of their fiduciary duties by remitting the sum of JPY 36,488,200 to D1, and that D1 is liable to account to P2 as constructive trustee.

ii. These arguments are not the subject of any proceedings in Japan. Ps did not know the facts underlying these allegations when the proceedings in Japan were filed.

v. It appears from para 16 of the Decision that (1)  this Honourable Court took the view that the entirety of the proceedings in HCA 325/2024 were justified as these were identical to the subject matters litigated in Japanese courts, and (2)  the Ds were therefore likely to be granted their application for stay.

vi. Yet, regarding point (1), as explained above, there remain substantive issues in Ps’ SOC which are not the subjects of any proceedings in Japan and which must be litigated in Hong Jong – thus making it at least partially, if not entirely, justified for Ps to pursue their arguments in Hong Kong in the present action. Any stay of the proceedings will and should not affect the part of the proceedings referred to above which are unique and specific to Hong Kong.” (emphasis added)

13.  First, I already explained in §20 of the Decision that it was impossible to stay only parts but not others of the claim because in the original Statement of Claim, the allegations were so intertwined that such a partial stay would not be feasible.

14.  Second and in any event, the JPY 36,488,200 clearly was a subject matter of the Second Japanese Proceedings.  In §15 of the 4^th Affidavit of Robert Osborne Lee filed on behalf of the Plaintiffs in opposition to the Defendants Summonses, it was said that:-

“Second, the Second Japanese Writ dated 8^th September 2022 concerned the 2^nd Plaintiffs claim for ¥36,488,200 against the 2^nd and 4^th Defendants, in respect of misappropriation by them in Japan of funds of the 2^nd Plaintiff, which they controlled because they were still directors at the time.”

15.  The Plaintiffs’ contention that there was no duplication is based upon there being different causes of action and there being not the identical parties (except the 2^nd Plaintiff, and the 2^nd and 4^th Defendants)  in the two sets of proceedings.  However, the JPY 36,488,200 was clearly the same subject matter, and three of the parties were identical.  That one pursues the same subject matter, though on different causes of action in proceedings commenced in different jurisdictions against some but not all of the parties, should still be regarded as duplication.   It is a matter of extent.  For example, a finding in the Japanese Proceedings that there was no misappropriation at all would definitely have a material effect on the present action.  Duplication to this extent, coupled with the fact that the Japanese Proceedings had been pursued substantively and substantially (see §16 of the Decision), justified an application to stay.

16.  Therefore, I do not see how this no-duplication ground would advance the Plaintiffs’ present application.

VI.  CONCLUSION

17.  In conclusion, I do not see any ground to vary my costs order nisi on the Plaintiffs’ Order 14 Summons, namely, the Plaintiffs should pay the Defendants costs of the Plaintiffs’ Order 14 Summons, to be summarily assessed.  I accordingly make it absolute.

18.  As regards the Defendants’ Summonses, for reason explained in §7 above, the Defendants should be liable to pay the Plaintiffs 20% of the costs of the Defendants’ Summonses, and the Plaintiffs to the Defendants 80%.  Taking a broad-brush approach, after setting off, the Plaintiffs should pay the Defendants 60% of the costs of the Defendants’ Summonses, to be summarily assessed.  And so I make a costs order absolute accordingly.

19.  As regards the costs of the present application, the Plaintiffs have only partially succeeded, limited to the variation set out in the preceding paragraph.  I order that the Plaintiffs shall pay the Defendants 75% of the costs of the present application, to be summarily assessed.

20.  It remains for me to thank counsel for their assistance.

Mr Knut Fournier, instructed by Robert Lee Law Offices, for the 1^st to 4^th Plaintiffs

Mr Wong Hok Yan, instructed by H.Y. Leung & Co. LLP, for the 1^st and 2^nd Defendants

Mr Terrence Cheng, instructed by Patrick Mak & Tse, for the 3^rd Defendant

Mr Samuelson T.L. Choi, instructed by V. Hau & Chow, for the 4^th Defendant

HCA 325/2024

[2025] HKCFI 1774

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 325 OF 2024

__________________

__________________

________________________

D E C I S I O N

________________________

I.  INTRODUCTION

1.  Before me are:-

(1)  The 1^st and 2^nd Defendant’s Summons filed on 9 July 2024 (the “D1-2’s Summons”) for:-

(a)  an order of stay of the Plaintiff’s claim on forum non conveniens in favour of Tokyo District Court and/or multiplicity of proceedings with those in Tokyo District court already commenced by the Plaintiff; or

(b)  alternatively, an order for striking out; or

(c)  alternatively, an order for security for costs;

(2)  The 3^rd Defendant’s Summons filed on 25 July 2024 for a similar order;

(3)  The 4^th Defendant’s Summons filed on 16 December 2024 for a similar order; and

(4)  The Plaintiffs’ Summons for Order 14 judgment.

2.  For convenience, I shall refer to the Defendants’ Summonses mentioned in subparagraph (1) – (3) above as the “Defendants’ Summonses” and the Plaintiff’s Summons mentioned in subparagraph (4) above as the “Plaintiff’s Order 14 Summons”.

3.  On 14 April 2025, the Plaintiffs filed and served on the Defendants at about 4:45pm an Amended Writ of Summons and an Amended Statement of Claim. By Order 65 rule 7, the service is counted as service on 15 April 2025. The Defendants agree that the amendment would effectively remove the parts of the Plaintiffs’ claim which the Defendants apply to stay on forum non convenience and multiplicity of proceedings. This has left only the claim on passing-off extant. To this passing-off claim, the Plaintiffs substantively amended by adding particulars of acts of passing-off, but whether with the substantive amendment or not, the Defendants no longer pursue their application to stay. However, the Defendants take the stance that in the first place, the amendment should not be allowed because of an interim stay order (a matter I shall detail later) and/or that the amendment in any event came too late, just 3 clear days before the hearing and just the day before the Defendants would have to file and serve their skeleton submissions.

II.  BACKGROUND

4.  I should set out the background briefly insofar as relevant to the present purposes.

5.  On 11 July 2023, the 1^st and 2^nd Defendants commenced Intellectual Property Proceedings No 45 of 2023 (“HCIP Action”) against the 4^th Plaintiff.

6.  On 23 February 2024, the Plaintiffs commenced the present action. The present action and HCIP Action are related. On 19 April 2024, the parties in the present action and in HCIP Action gave an undertaking (the “Undertaking”) that they all would be bound by the upcoming judgment upon trial in HCIP Action (the “HCIP Judgment”).

7.  On 9 July 2024, the 1^st and 2^nd Defendant filed the D1-2’s Summons, returnable on 2 August 2024 before the Registrar. Since the HCIP Judgment to be handed down would have impact on the Plaintiffs’ claim and thus on the D1-2’s Summons, at that hearing, the parties came to an agreement whereupon the learned Registrar made the following order (the “Interim Stay Order”):-

“1. By agreement by all parties in this Action, there be an interim stay of all proceedings in this Action pending the handing down of Judgment in the related HCIP 45/2023 with liberty to parties to apply to uplift the stay by serving at least 14 days prior written notice to the other parties;

2. All pending applications made by the Defendants in this Action be adjourned to be fixed for a second call-over hearing upon lifting of the stay…”

8.  On 29-31 July, 1-2, 5-6 & 14 August 2024, the trial of HCIP 45/2023 took place before Lok J. On 30 September 2024, his Lordship handed down the Judgment therein (the “HCIP Judgment”).

9.  About 5 months later, on 3 March 2025, the Plaintiffs filed an affirmation deposing that the Plaintiffs would withdraw the claims which are the subject challenge of the Defendants’ Summonses. However, the Plaintiffs provided no draft Amended Statement of Claim until 15 April 2025 as explained above.

III.  DISPOSAL OF THE DEFENDANTS’ APPLICATION TO STAY ON FORUM NON CONVENIENS AND MULTIPLICITY OF PROCEEDINGS UPON PLAINTIFFS’ AMENDMENT

10.  The parties dispute over whether the Interim Stay Order was automatically uplifted upon the handing down of the HCIP Judgment. The Plaintiffs argue in the affirmative, while the Defendants argue that it is not and that an application would be required for uplifting the Interim Stay Order. In principle, the difference between the two is that if the Interim Stay Order was automatically uplifted, then the Plaintiffs are entitled to rely on Order 20 rules 1 and 3 to make the amendments without the leave of the Court, and if the Interim Stay Order is not automatically uplifted, then the Plaintiffs are not entitled and thus the Defendants are entitled to proceed with the Defendants’ Summonses for an order of stay on forum non conveniens and multiplicity of proceedings in Japan.

11.  Assuming, for the sake of argument, that the Interim Stay is still extant, I would still lift the Interim Stay Order on my own motion for allowing the amendment in. The reason is simple: there would simply be no reason for the Defendants to insist on some claims the Plaintiffs would by the amendment abandon against the Defendants, and the Defendants not only would not suffer any prejudice by the abandonment, but would benefit from it. The Court would also benefit from the narrowing down of the Plaintiffs’ claim.

12.  For the above reasons, the Defendants’ application for stay has been rendered nugatory by the Plaintiffs’ late amendment. Therefore, I make no order on the Defendants’ application for stay.

13.  In any event, as the parties have made submissions on whether the Interim Stay was automatically uplifted, I express my view below briefly:-

(1)  The Interim Stay Order was clearly for the purpose of imposing a moratorium to save time and costs because the HCIP Judgment to be handed down would have impact on the scope of D1-2’s Summons, as explained above.

(2)  Therefore, the Interim Stay Order would no longer be necessary upon the handing down of the HCIP Judgment.

(3)  Paragraph 2 of the Interim Stay Order envisaged that the parties would then take out a summons for a call-over hearing for the Summonses. It is not that there would be a summons first for lifting up the Interim Stay Order and then for the call-over.

(4)  Thus viewed, the Interim Stay Order was meant to be uplifted automatically upon the handing down.

(5)  The phrase “with liberty to apply to uplift the stay by serving at least 14 days prior written notice” is in my view for a situation where the HCIP Judgment was not yet handed down but for some reasons, there was a need to lift up the Interim Stay.

(6)  If this phrase is to qualify the “handing down of the HCIP Judgment” rather than a phrase of its own, then “pending handing down of the HCIP Judgment” would be redundant. The parties could have simply agreed to that the stay could be lifted by serving 14 days prior written notice.

(7)  Therefore, whether by purposive construction ((1) – (4) above)) or literal construction ((5) – (6) above), the Interim Stay was automatically uplifted upon the handing down of the HCIP Judgment.

(8)  The Defendants’ reliance on Rofa Sport Management AG v DHL International (UK) Ltd [1989] 1 WLR 902 at 911B-C and Cmbicdha W Investments Ltd v Li Lei [2023] 2 HKLRD 939 at §15 does not assist them at all. The wording of the stay order in Rofa Sport Management AG v DHL International (UK) Ltd, supra at 905E did not contain the such phrase as “pending [an event]” as in the Interim Stay Order here. Rather, the stay order there was a general stay. In respect of Cmbicdha W Investments Ltd v Li Lei, supra, the issue was whether time still ran for an unless order during the interim stay pending the determination of the application for security for costs. DHCJ Le Pichon’s dicat there at §15 that an application to uplift a stay was necessary was said in the context of whether the time still ran for an unless order during this interim stay. The parties there did not take issue that the stay was automatically uplifted upon the determination of the application for security for costs and the payment of the security for costs into Court. They simply did not mount any argument that time would still not run upon the payment of the security for costs because of lack of an application to uplift the stay.

14.  In my view, the practical difference between the parties is about costs. In this regard, I would take a broad-brush approach.

15.  First, in terms of time, the temporal difference is more theoretical than real in the present case, because the Plaintiffs only served the Amended Writ and Amended Statement of Claim as late as just 3 clear days before the hearing and just the day before the Defendants would have to file and serve their skeleton submissions. In my view, the Plaintiffs’ affirmation filed on 3 March 2025 foretelling that the subject claims would be abandoned was insufficient – without any proper amended pleadings, the Defendants were unable to know exactly what were abandoned and were therefore legitimate to proceed with their Summonses as they were. By 15 April 2025, the Defendants’ legal representatives including Counsel would of course have been instructed and briefed to attend the hearing to argue the Defendants’ Summonses without the amendments (then not in existence yet) in any event.

16.  Second, in terms of the merits of the application for stay, there is no dispute that when the present Writ was issued, those parts (except for the claim of passing-off) the Defendants sought to stay were subject matters of existing Japanese proceedings. The Plaintiffs contend that it was the Defendants who commenced action in Japan against the Plaintiffs so that the Plaintiffs had to raise those subject matters as defence and/or presenting the whole picture to the Court in Japan. They may be right, but given that there were already parallel proceedings in Japan and the Plaintiffs, rightly or wrongly, chose to raise those subject matters in the Japanese proceedings, even if I assume that that was essential to the Plaintiffs’ defence therein, it does not mean that the Plaintiffs could commence and continue the present action on the same subject matters. I agree with Mr Colin Wright, counsel for the Plaintiffs, that commencing parallel Japanese proceedings itself may not be sufficient to ground an order for stay. However, in those Japanese proceedings, the parties have been pursuing the matters substantively and substantially to trial, judgement and even appeal. The Defendants have a strong case for a stay in this light.

17.  There is also no dispute that some other matters the Defendants sought to stay were subject matters of the HCIP Action. The Defendants, similarly, raise that that was commenced by the Plaintiffs and that the present action was initially intended as a counterclaim to the HCIP Action. For the same reason, this does not constitute any valid reason for the Plaintiffs to commence the present action.

18.  The parties have also made submissions on whether the Defendants have submitted themselves to jurisdiction in Hong Kong. Whether the Defendants have submitted to jurisdiction is a matter of fact to be found upon an objective assessment of the relevant circumstances. The Plaintiffs argue that they have, by virtue of the Defendants giving the Undertaking that they would be bound by the HCIP Judgment, the Defendants’ current application to strike out and their current application for security for costs up until the first case management conference. However, for the applications to strike out and for security for costs, they are applications alternative to the application to stay. Such alternative applications cannot be taken as submissions to jurisdiction. As regards the Undertaking, while giving an undertaking is an indicia of submission to jurisdiction, one has to understand that the undertaking was given in the context described §5 above in order for the Court to reach a judgment in the HCIP Action on some of the matters common to both actions. In other words, the giving of the Undertaking here cannot be any indication that the Defendants would submit themselves to jurisdiction in the present case. The Undertaking can be regarded as an undertaking that the Defendants would be bound by the HCIP Judgment if the present action would proceed further. Considering the above, I do not think that the Defendants submitted to jurisdiction.

19.  All in all, having considered the above, for these abandoned parts, the Defendants should in the first place not have pursued in Hong Kong and opposed an application to stay on forum non conveniens and multiplicity of proceedings.

20.  The remaining claim on passing-off in the present action is a claim or a related claim which Lok J’s ruling in the HCIP Judgment will advance in favour of the 2^nd Plaintiff, because in the HCIP Judgment, Lok J resolved a factual dispute on the ownership of the relevant goodwill by finding that it is owned by the 2^nd Plaintiff herein. The Defendants’ application to stay was initially for a stay of the whole proceedings including this passing-off claim. Upon the Amended Statement of Claim, in which the only claim is the passing-off claim, the Defendants no longer pursue any stay. In this regard, I agree with Mr Wong Hok Yan, counsel for the 1^st and 2^nd Defendants, whose submissions Mr Terrence Cheng, counsel for the 3^rd Defendant and Mr Samuelson Choi, counsel for the 4^th Defendant adopt, that in the original Statement of Claim, the various allegations were so intertwined that it was practically infeasible to hive off the passing-off claim out of the order of the stay, and thus the Defendants’ application to stay would be meritorious even in respect of the passing-off claim, which they now agree not to seek to stay upon the Amended Statement of Claim making the passing-off the only extant claim.

21.  In the circumstances, it is my view that the Plaintiffs should pay the Defendants costs of the application for stay.

22.  It remains for me to say that besides the stay application, the Defendants also applied for striking out relief 7, 8, 11 and 12, which have been removed in the Amended Statement of Claim. I do not see any reason to depart from the general costs rule that the party who withdraws a claim should pay the costs. Therefore, the Plaintiffs should also pay the Defendants cost of the application to strike out.

23.  The parties agree that the costs order I am to make should be an order nisi, on the basis that there may be materials that would be brought to my attention in determining costs. I therefore make a costs order nisi that the Plaintiffs do pay the Defendants costs of the application to stay and to strike out. Upon the costs order nisi becoming absolute, each of the Defendants having already lodged and served a statement of costs of the application to stay and strike out, the Plaintiffs shall lodge and serve a list of objection within. I shall dispose of the summary assessment on paper within 14 days thereafter.

IV.  PLAINTIFFS’ ORDER 14 SUMMONS

24.  Before I deal with the application for security for costs, logically, I should deal with the Plaintiff’s Order 14 Summons, because if I enter summary judgment, the application for security for costs would be unnecessary.

25.  Relevant to the present circumstances are the following legal principles I summarise based on Hong Kong Civil Procedure 2025 Vol 1 §§14/1/6 and 14/1/7:-

(1)  Where there is technical defect in the Statement of Claim, an amendment should be effected as soon as possible.

(2)  The Order 14 summons should be amended to refer to the Amended Statement of Claim, unless the amendment is immaterial.

(3)  If the amendment is more than clerical, it is unlikely that the Court will exercise its discretion to grant an abridgement of time for service of verifying affirmation which should be done 10 clear days prior to the return day pursuant to Order 14 rule 2(3).

(4)  In exceptional circumstances, the Court may be prepared to abridge time provided that the affidavit verifying the amendment has been served sufficiently long in advance to enable the defendant to appreciate the nature of the plaintiff’s claim and meet it with appropriate evidence.

(5)  The requirement of an affidavit to verify the Statement of Claim upon which judgment is sought is mandatory and cannot be dispensed with.

(6)  An adjournment for the plaintiff to prepare and file verifying affirmation should be long enough to enable the defendant to prepare evidence to answer the verifying evidence.

26.  In the present case, after the amendments to the Statement of Claim, the Plaintiff’s Order 14 Summons can only be on the Plaintiffs’ passing-off claim only. As mentioned above, the Plaintiffs only filed and served the Amended Statement of Claim on 15 April 2025. Substantive amendments to the goodwill claim are made, namely, additional particulars are added for the act of passing-off. There is, however, no affirmation to verify the Amended Statement of Claim, and so the Defendants have not had any chance to respond to the additional particulars. Nor, equally fundamentally, is there any amended summons for the Order 14 application. In fact, the first time the Plaintiffs indicated that it would pursue the current, unamended Plaintiffs’ Order 14 Summons on the Amended Statement of Claim was made in the Plaintiffs’ Skeleton Submissions filed on 16 April 2025.

27.  Despite all these, Mr Wright, for the Plaintiffs, pressed ahead during the hearing. He submits that the evidence in support of the particulars has already been in the filed affirmation. In particular, during the hearing, he drew my attention to §9 of the 3^rd Affidavit of Lee filed as a reply affidavit for the Plaintiffs’ Order 14 Summons on the original Statement of Claim. This reply affidavit was filed on 3 March 2025, while the Amended Statement of Claim was only served on 15 April 2025. Therefore, not only that the reply affidavit cannot be a verifying affidavit for the original Statement of Claim, it certainly cannot be for verifying the Amended Statement of Claim which was simply not yet in existence at the time. The absence of a verifying affirmation is not a purely technical matter, but it substantively goes to whether the Defendants would be afforded a fair opportunity to respond in such summary proceedings without trial. This is why it is a mandatory requirement for a verifying affidavit under Order 14 rule 2, which provides that an Order 14 application “must be made by summons supported by an affidavit verifying the facts on which the claim… to which the application relates is based…” (emphasis added)

28.  Mr Wright, for the Plaintiffs, submits that §9 of the 3^rd Affidavit of Lee is evidence from the Defendants themselves, and thus such evidence cannot be realistically disputed by the Defendants. This may or may not be the case, but it is unsafe for me to reach such a conclusion without affording a chance for the Defendants to respond before the Court would enter a summary judgment. In any event, for §27(6A)(v) of the Amended Statement of Claim, the evidence the Plaintiffs rely on is, as clarified during the exchange between Mr Wright and me, evidence from the Plaintiffs but not the Defendants, being photos of snapshots of certain moments which the Plaintiffs say are evidence of use in the sense of passing-off. For such evidence from the Plaintiffs, Mr Wright’s submission that the Defendants cannot realistically dispute is even weaker.

29.  It remains for me to say I cannot accept Mr Wright’s submissions that the evidence has been adduced for quite some time and if the Defendants would like to respond, they would have done so for a long time. While the evidence may have been adduced for quite some time, not until the service of the Amended Statement of Claim if not until the Plaintiffs’ Skeleton Submissions, could the Defendant know that the Plaintiffs would apply for Order 14 judgment on the Amended Statement of Claim. All the more, not until the hearing when Mr Wright drew my attention to §9 of the 3^rd Affidavit of Lee could the Defendants really know which evidence the Plaintiffs rely upon for the added particulars (except for §27(6A)(v) of the Amended Statement of Claim for which Mr Wright could not point to any evidence). I should also add that during the hearing, Mr Wright took quite some time to pinpoint the evidence for me upon my query which he submits would verify the added particulars. This only shows that the Defendants would find it more difficult to know what evidence the Plaintiffs would like to rely upon.

30.  In addition to the lack of verifying affirmation, the constitution of the Plaintiffs’ claim appear problematic at least for the 1^st, 3^rd and 4^th Plaintiffs. By the HCIP Judgment, it was found that the 2^nd Plaintiff is the owner of the goodwill. In the present action, the Plaintiffs do not say otherwise (and apparently they cannot by virtue of the undertaking). As a matter of law, in general, only the owner of the goodwill has the legal standing to sue: see Wadlow on the Law of Passing-off (6^th ed), §§5-40 – 5-41. Mr Wright, for the Plaintiff, explains that the 1^st, 3^rd and 4^th Plaintiffs joined the action because they had causes of action in the original Statement of Claim. This explains why they were in the original Statement of Claim, but does not explain why in the Amended Writ and Amended Statement of Claim, they remain the parties.

31.  The Plaintiffs’ passing-off claim, or more accurately, the 2^nd Plaintiff’s passing-off claim, against the 2^nd, 3^rd and 4^th Defendants are equally problematic. Upon the lack of any plea of common design or joint tortfeasors, Mr Wright submits that the passing-off claim against these Defendants is that they themselves passed off the Plaintiffs’ business. However, Mr Wright is unable to point to any plea that any of these Defendants did so.

32.  Faced with all these problems, Mr Wright urge me that if I am not to enter summary judgment, I should not dismiss but should adjourn the Plaintiffs’ Order 14 Summons so that the Plaintiffs could put the matter in proper order.

33.  Having considered the above, I refuse to enter summary judgment. Further, given the substantive amendment to and the substantial abandonment in the Statement of Claim, and despite the substantive and substantial amendment, there are still at least quite arguably the problems identified above, I think the proper course to take is to dismiss the Plaintiffs’ Order 14 Summons, without prejudice to the Plaintiffs or the 2^nd Plaintiff to make an Order 14 application on the Amended Statement of Claim (or if the Plaintiffs think fit, any further amended Statement of Claim). I so order.

34.  For those abandoned claims, I reached a conclusion that they should not have been pursued in the present action in the first place. It follows that the Plaintiffs’ Order 14 Summons on these claims should not have been pursued. For the remaining passing-off claim, I have dismissed it for the reason explained above. I see no reason why costs should not follow the event. I therefore make a costs order nisi that the Plaintiffs should pay the Defendants costs of the Plaintiffs’ Order 14 Summons. Upon the costs order nisi becoming absolute, each of the Defendants having already lodged and served a Statement of Costs of the Plaintiffs’ Order 14 Summons, the Plaintiffs shall lodge and serve a list of objection within 3 days. I shall dispose of the summary assessment on paper within 14 days thereafter.

V.  SECURITY FOR COSTS

35.  I agree with the Defendants’ submissions that if I would dismiss the Plaintiffs’ Order 14 Summons (as I have now), I should consider the Defendants’ application for security for costs because the dismissal would mean that there is no Order 14 application, the existence of which usually would be a reason for adjourning an application for security for costs together therewith.

36.  At the hearing, Mr Cheng, for the 3^rd Defendant, informed the Court that he no longer pursues security for costs against the 1^st, 3^rd and 4^th Plaintiffs, while the other Defendants still pursue security for costs against all the Plaintiffs.

37.  Since the Amended Statement of Claim was only served on 15 April 2025, there is of course no defence filed in response to it and no evidence to respond to the amendments. What is clear is that all the Defendants now take the point that the 1^st, 3^rd and 4^th Plaintiffs are not the owners of the goodwill and so these three Plaintiffs do not have the legal standing to pursue the amended claim. This point was understandably not taken against the original Statement of Claim because as Mr Wright, for the Plaintiffs, explain (as I mentioned above), these three Plaintiffs had causes of action in the original Statement of Claim. Now with the late amendments, the Defendants simply have had no proper chance to amend their respective Defences to reflect this point.

38.  Given that the 2^nd Plaintiff’s position is different from the 1^st, 3^rd and 4^th Plaintiffs’, there may be a scenario (as Mr Wong, for the 1^st Defendant, submits) where costs would be awarded in favour of the Defendants against the 1^st, 3^rd and 4^th Plaintiffs while costs would be awarded in favour of the 2^nd Plaintiff against the Defendants. As between the 1^st, 3^rd and 4^th Plaintiffs, if none of them has any cause of action in the Amended Statement of Claim, any costs order against them would be several rather than joint and several, as they cannot claim that they would jointly and severally be liable for a non-existent cause of action. In any event, for the present purpose of security for costs, I think it is appropriate to treat them separately especially upon Mr Wright’s submissions that a foreign plaintiff can join any friendly party within jurisdiction as a co-plaintiff to avoid security for costs, by making use of the legal principle summarised in §23/3/5 of the Hong Kong Civil Procedure 2025 Vol 1:-

“In general the practice may be summarised as follows: there is a well settled rule that orders for security for costs will not be made against a foreign plaintiff if there are one or more co-plaintiffs resident in the jurisdiction; but the court has a wide discretion and the principles on which it is exercised are more important than the semantic analysis of particular cases; arguments for and against security have to focus on the circumstances and justice of the particular case, viewed in the light of the wording of O.23 r.1 and the basic principle that it is prima facie unjust to allow a foreign plaintiff to proceed without making funds available in the jurisdiction to cover any order for costs made against him…

the rule may have become one of the many factors that the court should consider when exercising its general discretion as to whether security for costs should be granted, so that even if a co- plaintiff is ordinarily resident in Hong Kong this does not by itself mean that security should not be granted.” (emphasis added)

39.  Such submissions seem to suggest that there is indeed risk that the 3^rd and 4^th Plaintiffs would remain as co-plaintiffs as a way to avoid security for costs against the 1^st and 2^nd Plaintiffs using the 3^rd and 4^th Plaintiffs being resident in Hong Kong.

40.  The rationale for this rule is, in my view, that co-plaintiffs would be jointly and severally liable to pay costs and thus, a foreign plaintiff should not be ordered to pay security for costs so long as the co-plaintiff would be able to make good the costs order. This rationale does not apply here as between the 2^nd Plaintiff and the 1^st, 3^rd and 4^th Plaintiffs. In any event, as the quote passage explains, this rule is not an inflexible rule but the Court has a discretion considering all the relevant factors. In the light of the risk that the 3^rd and 4^th Plaintiffs may simply remain to help the 1^st Plaintiff to avoid security for costs while they apparently do not have any cause of action and thus may be dropped at any stage, I should treat the Plaintiffs separately in terms of security for costs.

41.  The 1^st Plaintiff is a Japanese limited company resident out of Hong Kong. In relation to its assets within jurisdiction, they are the shares in the 3^rd and 4^th Defendants. However, the value of such assets are difficult to ascertain and such assets are difficult to realise: see Re Charter View Developments Ltd, HCCW 45/2006, 21 December 2006 at §26 Kwan J (as she then was). Therefore, in my view, it is appropriate to order security for costs against the 1^st Plaintiff. However, realistically, given that the 1^st Plaintiff (apparently) does not have any cause of action, the costs incurred by the Defendants against the 1^st Plaintiff should not be substantial up until the first Case Management Conference. I assess it to be HK$100,000 only for each of the 1^st – 2^nd Defendants (as one group) and the 4^th Defendant (as another group).

42.  The 2^nd Plaintiff is also a Japanese limited company resident out of Hong Kong. Its only assets within jurisdiction are also the shares in the 3^rd and 4^th Defendants. For the same reason, there should be security for costs against the 2^nd Plaintiff. The costs in respect of the 2^nd Plaintiff’s claim are more substantial, given that it is the 2^nd Plaintiff who is the owner of the goodwill. While the 2^nd, 3^rd and 4^th Defendants have an additional defence that they are not the joint tortfeasors, I think adopting a broad-brush approach, the costs for each of the Defendants should be the same. I assess it to be HK$400,000 for each of the 1^st – 2^nd Defendants, the 3^rd Defendant and the 4^th Defendant.

43.  For the 3^rd and 4^th Plaintiffs, by virtue of section 905 of the Companies Ordinance (Cap 622), the burden lies upon the Defendants to adduce credible evidence that there is reason to believe that they will be unable to pay the Defendants’ costs: see Lancom Ltd v Capxon International Electronic Co Ltd[2022] HKCFI 381 at §§25-26. The only evidence the Defendants rely upon is their belief that the 3^rd and 4^th Plaintiffs do not have assets within jurisdiction and the Plaintiffs’ response so such evidence of belief that the 3^rd and 4^th Plaintiffs own a company or a business in Hong Kong the value of which is unknown. One may draw adverse inference from the Plaintiffs’ evidence if the Defendants have in the first place adduced some prima facie evidence for the Court to say that the 3^rd and 4^th Plaintiffs would be unable to pay. However, evidence of a mere “belief”, without stating the basis, that the 3^rd and 4^th Plaintiffs would be unable to pay does not constitute such prima facie evidence. In the circumstances, I find that the Defendants fail to discharge their burden under section 905, and therefore dismiss their application against the 3^rd and 4^th Plaintiffs.

44.  I therefore make an order along the lines of §§5-6 of D1-2’s Summons, §§5-6 of D3’s Summons and §§4-5 of D4’s Summons with appropriate amendments to reflect the separate treatment to the Plaintiffs and the assessments mentioned above.

45.  For costs of the applications for security for costs, the 1^st – 2^nd Defendants and the 4^th Defendant succeeded against the 1^st and 2^nd Plaintiff. The 3^rd Defendant succeeded against the 2^nd Plaintiff. The 3^rd Defendant’s withdrawal of the application against the 1^st, 3^rd and 4^th Plaintiffs only during the hearing did not save much costs, if any. The 3^rd and 4^th Plaintiff succeeded in resisting the application. Adopting a broad-brush approach, I make a costs order nisi that there be no order as to costs.

VI.  CONCLUSION

46.  In summary, I have made various orders in §§12, 23, 33, 34, 44 and 45 above.

47.  It remains for me to thank counsel for their assistance.

Mr Colin Wright, instructed by Robert Lee Law Offices, for the 1^st to 4^th Plaintiffs

Mr Wong Hok Yan, instructed by H.Y. Leung & Co. LLP, for the 1^st and 2^nd Defendants

Mr Terrence Cheng, instructed by Patrick Mak & Tse, for the 3^rd Defendant

Mr Samuelson Choi, instructed by V. Hau & Chow, for the 4^th Defendant