CHINA MEDICAL TECHNOLOGIES, INC (IN LIQUIDATION) AND OTHERS v. WU XIAODONG AND OTHERS

CHINA MEDICAL TECHNOLOGIES, INC (IN LIQUIDATION) AND OTHERS v. WU XIAODONG AND OTHERS

The application for security for costs was dismissed because the court, having regard to all circumstances and the discretion under RHC O 23 r 1 and s905 CO, was satisfied the plaintiffs had a genuine and strong case of massive alleged fraud and misappropriation; ordering security would be unjust and oppressive as the plaintiffs' impecuniosity was substantially caused by the alleged wrongdoing; the defendant's contempt, absconding and US indictment further militated against ordering security.

Citation
[2022] HKCFI 3237
Parties
1st Plaintiff (in Liquidation): China Medical Technologies, Inc; 2nd Plaintiff: CMED Technologies Ltd; 3rd Plaintiffs (joint and Several Liquidators): Cosimo Borrelli and Yuen Lai Yee; 1st Defendant: Wu Xiaodong; 2nd Defendant (applicant for Security for Costs): Samson Tsang Tak Yung; 3rd Defendant: Chen Zhong; 7th Defendant: Supreme Well Investments Limited
Court
Court of First Instance
Jurisdiction
Hong Kong
Judgment Date
21 October 2022
Case Number
HCA3391/2016
Procedural Posture
Consolidated Civil Actions Concerning Alleged Corporate Fraud and Misappropriation; Security for Costs Application / Hearing on Summons for Security for Costs; Judgment on Application (dismissed)
Outcome
Summons for security for costs dismissed; costs ordered against applicant on an order nisi basis
Legal Topics
Security for Costs, Companies Ordinance S905, Mareva Injunction, Misappropriation of Company Assets, Breach of Fiduciary Duty, Contempt/section 221 Examination
Source Language
EN
Company Law Civil Procedure Insolvency Fraud Banking and Trusts Security for Costs Companies Ordinance S905 Mareva Injunction +3 more

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Parties

China Medical Technologies, Inc

1st Plaintiff (in Liquidation)

CMED Technologies Ltd

2nd Plaintiff

Cosimo Borrelli and Yuen Lai Yee

3rd Plaintiffs (joint and Several Liquidators)

Wu Xiaodong

1st Defendant

Samson Tsang Tak Yung

2nd Defendant (applicant for Security for Costs)

Chen Zhong

3rd Defendant

Supreme Well Investments Limited

7th Defendant

Procedural Posture

Consolidated Civil Actions Concerning Alleged Corporate Fraud and Misappropriation; Security for Costs Application / Hearing on Summons for Security for Costs; Judgment on Application (dismissed)

Legal Issues

  1. 1 Whether security for costs should be ordered under RHC O 23 r 1 and s905 Companies Ordinance
  2. 2 Whether the plaintiffs' impecuniosity caused by alleged defendant wrongdoing should preclude a security order
  3. 3 How far the court may consider merits/good arguable case on a security for costs application

Ratio Decidendi

The application for security for costs was dismissed because the court, having regard to all circumstances and the discretion under RHC O 23 r 1 and s905 CO, was satisfied the plaintiffs had a genuine and strong case of massive alleged fraud and misappropriation; ordering security would be unjust and oppressive as the plaintiffs' impecuniosity was substantially caused by the alleged wrongdoing; the defendant's contempt, absconding and US indictment further militated against ordering security.

Court Disposition

Summons for security for costs dismissed; costs ordered against applicant on an order nisi basis

Orders

  • Summons for security for costs by Mr Samson Tsang dismissed
  • Order nisi that costs of and occasioned by the summons be to the Plaintiffs, to be taxed if not agreed, and paid by Mr Samson Tsang forthwith