SIGNATURE DIAMOND LLC v. PHILLIPS FINE WATCHES LTD

HCA 1536/2017

[2019] HKCFI 2903

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1536 OF 2017

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DECISION

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Introduction

1.  By a summons filed on 24 July 2019 (“the Summons”), the Plaintiff (“P”) applied for an order lifting the stay of proceedings ordered by Master Hui on 6 March 2018 and forcing the Defendant (“D”) to file its Defence and Counterclaim.  D opposed the Summons. 

2.  I heard the Summons substantively today.  My decision is to (1) dismiss the Summons; and (2) order P to pay the costs of the Summons, summarily assessed by me with Certificate for Counsel at HKD 225,000 to D, forthwith (“the Decision”). 

3.  My reasons for the Decision are as follows. 

Background Facts

4.  P was a company incorporated in Dubai.  D was a company incorporated in Hong Kong.  Since December 2015, P & D had a dispute over some timepieces (“the Watches”).  On 31 May 2017, P commenced proceedings against D in the Canton of Geneva, Switzerland (case number C/12375/2017 8 OO) (“the Swiss Proceedings”).  Subsequent to that, on 29 June 2017, P commenced these Hong Kong proceedings against D (“the HK Proceedings”). 

5.  On 6 March 2018, after a substantive hearing where both sides were represented by Counsel, Master Hui stayed this action “until after the final determination of the Swiss Proceedings, including any appeals”, and extended time for D to file its Defence and Counterclaim (if any) until 28 days after the final determination of the Swiss Proceedings. 

6.  There was no appeal against Master Hui’s order.

P’s Submissions

7.  Mr Azan Marwah, Counsel for P, submits, inter alia, that (1) as the Court of Appeal had mentioned in China Construction Bank (Asia) Corp Ltd v Shanghai Pudong Development Bank Co Ltd (unrep, CACV 14/2016, 3 February 2017, Cheung & Yuen JJA), this Court does have the jurisdiction to lift a stay; (2) on the facts of this particular case “the balance of convenience has shifted” in that it is now realized Master Hui’s March 2018 order will cause “at least a 7-year delay” in resolving this action and meanwhile the Watches will suffer permanent damage and/or loss of value for lack of expert servicing; and (3) all things considered, in the absence of prejudice to D, the stay previously ordered should now be lifted. 

D’s Submissions

8.  Mr Norman Nip, Counsel for D, submits, inter alia, that (1) there is affidavit evidence from Mr Blaise Stucki, a Swiss Lawyer based in Geneva, duly placed before me, to the effect that the Swiss Proceedings are just proceeding at a normal pace; (2) as Recorder Andrew Liao SC had said in Clinton Engineering Limited v B-Tech (Holdings) Limited (unrep, HCA 3608/1998, 28 September 2001), in considering whether to lift a stay this Court must consider whether there are material changes in circumstances subsequent to the making of the original order, and on the evidence placed before me there is none; (3) there is affidavit evidence from Ms Mathilde Heaton, the General Counsel for the Phillips Group (D being a member of it), that the Watches are being professionally looked after as it is in D’s own best interests that it does so; and (4) all things considered the Summons is “wholly unmeritorious” and should be dismissed with costs forthwith.  

My View

9.  In gist, I agree with D’s submissions.

10.  The stay of proceedings perfectly properly ordered by Master Hui on 6 March 2018 was a “case management stay pending outcome of proceedings abroad”, in the sense as had been explained by the editors of HKCP 2020 at paragraph 11/1/12F of their work.  Given the nature of the order, this Court obviously retains the discretion to lift the stay if there are material changes in circumstances.  However, it must be emphasized that an application to lift such a stay should only be considered by this Court if genuine material changes can be shown.  To suggest otherwise would be to make a mockery of Order 58 of the RHC which (1) imposes time limits for litigants to appeal against a Master’s decision; (2) provides that appeals do not operate as a stay; and (3) restricts the parties’ entitlement to adduce new evidence.  The power to lift a stay should not be used to circumvent Order 58.  Matters which had been, or could have been, argued previously cannot be argued at a lift application as if it is an Order 58 appeal. 

11.  I read everything, including all affidavits, written submissions lodged for the hearing before Master Hui on 6 March 2018, the transcripts for that hearing, and subsequent materials.  I cannot see anything that can be legitimately described as “material changes in circumstances”. 

12.  By way of example, in support of the Summons, P filed the Affirmation of Christoph Philipp Good-Roseau, a Swiss Lawyer based in Zurich, on 24 July 2019, paragraph 47 of which is an estimation as to how long the Swiss Proceedings may take.  There is no evidence that this was out of the contemplation of the parties at the hearing before Master Hui on 6 March 2018.  If the current estimation is not “new” in the sense of being out of the contemplation of the parties previously, this cannot be a genuine “material change in circumstances”. 

13.  Similarly, on 24 July 2019, in support of the Summons, P filed the 3^rd Affirmation of Phillip Loukis Georgiou, paragraph 12 of which is as follows: -

“... It should come as no surprise that watches with value of those that are the subject of these proceedings require special care and maintenance to ensure their quality and market integrity…”

14.  I have no doubt the Watches should be carefully kept, but this was known to P at the hearing before Master Hui and was not a “material change in circumstances”.  It has not been suggested to this Court that the Watches became something else, or that their nature was unknown to P.  If this point about special care was never raised before Master Hui but could have been raised had P been reasonably diligent, raising it now should in any case be prohibited under the principle of res judicata in its wider sense.  See: Henderson v Henderson (1843) 3 Hare 100 at 115 per Wigram V-C; and Yat Tung Investment Co Ltd v Dao Hang Bank Ltd [1975] AC 581 per Lord Kilbrandon. 

15.  Furthermore, there is no cogent affidavit evidence before me that D had failed to maintain the Watches properly, or that the Watches had been damaged, or that the market value of the Watches had dropped, or that there is a real or high probability of any of these things happening in the future.  In the absence of such evidence, I am not persuaded the Watches are in any way at risk. 

16.  All things considered, in the conspicuous absence of genuine “material changes in circumstances”, the Summons should be dismissed.  

Costs

17.  Costs of the Summons should follow the event and be paid by P to D forthwith. 

18.  On the question of Certificate for Counsel, in my judgment it was reasonable, necessary and proper for both sides to engage Counsel to argue the Summons.  I certify the attendance of Counsel. 

19.  On the quantum of costs, D claims HKD 251,061.  Pursuant to paragraphs 13 & 14 of Practice Direction 14.3, I examined each item in D’s Statement of Costs, and also the final figure.  Taking a broad-brush approach, I consider a total sum of HKD 225,000 to be fair and reasonable. 

Final Remarks

20.  I have been told Master Hui had on 6 March 2018 ordered P to pay HKD 340,000 to D forthwith but as of today (ie 25 November 2019) P is still refusing to pay.  With respect, I find this behaviour of P shocking.  P is not above the law, and P is not entitled to ignore an order of this Court. No person is.  When a Master of this Court orders P to pay D, P must pay D.  P is hereby reminded that non-compliance with an order of this Court is, or can be, a very serious matter.  Depending on the exact nature of the order and the circumstances of its non-compliance, the party in default can be penalized for contempt, or find itself at the receiving end of a Hadkinson order which takes away its legal rights to be heard:  CWG v MH [2014] 4 HKLRD 141 (paragraph 12 per Yuen JA).  I express no view on the steps which D should or should not be taking against P. 

21.  I do thank both Counsel for their most able assistance.