KADER INDUSTRIAL CO. LTD. v. GALCO INTERNATIONAL TOYS N.V.

-------------------

--------------------

J U D G E N T

--------------------

Kempster, JA:

1. These proceedings involve claims by Kader Industrial Co Ltd ("kader"), the plaintiffs, against Galco International Toys N.V. ("Galco"), the defendants, for the price of children's toys and components of toys sold and delivered and for expenses incurred and damages sustained in connection therewith together with interest.

2. On 30 may 1991, by consent, Master Jones entered judgment in favour of the plaintiffs for certain sums claimed by way of interest and for $3,459,946 net with interest pursuant to RSC O14 r3. The application for judgment on the balance of the claim was adjourned. At the adjourned hearing, held on 10 december 1991, Master Yam entered summary judgment for further sums amounting to 5936,904, gave the defendants unconditional leave to defend some of the remaining claims, conditional leave to defend others and stayed execution on part of the judgment which had been entered on 30 May He refused a general stay pending appeal. Master Yam also gave directions including an order for consolidation with other actions (the proceedings henceforth t6 be called "the second consolidated action").

3. On the following day the defendants rave notice of appeal against the refusal of a general stay pending apoeal in relation to the judgment entered by Master Yam. This was a somewhat unusual course and may have led to some of the complexity arising in the course of this hearing. That appeal was heard and allowed by Jones J on 18 December by reference to the contents of the affidavit of Rupert Skrine sworn on 16 December and implicitly with reference to 056 r1 (4). He ordered a general stay on Master Yam's order pending appeal to the judge (himself) in chambers. Now the plaintiffs appeal to us seeking; the removal of that stay.

4. On 16 December 1991 the defendants had given Notice of Appeal seeking unconditional leave to defend the claims in respect of which conditional leave had been given and a stay of execution on both the May and December judgments pending the full and final determination of the second consolidated action. That appeal is listed for 9 April 1992. Being an appeal from the Master the defendants will not be required to show error.

5. In his affidavit Mr Skrine deposes to the fact that in one of the consolidated actions Galco are the plaintiffs and claim against Kader, as defendants, damages in the sum of $26,997,821 for breach of express provisions relating to health and safety requirements in 17 contracts for the manufacture and shipment by Kader of 159,400 dolls. This claim far exceeds the sums in respect of which, to date, Kader have obtained judgment against Galco.

6. In relation to such circumstances the terms of RSC 014 r3(2) are material and, with the omission of the words "with a stay of execution", the overall effect of the authorities is summarised on PP 152 and 153 of the Supreme Court Practice for 1991 under paragraphs 14/3-4/13. Having regard to the authorities cited that note should, I believe, read:

"Set off and Counterclaim ... where ... there is clearly no defence to the plaintiff's claim, so that the plaintiff should not be put to the trouble and expense of proving it, but the defendant sets up a plausible counterclaim for an amount not less than the plaintiff's claim, the order should not be for leave to defend but should be for judgment for the plaintiff on the claim with costs, with a stay of execution until the trial of the counterclaim or pending further order. {Sheppards & Co v Wilkinson & Jarvis (1889) 6 TLR 13 CA.}"

7. This statement of principle was endorsed by Dillon LJ in Schofield v Church Army (199G] 1 WLR 1328 at p 1335. However, as Cumming-Bruce LJ explained in A.B. Contractors Ltd v Flaherty Bros Ltd (1978) 16 BLR 8, there must be such a connection between the dealings of the parties in regard to the contracts under which judgment has been signed in the plaintiffs' favour and those grounding the defendants' outstanding claims against theta "... as to make it fair and sensible to require the plaintiffs to be kept out of their money on the judgment they have obtained ... pending the determination of the issues in dispute in relation to" the defendants' claims. He doubted whether any broad principle or test could sensibly be suggested in what he had described as "the wide middle area" between judgments on bills of exchange or for rent, where a stay will rarely be granted, and those where claim and potential counterclaim arise out of the same contract or transaction, when a stay will usually be granted.

8. As Jones J pointed out, the stage for determination of this question has not yet been reached and we have to determine, and I think this is common ground, whether the plaintiffs have demonstrated to us that his exercise of discretion was based on an error of law or, as Mr Ching, on behalf of the plaintiffs, does not hesitate to say, plainly aberrant.

9. Looking at the rather laconic reasons given by the judge and the harms of his order, lam of the opinion that his discretion was exercised on the footing that the defendants had demonstrated a reasonable prospect of showing, when the substantive appeal is heard, that 014 r3(2) and the Sheppards & Wilkinson principle are applicable and that, in consequence, the status quo should be preserved in the meanwhile.

10. It is true that the terms of 058 r1(4) are very like those of 059 r13(1), which relates to appeals form the judge to the Court of Appeal, and that the practice in considering whether or not to grant a stay, on such appeals is to ascertain whether or not, if damages are paid pending appeal, there is a reasonable prospect of getting them back if the appeal succeeds. But even in the light of the case just quoted by Mr Chineg Atkins v The Great Western Railway Company (1886) 2 TLR 400, I am not satisfied that this practice limits the factors which a judge acting pursuant to 058 r1(4) may properly take.into account.

11. I find no grounds for interfering with the judge's exercise of discretion and would dismiss this appeal accordingly.

Clough, JA:

12. I agree.

Ryan, J:

13. I also agree.