XCHRX CHANG CHEE KEUNG GARY v. CHAN SZE WAH MICHAEL

HCA 11816 of 1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 11816 OF 1998

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J U D G M E N T

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1. This is an appeal from the order of Master Poon made on 28th May 1999 dismissing the Defendant's summons dated 4th of March 1999 for an application that there be a trial of a preliminary issue.

2. The application was for an order that:

"the questions or issues raised by paragraphs 3 to 8 of the Statement of Claim; and/or more particularly, the issue whether the Defendant was carrying on business with the Plaintiff in partnership by incorporating and running the company Studio Archivio Limited be tried as preliminary questions or issues before all other questions or issues in the action".

3. Para. 3 of the Statement of Claim pleaded that since in or about 1994, the Plaintiff and the Defendant entered into a partnership carrying on the business, inter alia, of architectural and interior design. However, on the affirmation evidence of the Plaintiff, it is clear that the Plaintiff's case is that there was in fact a partnership between the parties even before 1994 and as far back as prior to 1990. Counsel for the Plaintiff recognises that the Plaintiff will have to seek leave to amend the Statement of Claim.

4. By para. 3 of his Defence, the Defendant denies the existence of a partnership with the Plaintiff whether as alleged or at all. There is, therefore, an issue as to this between the parties.

5. In or about 1994, a company Studio Archivio Limited was incorporated as a vehicle to carry on the partnership. The Plaintiff and the Defendant were the only two shareholders and directors of the company.

6. It is also the Plaintiff's case that the terms of the partnership between the Plaintiff and the Defendant remained in force even after the incorporation of the company. The Plaintiff alleges that a business opportunity with a Japanese company, namely the Tobu Department Store Company Limited ("Tobu") which was intended for the partnership was taken by the Defendant personally and that he has obtained secret profits from such business opportunity. An account is claimed from him of what is due to the Plaintiff in respect of secret profits received by the Defendant in relation to services rendered to Tobu and payment of what is found due.

7. There are also some further allegations of wrong-doing on the part of the Defendant in breach of his partnership obligations in respect of the publication of designs. All these allegations are denied.

8. The Defendant's application was made under Order 33 r.3 R.H.C. Whether or not an order is made is in the court's discretion. It is stated in marginal note 33/4/10 of the White Book that:

"An order for the separate trial of separate issues is a departure from the beneficial object of the law that all disputes should be tried together, and therefore, generally speaking, such an order should only be made in exceptional circumstances or on special grounds".

9. The Court of Appeal in Telford Development Limited v. Shui On Construction Company Limited [1990] 2HKC 110 held that the general rule was that all the issues were to be tried at one and the same time. Although there was power to order different issues to be tried at different times, the general rule was departed from only if it was just and convenient. It was for the party seeking such departure to show that it was just and convenient. Thus, it is clear that the Defendant, as the party seeking departure from the general rule, must show that it was just and convenient.

10. It was submitted by counsel for the Defendant that the trial of the preliminary issue was likely to save costs. It was necessary for the Plaintiff to prove the partnership to found his cause of action. It was submitted that it was just and convenient to try the question of the existence of the partnership first and if established, then to try the issue of whether the Defendant was in breach of fiduciary duties.

11. In my view, on the proposed preliminary issue the question for determination is a question of mixed fact and law. No doubt, the main witnesses will be the Plaintiff and the Defendant. It will be necessary to proof and call the Plaintiff and the Defendant as witnesses of fact. On the remaining issue as to whether the Defendant was in breach of his fiduciary duties as a partner, the Plaintiff and the Defendant will also, in my view, be the main witnesses. If the preliminary issue is decided against the Defendant, the Plaintiff and the Defendant will have to be proofed and called again as witnesses of fact.

12. If there were two trials instead of one trial in respect of all the issues on liability, there could well be some duplication of evidence as well as some overlap. With two trials, whether before the same judge or before different judges, there could well be inconsistent findings. In my judgment, the court should endeavour to avoid this. Also, the court would have to assess the credibility of the Plaintiff and the Defendant as witnesses of fact. And it is desirable that this should be done in one trial instead of two separate trials.

13. I am also not satisfied that there will be a significant saving of time or costs in the ordering of a trial of the preliminary issue. Although counsel for the Defendant estimated the trial of the preliminary issue to be 3 days, I think it will properly last more than that, more like 5 days, as events over a period of a few years will have to be explored. I recognise, of course, that this estimate is only an estimate at this stage. The trial of the remaining matters would not, in my view, add much more to that period of time, probably about 2 more days. In the circumstances, I do not consider that there will be a significant saving of time or costs if the preliminary issue is ordered.

14. Furthermore, if the result of the trial of the preliminary issue is appealed to the Court of Appeal and even beyond that, there will inevitably be some delay to the trial of the main action. It is likely also that in that event additional costs will be incurred.

15. In all the circumstances, the Defendant has not, in my judgment, shown that it was just and convenient to have a separate trial of the preliminary issue. The discretion should, in my judgment, be exercised against the Defendant. Master Poon was, in my judgment, correct in dismissing the Defendant's summons.

16. The appeal is dismissed.