CLINTON ENGINEERING LTD v. B-TECH (HOLDINGS) LTD

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.3608 OF 1998

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REASONS FOR DECISION

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1. This is an application by the defendant for a stay of proceedings pending an appeal against the order and judgment of Mr Recorder Liao SC dated 29 September 2001 in which he lifted a stay of proceedings which had been imposed by Findlay J on 5 May 1998.

2. Findlay J's stay was a stay pending arbitration. The arbitration proceeded in the PRC where an award was made in the plaintiff's favour. When the matter came before Mr Recorder Liao SC it was argued, inter alia, by the defendant that the PRC award was invalid and so the stay should not be lifted. Much evidence on PRC law was considered. The learned recorder found against the defendant. The defendant's appeal against that decision is due to be heard in May 2002.

3. The defendant now asks this court to re-impose the stay pending that appeal.

4. The lodging of an appeal will not act as a stay of the court's judgment. The defendant must establish special circumstances when asking the court to depart from the norm. The burden is on the defendant either to show strong grounds of appeal or that the up coming appeal would be rendered nugatory if a stay were not granted.

5. For the following three reasons I have concluded that no grounds exist in this case for the stay to be re-imposed pending appeal.

(1) Strength of the appeal?

6. This court would not and should not try to predict the outcome of the appeal. However if there seem to be, on a preliminary investigation of the issues, obvious strengths or weaknesses they should be identified and weighed in the balance. Litton JA in World Trade Centre Group v. Resourceful River Ltd, CA70/1993 described the test as follows :

"If the appellant was able to demonstrate that he had very strong grounds of appeal, that something had grievously gone wrong with the process of law in the court below, the court would be inclined to make such order as to ensure that the appeal would not be rendered nugatory in the meanwhile."

7. The learned recorder carefully considered the respective experts' evidence and having analysed it at some length made the following finding of fact :

"On the basis of the expert evidence before me, there is thus nothing to question the present legal validity and effectiveness of the award."

8. Moreover, he stated that as the stay in question was a temporary rather than a permanent stay the proper test, which he applied, was to consider :

"The balance of convenience and fairness as between the parties and whether there are material changes in the circumstances as affecting the balance of convenience or the fairness between the parties."

9. In this context he noted a number of matters. He observed that the award had been made, the award had determined the defendant's liability, the defendant was refusing to be bound by the award, the defendant was resiling from its own stated basis for asking for the stay before Findlay J (see below) and that there was nothing to prevent these proceedings from continuing.

10. In short, the defendant has far from discharged the burden on it to show that something went seriously wrong in the judgment which it seeks to appeal. The judgment is based on a finding of fact (the foreign law finding) and the exercise of a discretion, the very things with which appellate courts are reluctant to interfere.

(2) Defendant's inconsistency

11. Sir Nicholas Browne-Wilkinson VC in Express Newspapers v. New Ltd [1990] 1 WLR at page 1329 said :

"There is a principle of law of general application that it is not possible to approbate and reprobate. That means you are not allowed to blow hot and cold in the attitude that you adopt. A man cannot adopt two inconsistent attitude towards another: he must elect between them and, having elected to adopt one stance, cannot thereafter be permitted to go back and adopt an inconsistent stance."

12. Before Findlay J, counsel who then appeared for the defendant, as a basis for asking for a stay relied heavily on the defendant's undertaking to pay whatever amount was determined in the arbitration and acknowledged that such a finding would determine the extent of the defendant's liability.

13. Now, the defendant's refusal to be bound by the award, reflects poorly on its bona fides. It has advanced a number of technical arguments in an attempt to avoid any liability both in the PRC courts and now in Hong Kong.

(3) Appeal rendered nugatory

14. The defendant submits that as the plaintiff is a company not incorporated in Hong Kong it may not recoup its costs if its appeal is successful. In my judgment this is the least persuasive of the submissions made by the defendant. The point being made is that the plaintiff is a shelf company and no more. There is no evidence however, challenging that it does substantial business in Hong Kong, that it has a significant share capital that it has assets in Hong Kong or that it is a sizable construction company.

15. More importantly however is the fact that since the writ was issued, nearly four years ago, there has never been any application for security for costs. If the plaintiff is a foreign plaintiff and if the defendant is concerned that it may suffer loss for which it could not be compensated in damages and if the defendant believes the plaintiff would be unable to pay security into court, then the proper course is to apply for security which, if unpaid, would result in a stay of proceedings.

16. It is hard to conclude that the defendant would be seriously prejudiced by a refusal to stay, when it has not made the proper application. A successful security for costs application could only have two outcomes, either a payment into court in the defendant's favour or a stay.

17. For all the above reasons I consider the defendant's application to be without merit. It is dismissed. Counsel have also addressed the court on the question of costs. I make a costs order in the plaintiff's favour to be taxed and paid forthwith.