MAGIC SCORE LTD v. THE HONGKONG AND SHANGHAI BANKING CORPORATION LTD AND ANOTHER

HCA 11077/1994

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 11077 OF 1994

____________

____________

______________

D E C I S I O N

______________

1.  Two applications by the Defendant were before me at the hearing on 18 February 2006,

(a)   An application to stay Part II of the trial or to vacate the trial dates;

(b)   An application for security for costs regarding Part II of the trial.

Application for stay or vacating the trial dates

2.  After hearing submissions from leading counsel, I refused to grant a stay but re-fixed the trial dates to March 2007 (with 5 weeks reserved).  I now give reasons for that decision.  I also deal with the question of costs of that application in this Decision.

3.  I shall first dispose of the question whether this court is prevented by the previous decision of Waung J on an earlier stay application from entertaining the present application and some remarks by Waung J during the recusal application.  Although the arguments of res  judicata and legitimate expectation were canvassed in the written submissions of the Plaintiff, I understand Mr Lee SC did not pitch his case as high as that.  Mr Lee however invited this court to take these matters into account in considering the overall justice of the case.

4.  Counsel quite rightly did not pursue the contention based on legitimate expectation.  That argument was founded on the premise that the fixing of trial dates is an administrative decision and as such subject to the public law doctrine of legitimate expectation.  Whatever one might say about the nature of a decision of the Listing Officer (or for that matter, the Listing Judge) in fixing a trial dates, the vacating of a trial dates, like the adjournment of a trial, by a judge in the exercise of his case management power is a judicial decision.  Whilst I have no problem with Mr Lee’s submission that the history of the matter should be taken into account in the overall assessment, a decision on the vacating of trial date by the trial judge remains an exercise of judicial discretion.  It is wholly misconceived to characterize such decision as an administrative decision susceptible to judicial review basing on the doctrine of legitimate expectation.

5.  The argument of res judicata is equally without merit.  To start with, the question as to re-fixing of trial date was not a question before Waung J when His Lordship ruled on the stay application on 12  September  2005.  In any event it must be a matter of case management and the court has a duty to consider the then prevalent circumstances.  Irrespective of any decision on stay in the past, as the preparation for the trial progress, it is quite possible that new circumstances call for trial dates being postponed.  It would be lamentable if the court does not have the power to re-fix a trial date even though circumstances demand the same merely because a stay application has been unsuccessful in the past.

6.  One factor that I have taken into account is the pending appeal against the Liability Judgment which is scheduled to be heard by the Court of Appeal in September.  Although the normal rule is that an appeal does not operate as a stay and a successful plaintiff is therefore at liberty to proceed with steps pursuant to a judgment under appeal, the court is entitled to take into account of the pending appeal and in an appropriate case, fix subsequent hearings by reference to the dates on which the appeal would be heard.

7.  In Strix Ltd v Otter Controls Ltd [1995] RPC 675, Laddie J refused to grant a stay of an inquiry but re-fixed the date for the inquiry pursuant to a judgment on liability in a patent dispute in the light of a pending appeal against that judgment.  His Lordship re-fixed the date to provide for a reasonable time between the disposal of the appeal and the commencement of the inquiry.  The underlying rationale was that those involved in the inquiry should have the benefit of the judgment by the Court of Appeal in dealing with the inquiry.

8.  Another instance where the court has taken into account of a pending appeal in the exercise of its discretion is Derby v Weldon (No 5) [1989] 1 WLR 1244.

9.  Since it is a matter of discretion, the court must have regard to all the circumstances of the case before it in deciding how the discretion should be exercised.  Mr Lee urged upon this court that the Plaintiff is entitled to the fruit of the judgment and Part II of the trial should be proceeded with expeditiously.  In this connection, counsel marshalled support from certain dicta of Waung J in his judgment on refusal of stay and his remarks in the recusal application.  Reference was made to Laddie J’s judgment in Strix Ltd v Otter Controls Ltd [1995] RPC 675 at p. 679.  

10.  Even in the context of an application for stay, the ultimate test is justice.  After referring to the prima facie right of a successful plaintiff to proceed, Laddie J said at p. 679,

“However, this prima facie entitlement to proceed with the inquiry must make way for a stay if, in all the circumstances, greater justice or, perhaps less injustice, requires it.  Whatever the court’s decision on an application for a stay, one or other party will be able to complain.  The plaintiff can complain that he is kept out of his money if the stay is granted and the defendant can complain that he will incur irrecoverable costs if the stay is not granted but he eventually wins on appeal.  I do not read the decision in Lucas as indicating that a single special feature or number of special features must be found before a stay will be granted.  Nor do I read it that the combination of features should be extraordinarily unusual.  What the court must look at is all the circumstances for and against and decide whether on balance there are good reasons to depart from the plaintiff’s normal entitlement to seek assessment and payment of damages as quickly as the court’s procedure will allow.”

11.  In my judgment, there are compelling and exceptional features in the present case which calls for the postponement of Part II of the trial.  First, Part II is not a simple exercise of assessment of quantum.  Although the order for split trial made by Waung J only reserved the question of quantum for the second part of the trial, it is now quite apparent that the issues that the parties intend to canvass at Part II are much more wide ranging.  A casual reading of the documents filed pursuant to the directions of Waung J of 12 September 2005 can demonstrate the immense complexity of issues raised in Part II.  Very substantial costs will have to be incurred by the parties.  The estimated length of 5 weeks speaks for itself in terms of the judicial resources that have to be allocated to the exercise. 

12.  Although the mere existence of a risk of irrecoverability of costs of a defendant is generally not enough to justify a stay of inquiry as to damages, it is still a factor that the court should take into account in conjunction with other circumstances, see Strix Ltd v Otter Controls Ltd [1995] RPC 675 at p.679-80.  The Defendant estimated that it would have to incur professional fees in excess of $13 million.  Bearing in mind the complexity of the matter, the engagement of leading counsel by both sides, the number of interlocutory applications, I do not regard this as an unreasonable estimate.  I will deal with the application for security for costs below.  In any event, even if security for costs is ordered, the Defendant cannot be fully protected against its exposure.

13.  Another unusual feature is the recusal of Waung J from Part II of the trial.  In a simple and straightforward case, that should not be too problematic.  However, this is not a simple case.  In the Liability Judgment, Waung J had ruled on several controversial legal issues.  For instance, His Lordship held that the Plaintiff succeeded on economic duress and undue influence as separate causes of action and the commission of such equitable wrongs should give rise to equitable relief notwithstanding that the transaction in question could no longer be set aside.  It is not appropriate for this court to go into the merits of the appeal.  However, if this court were to hear Part II of the trial before the appeal, I would have to approach the matter by reference to the determination in favour of the Plaintiff in the Liability Judgment.  Mr Javis QC had highlighted some controversial aspects in the Liability Judgment.  Irrespective of the outcome of the appeal, I have no doubt that the judgment by the Court of Appeal will provide this court with guidance on how the question of Relief and Remedies should be approached.  It is also likely that with the enlightenment in the Court of Appeal judgment, the scope of the Part II trial will be narrowed. 

14.  Mr Lee submitted that even without a judgment from the Court of Appeal, it is not impossible to go ahead with Part II of the trial as counsel would strive to assist this court in the faithful application of the legal issues decided in the Liability Judgment.  Unfortunately, it seems that counsel do not agree with each other as to what are the true bases underlying the Liability Judgment and such disagreements will be settled by the judgment by the Court of Appeal.

15.  Further, with respect, the test is not whether it is impossible to go ahead with Part II.  The question that I have to ask is whether there are good reasons for the postponement of Part II in the circumstances of the case. 

16.  There are still a number of substantial outstanding interlocutory applications and potential applications regarding discovery, expert evidence, striking out.  Unfortunately, given the state of this court’s diary, it is unlikely that those interlocutory applications can be disposed of prior to early June.  Although the parties have complied with Waung J’s directions diligently, the complexity of the matter were not fully appreciated when Waung J set the trial dates for Part II.  Realistically speaking, having regard to the outstanding applications, the case is not in such a state of readiness that one can confidently say Part II could start in June.

17.  On the other hand, having checked my diary, this court can start the Part II trial in early 2007.  By then, the court will have the benefit of the judgment from the Court of Appeal and the parties should be ready for trial.  That would mean a delay of about 9 months.  

18.  Mr Lee said the Plaintiff would harbour a sense of injustice if the trial dates were put off.  If there were any sense of grievance, it is wholly misplaced.  Although once a trial date has been fixed, a party could usually expect his case to be dealt with accordingly, the overriding consideration is the fair and just disposal of the matter.  As observed by Lord Templeman, albeit in another context, in Ashmore v Corporation of Lloyd’s [1992] 1 WLR 446 at 454,

“…the control of proceedings rests with the judge and not with the plaintiffs.  The only legitimate expectation of any plaintiff is to receive justice.”

19.  In the present case, given the circumstances set out above, I do not see any injustice to the Plaintiff if Part II of the trial was postponed to March 2007.  It was suggested that the Plaintiff might have problems with witnesses.  The evidence adduced by the Plaintiff on this aspect is scanty and I am not satisfied that the postponement would make any difference.  I have however provided for liberty to the Plaintiff to apply for the evidence of these witnesses to be heard in advance of March 2007 if they have concrete evidence and cogent reasons to support such an application.

20.  Waung J had expressed a pious hope in his judgment on the stay application that the Court of Appeal could deal with appeals against liability and quantum together in September.  Given the complexity of the matter and the original Part II trial dates run up to late July, it is quite unlikely that this court will deliver judgment before September even if we stick to the original schedule.  In any event, the disadvantages of having two sets of appeals (one for liability and one for quantum) are inherent in any cases where split trials are ordered.  There is no appeal against Waung J’s order for split trial and parties should be taken as having accepted the disadvantages flowing therefrom.

21.  A lot have been said on behalf of the Plaintiff regarding the remarks of Waung J in the recusal application about preservation of the trial dates.  However, at that stage, the question of postponement of trial dates was not an issue before the court.  The duty of this court is to exercise its case management discretion by reference to the prevalent circumstances.  Although the Plaintiff may be disappointed by the delay of the trial, I do not regard that to be a sufficiently strong factor to outweigh the other considerations I have alluded to.

22.  As regards the costs of this application, I will order that it be costs in the cause of Part II of the trial.  Although the June trial dates were vacated, it is understandable that the Plaintiff would wish to resist the summons.  First, the primary application is for a stay of Part II, which I did not accede to.  Second, having regard to the history, including the previous decision of Waung J on stay application and the remarks made in the recusal application, the Defendant had to come to court to justify the vacating of the dates in any event.  In the circumstances, the application should be treated in the same way as other application for case management directions and the costs should be dealt with accordingly.

Security for costs

23.  The security for costs I have to deal with is that for costs of Part II of the trial, not costs of the appeal.  Nor am I dealing with the costs relating to Part I of the trial.  At this stage, I have to proceed on the basis that the Liability Judgment is correct.  It is not for me to assess the Defendant’s prospect of success in the appeal.

24.  In the context of the present application, the relevant prospect of success is therefore not the Defendant’s prospect of success in the appeal.  Rather it is the Plaintiff’s prospect of success in obtaining judgment in its favour for relief other than nominal damages in Part II of the trial.  If the Plaintiff shall fail to obtain any judgment other than one for nominal damages, it might be ordered to pay the Defendant’s costs in Part II.  If there is a real prospect for such a result, security for costs can be ordered notwithstanding the Liability Judgment, see Triodos Bank NV v Dobbs  [2005] EWHC 108 (Ch) Para.19.

25.  For reasons given below the Liability Judgment may not be determinative on the relevant prospect of success.

26.  Although Waung J held in favour of the Plaintiff in the Liability Judgment, His Lordship did not order judgment to be entered.  There are still outstanding questions on liability that have yet to be determined in Part II of the trial.

27.  Mr Lee urged this court to regard this as a case where the Plaintiff has an overwhelming strong prospect of success by reason of the Liability Judgment.  In Paragraph 7 of his written submissions on security for costs, Mr Lee explained why it is most likely that the Plaintiff would receive something more than nominal damages.

28.  At the hearing on 18 February 2006, Mr Jarvis informed the court that the Defendant has filed a proof of debt of about $200 million in the liquidation of Esquire (Electronics) Limited.  Counsel also suggested that this sum could, as a matter of law, be utilized to set off whatever damages or monetary compensation awarded to the Plaintiff.  If this were taken into account, the prospect of a nil award in Part II will increase.

29.  Unfortunately, the point was not dealt with by Mr Lee in his submissions at the hearing.

30.  Nor do I have the benefit of Mr Lee’s submissions on the quantum of security if this court is minded to order the same.

31.  Another point which may be relevant to the exercise of discretion on security for costs is the whether the benefit of the costs order made by Waung J for costs in Part I of the trial can be relied upon by the Plaintiff to set off any potential liabilities for costs in Part II.        

32.  In view of that, I would direct further written submissions be filed on security for costs dealing with the points mentioned above and unless parties requested a further hearing, I shall then decide the summons without restoring the case for hearing.

(a)   Plaintiff shall file further written submission on the points identified in Paragraphs 28 to 31 above by 6 March 2006;

(b)   Defendant shall file further written submissions in reply by 13  March 2006.