WING SIU CO. LTD. v. GOLDQUEST INTERNATIONAL LTD.

HCA3183/2001 and
HCA4145/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NOS.3183 AND 4145 OF 2001

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(Actions consolidated by Order dated 26 April 2002)

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REASONS FOR DECISION

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Background

1. The background to the present summonses before the court is as described in the Reasons for Decision handed down on 23 April 2002 in relation to an application by the defendant to strike out HCA 3183/2001 ("the Second Action"). There, Master H.C. Wong had made an order striking out the action but on appeal, I allowed the plaintiff's appeal after a hearing on 15 April 2002 and dismissed the defendant's strike out application.

2. The defendant has appealed my decision by a notice of appeal dated 3 May 2002 ("the Appeal"). The hearing before the Court of Appeal is to take place on 17 January 2003.

3. It will be recalled that the plaintiff is the owner of premises situate at Suites 2101-05A, 21/F, Dah Sing Financial Centre, 108 Gloucester Road, Wanchai, Hong Kong ("the Premises"). Under a lease dated 11 October 1999 ("the Lease"), the Premises were let to the defendant for a period of three years from 11 October 1999 to 10 October 2002. Following defaults by the defendant in the payment of rent and other charges, the plaintiff commenced proceedings in the District Court on 19 January 2001. These proceedings were transferred to the High Court on 4 September 2001 (in HCA 4145/2001). I will refer to the District Court proceedings and the transferred proceedings simply as "the First Action".

4. On 22 January 2001, three days after the Writ had been issued in the District Court in the First Action, the defendant purported to determine the lease and returned the keys of the Premises to the plaintiff. The plaintiff treated this as a repudiation of the lease and by a letter dated 6 February 2001 from its solicitors, accepted the repudiation.

5. On 6 April 2001, the plaintiff applied for summary judgment on its claim for the outstanding rent and other charges. On 17 May 2001, Master Kwang granted summary judgment to the plaintiff in the sum of $354,252 and interest, but stayed execution pending the determination of the defendant's counterclaim for the return of rental deposit. That counterclaim to this day remains unresolved and the defendant has not made much progress in this regard.

6. Subsequent to Master Kwang's order, by a summons dated 20 June 2001, the plaintiff applied for leave to amend the Statement of Claim in the First Action to plead the cause of action based on the acceptance of the defendant's repudiation of the Lease. On 29 June 2001, Master Au-Yeung refused leave. Following this refusal, the plaintiff instituted the Second Action on 16 July 2001, making a claim based on the said repudiation. It is this claim the defendant sought to strike out. Whether this action should be struck out will of course be a matter for the Court of Appeal to resolve in the Appeal. As stated earlier, I had dismissed the defendant's application to strike out.

7. By a summons dated 3 August 2001, just before the defendant's application to strike out, the plaintiff applied for summary judgment against the defendant in the Second Action. Following the plaintiff's appeal from Master H.C. Wong being allowed on 15 April 2002, the plaintiff amended the Statement of Claim in the Second Action on 5 July 2002. On 9 July 2002, the plaintiff issued a summons seeking leave to amend the 3 August 2001 Summons to refer to the Amended Statement of Claim and also to claim interim payment under RHC Order 29, rule 10. In addition, the plaintiff sought directions for the hearing of the amended Summons. On 26 July 2002, leave to amend was given by Master Ho, leaving the directions part of the 9 July 2002 Summons outstanding.

The applications before the court

8. By a summons dated 18 July 2002, the defendant sought a stay of the Second Action (perhaps more accurately the consolidated action as Master Mary Yuen had ordered the consolidation of the First and Second Actions on 26 April 2002) pending the determination of the Appeal.

9. There were therefore two matters before the court : the plaintiff's Summons dated 9 July 2002 seeking directions and the defendant's Stay Summons dated 18 July 2002.

10. Both summonses were heard by me on 16 August 2002. Mr Nigel Francis appeared for the plaintiff, Mr William Wong for the defendant.

11. After hearing submissions, I dismissed the defendant's stay application and gave directions in relation to the hearing of the plaintiff's application for summary judgment and interim payment.

12. I now give the Reasons for my Decision.

The application for a stay

13. The defendant applies for a stay on the basis that if it succeeds in the Appeal, then the claims made in the Second Action would be struck out in their entirety and therefore it would be right at this point to stay the present proceedings. Otherwise, there was a significant risk of wasted costs and effort. To this, Mr Wong added that the period from now to the hearing of the Appeal is only some five months and that as far as the merits were concerned, the defendant had a better than 50% chance of success.

14. Applications such as the present feature quite regularly in the courts. They take a variety of forms but generally all involve the court being asked to prevent or delay a party from exercising what otherwise would be his rights, procedurally or substantively. They include, for example, applications for a stay of execution pending appeal or applications that, say, discovery is postponed until pleadings are amended. Sometimes the Rules of the High Court make express provision dealing with this type of situation (such as in the case of stays of execution), but more often than not, the Rules are silent. In the latter case, the court is guided by balancing the interests of both parties, the respective prejudices and its own administration of justice. The present case involves a party applying for a stay on the basis of a pending appeal. The parties have treated this as being akin to an application for a stay of execution pending appeal. Though conceptually not an application for a stay of execution as such, the basic principle is the same : an appeal does not operate to halt or delay proceedings and a court will not grant a stay unless exceptional circumstances are shown.

15. In my view, the defendant has not demonstrated an entitlement to a stay :

(1) The plaintiff wishes to proceed with its application for summary judgment and interim payment. The application for summary judgment has been pending since 3 August 2001. The claim arises out of events which took place in early 2001. The summary judgment granted by Master Kwang dates back to 7 May 2001 but the plaintiff has as yet not been able to levy execution. Given this chronology, in my view, a further delay of five months would cause prejudice to the plaintiff and would not be fair or just. This is particularly so when on the evidence before me, the defendant has as yet not disclosed any defence to the summary judgment claim. At its lowest (for the plaintiff), therefore, it has an arguable application for summary judgment that should be heard.

(2) I have already referred to Mr Wong's submission that should the Appeal be allowed, the time and costs expended on any further proceedings from now would be wasted. He also submits that there is a risk of irreparable harm if summary judgment is granted, because even if the Appeal is successful, the summary judgment may nevertheless remain intact. In my view, no prejudice is demonstrated by these arguments. As to wasted costs and time, should it transpire that the defendant succeeds in the Appeal, I would have thought that it would in general be entitled to the costs of the action. If a case of wastage is made out, the defendant would be compensated in a costs order. As to the risk that despite a wholly successful outcome in the Appeal, any summary judgment granted would remain intact, I cannot envisage any circumstances in which this could occur.

(3) This leaves only the aspect of the merits of the Appeal. I accept that if the defendant can demonstrate that it has a strong appeal (as opposed to merely an arguable one), this would be a highly relevant factor in the exercise of discretion. An arguable appeal is not sufficient because in these circumstances, both sides have an equal chance of success and there is no reason why the successful party (the plaintiff in the present case) should be prejudiced. A strong appeal, on the other hand, may well tilt the balance in favour of the party applying for a stay. Though Mr Wong has submitted to me that the defendant has a more than 50% chance of success, I do not share this view. The highest that can be said in favour of the defendant is that it has an arguable appeal and I say this really only because the matter will be argued afresh before the Court of Appeal and I fully accept the possibility that it may well find the defendant's arguments persuasive. For my part, however, the arguments are as unattractive now as when the matter was argued before me on 15 April 2002.

16. For the above reasons, I see no reason why the progress of this action should be further delayed and, as I have said, I have accordingly made directions on the plaintiff's Summons.