TIN SHUI WAI DEVELOPMENT LTD v. ATTORNEY GENERAL

[The Court's power to order separate trials of separate issues will be exercised only if the party asking for the order can demonstrate that it would be just and convenient so to order]

Construction List

1987, No. 5

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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1. On 29th July 1982, the Hong Kong Government's Secretary for Lands and Works wrote a letter to Mighty City Company Limited ("MCL") and its associated company Tin Shui Wai Development Ltd. ("TSW"). The letter concerned proposals submitted by MCL to the Government for the development of a new town at Tin Shui Wai, N.T. It contained a contractual offer to MCL and TSW in this connection. MCL and TSW accepted the offer contained in the letter. This constituted what I will call "the July 1982 Agreement".

2. The development is proceeding. But TSW has a complaint against the Government. TSW's complaint concerns an obligation which, TSW alleges, the Government assumed under the July 1982 Agreement, to clear, form and service at the Government's own expense some 38.8 hectares of land at Tin Shui Wai and give possession of it in this state to TSW for building development.

3. The parties now differ, among other things, as to the time, if any, by which the Government were bound to perform this obligation. The Government accepts that it assumed an obligation to use its best endeavours timeously to clear, form and service the land. The Government says it did use its best endeavours to do this, in accordance with its obligation. But TSW says that the Government were under a more stringent obligation. TSW says that the Government assumed an absolute obligation to give possession of all or sufficient of the land, cleared, formed and serviced, within three years of the date of the July 1982 Agreement (as to any balance, in timely fashion after 1st July 1985). If it is wrong about that, TSW says that the Government came under an obligation to give it possession of the land in accordance with phased dates finally identified in a Master Development Plan prepared in October 1983. Finally, TSW says that, in any case, there is to be implied, in the July 1982 Agreement, a term to the effect that the Government would give possession of sufficient of the land by 1st July 1985, or within a reasonable time after 29th July 1982.

4. So, quite apart from any question of breach (and there are questions of breach) the parties are at issue as to what, at the date of the writ (6th March 1987) the Government's obligations as to giving possession to TSW of this land actually were. For a start, whatever may have been the original effect of the July 1982 Agreement, the Government's obligations under it may have been varied or modified in October 1983 with the identification of phased dates then made in the Master Development Plan. Further, on 21st May 1985 TSW accepted from the Government certain Conditions of Grant affecting the land. These Conditions of Grant, says the Government, varied or modified its obligations as they then stood, Any way, says the Government, TSW has so conducted itself as to preclude it from relying on the absolute obligations (if such they are) on the part of the Government for which it contends. So far as the Government's case dated on the Conditions of Grant is concerned, TSW contends that these Conditions of Grant, if as they stand they did have the effect that the Government claims they have, ought to be rectified, since they were not intended to have that effect.

5. That is a very brief, and necessarily oversimplified, conspectus of the dispute between the parties. But, in my judgment, it is sufficient to demonstrate that the obligations of the Government to deliver possession of this land to TSW cannot necessarily be treated as having crystallized in July 1982. TSW has raised the matter of the Master Development Plan finalised in October 1983. The Government has raised the matter of the Conditions of Grant of May 1985; and further, has raised the matter of TSW's conduct after July 1982 as having a material bearing on the Government's own obligations.

6. It is against this background that I turn to consider the present point of difference between the parties. TSW wants the case to proceed to trial on the issues of liability (it has already agreed that any issue of damages should be tried separately) in the ordinary way. The Government, understandably, wants to avoid the expense of a lengthy trial at the end of which it may and probably will turn out that many matters will have been canvassed unnecessarily, and so wants an order isolating and directing the trial of certain issues before others. Indeed, when it recently seemed possible to allow time convenient for the court and for counsel to deal with such issues (or some of them) at an early date, TSW was willing in principle to agree with the Government about this. But that opportunity has passed and in the absence of agreement the court has to consider the point afresh.

7. How should the court approach the matter?

8. Some authority, more ancient than modern, was cited to me in this connection. The first case (in point of date) cited to me was Emma Silver Mining Company v. Grant (1878) 11 Ch.D. 918. This was an action against several defendants involving various issues. The plaintiffs applied for and obtained, on terms, an order for two simple issues to be tried as between themselves and two of the defendants before the rest of the action.

9. Jessel M.R. said this (at p.927) :-

"In a case of this kind my opinion is that the Judge must have some evidence which will make it at least probable that the issue will put an end to the action. The Plaintiff is not to be harassed at the instance of the Defendant by a series of trials, each trial taking issue on every link of the Plaintiff's case. That is not the meaning of the rule as I understand it, but it may properly be applied in such a case as that I have stated, where the Judge has serious reason to believe that the trial of the issue will put an end to the action."

10. The judge instanced a number of cases in which the defendant had challenged the plaintiff's standing to bring the action and in which he had ordered that issue to be tried as a preliminary issue. He said (at p.928) :-

"The defendant has of course a right to shape his own case, and to say to the plaintiff 'you must prove every part of your case; if I can put my finger on one part of your case and show that there is no foundation for it whatever, it is quite wrong to subject me to the whole expense of a protracted investigation ....."

11. The next case was Piercy v. Young (1879) 15 Ch.D. 475. This was another decision of Jessel M.R. The action was a partnership action, in which the defendant set up by counterclaim an agreement by the plaintiff for sale to the defendant of his (the plaintiff's) interest in the partnership at a stated price.

12. Jessel M.R. said this (at p. 477) :-

"The rule in question, I think, never was intended to enable the defendant to take the conduct of a cause away from the plaintiff. It was intended to be applied to the class of cases which I have mentioned in my judgment in the case of Emma Silver Mining Company v. Grant, which I may call exceptional cases."

13. He added this (at p. 479) :-

"That being so, it is plain to my mind that this is not a case which was contemplated by the rules, and the defendant has only himself to thank for this issue being mingled up and having to be tried at the same time with another issue or other issues. The object of the Judicature Act was to try all disputes together, and it was considered a beneficial object. Separate trials of separate issues are nearly as expensive as separate actions, and ought certainly not to be encouraged, and they should only be granted on special grounds."

14. Finally, he said this (at p. 480) :-

"I think that the application of the rule should be limited to extraordinary and exceptional cases, and I think the case of Emma Silver Mining Co. v. Grant was an extraordinary and exceptional case. As I said at the beginning it never was intended that the conduct of the action should be taken from the plaintiff and given to the defendant under this rule ....."

15. The third case is Bottomley v. Hurst and Blackett Limited [1928] 44 T L.R. 451. This was a libel action. The defendants pleaded justification and that the plaintiff had, in return for payment, undertaken in writing to indemnify them against any actions for libel. The plaintiff in his reply disputed his signature and said that he was not bound by the alleged undertaking. The plaintiff then applied for an order that the issue as to the alleged undertaking and its construction should be tried separately before the other issues. It was held that when a plaintiff asked for an order that one issue should be disposed of before the trial of the other issues, the order should be made only where there were special circumstances justifying it, and as there were none in the present case, the order must be refused. Although the master had made such an order, and the judge had affirmed him, the Court of Appeal took a different view. Scrutton L.J. said that there was power in the court, if thought convenient to do so, to order one issue to be disposed of and the rest of the issues to be postponed until that one issue had been decided; but he added that experience had taught the court that that power was only to be resorted to in very special cases when it was asked for by the plaintiff. When one issue was picked out, it was not always one which could be disposed of quickly. Cases in which such an order had been made were cases in which a point of law had been raised as a preliminary issue, but when to that was to be added a question of fact, an additional difficulty was created.

16. The last case cited to me was Tilling v. Whiteman [1979] 1 All E.R. 737. In that case the judge had allowed a preliminary point of law to be taken at the hearing. Lord Wilberforce said this (at p. 738) :-

"I, with others of your Lordships, have often against the practice of allowing preliminary points to be taken, since this course frequently adds to the difficulties of Courts of Appeal and tends to increase the costs and time of legal proceedings. If this practice cannot be confined to cases where the facts are complicated and the legal issue short and easily decided, cases outside this guiding principle should at least be exceptional."

17. Despite all this, there will be cases where an issue (maybe more than one issue), whether of fact or law, can conveniently be isolated and dealt with separately from the other issues in the action. This is now frequently done in personal injury cases, where the court directs separate trials on the issues of liability and quantum (see Coenen v. Payne [1974] 2 All E.R. 1109) and, indeed, I believe, is not uncommon in construction cases, also. I have myself directed the trial of a limitation defence as a preliminary issue when that seemed to me an appropriate course.

18. In my judgment, the modern approach must be this. The policy of the court, in line with the reforms introduced by the Judicature Acts, is that all matters in dispute between the plaintiff and the defendant should be tried together at one hearing; but, if either of them can satisfy the court that the just and convenient course would be to have separate trials of different issues, the court should not feel inhibited by authority from exercising the power in that behalf conferred on it by the rules. As Stephenson L.J. said in Coenen v. Payne (above) at p.1114 :-

"If the court thinks it just and convenient to order separate trials of separate issues ...... the court can and should do so without treating ancient decisions as limiting its powers."

19. What is the just and convenient course to take here? The action is a heavy action. The Government says that the issues of liability in the case can and should be divided, and dealt with at two hearings. This, says the Government, will keep the litigation in a manageable form and will save time and money. The Government's argument is set out in the affidavit of David James Plunkett sworn on 4th October 1989. Mr Plunkett says this :-

"5.     ......In essence, the object of separating the preliminary issues was to keep the evidence in the case in some manageable form. The obvious cut-off point is the signing of the July 1982 Agreement, at which time all the contractual obligations of the defendant would have crystallised. The evidence relevant to the ascertainment of those obligations is reasonably self-contained ...... and is restricted to matters which took place up to and including the signing of the July 1982 Agreement. The evidence which has to be led in relation to matters occurring after the signing of the July 1982 Agreement depends very much on the Court's findings as to what those obligations were, and their inter-relationship with the provisions of the Conditions of Grant.

6.     If the Court finds that the Government entered into specific time obligations as pleaded in any of the various alternatives set out in the Reamended Statement of Claim, it will not be necessary for the Court to go into the very detailed and time-consuming question whether Government performed its obligations under the Agreement and/or Conditions of Grant using best endeavours or within a reasonable time. The only issue then will be whether the plaintiff by its conduct waived the obligations as to time, and the evidence relating to the issue of waiver and/or estoppel and/or acquiescence is very much more limited in scope.

7.     In the alternative, if the Court decides that the Government did not enter into any specific time obligations as pleaded, the question of waiver, estoppel and acquiescence will be irrelevant, and none of that evidence will have to be led, and (subject to any order which the Court may make as to the sufficiency of the plaintiff's pleading on this point) the second stage of the trial will be concerned with a detailed examination of the Government's conduct.

8.     It is the Government's respectful submission that the Court should only embark upon an investigation of that kind if it appears, upon a true construction of the Agreement and in the light of all other contractual obligations which the Government undertook, it is necessary to do so. As the defendant's solicitors indicated in their letter of 19th September 1989, if the defendant has to present its full case on the question of its performance of its obligations, there is a very substantial amount of documentation to be presented to the Court, and some 25 witnesses will have to give oral evidence of their own personal dealings with this very large development project over a substantial period of years. Many of the Government's prospective witnesses have retired from Government service and are no longer resident in Hong Kong. ..........

20. I regard these as reasonable and cogent arguments.

21. But TSW urges me to reject them. TSW says, in brief, that the matters in issue cannot be so easily divided and compartmentalized as the Government claims. TSW does not accept that the obligations of the Government on the substantive matter in issue can, necessarily, be treated as having crystallised when the July 1982 Agreement was made. TSW says that the issues which the Government wishes to have tried at the first hearing (issues which, as formulated, take up several pages of typescript) will not be determinative of the litigation at first instance; and further, says TSW, it is inevitable that the unsuccessful party at the first hearing will wish to appeal the decision at first instance, ultimately to the Privy Council. Not only that, says TSW, the matters of estoppel, waiver and so on to which reference has been made will have to be considered at the first hearing in order to arrive at a meaningful decision as to what the obligations of the Government actually were. There is no point in deciding what obligations the Government originally entered into only to leave it to be decided later that, because of something in TSW's conduct, the Government are not in fact to be held bound by those obligations at all. And says TSW, there will inevitably be duplication of evidence at the two hearings, with the risk of inconsistent findings. So far from saving time and money, says TSW, the Government's proposal for two separate hearings (although it originally espoused it) will lead to delays and to additional costs.

22. I regard these arguments as reasonable and cogent, too.

23. In the end, I have come to the conclusion that, although there is much to be said for the Government's arguments, they are outweighed in the balance by those urged on me by TSW. TSW is the plaintiff. It is TSW's action. TSW invokes the general rule that all disputes should be heard together. The Government has to satisfy me that the balance of justice and convenience comes down demonstrably in the Government's favour. It has failed to do this. I agree with the Government that this is an exceptional case; but I am left at the end unpersuaded that the course proposed the Government is likely to lead to a greater saving of time and money than the course proposed by TSW. On the contrary, I think that, already, the difficulties of separating the issues of liability in this case so that they can be conveniently dealt with at two separate hearings have become apparent and I suspect those difficulties would be likely to become more pronounced as the preparation for the first hearing proceeded and as the date for that hearing approached. I think the safer course, and the one less likely to produce injustice and inconvenience, is to have all the issues of liability decided at one trial. I shall so order. The case will be listed for hearing on the first date convenient to the parties, 7th May 1990.