GRANT THORNTON INTERNATIONAL LTD AND OTHERS v. TANG CHUNG WAH AND ANOTHER

HCCL 17/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO 17 OF 2012

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D E C I S I O N

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Introduction

1.  On 7 March 2013, after a contested hearing, this court made the following orders (“7 March Order”):

(1) The Defendants do within 14 days from the date hereof provide to the Plaintiffs and file in court an English translation of their Defence and Counterclaim filed herein.

(2) The Defendants do provide to the Plaintiffs and file in court an English translation of all further Chinese documents to be filed in court and served by them on the Plaintiffs.

2.  The Defendants having failed to provide to the Plaintiffs an English translation of their Defence and Counterclaim within 14 days, the Plaintiffs sought an unless order by summons dated 21 March 2013 to compel the Defendants to do so.

3.  The summons came before this court on 11 April 2013. The 1^st Defendant did not turn up. The 2^nd Defendant did, and told this court she would comply with the 7 March Order. On that basis, this court adjourned the Plaintiff’s summons for unless order, and further extended the time for the Defendants to file and serve an English translation of their Defence and Counterclaim for another 14 days (“11 April Order”).

4.  The Defendants still failed to provide to the Plaintiffs an English translation of their Defence and Counterclaim. The summons for unless order was restored before this court on 29 May 2013. On that occasion, having heard both Defendants in person and having concluded that the Defendants’ failure to comply with the 7 March and 11 April Orders were intentional and contumelious, this court made an unless order (“Unless Order”) in the following terms:

“Unless the Defendants do within 7 days from today file and serve an English translation of their Defence and Counterclaim dated 4 February 2013, the Defence and Counterclaim be struck out and default judgment be entered in favour of the Plaintiffs in terms of the Statement of Claim herein.”

The applications

5.  This is the fifth time within the last 3 months that the parties have come before this Court. This time, there are four applications, all by the Defendants.

6.  First, the Defendants’ application by summons dated 20 March 2013 for leave to appeal against the 7 March Order and stay of execution pending appeal.

7.  In that summons, the Defendants also asked this court to deal with the Plaintiff’s application to vary the costs order nisi this court made on the Plaintiffs’ summons dated 22 February 2013 for extension of time to file their Reply and Defence to Counterclaim (“Variation of Costs”). The order nisi was that “costs of and occasioned by the Plaintiffs’ application for an extension of time be to the Defendants”.

8.  This matter, however, has already been overtaken by event. At the hearing on 11 April 2013, this court indicated to the parties present that it would deal with Variation of Costs on paper and gave directions for filing of skeleton submissions. The Plaintiffs filed their skeleton submissions on 16 April 2013. The Defendants failed to file any. On 8 May 2013, this court did vary the costs order nisi on paper to “costs of and occasioned by the Plaintiffs’ summons dated 22 February 2013 for extension of time to serve their Reply and Defence to Counterclaim, as well as costs of the Plaintiff’s application to vary costs order nisi by summons dated 21 March 2013, be in the cause, to be taxed if not agreed” (“Costs Order”).

9.  Second, the Defendants’ application by summons dated 13 May 2013 for leave to appeal against the Costs Order and stay of execution pending appeal.

10.  Third, the Defendants’ application by summons dated 29 May 2013 for leave to appeal against the Unless Order and stay of execution pending appeal.

11.  Fourth, the Defendants’ application by summons dated 29 May 2013 to compel the Plaintiffs and their solicitors to submit documentary proof that the solicitors were duly appointed and authorised by the Plaintiffs prior to the commencement of the present proceedings.

12.  Despite the 2^nd part of the 7 March Order, the Defendants have failed to provide to the Plaintiffs or file in court an English translation of any of the four summonses which are in Chinese. The Defendants’ conduct is nothing short of intentional and contumelious.

Leave to appeal

13.  The three leave applications can be dealt with together.

14.  Under section 14AA(4) of the High Court Ordinance, Cap 4, leave to appeal shall not be granted unless the court is satisfied that the appeal has a reasonable prospect of success or there is some other reason in the interests of justice why the appeal should be heard.

15.  Reasonable prospects of success as envisaged by the section involve the notion that the prospects of succeeding must be reasonable and therefore more than fanciful, without having to be probable: SMSE v KL [2009] 4 HKLRD 125 at §17.

16.  As far as the 7 March Order is concerned, I have considered the Reasons for Decision handed down on 11 March 2013 and each of the Defendants’ grounds of appeal. Grounds 1 to 3 are based on the Defendants’ allegation that the Plaintiffs’ solicitors were and are not duly authorised to commence and conduct the present proceedings. The allegation is unsubstantiated by evidence. In relation to grounds 4 to 10, I wish to reiterate that the 7 March Order was made upon the Plaintiffs’ application, not on my own motion. The legal basis of the Order was not just section 4 of the High Court Civil Procedure (Use of Language) Rules, Cap. 5C, but also the court’s general case management power conferred by RHC O 1B r 1: see para. 29 of the Reasons for Decision dated 11 March 2013. In my judgment, none of the grounds of appeal have any reasonable prospects of success.

17.  As far as the Costs Order is concerned, it is well‑established that the court has a wide discretion in relation to costs. For interlocutory applications, the principle that costs should follow the event is no longer the prescribed usual order, but just an option, and the court can take into account inter alia the underlying objectives of the Rules of the High Court and the conduct of the parties in determining costs: Hong Kong Civil Procedure 2013 para. 62/0/2; RHC O 62 r 3(2A).

18.  Even for applications to extend time, the court has power not to order costs to be borne by the party making the application: Hong Kong Civil Procedure 2013 para. 62/3/3; RHC O 62 r 3(4). 

19.  In the present case, the court has considered and accepted the Plaintiffs’ written submissions filed on 16 April 2013, in particular, those concerning the Defendants’ conduct, before making the Costs Order. The Defendants have chosen not to put in written submissions on Variation of Costs, despite clear directions by this court at the hearing on 11 April 2013. Although the 1^st Defendant was not present at that hearing, the 2^nd Defendant was. It stands to reason that, in all probability, the 2^nd Defendant would have informed the 1^st Defendant of the directions this court made. If not, then the only reasonable inference is that the 1^st Defendant deliberately chose not to ask her.  In my judgment, none of the 10 grounds of appeal have any reasonable prospects of success.

20.  In relation to the Unless Order, I have reviewed the Defendants’ grounds of appeal ie this court has failed to fully consider the 1^st Defendant’s submissions at the hearing, and the Unless Order has directly affected and obstructed the Defendants’ application for leave to appeal the 7 March Order and rendered it meaningless. In my judgment, neither ground has any reasonable prospects of success.

21.  Lastly, in all three cases, the Defendants have failed to demonstrate the existence of some other reason in the interests of justice why the appeal should be heard.

22.  Leave to appeal is refused in all three cases.

Stay of execution

23.  The starting point is RHC Order 59 rule 13(1):

“Except so far as the court below or the Court of Appeal or a single judge may otherwise direct—

(a) an appeal shall not operate as a stay of execution or of proceedings under the decision of the court below;

(b) no intermediate act or proceeding shall be invalidated by an appeal.”

24.  In other words, unless the Defendants can justify a stay of execution, one will not be ordered.  Justification can exist in various forms. The two factors commonly referred to in stay applications are: (1) whether the absence of a stay would render an appeal nugatory, and (2) the merits of the appeal.

25.  On these two factors, Ma J (as he then was) made the following detailed observations in Star Play Development Ltd v Bess Fashion Management Co Ltd. [2007] 5 HKC 84, 87-9:

“(1) In determining the question whether or not an appeal would be rendered nugatory, the court must of course first have regard to the nature of the order that is the subject matter of the appeal. If the order appealed against is a money judgment, the court will require evidence as to why the levying of execution will result in the appeal being rendered nugatory, such as, for example, an appreciable risk that the respondent to the appeal would not be able to repay in the event of a successful appeal. Sometimes, though, the nature of the order will by itself almost be determinative of the question. Where the relevant order is, for example, an injunction (and particularly so if it is a mandatory injunction), it may well be that, without a stay, an appeal would be rendered nugatory in the event of a successful appeal…

(2) That said, whatever the nature of the order or judgment appealed from, the court will still require evidence as to why an appeal will be rendered nugatory in the event of a stay not being granted. The requisite quality of the evidence will, of course, depend on the nature of the order or judgment appealed against…

…

(4) An appeal being rendered nugatory does not mean in all cases that without a stay, the appellant faces financial ruin or the loss of all his property. Demonstrating that the failure to grant a stay would have a serious deleterious effect is enough: see Caine Tai Investment Company Limited v Ayala International Finance Limited [1983] 1 HKC 163, a decision of the Court of Appeal which made reference to Wilson v. Church (No.2) [1879] 12 Ch. D. 454.

(5) How relevant then is the court’s consideration of the merits or strength of the appeal? In my view, while it is impractical and even undesirable for the court in dealing with an application for a stay of execution, to go deeply into the merits and strengths of an appeal, it must however form a preliminary view of these aspects. This I believe to be an inevitable consequence of the starting point I have earlier mentioned in referring to RHC Order 59, rule 13(1).

(6) The existence of merely an arguable appeal cannot by itself amount to sufficient reason to justify a stay. It can be put this way: the existence of an arguable appeal (that is, one with reasonable prospects of success) is the minimum requirement before a court would even consider granting a stay. In other words, however exceptional the circumstances may be otherwise justifying a stay of execution, if the court is not convinced that there exist arguable grounds of appeal, no stay will be granted.” (emphasis added)

26.  As I said earlier, none of the grounds in the three proposed appeals have any reasonable prospects of success. That is, the Defendants have failed to satisfy even the minimum requirement before a court would consider granting a stay of execution.

27.  Further, in my view, even in the absence of a stay, the three proposed appeals would not be rendered nugatory.

28.  This is obviously so with the appeal against the Costs Order. Since the order is costs in the cause, it is not capable of immediate execution. As for the 7 March Order and the Unless Order, the Court of Appeal is quite capable of making appropriate consequential orders, should they decide to allow the appeals. If the Defendants have incurred costs in preparing an English translation of their Defence and Counterclaim, they can be compensated for if they succeed in their appeals.There is hardly any serious deleterious effect on the Defendants even if a stay of execution is not granted.

29.  All three stay applications are refused.

Proof of Authority of the Plaintiffs’ solicitors

30.  The Defendants have, in their Defence and Counterclaim, alleged that the Plaintiffs’ solicitors were not duly authorised to commence and conduct the present proceedings. As I said earlier, the allegation is unsubstantiated by evidence. This court asked the 1^st Defendant at the hearing what proof he had that the Plaintiffs’ solicitors were not duly authorised to institute the present proceedings. The answer was he had no “positive proof” ie a document or affidavit from any of the Plaintiffs that they have not authorised the solicitors in question to commence the present proceedings.

31.  The 1^st Defendant said, however, he had “negative proof”, referring this court to two emails he sent to some of the Plaintiffs on 25 March and 30 May this year. The emails referred to the present proceedings and the allegation that the Plaintiffs’ solicitors were not duly authorised. The 1^st Defendant did not receive any reply to his emails. As far as the evidence before this court shows, the emails did not provoke any response from any of the Plaintiffs recipients. I accept Mr Brock’s point that the Plaintiffs recipients would likely be extremely upset if they found out their names had been misused in the present proceedings without their proper authority and consent. In my view, the emails are not proof of the Defendants’ allegation – they are proof of the opposite.

32.  Further, despite being asked by this court at the hearing, the Defendants have not been able to explain the legal basis of their application. In the summons, the application was purportedly brought under RHC O 59 r 2B which clearly does not support the application.

33.  In my view, if a defendant challenges the lawfulness of legal proceedings on the ground that they have been issued and conducted without authority of the plaintiff, the proper way to do so is by applying to strike out the Plaintiff’s name under the inherent jurisdiction of the court and dismiss the action: Airways Ltd v Bowen [1985] BCLC 355; Kammy Town Limited v Super Glory Corp. Ltd. unrep. HCA 3524 of 2003; 14 January 2005; Hon. A Cheung J (as he then was). It is not for a plaintiff and/or its solicitors to disclose privileged materials, such as a retainer, in order to satisfy a defendant every time the latter chooses to challenge the lawfulness of the legal proceedings.

34.  The application is misconceived and I would dismiss it as well.

[submissions on costs]

35.  I order the costs of and occasioned by the four summonses be to the Plaintiffs, to be summarily assessed on paper. The Defendants are directed to file and serve their comment on the Plaintiffs’ statement of costs or list of objections within 3 days from the date hereof. The 2^nd Defendant is directed to inform the 1^st Defendant of this direction on summary assessment of costs.