IRONWOOD CAPITAL LTD AND OTHERS v. DU WANG AND OTHERS

cacv 34/2007 AND cACV 35/2007

CACV 34/2007 CACV 34/2007

in the high court of the

hong kong special administrative region

court of appeal

civil appeal no. 34 of 2007

(on appeal from HCA NO. 76 of 2005)

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BETWEEN

CACV 35/2007

in the high court of the

hong kong special administrative region

court of appeal

civil appeal no. 35 of 2007

(on appeal from HCA NO. 2836 of 2004)

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REASONS FOR JUDGMENT

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Hon Rogers VP:

1.  This was an appeal from a decision of Chung J given on 24 January 2007 with reasons handed down on 6 February 2007.  The matter before the judge was an application for consolidation of two High Court actions.  The order made by the judge was that the two actions, HCA 2836/2004 and HCA 76/2005, be tried together at the same time before the same judge.  The judge also gave consequential directions as to the filing of witness statements.  At the conclusion of the hearing of this appeal, this court set aside the order of the judge below and ordered that there should be consolidation of the actions but that action 2836/2004, which is referred to as the account action, should be tried and decided first before action 76/2005, which is referred to as the recovery action.  Nevertheless, the matters should be consolidated in the sense that they ought to be heard by the same judge and the findings in the first action should stand as findings in the second action.

2.  The two actions arise out of the same dealings between the parties.  Essentially the plaintiff in the first action, which is also the first plaintiff in the second action, was the investment vehicle of the third plaintiff.  In about 2000 the plaintiff in the first action arranged to invest in distressed debts of Chinese corporations.  It was thought that the plaintiffs’ knowledge of Chinese corporations and their financial affairs could be combined with the expertise of the defendants to enable successful trades in distressed debts to be made.

3.  In the account action the major allegations are that the defendants, who operated various accounts on behalf of the plaintiffs, have not accounted to the plaintiffs for all that is due to them.  In the recovery action the plaintiffs’ allegation is that the plaintiffs were misled by various statements made by the defendants.  Amongst those statements were statements that the plaintiffs did not have at their disposal sufficient funds to complete particular investment transactions.  The plaintiffs contend that the there were sufficient funds available to them in the accounts operated by the defendants on behalf of the plaintiffs.  There are other issues in particular those relating to the investment transactions themselves and how they were handled by the defendants and claim has been made in respect of further statements that have nothing to do with the account action.

4.  The application before the judge was for the two actions to be heard at the same time on the basis that there were common issues involving, in some respects, the same facts and also the same witnesses.  The judge referred to the desirability of having the evidence heard at one time and the avoidance of any divergence in the fact-finding process.  In paragraphs 21 and 22 the judge refers to the question of assessing credibility and it was suggested in the course of argument in this court that he had in mind questions of consistency in findings as to the credibility of witnesses common to both actions.  Overall the judge considered, as he said in paragraph 23, that there would be substantial savings in costs and time if the actions were tried together.

5.  Unfortunately, one matter was considered not to be a valid point, namely the question whether there had been sufficient funds in the various accounts at the relevant times when they were needed for particular investments.  The judge took up a suggestion that had been made in argument that that question amounted almost to an admission that, without a finding in the account action, there was insufficient evidence in the recovery action to establish that there were enough funds.  Possibly because the point appears to have only been raised towards the end of the argument, the judge considered it was not a valid point.

6.  The question as to the amounts available to the plaintiffs, which will have to be decided in the account action, is something that, in my view, must be decided prior to the hearing of the recovery action.  It is not a question of the plaintiff having insufficient evidence to prove its case, it is a question of the matter being in dispute between the parties.  Until that dispute is resolved many of the arguments in the recovery action would have to be based upon alternative hypotheses.  That would not only be undesirable but would clearly lengthen the trial of the recovery action and make it far more complex.

7.  Whilst I am very mindful of the fact that this court is very reluctant to interfere in case management decisions of the trial court, the appropriate course is in my view clear.  The difficulties of duplication of evidence and duplication of findings, with dangers of divergent findings, can be avoided provided that the appropriate directions, as to the findings in the first action being treated as findings in the second, are given at this stage.  The question of findings as to credibility of particular witnesses cannot be of overriding concern because it frequently happens that a witness is believed in respect of one matter but not in respect of another.  Importantly, it does appear to me that it would be unnecessarily prejudicial to the presentation of the plaintiffs’ case if the matter of the account were not resolved prior to the recovery action.  Furthermore, the efficient administration of the cases, particularly the recovery action, would be enabled and the case may indeed be shortened if the account action were heard first.

8.  Mr Thomson (appearing for the plaintiffs) also asked for a stay of the recovery action pending resolution of the account action.  However, I do not believe that a stay is appropriate.  The extent to which the recovery action is to proceed (including discovery and the filing of witness statements) is something best left to the management of the trial judge.  In particular, he can give such directions on discovery and other matters as he feels are necessary to ensure that both actions are progressed expeditiously.  He can also decide how soon, after the account action, the recovery action is to be tried.

Hon Reyes J:

9.  I agree.