NG YAT CHI AND ANOTHER v. CHINA RESOURCES (HOLDINGS) CO LTD AND OTHERS

HCA 424/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 424 OF 2005

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D E C I S I O N

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1.  At the outset of the hearing on 5 May 2005, Mr Choy, the 2^nd Plaintiff, referred this court to the letter from the clerk of Cheung J dated 3 May 2005. In that letter, Cheung J gave certain directions regarding what I shall call the “gagging order proceedings”. The background to such proceedings is the order of the Court of Final Appeal dated 3 March 2005 in FACV 5 of 2004 [“the CFA Order”]. Apparently, there are disputes as to the scope and effect of that order set out in the correspondence placed before the court by the parties. Those disputes would have to be resolved by Cheung J as the designated judge seised of the matter.

2.  In the letter of 3 May 2005, Cheung J set out two intended directions which were not to become effective until parties have an opportunity to be heard.  Those directions are as follows,

“(j)    Save as otherwise provided in these directions, all further proceedings in the action (that are not already covered by the terms of paragraph 10 of the order) be stayed pending the determination of the application, and all existing hearing dates in the action be vacated accordingly;

(k)     If the application is not made within the time prescribed above, the stay of proceedings will lapse without further order;”

Cheung J also directed in paragraph 6 that the hearing regarding those two paragraphs should take place before me on 5 May 2005.

3.  At the hearing on 5 May 2005, Mr Choy protested that this should not be a matter before me. He submitted that the only matter before this court is the appeal against the order of Master Ho on 8 April 2005 [“Master Ho’s Order”] that the applications by summons dated 23 March 2005 (the striking out application by the 4^th Defendant) and summons dated 31 March 2005 (the cross application by the Plaintiffs to strike out the said application by the 4^th Defendant) be referred to Cheung J for a decision on whether the proceedings (meaning this action) and the applications (meaning the two applications alluded to) should be allowed to continue. The order was made after Master Ho had duly considered the CFA Order.

4.  Mr Choy sought to appeal against Master Ho’s Order by a Notice issued under Order 58 Rule 1 dated 11 April 2005.

5.  Chronologically, before Master Ho’s Order, the Registrar had made an order on 6 April 2005 in the presence of Mr Choy that the case be referred to Cheung J for his decision on whether the action should continue. There is no appeal against that order, whether by Mr Choy or Mr Ng.

6.  The gagging order proceedings have progressed substantially since Master Ho’s order. In the context of the appeal against Master Ho’s Order, it is pertinent to note that the 4^th Defendant has applied through solicitors by a letter dated 12 April 2005 for a gagging order against Mr Choy in terms similar to the CFA Order. Further, solicitors for the 1^st to 3^rd Defendants wrote to the court on 9 April 2005 contending that Mr Choy’s claim in this action falls within the scope of the CFA Order and should be barred accordingly. It is therefore quite clear that Mr Choy’s claim might be affected by the outcome of the gagging order proceedings.

7.  It is convenient at this juncture to dispose of an argument of Mr Choy. He submitted that as he was not a party to FACV No.5 of 2004, the CFA Order cannot bind him. He relied on the principle that a person is entitled to be heard before a gagging order is made against him. He further argued that since the Defendants had filed acknowledgment of services and taken other steps in the action, the effect of the CFA Order had been spent by reason of Paragraph 10 thereof.

8.  Whether the CFA Order has a gagging effect on Mr Choy’s claim and whether the effect of that order had been spent are points that have to be canvassed before Cheung J in the gagging order proceedings. Even if the CFA Order does not have such effect, Cheung J still has to consider whether a similar gagging order should be made against Mr Choy in order to dispose of the application by the 4^th Defendant by letter dated 12 April 2005. Mr Choy will have opportunity to address Cheung J on all these issues in the gagging order proceedings and it is not appropriate for this court to deal with the same in the context of this Decision. Suffice to say that the points merit substantial arguments.

9.  Moreover, even if no gagging order is to be made against Mr Choy, given the relationship between the subject matters in the present action and the previous actions and Mr Choy’s connection with Mr Ng and his involvement in some of the previous actions, evidence and submissions pertinent to the gagging order proceedings might (and I put it no higher than that) have a bearing on the two striking out applications.

10.  As I see it, the crucial issue before me both in the appeal against Master Ho’s Order and in the directions to be given for the purpose of the gagging order proceedings is a matter of case management. The short point is whether the court should direct that the gagging order proceedings should be determined first before other steps in the action should be allowed to continue. For reasons given below, I am of the view that the answer must be affirmative.

11.  Incidentally, Mr Choy seems to be mistaken about the exact term of Master Ho’s Order. In his Notice dated 11 April 2005, he lodged the appeal on the basis that Master Ho ordered a stay of the summons of 31 March 2005.  That was not the order of Master Ho. All that Master Ho did was to refer the matters to Cheung J to decide whether they could be proceeded with. I confess I was misled by Mr Choy’s notice when I put to him at the hearing of 5 May 2005 whether he wanted the stay to be lifted. Upon review of the papers in the court file during the course of my deliberation, I think it is necessary to set the record straight and I have therefore recited Master Ho’s order in Paragraph 3 above.

12.  A master has the power to refer any matter before him to a judge under Order 32 Rule 12. In view of what I said below, I do not think Master Ho exercised his power incorrectly in so ordering on 8 April 2005. In fact, my view is that it would be wrong for Master Ho not to make such an order.

13.  Coming back to the crucial question, one must bear in mind the rationale behind a gagging order as set out in the judgment of the Court of Final Appeal in Ng Yat Chi v Max Share Ltd [2005] 1 HKLRD 473. A couple of points should be noted for present purposes,

(a)     A gagging order does not interfere with the constitutional right of access to courts.

(b)    The underlying purpose of a gagging order is to prevent abuse of process by vexatious litigants.

(c)     It is recognized that in appropriate cases, the court has to be more proactive in preventing abuse. To leave it to the opposite party to apply for a vexatious claim to be struck out or to the Secretary for Justice to apply under Section 27 HCO no longer provides adequate solutions to the problem. When circumstances warrant, the court should not shirk from its responsibility to act firmly to prevent abuse of process properly and effectively  (see the judgment of the Chief Justice at Paras. 3 to 6, 17 and 18; the judgment of Ribeiro PJ at Paras.52 to 60).

(d)    The jurisprudence on gagging order is developing. The court should exercise such jurisdiction with flexibility. The overriding objectives are to prevent injustice to any parties and to maintain the operation of a fair and efficient judicial system. Ribeiro PJ said at Para.111,

“This is an area of developing jurisprudence. As the case-law shows, the courts have been refining the form of extended orders and developing ancillary directions in aid thereof. Supporting arrangements also need to be put in place by the court system to promote their effectiveness. Details concerning the terms of the orders, appropriate directions and the court system’s operational arrangements will have to be progressively worked out in individual cases, in practice directions and perhaps in rules of court.”

(e)     There should be measures put in place in the court system to ensure fresh proceedings that may come within the scope of a gagging order to be detected and referred to the designated judge as soon as possible.

(f)     The court should look to the substance of a fresh action as opposed to its form to determine whether it comes within the scope of a gagging order. As noted by Ribeiro PJ at Para.121,

“… new proceedings, even if embellished with additional elements, may in substance be a vexatious attempt to re-litigate the concluded matter.”

Hence, the mere fact that parties to a fresh action are not exactly the same as those in the action in which the gagging order was made is not conclusive.

14.  In my judgment, it is reasonably clear from the judgment of the Court of Final Appeal that once a gagging order has been granted, the court should adopt what I may call a “bud nipping” approach in dealing with fresh actions filed without leave that arguably falls within the scope of that order. In other words, the fresh action should be referred to the designated judge without any delay. The designated judge could then decide on the further conduct of the action, including giving directions to facilitate him to decide whether the action comes within the scope of the gagging order and if it does, whether leave should be granted. The designated judge could also consider whether there are matters arising from the action that required urgent attention before a decision is reached as to the effect of the gagging order on the fresh action.

15.  In the meantime, subject to directions by the designated judge, no further step should be taken in the action. That must be the purpose behind Paragraph 10 of the CFA Order. This is essential because if it is otherwise, costs will be incurred on those steps and the objectives of a gagging order in avoiding unnecessary costs and judicial time being wasted would be frustrated. The present case provides a good illustration. For reasons unknown to me, all the Defendants filed acknowledgment of service despite Paragraph 10. A number of interlocutory applications were issued and there were several hearings before masters. Substantial affidavits / affirmations were filed. One appeal against the decision of a master was mounted and heard. All these involved costs and judicial resources.

16.  Given that the present action is somewhat complicated in that Mr Choy is apparently not a party before the Court of Final Appeal when the CFA Order was made, it would not be right for me to put the blame on anybody for this state of affairs. However, as for the future, I venture to suggest that given the direction in Paragraph 8 of the CFA Order or direction in similar terms (see Para.11(a) of Practice Direction 11.3), whenever it comes to the notice of a judicial officer that a fresh action that arguably falls within the scope of a gagging order is commenced without leave, he or she should refer the case to the designated judge immediately without any hearing. If there is already a hearing fixed before him or her, the judicial officer should consider vacating that hearing date in order to avoid unnecessary costs and judicial resources being wasted. Normally, it would be desirable to leave it to the designated judge to decide whether and if so when and how the outstanding application should be restored.

17.  Hence, what Master Ho did on 8 April 2005 was in line with Paragraph 8 of the CFA Order and a proper exercise of his discretion under Order 32 Rule 12. For the reasons set out in the judgment of the Court of Final Appeal, the gagging order proceedings does not interfere with Mr Choy’s constitutional right of access to the court. If the designated judge shall decide that his claims are not affected by the CFA Order and no gagging order should be made against him, directions would be given as to the future conduct of the claim.

18.  Mr Choy argued that the referral of the case to the designated judge would cause delay to the action. As I said, if Mr Choy thought that there are matters which require urgent attention before Cheung J reached a decision on the gagging order proceedings, he could and should bring it to the attention of Cheung J. Unless he could pinpoint such matter, given that it is at least arguable that the present action is either caught by the CFA Order or a gagging order in similar terms should be made against Mr Choy, I do not think Mr Choy could have any legitimate complaint if the court decides by way of case management that the gagging order proceedings should be dealt with first before other steps are entertained.

19.  The appeal is therefore dismissed. I also make an order nisi that Mr Choy should pay the costs of the 4^th Defendant in respect of the appeal in any event.

20.  As regards the position of the 1^st to 3^rd Defendants and the intended directions (j) and (k), I see no reason why I should not act in accordance with the “bud nipping” approach. Mr Choy did not indicate to this court that he would suffer any prejudice if I were to deal with directions (j) and (k). Notice has been given to him in the letter of 3 May 2005. The objections he had with regard to the gagging order proceedings could be canvassed before Cheung J in due course. I therefore make an order in terms of those intended directions accordingly. In view of that, there is no need for further extension of time to the 1^st to 3^rd Defendant to file defence. The designated judge can give directions for that in the future if it shall become necessary. I further order by way of costs order nisi that the costs pertaining to the attendance of the 1^st to 3^rd Defendants on 5 May 2005 be costs in the cause of the gagging order proceedings.

21.  I propose to release this Decision for publication and if any party has any view on that, such view should be sent to my clerk in writing within 3 days.

22.  By way of postscript, without leave of the court Mr Ng wrote a letter to this court after the hearing of 5 May 2005.  This prompted solicitors for the 4^th Defendant writing to this court ‘in reply’.  As stated by Court of Appeal in 陳梓深對金源洋楼業主立案法團, CACV 235/2002, such correspondence with the court is inappropriate and I took no notice of the same in coming to my Decision.