ALLIED GROUP LTD. AND ANOTHER v. THE SECRETARY FOR JUSTICE AND ANOTHER

HCA 4246/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4246 OF 2001

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DECISION

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1. I deal firstly with the appeal against Master Kwan's decision made on 23 November 2002 to adjourn the plaintiffs' summons for specific discovery pending the determination of the defendants' applications to strike out the claim.

2. Principally, three arguments were advanced on behalf of the plaintiffs. The first is that the objection taken by the defendants to the claim, which forms part of the basis for the striking out applications, that there has been a breach of the implied undertaking of non-disclosure attached to the unused material disclosed in the criminal prosecutions against the plaintiffs' directors would have gone if proper discovery is made in these proceedings. The second argument is that the specific discovery exercise may disclose more documents that would enable the plaintiffs to properly meet the striking-out applications. The third argument is that to hear the specific discovery application before the striking out applications will not occasion any prejudice to the plaintiffs that cannot be compensated by costs. I shall deal with these arguments in turn.

3. The first two arguments are, in my view, related. They clearly point to one direction and that is the specific discovery application is made for the purpose of better equipping the plaintiffs against the striking out applications by overcoming any perceived weakness in the claim. Viewed in that way, it cane be said to be an attempt to salvage the plaintiffs' claim. It is in effect asking the defendants to assist the plaintiffs to resist a striking-out application. There can be no justification for placing such a burden on the defendants.

4. On the third argument, there is indeed prejudice that cannot be properly compensated by costs and it is this. According to the plaintiffs, the objective of the specific discovery application is to enable the plaintiffs to find out more or to obtain more materials so as to meet the striking out applications. If the application was heard before the striking out applications and if the court were to grant the specific discovery sought, then it is tantamount to reversing the burden of the civil litigation by asking the defendants to help in justifying the plaintiffs' claim. That is a form of prejudice that cannot be adequately or in any way compensated by costs. For these reasons, I would dismiss the appeal with costs to the defendants to be taxed if not agreed.

5. I turn then to the application for stay by the defendants. The application is not for a permanent stay of the proceedings. Rather, it is for an interim stay pending the determination of the striking out applications. It is therefore procedural in nature. That is something always within the court's inherent jurisdiction to make. It is, in my view, more in the nature of a case management exercise. It does not have the effect of putting off the proceedings or preventing the proceedings from proceeding to trial, subject of course to the outcome of the striking out applications.

6. The plaintiffs have suggested that a stay will prevent them from taking out an Order 24, r10 application for production of documents said to be referred to in the 2nd defendant's affidavit in support of his striking out application. Application of the kind must be part and parcel of the striking out application and can be brought notwithstanding an interim stay. The plaintiffs also indicate that there may be attempts to further amend the statement of claim. If indeed re-amendment is necessary for the purpose of meeting the striking out applications, then either that would also be part and parcel of the striking out application and unaffected by any interim stay or, that it is open to the plaintiffs to apply to lift the interim stay if there is a need for it.

7. Other than these, the plaintiffs have not identified any possible interlocutory step, which must be taken in the meantime pending the determination of the striking out applications. The striking out applications are made primarily on the basis that the proceedings is an abuse of the process. The matters relied upon are, in my view, of such a nature that it ought to be determined before the proceedings should be taken any further.

8. For the above reasons, I consider that this is a case where an interim stay should be imposed pending the final resolution or disposal of the striking out applications with liberty to apply