MOHAWK INCORPORATED AND OTHERS v. SWIRE INSURANCE LTD.

1987, No.CL81
1988, No.CL247

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL LIST

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J U D G M E N T

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1. On 29th July 1997, I handed down a judgment in this case. That judgment was consequent upon a strike out application which had been issued by the Defendant against the Plaintiffs. That application was based upon want of prosecution. After some deliberation, as the judgment makes clear, the application failed.

2. I refer to this judgment because it is the key to two matters which are before me this morning. The first is the outstanding question of costs, and the second is the Plaintiffs' application for a split trial. I will deal with them briefly in turn.

3. As to the costs of and occasioned by the strike out application, I indicated at the last page of my judgment that I would hear the parties in due course. The matter was not totally without controversy in my view; I could I suppose have made an order nisi but I chose not to do so. In the event, the matter has been dealt with shortly this morning. Mr Reyes, who appears on behalf of the Plaintiffs this morning, says simply and understandably : "I won, can I have my costs? Costs follow the event." Mr Fok, who appears for the Defendant as he did in the strike out application, suggests that in light of the circumstances of that application, and in particular, I think, in light of the fact that I found there had been inordinate delay, that there should be no order as to costs. He was good enough, within the course of his address, to outline a number of other possibilities that would be available to the Court, including the question of an apportionment. He also indicated to me that he was in the position of having to resist a certificate for two Counsel.

4. Curiously enough, I have not found the question of costs an easy matter. Possibly because, as my judgment makes clear, I did rather teeter on the edge before finally coming down in favour of the Plaintiffs in refusing the application. However, after some reflection, and taking into account all that has been placed before me, I think that the appropriate costs order is Plaintiffs' costs in the cause, and I so order. I think it would be difficult in the circumstances of the strike out application to refuse a certificate for two Counsel. If the bench-mark is the reasonableness of instructing leading Counsel, I think one must factor in both the intrinsic difficulty of the application and the stakes at issue. This may be one case where the fact that the Defendant was not itself represented by leading Counsel is not a powerful argument. Accordingly, I certify the matter as fit for two Counsel.

5. This brings me to the second matter. The history is this. By a Summons for Directions dated 22nd February 1997 the Plaintiffs asked, at paragraph 1 of that summons, that the question or issue of the liability of the Defendant to the Plaintiffs in this action be tried as a preliminary issue before the question or issue of damages (if any); and then proposed directions in the summons went on to deal with matters consequential. What happened was that, at least so far as I am able to discern, this Summons for Directions in turn spawned the strike out application which I heard in June. It was agreed between the parties, and I am sure there is an Order to this effect, that the question of the preliminary issue be held over until the determination of the strike out. That of course occurred, the strike out has now been determined, and the matter is now at large before me this morning.

6. This was one of those applications where the Court was very greatly assisted by the clarity of the affidavits which were filed by Mr Cutler for the Plaintiffs and by Miss Sumption for the Defendant, both for and against the proposition that there should be a split trial between liability and quantum. The clarity of thought demonstrated in the affidavits has been, as one would expect, continued this morning within the arguments of Counsel. Mr Reyes, who argued a difficult brief with a conspicuous sense of fairness, accepted that a clear line of demarcation must be the touchstone for the Court in any decision of this nature - a clear line of demarcation between liability and quantum. He drew his notional line, with reference to the Points of Claim, immediately preceding paragraph 12 thereof. He accepted that he did not get, as he put it, "home free" on the question of liability simply by establishing breach of warranty or non-disclosure, the two principle points in the case, but that he had to go on to establish quantum, and that causation was an important part thereof. He pointed out that if the Defendant were to succeed on both elements, namely the breach of warranty point and the non-disclosure point, that would be it, so to speak, and accordingly there would be a profound saving of costs by ordering a split trial. In essence he said : clear line of demarcation, considerable saving in costs, therefore in the exercise of the Court's discretion, the order should be made.

7. Mr Fok firmly opposed this application. He agreed on the nub of the issue, but profoundly disagreed that it could be achieved. Indeed, he went so far as to say that the line between liability and quantum is exceedingly difficult, in fact, in his view, impossible to draw. In the course of his argument, he drew my attention to the judgment of Jenkins L.J. in Polskie Towarzystwo Handlu Zagranicznego Dla Elektrotechniki "Elektrim" Spolka Z Ograniczona Odpowiadziolnoscia v. Electric Furnace Co. Ltd. [1956] 1 WLR 562 at 565 where the learned judge observed, in the context of a similar argument as follows :

"It would be highly inconvenient if the parties went before the court for the trial of the issue of liability and there ensued a difference, perhaps an irreconcilable difference, in their respective views as to where the judge's jurisdiction was to end for the purposes of that particular hearing."

8. Mr Fok went on to demonstrate the difficulties of demarcation with particular reference to the pleadings, in particular paragraph 9(c) and paragraphs 9A(c) and (d), in an endeavour to show how the matters therein pleaded clearly intruded into the issue of quantum.

9. I am bound to say that I agree with Mr Fok. Although the Commercial Court, as Mr Reyes properly pointed out, does endeavour to maintain flexibility in its procedures and in its response to the different forensic problems that are thrown up in the course of litigation, it does not do so at the expense of analytical precision. It seemed to me, when I read the papers, that the causation issue loomed very large in any decision that was going to be made on this application, and despite Mr Reyes' persuasive argument, I have not deviated from that view. If not a recipe for disaster, then, in my judgment, an order for a split trial as requested in this case would be a recipe for very considerable difficulties. Indeed my own practical experience of matters of this sort is that difficulties tend to emerge from the woodwork as one proceeds through a case if the judge has been, in effect, seduced, perhaps for very good reasons in terms of costs and time, to adopt a shortcut. I confess that my own predilections, sometimes painfully established, tend very much to the view that shortcuts do not generally work unless it is the most clear-cut situation. And if one thing is clear about this case, in my judgment, it is that the situation is not clear-cut. The waters, if I can borrow Mr Fok's phrase, are murky indeed.

10. It follows, therefore, that I decline the application which has been made by the Plaintiffs. I have no doubt that, in part at least, their motivation was to save time and consequently costs. Sometimes cases arise where time and costs are simply part and parcel of the process, and no amount of fancy footwork can avoid that result. At the end of the day, it seems to me that the approach of the Court in these matters is nicely encapsulated in an extract from the judgment of the Court of Appeal in Telford Development Ltd. v. Shui On Construction Co. Ltd. [1990] 2 HKC 110 at 117, wherein Bokhary J. (as he then was) observed :

"The general rule is that all the issues in a case are to be tried at one and the same time. There is power to order that different issues in a case be tried at different times. But that departure from the general rule is ordered only if it is just and convenient and it is, of course, for the party who seeks such a departure to demonstrate that it is indeed just and convenient."

11. I regret that I do not find it just and convenient, and accordingly the application is refused.

12. The parties have been constructive enough to place before me alternative directions consequent upon the possible alternative decisions in this application. Accordingly I am happy to fit in with them and to make an order in terms of the draft directions submitted in the event that the Court does not order a split trial. Those directions seem to me to be unexceptional and useful, and I make them in terms, save that paragraph 6 of that draft should be amended so that the last clause reads : "Be adjourned sine die to the Commercial judge." As I understand our procedure, the matter does not go before a listing judge until I have perused all aspects and have certified the case as fit for trial. In all other respects, however, these directions seem to me to be admirable, and I am happy to make them in terms.

13. That leaves only, I think, the question of costs of this application. I will hear the parties.

[Submissions from Counsel]

14. As to the question of costs upon the Summons for Directions, I think it is right, and indeed Mr Reyes does not resist in principle, that the costs of and occasioned by the argument today should be to the Defendant in any event, to be taxed if not agreed. Mr Reyes draws my attention to the initial hearing for directions which stood postponed. In terms of the costs of that first summons for directions hearing on 7th March 1997, which I understand was dealt with by consent, I order that the costs of that day be in the cause.

15. That concludes matters for this morning. I thank Counsel for their considerable assistance.