THE LIQUIDATORS OF WING FAI CONSTRUCTION CO LTD (IN COMPULSORY LIQUIDATION) v. YIP KWONG ROBERT AND OTHERS

HCCW 735/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 735 OF 2002

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DECISION

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1.  On 7 October 2009, I handed down my decision dismissing the respondents’ summons to strike out the misfeasance proceedings brought against them by the liquidators of Wing Fai Construction Company Limited for want of prosecution or abuse of process. The respondents issued a summons on 21 October 2009 for leave to appeal from my decision to the Court of Appeal.

2.  The application for leave to appeal is governed by section 14AA of the High Court Ordinance, Cap. 4 and Order 59 rule 2B of the Rules of the High Court. Section 14AA(1) provides that except as provided by rules of court, no appeal lies to the Court of Appeal from an interlocutory judgment or order of the Court of First Instance in any civil cause or matter unless leave to appeal has been granted by the Court of First Instance or the Court of Appeal. Subsection (4) is in these terms:

“Leave to appeal for the purpose of subsection (1) shall not be granted unless the court hearing the application for leave is satisfied that –

(a)  the appeal has a reasonable prospect of success; or

(b)  there is some other reason in the interests of justice why the appeal should be heard.”

3.  Mr. Barlow, SC for the respondents relies on both (a) and (b) in subsection (4).

4.  Guidance on how the threshold test in subsection (4) might be satisfied was given by Le Pichon JA in SMSE v. KL [2009] 4 HKLRD 125 at para. 17:

“Leave to appeal under O. 59 r.  2B is not lightly granted.  The relevant test appears in s.  14AA (4) of the High Court Ordinance (Cap.  4).  In granting leave, the Judge must have considered that the test set out in s. 14AA (4) had been met.  The section requires that the court be 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 before granting leave.  Reasonable prospects of success involves the notion that the prospects of succeeding must be ‘reasonable’ and therefore more than ‘fanciful’, without having to be ‘probable’.”

5.  In Wynn Resorts (Macau) SA v. Mong Henry [2009] HKEC 1293, Chu J rejected the argument raised by the party opposing an application for leave to appeal that “reasonable prospect of success” in section 14AA(4)(a) should receive similar interpretation as rule 52.3(6) of the Civil Procedure Rules (“CPR”) in England (which provides that permission to appeal will only be given where the court considers that the appeal would have “a real prospect of success”), and also the applicant’s contention that the court should only refuse leave if the applicant has no arguable case. Her ladyship had this to say in paras. 18 and 19:

“The adoption of the ‘reasonable prospect of success’ test, as opposed to the ‘real prospect of success’ test, in our legislation is not accidental.  In the Interim Report of the Chief Justice's Working Party on Civil Justice Reform (2001), the proposal was to adopt the ‘real prospect of success’ test as the threshold for granting leave to appeal: Proposal 44 and paras. 535-539.  In the Final Report (2004), however, the Working Party decided to adopt as the test for granting leave a requirement that the appeal has reasonable prospects of success, as conveying the notion that the prospects of succeeding in the appeal must be ‘reasonable’ and therefore more than ‘not fanciful’, without having to be ‘probable’: Recommendation 115 and para.  656.

To meet the ‘reasonable prospect of success’ test, an applicant is required to show more than just an arguable case, but an appeal that has merits and ought to be heard, although he does not have to demonstrate that the appeal will probably succeed.”

6.  I will consider the grounds in the respondents’ Notice of Appeal with the guidance given in the above cases on the threshold test.

7.  Mr. Bartlett submitted on behalf of the liquidators that the proposed appeal is from a decision involving the exercise of the decision of the court below and it is well established that the Court of Appeal would not interfere with the exercise of discretion in interlocutory appeals unless the decision below is wrong in principle or manifestly wrong, even if the Court of Appeal might itself have made a different decision.

8.  I would agree with Mr. Bartlett that the interlocutory order involved the exercise of the discretion of the court. I also agree with him that paragraph 1(a) of the grounds of appeal, which is concerned with the limitation period for dishonest misfeasance, was the subject of an obiter discussion in my decision (paras. 69 to 75). As he rightly submitted, limitation period would arise for consideration under the discretion whether to strike out the misfeasance proceedings only if the respondents should succeed in establishing they have suffered prejudice and there is substantial risk it is not possible to have a fair trial, which it was held they had failed to do (paras. 62 to 68).

9.  Mr. Barlow submitted paragraphs 1 and 2 of the grounds of appeal are primarily directed at the pre-Civil Justice Reform (“CJR”) criteria, whereas paragraphs 3 and 4 “revive” the issues “which were argued below” as to how, in the post-CJR era, the principles in Birkett v. James [1978] AC 297 are “to be adjusted to the new procedural regime”.

10.  The issue in paragraphs 3 and 4, as framed in his written submission for the present application read like this: where, under the post-CJR era, “it is realistically arguable that the substantive interests of delinquent plaintiffs will be required to yield to the new procedural imperative of justly making available the Court’s resources only to litigants who are prepared to comply with the Court’s procedural timetable.” Mr. Barlow submitted this issue is one of considerable public importance and the interests of justice would be served by permitting the appeal to be heard.

11.  In support of this issue, he cited an article by Professor Adrian Zuckerman entitled “The New Civil Justice Reform Court-Managed Litigation System” published in Hong Kong Civil Procedure 2010, Civil Justice Reform Special Release to the 2010 Edition, in which the author discussed at paras. 26 to 35 the pre-CPR approach to a party’s failure to comply with process deadlines encapsulated in the principles of Birkett v. James and the post-CPR approach by which the English court distanced itself from Birkett v. James. Reliance was also placed on the decision of Reyes J in Nanjing Iron & Steel Group International Trade Co. Ltd. & Ors v. Stx Pan Ocean Co. Ltd., HCAJ No. 177 of 2006, para. 13 in which the judge applied the underlying objective in the new CJR rules and regarded that as sufficient cause to strike out a claim under the new regime.

12.  This issue was not addressed in my decision. Mr. Barlow made brief mention to the CJR in paragraph 3.5 of his written submission, citing Arbuthnot Latham Bank Ltd. v. Trafalgar Holdings Ltd. [1998] 1 WLR 1426, per Lord Woolf, MR at 1436 and 1437. He made no submission that the principles of Birkett v. James were “adjusted” post-CJR by reference to any of the underlying objectives in Order 1A rule 1 of the Rules of the High Court. Reyes J’s decision was provided to the court after the hearing but no particular aspect of that case was drawn to the court’s attention.

13.  Mr. Bartlett submitted it would be inappropriate and unjust to give leave to appeal to allow the respondents to re-run their application on an entirely different footing on appeal. I am inclined to think the issue raised by Mr. Barlow on how the principles of Birkett v. James should be applied in the post-CJR era is a matter of importance to warrant consideration by the Court of Appeal. If the respondents should succeed on a footing not advanced in the court below, this could be dealt with by an appropriate costs order.

14.  I am satisfied both limbs in (a) and (b) in section 14AA(4) are satisfied in this instance, on the basis of the issue as mentioned above.

15.  I will grant leave to appeal. Costs of this application will be in the cause of the appeal.