FIRST LASER LTD v. FUJIAN ENTERPRISES (HOLDINGS) CO LTD AND ANOTHER

HCMP 1554/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO. 1554 OF 2016

(ON AN INTENDED APPEAL FROM HCA NO. 4414 OF 2001)

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J U D G M E N T

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Hon Kwan JA (giving the judgment of the court):

1. This is the defendants’ application for leave to appeal against the decision of To J handed down on 28 January 2016 (“the 1^st Decision”). Leave to appeal was refused by the judge on 7 June 2016 (“the 2^nd Decision”). The defendants renew their leave application before the Court of Appeal. We exercise our power under Order 59 rule 2A(5) to determine this application without a hearing on the basis of written submissions only.

2. In the 1^st Decision, the judge dealt with these five applications:

(1)  the plaintiff’s application for directions, including leave for filing expert report and to exchange witness statements (“the directions application”);

(2)  the defendants’ application for an order that unless the plaintiff pays all outstanding costs and interests within a specified time its statement of claim shall be struck out and dismissed (“the unless order application”);

(3)  the defendants’ application for an order that the plaintiff gives an undertaking as to damages and fortification (“the fortification application”);

(4)  the defendants’ application for an order that the plaintiff gives security for the defendants’ costs in the trial of the issue of restitution remitted by the Court of Final Appeal[1] (“the security for costs application”); and

(5)  the defendants’ application seeking payment out of the money paid into court directed by the Court of Final Appeal to be dealt with by the Court of First Instance as an issue consequential upon the order for trial of the remitted issue (“the payment out application”).

3. The judge made the following orders regarding the five applications:

(1)  on the directions application, he made no order except that the costs of the application be the plaintiff’s costs in the cause of the remitted issue;

(2)  on the unless order application, he made an unless order, but instead of payment to the defendants as sought, he ordered the plaintiff to pay into court all outstanding taxed costs as at the date of the order by the specified date and time; he ordered the plaintiff to pay the defendants the costs of this application;

(3)  on the fortification application, he ordered the plaintiff to give an undertaking as to damages but declined to order fortification, and made no order as to the costs as to this application;

(4)  on the security for costs application, he ordered the plaintiff to pay $2.5 million into court as security for the defendants’ costs in the remitted issue; he declined to order security in the region of $4.3 million as sought by the defendants; he ordered costs of this application to be the defendants’ costs of the remitted issue; and

(5)  on the payment out application, he ordered this application be adjourned to be heard after the hearing of the remitted issue and that the costs of this application be reserved.

4. The defendants seek leave to appeal against the orders made on (1) to (4).

5. It has been acknowledged by all that these orders involved the exercise of discretion of the judge and most, if not all, are in the nature of case management decisions.  A number of decisions on the relevant threshold test in this regard have been cited to the judge and to this court.  We need only refer to the decision of the Chief Judge in廈門新景地集團有限公司 v Eton Properties Limited, HCMP 13, 15, 18 and 21/2012, 14 February 2012 at §9:

“No leave to appeal should be granted unless the threshold test of reasonable prospect of success is satisfied, or (which is not relevant to the present case) there is some other reason in the interests of justice why the appeal should be heard: section 14AA(4), the High Court Ordinance (Cap 4). But the court still retains a discretion whether to grant leave even if the threshold test is satisfied. This is particularly so in relation to an intended appeal against a case management decision. In relation to such an intended appeal, this court rarely intervenes save in exceptional circumstances. As Kwan JA reiterated in the recent case of Mimi Kar Kee Wong Hung v Severn Villa Limited, HCMP 2192/2011, 12 January 2012, para 31, it need hardly be emphasized that generally, an appellate court will not interfere with a judge’s exercise of discretion unless the judge has misunderstood the law or the evidence or the exercise of his discretion was plainly wrong such that it was outside the generous ambit within which a reasonable disagreement is possible. In relation to case management decisions, the intended appellant must show that the judge “has gone clearly wrong and made orders which will clearly involve an injustice or an inability for the trial court to carry out its task”, or if the judge “erred in principle or the order was irrational having regard to the issues that had to be resolved”. It is of great importance that this court does not descend to micro‑managing cases pending before the court below.”

6. Mr Paul Shieh, SC submitted on behalf of the defendants their appeal has a reasonable prospect of success notwithstanding the high hurdle.  Alternatively, he contended that the circumstances here demonstrate there is some other reason in the interests of justice why the appeal should be heard.

7. The circumstances relied on were an irregularity in the proceedings and it arose in this way.

8. The five applications were set down for hearing before the judge on 25 September 2015 with half a day estimated.  In anticipation of a full hearing, the parties had filed affirmations and submissions on all five applications.  The defendants filed 38 pages of affirmations with 250 pages of exhibits and a submission of 13 pages.  The outcome of the defendants’ applications depended very much on whether leave is given for expert evidence to be adduced as per the directions application[2].  At the hearing, despite there was sufficient time to deal with all five applications[3], after hearing arguments on the directions application (on which the judge reserved judgment), he acceded to counsel’s request and adjourned the other four applications to a date to be fixed in consultation with counsel’s diary.  The adjourned hearing was subsequently fixed eight months away, to be held on 24 May 2016.  If the judge had known it would have taken eight months to accommodate counsel’s diary, he would have refused the adjournment or made an order that the defendants’ summonses be dealt with on paper without an oral hearing[4].

9. Be that as it may, in the course of his deliberation on the directions application, the judge somehow overlooked the fact that the other four applications had been adjourned for hearing and in the 1^st Decision handed down on 28 January 2016, he decided those applications on the basis of the affirmations filed by the parties and counsel’s full written submissions[5].

10. Mr Shieh submitted that in light of this irregularity, the defendants were denied a fair hearing.  The right to have a fair and public hearing is entrenched in Article 10 of the Hong Kong Bill of Rights (“BOR 10”).  The judge determined the defendants’ applications without hearing oral submissions from the defendants.  They were not given an opportunity to make out their case in oral submissions.  The points raised in the plaintiff’s skeleton submissions were not dealt with by the defendants in their written submissions.  Specifically, the defendants did not have the chance to advance oral arguments to allay the court’s concerns that the defendants had no assets available for execution in Hong Kong and had removed its assets out of the jurisdiction, and hence in the unless order application the judge ordered the plaintiff to pay into court all outstanding taxed costs instead of paying them to the defendant.  Mr Shieh further complained that the judge had erred in holding that the defendants had removed assets out of Hong Kong “after service on them of the court’s injunction order”[6] and was wrong to take into account the remission of funds to the Fujian provincial government as this was for the purpose of the restructuring of the 1^st defendant’s group of companies.

11. In summary, counsel submitted there was a breach of natural justice and it is important that justice must not only be done but must manifestly be seen to be done. It is no answer to say that if the case had been properly conducted, the result would have been the same, quoting Thames Magistrates Court, ex p Polemis [1974] 1 WLR 1371 at 1375H to 1376A, per Lord Widgery CJ.  He cited also Chow Shun Yung v Wei Pih & Anr (2003) 6 HKCFAR 299 at §37.3, in which Ribeiro PJ stated that “in relation to first instance hearings, the right to a hearing generally entails an entitlement to an oral hearing held in public unless there are exceptional circumstances that justify dispensing with such a hearing”.

12. It is important that the irregularity here is considered in context.  The defendants’ summonses do not involve the determination of substantive rights, such as the striking out of a claim as considered by the English Court of Appeal in Labrouche v Frey & Ors [2012] 1 WLR 3160, another case relied on by Mr Shieh.  In Chow Shun Yung, Ribeiro PJ stated that the right to a hearing is not absolute (at §37.1) and that the right to a fair and public hearing in BOR 10 is “engaged only where the rules and proceedings in question are decisive of the substantive rights of the person in question, and has no application to merely interlocutory or case management issues” (at §37. 2).

13. The issues involved in the defendants’ summonses are straightforward and full arguments have been advanced in the written submissions.  When Mr Shieh indicated to the judge he would take only five to ten minutes to deal with the defendants’ summonses, his submissions were merely of a “top up” nature.  He has since been given the opportunity to expand on the oral arguments he would have made – at the hearing of the leave application before the judge on 24 May 2016, and in the skeleton argument he placed before this court to renew the leave application.  It is amply clear that such additional arguments would not have provided a proper basis for the appeal court to interfere with the exercise of discretion of the judge, particularly in relation to case management decisions.

14. On the unless order application, it could not be said that the judge was plainly wrong to order the plaintiff to pay outstanding taxed costs into court instead of to the defendants.  The judge was entitled to take into account there was a record of the defendants swiftly removing its assets out of the jurisdiction[7].  That the judge had made an error in the 2^nd Decision stating that the transfer was made after service of the injunction order instead of the injunction summons is not of sufficient materiality to warrant the intervention of the appeal court.  As for the assertion that the remission of funds was for a debt restructuring exercise, the judge had found in his earlier decision on 28 April 2008 at §14 that he was not satisfied as to the purpose of the transfer of funds and far from being satisfied that there was any restructuring negotiation underway.

15. On the fortification application, it is entirely within the judge’s discretion to refuse to order the plaintiff to provide fortification.  Having considered Mr Shieh’s arguments before the judge in the leave application[8], we see no basis to interfere with the judge’s exercise of discretion.

16. On the security for costs application, the amount of security ordered is eminently for the discretion of the judge, who considered $2.5 million “very generous” for a three-day hearing[9].  There is no injustice to the defendants.  They have liberty to apply for more security if more costs are likely to be incurred in the light of new developments.

17. This court retains discretion whether to grant leave to appeal even if the threshold test is satisfied.  Notwithstanding the irregularity in the present case, we are not persuaded that leave to appeal should be granted in the interests of procedural economy and proportionality (Mimi Kar Kee Wong Hung v Severn Villa Limited [2012] 1 HKLRD 887 at §30) and because we are satisfied that no injustice was occasioned to the defendants by the irregularity.  As the judge has noted, this case is approaching its 15^th anniversary.  Another round of appeal would mean further delay before the Court of First Instance could hear the restitution issue remitted to it by the Court of Final Appeal.

18. This leaves the intended appeal on the directions application, which we will deal with briefly.  This was fully argued before the judge the first time round and we see no basis whatsoever to support a contention that there is reasonable prospect of success on any of the grounds of appeal.  The judge made no order on this application save as to costs, that was recognised by Mr Shieh in his oral submissions to be “perfectly open” to the judge[10].

19. We dismiss the defendants’ application for leave to appeal.  And as the application is wholly without merit, we make a further order pursuant to Order 59 rule 2A(8) that no party may under rule 2A(7) request the determination to be reconsidered at an oral hearing inter partes.

20. We make an order nisi that the defendants should pay the plaintiff’s costs, to be taxed if not agreed, with a certificate for two counsel.  As the judge has ordered the costs of the leave application before him to be taxed in the usual way, we think it more appropriate to do likewise instead of making a gross sum assessment.