ALLSON CLASSIC HOTEL (H.K.) LTD. v. ABUNDANCE ASSETS LTD.

- Headnote -

Civil suits - Interlocutory applications - paramount duty of Judge or Master to bear in mind the need for the "just economical and expeditious" disposal of the issues between the parties. Deputy judge failed to have regard to this principle. Exercise of discretion set aside. Interim stay of proceedings ordered-by Court of Appeal.

IN THE COURT OF APPEAL

1994, No. 152
(Civil)

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J U D G M E N T

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Litton, J.A.:

1. What we have before us is an interlocutory appeal. The circumstances are unusual.

2. The writ in this action CL108/94 was issued on 17 June 1994 and on the same day the plaintiff's solicitors wrote to the defendant's solicitors as follows:

"Dear Sirs,

Re: The Hong Kong Renaissance Hotel ("the Hotel")

We act for Allson Classic Hotel (H.K.) Limited.

We refer to the Notice published on 20 May 1994 referring to the sale of the business of the Hotel to Harvest Star International Limited.

We enclose by way of service a writ issued today against your client Abundance Assets Limited. Please confirm that you will accept service of the writ on their behalf.

This Writ has been issued in order to preserve our client's right under the Transfer of Businesses (Protection of Creditors) Ordinance pending determination of those rights in the proceedings commenced earlier this year in Hawaii against your client and others. In these circumstances we propose to seek a stay of these proceedings pending determination of the proceedings in Hawaii."

3. At that time the proceedings in Hawaii had been on foot for about 6 months; proceedings under which the plaintiff sought substantial damages against the defendant arising from the alleged breach of the management agreement for the Ramada Renaissance Hotel. In those proceedings the plaintiff, fearing that any judgment obtained against the defendant might be an empty one, sought to attach liability also on certain individuals and entities lying behind the corporate veil of the defendant company.

4. It is the plaintiff's case that the defendant Abundance, as transferor of the business of the hotel, had incurred obligations sounding in damages to the plaintiff. To ensure that any liability established against Abundance, as transferor of the business of the hotel, might be fixed on the transferee, Harvest Star those advising the plaintiff took the view that proceedings must be instituted in Hong Kong against the transferor as well, within 1 month of the transfer notice being given under the Transfer of Businesses (Protection of Creditors) Ordinance. Hence the writ in CL108/94.

5. As envisaged in their letter to the defendant's solicitors, the plaintiff's solicitors took out a summons on 6 July 1994 to stay all proceedings in CL108/94 on the ground that "there are existing proceedings in the Hawaii Court of the United States between the plaintiff and the defendant involving the same subject-matter and relief or remedy as in this action". This application was supported by an affidavit in which the deponent Mr Allante said:

"21. On 17th June 1994 Allson commenced the present proceedings. At the same time as serving the Writ Allson's solicitors wrote to the solicitors for Abundance in terms of a letter dated 17th June 1994 ...... As the letter makes clear the purpose of the Writ is to preserve Allson's position under the Transfer of Businesses (Protection of Creditors) Ordinance rather than to litigate the issues relating to Abundance in Hong Kong. Those issues (as well as issues against other Defendants) are being actively litigated in Hawaii and discovery and the taking of depositions is underway. From my records I note that something in the order of 50 documents have been filed in the Hawaii proceedings including pleadings, motions, affidavits, orders, subpoenas and deposition notices over the last 5 months.....

24. In the circumstances set out above I ask for an Order staying these proceedings pending the outcome of the proceedings in the United States."

6. This application was opposed by the defendant, so a date had to be fixed for its hearing: unfortunately, no date earlier than 9 November 1994 could be given because the time limit for the hearing exceeded 30 minutes. In the meanwhile those in the defendant's camp took up a belligerent stance. The solicitors for the defendant wrote a letter on 12 July 1994 giving the plaintiffs 48 hours to file their statement of claim. This was followed up by a summons dated 19 July 1994 to have the action dismissed in default of a statement of claim. Because this was marked for hearing "less than 30 minutes" it was able to "leap-frog" the hearing of the plaintiff's application of 6 July 1994 to stay the proceedings. Hence, to safeguard its own position in the face of the defendant's belligerent stance, the plaintiff took out a summons on 4 August 1994 to preserve in effect the status quo, until its summons of 6 July 1994, fixed for hearing before Mayo J on 9 November could be heard. It was this summons which the Deputy Judge Pang eventually dealt with and against whose decision this appeal is now lodged.

7. The summons is in these terms:

" LET ALL PARTIES CONCERNED attended before Deputy Judge Pang at the Supreme Court..... on the hearing of an application on the part of the Plaintiff for an Order under the inherent jurisdiction of the Court that all further proceedings in this Action be stayed pending the hearing of the Plaintiff's summons dated 6 July 1994 before the Honourable Mr Justice Mayo on the 9th day of November 1994, alternatively, for an order that the time for service of the Points of Claim herein be extended until 14 days after the hearing of the said summons dated 6 July 1994, or, in the (further)alternative, for such period of time as this Honourable Court may deem fit."

8. Deputy Judge Pang heard this summons on 12 August and refused the plaintiff's application for an interim stay. He ordered that the plaintiff should serve its points of claim by 9 September 1994 and gave the costs of the proceedings to the Defendant.

9. The judge in his reasons for decision was much influenced by the regime of time limits for interlocutory steps laid down under Order 18 of the Rules of the Supreme Court. He said that by Order 18 rl the plaintiff was required to serve its statement of claim on the defendant so that the defendant could know "at the earliest opportunity the particulars of the case they had to meet".

10. With respect to the deputy judge this is slightly unrealistic, having regard to the position of the litigation then on foot between these parties. The complaint filed in the Hawaii proceedings sets out in detail the particulars of the plaintiff's case. From the moment the plaintiffs issued the writ in the present action, they made it clear that the purpose of doing so was to preserve their rights under the Transfer of Businesses (Protection of Creditors) Ordinance, not to prosecute parallel proceedings in Hong Kong.

11. The deputy judge thought that the Hong Kong proceedings were not "entirely similar" to those in Hawaii because the indorsement of claim in CL108/94 included two prayers for declarations. These are as follows.

"The Plaintiff's claim is for

1. A declaration that proceedings in the Circuit Court of the First Circuit State of Hawaii, Civil No. 94-0347-01 are 'proceedings instituted against the transferor in respect of any liability of the transferee' within the meaning of subsection 4(5) of the Transfer of Businesses (Protection of Creditors) Ordinance, Cap.49.

2. A declaration that a purported Notice of Transfer of Business dated 20th of May 1994, is and shall be deemed incomplete within the meaning of the Ordinance, pending the final determination of the Hawaii Proceedings including all possible appeals, and pending the expiration of all periods during which such appeals may be brought."

12. As is plain from the wording of these two declarations, the object is to preserve the plaintiff's rights of suit under the statute: whether it be effective or not, without the transferee of the business Harvest Star being a party to the proceedings, is wholly beside the point in the present appeal.

13. Obviously, a judge has a wide discretion in interlocutory matters and generally this court would be very slow to interfere with the exercise of such a discretion. But from the reasons for decision given by the deputy judge he does not appear to have fully grasped the thrust of the plaintiff's case which was, in essence, this: that for the just, economical and expeditious disposal of all issues between the parties, and particularly for the saving of legal costs, there should not be parallel proceedings in Hong Kong and Hawaii; so long as the plaintiff's rights under the statute are preserved, by the issue of "proceedings" within the meaning of that expression in section 4(5) of the Ordinance, there should be no further costs incurred and time expended on the prosecution of CL108/94. Before the Deputy Judge, all that the plaintiffs sought in the first place was an order for an interim stay, until their case for a more permanent stay pending the determination of the Hawaii proceedings could be properly heard by Mayo J in November this year. The alternative reliefs, for enlarging the time to serve the statement of claim, were simply their fall-back positions, in case the judge should for some reason decline to give the primary relief, so that the issue of "proceedings" be not imperilled.

14. The deputy judge said he failed to follow the logic behind Mr Stone's argument. Mr Stone was counsel for the plaintiff. The "logic", as I understand it, is that expressed in Order 25 rule 1(b) of the Rules of the Supreme Court. It cannot be emphasized too strongly by this court that whenever a judge or a master entertains interlocutory applications - of which, I would add, there are far too many in this territory - the paramount concern must always be the just expeditious and economical disposal of the litigation between the parties. The deputy judge had in my judgment lost sight of this fundamental principle when he dealt with the application in this case.

15. There were no reasons for the defendant or its solicitors to press the plaintiff to serve its points of claim, when the issue of a stay pending the determination of the Hawaii proceedings had not been decided. The effect of the stance taken by the defendant was to force the plaintiff to incur legal costs which might in the end have been totally unnecessary. The matter can be tested thus. Assuming that the Statement of Claim were lodged, as the defendant had insisted it should, was the defendant proposing then to comply with the strict time limit in Order 18 r2 in serving its Defence or Defence and Counterclaim? Or were further legal costs contemplated, on an application for an extension of time to take that step? And what of the Reply and Defence to Counterclaim? Were all these interlocutory steps - which might turn out in the end to be phantom steps - to take place before Mayo J decided in November whether there should or should not be a more permanent stay? And what about further and better particulars of the pleadings?

16. In my judgment the deputy judge had unfortunately erred in principle in entertaining this application and his order of 12 August 1994 must be discharged. I would, in place of the Order he made, order that all further proceedings in CL108/94 be stayed pending the hearing of the plaintiff's application of 6 July 1994 by Mayo J on the 9 November 1994 or until further order.

Rhind, J.:

17. I agree.

Barnett, J.:

18. For the reasons which have been given I too agree that this appeal should be allowed and that further proceedings should be stayed until Mayo J has dealt in detail with the substantive application. As we are disagreeing with the judge in the court below I think in fairness this should be added: At the end of his judgment he said and I quote "I would have thought it is essential for Mayo J to have as full and complete a picture as possible before him of the issues between the parties before any adjudication of the summons could be made, to enable the learned judge to have a panoramic view of the dispute between the parties. I am convinced that an order for Allson to serve the points of claim before the November hearing must be the appropriate order to make at this stage."

19. As a matter of principle, I think there can be no disagreement with what the judge said. The fact of the matter is, however, as my Lord has explained, that the material which has already been marshalled, both before the judge below and before us, already gives a panoramic view of the dispute between the parties. It seems clear to me therefore that, convinced though the deputy judge was, an order for service of the points of claim before the November hearing is wholly inappropriate. There is nothing else I think which I can usefully add.