COMPANIA SUD AMERICANA DE VAPORES S.A. v. HIN PRO INTERNATIONAL LOGISTICS LTD

DCCJ 3986/2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3986 OF 2014

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D E C I S I O N

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1. The plaintiff (“CSAV”) commenced the present action to enforce a costs order against the defendant (“Hin-Pro”) in an interlocutory application in the English court. CSAV applied for summary judgment whereas Hin-Pro resisted and applied to transfer the present action to the High Court. On 17 November 2015, I gave judgment in favour of CSAV and dismissed Hin-Pro’s application for transfer (“the Decision”). By summons dated 8 December 2015, Hin-Pro seeks leave to appeal and, if leave to appeal is granted, stay pending appeal.

BACKGROUND

2. The background of the dispute between the parties has been set out in the written decision dated 17 November 2015.  The same defined terms are adopted here.

LEAVE TO APPEAL

3. Leave to appeal shall not be granted unless the appeal has a reasonable prospect of success or there is some other reason in the interest of justice that the matter should be heard by the appellate court: section 63A(2) of the District Court Ordinance, Cap 336.  What amounts to reasonable prospect, as explained by the case law, is not a matter of dispute.

4. The intended appeal focuses on the defence of set off, which is one of defences pleaded by Hin-Pro.  Hin-Pro puts forward 2 main grounds: (i) the test of equitable set off for summary judgment applications set out in the Decision was wrong; and (ii) applying the test to the facts of this case, the conclusion was wrong.

5. Much was said about the authorities, specifically Esso Petroleum Co Ltd v Milton [1997] 2 All ER 593 (at 604-605) and Townearn Industrial Ltd v Golden Globe Holdings Ltd [2003] 1 HKC 186 (at 191I-193E), which were but 2 of the cases referred to.  All the references made, the key is the test actually set out in §40 of the decision, which I do not see how it could be faulted.  It is not materially different from what was submitted on behalf of Hin-Pro in this hearing either.

6. As to the application of the test to the facts, Hin-Pro’s pleaded case was that the Mainland judgments for the total sum in excess of US$12 million served as defence of set off against CSAV’s claim for the sum of the 3/10/2014 Costs Order[1]. Whilst reference was made to the Mainland judgments, which were said to be binding on CSAV[2], there was strictly no pleaded claim for enforcement of such judgments (or the costs orders made therein).  By way of counterclaim, Hin-Pro claimed a declaration that CSAV was not entitled to judicial assistance of the Hong Kong court and, vaguely, damages[3]. That formed the premise for consideration of CSAV’s application and hence the discussion in the Decision.  I rejected Hin-Pro’s such contention, and it does not appear during the present hearing that this part of the decision is under challenge.

7. Hin-Pro also sought to rely on the costs orders in its favour against CSAV made in the Hong Kong proceedings as defence of set off against CSAV’s claim in this action.  Those costs orders were made in CSAV’s application for injunction in aid of the English proceedings pursuant to section 21M of the High Court Ordinance, Cap 4 (HCMP 1449/2014 and CACV 243/2014)[4] (“the Hong Kong Costs Orders”). The most recent development was that with leave of the Court of Final Appeal, CSAV’s final appeal will be heard in this October: see determination of the appeal committee in FAMV 33/2015 (2 February 2016).

8. Reliance on the Hong Kong Costs Orders was not Hin-Pro’s pleaded defence but raised only during the last hearing.  CSAV repeated its complaint about that during the present hearing, citing Sinoearn International Ltd v Hyundai-CCECC Joint Venture (2013) 16 HKCFAR 632 at §30.  In Sinoearn, the Court of Final Appeal warned against allowing the parties to argue alternative case without actually pleading it even by way of amendment.  However that was an appeal after trial. In resisting summary judgment, contentions in defence, albeit un-pleaded, may be entertained if they are well covered by evidence by affidavit and submissions by both sides.  That the defendant eventually would not have survived the summary judgment application but for the un-pleaded contentions may have consequences in terms of costs (being thrown away).  Hin-Pro’s un-pleaded contention by reliance on the Hong Kong Costs Orders, albeit de bene esse, was therefore considered and briefly explained[5].  Now this appears to have become the focus of the intended appeal.

9. The Hong Kong Costs Orders are orders of the court enforceable subject to taxation.  No claim in any form for Hin-Pro’s entitlement under those orders, as opposed to the case of enforcement of foreign judgments, such as the Mainland Judgments, in the present action would be necessary.  On this basis, one goes back to the summary of the propositions regarding the set-off and summary judgment in §37 of the Decision (which Hin-Pro does not dispute).

10. The second to the fourth, and thus the fifth, propositions summarised in §37 of the Decision concern the situation where there is a counterclaim, whether or not it also serves the defence of set-off against the claim.  As mentioned, they do not concern Hin-Pro’s reliance on the Hong Kong Costs Orders.  There should be no question of whether there should be leave to defend CSAV’s claim because of a counterclaim on the basis of the Hong Kong Costs Orders or alternatively judgment on CSAV’s claim but stayed until the trial of such counterclaim as suggested by Hin-Pro.  The question therefore falls within the first proposition summarised in §37 of the Decision, that is whether the Hong Kong Costs Orders, if and when raised, would serve as a valid defence of (equitable) set-off against CSAV’s claim for judgment in enforcement of the 3/10/2014 Costs Order.

11. To recapitulate, after Hin-Pro had obtained the Mainland Judgments against CSAV, CSAV commenced the English proceedings (Action 1248/2013), and obtained ex parte injunction from the Hong Kong court in aid of the English proceedings (HCMP 1449/2014).  Hin-Pro sought discharge of the ex parte injunction.  Meanwhile it sought to enter appearance in the English proceedings and applied for an adjournment.  The application for adjournment was dismissed and hence the 3/10/2014 Costs Order.  It is important to note that Hin-Pro never sought to appeal against that order, which became final.  Hin-Pro eventually defaulted appearance in the English proceedings and CSAV obtained judgment after trial.  Actions were commenced in Hong Kong to enforce the English judgment, including the present action to enforce the 3/10/2014 Costs Order.  Application for summary judgment followed.  Afterwards, the ex parte injunction obtained in HCMP 1449/2014 was discharged inter partes, and CSAV’s appeal in that respect was dismissed (CACV 243/2014).  Hence the Hong Kong Costs Orders.  As mentioned, final appeal is pending.  But the English judgment against Hin-Pro remains, after its failure to obtain leave to appeal to the Supreme Court.

12. It is not difficult to see the common background and connection between the English proceedings and the section 21M proceedings in Hong Kong in the factual sense. Yet the question remains whether all considered, such connection in the events as developed, as summarised above, was such that it would be inequitable or manifestly unjust to allow the enforcement of the 3/10/2014 Costs Order without regard to the Hong Kong Costs Orders.

13. That the parties on different occasions in related proceedings owe each other costs per se does not suffice.  The Hong Kong Costs Orders (now subject to the outcome of the final appeal) were made in the context of whether the Hong Kong court would lend assistance to the English proceedings then just commenced.  Whilst Hin-Pro opposed such aid on the ground of, among others, jurisdictional conflict, it sought to enter appearance in the English proceedings and applied for an adjournment there.  The 3/10/2014 Costs Order was the consequence of the dismissal of the application as a matter of case management decision.  It was never challenged and became final.  All considered, I did not find that enforcement of the 3/10/2014 Costs Order regardless of the Hong Kong Costs Orders would be manifestly unjust.  Now Hin-Pro essentially argued that this was too narrow a view of the operation of the principle of equitable set-off.  But in the circumstances of this case summarised above, I am just not convinced that such argument has a reasonable prospect of success.

STAY OF EXECUTION PENDING APPEAL

14. It follows from the above that leave to appeal is refused.  I consider the stay pending appeal for completeness only.

15. The court will not grant a stay pending appeal unless for good reasons.  Merit of the intended appeal would be relevant.  In some cases, that the absence of stay would render the appeal nugatory would be a factor: see Star Play Development Ltd v Bess Fashion Management Co Ltd [2007] 5 HKC 84.  It is the burden of the applying party to satisfy the court that the stay should be granted.

16. There is no dispute that where the judgment being appealed is a monetary judgment, a stay of execution of the judgment will generally only be granted if there would be no reasonable prospect of recovery of the judgment sum in the event that the appeal is successful.  Indeed Hin-Pro suggested that.  Both sides’ affidavit evidence has been considered.

17. CSAV is a foreign company, which, for the purpose of execution, is undeniably but one of the relevant considerations.  Hin-Pro referred to a couple of reports in financial websites in England and the Mainland about heavy business loss suffered by CSAV in 2013 and 2014.  However, there was no actual evidence of its inability or failure to discharge liabilities.  It is also interesting to note that the Mainland website reported reduction in business cost and increase in business volume of CSAV.  What was projected by Hin-Pro, as a matter of fact, is not equivalent to insolvency either.  The fact, at least presumably, is also that CSAV has been affording substantial legal representation in the ongoing related legal proceedings, the present action being one of them.  I would not be surprised that the costs so far incurred in the present action already exceed the amount of the 3/10/2014 Costs Order and thus the monetary judgment herein.

18. It is not demonstrated that the enforcement of a monetary judgment in respect of the 3/10/2014 Costs Order, whilst the appeal is pending, would give rise to injustice because of lack of prospect of recovery in the event that the appeal were successful.  I would not have been minded to stay the execution of the judgment, had leave to appeal been granted.

ORDER

19. The application is dismissed with costs, to be taxed if not agreed with certificate for counsel.  The costs order is nisi and shall become absolute in the absence of application in 14 days to vary.

20. I thank counsel for their assistance.