CHINA SCIENCES CONSERVATIONAL POWER LTD v. CHAT TAT CHEE

HCA 870/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 870 OF 2009

____________

BETWEEN

_______________

J U D G M E N T

_______________

I. Introduction

1.  Chan sues Hon as Third Party in High Court Action 870 of 2009 and as Defendant in High Court Action 1234 of 2009.  Both Actions are related to ongoing criminal proceedings in the District Court (DCCC 661B/2006). 

2.  Hon applies to stay the Actions pending the conclusion of the criminal proceedings.  Without a stay, Hon would have to file Defences in the Actions in order to avoid a default judgment.  Hon says that, if he is made to file pleadings, he would in effect be prematurely disclosing his defence in the criminal proceedings.  That (Hon claims) would undermine his constitutional right to silence guaranteed by the Basic Law.

3.  Hon also applies to set aside the Order of Registrar Au-Yeung ordering that, unless Hon file a Defence by 14 August 2009, Chan be at liberty to enter judgment against Hon in Action 1234.

II.      Background

4.  Hon was a former director and chairman of China Sciences Conservation Power Limited (CSCPL), a listed company.  Chan was also a former director and chairman of CSCPL.

5.  Hon and Chan were arrested by the ICAC in September 2005 for alleged offences involving the misappropriation of CSCPL’s monies for their private purposes.  The misappropriations are said to have taken place in 2004 and 2005.  

6.  Chan faced 14 charges, Hon 11 charges; 7 of the charges were joint.  Other persons were also charged along with Chan and Hon.

7.  Chan pleaded guilty to some of the charges against him.  As a result, Chan’s trial was split from the criminal proceedings against Hon and the other defendants.  Chan became a witness against Hon and the other defendants.

8.  The criminal proceedings against Hon and the other defendants started in April 2008.  After several adjournments, the trial began in January 2009.  Chan testified against Hon.  The prosecution closed its case in July 2009.

9.  Hon sought 2 adjournments of the trial because he wanted to call evidence from witnesses in the Mainland.  The assistance of the Mainland authorities was sought for the taking of evidence from those witnesses in the Mainland.  Discussions took place among the parties (assisted by the Hong Kong Government) on arrangements for the taking of such evidence. Those discussions have so far not led to anything concrete.

10.  On 4 November 2009, District Court Judge Stanley Chan (the trial judge) refused to grant any further adjournment to await developments in the discussions with the Mainland authorities.  On the following day, Hon elected not to give evidence.  The proceedings were then adjourned to 16 November 2009 to enable Chow Ho Tung (one of the other defendants to the criminal proceedings) to give evidence.  Chow’s evidence was concluded on 20 November 2009.

11.  Hon applied for yet another adjournment.  Judge Chan agreed to adjourn the trial until 25 January 2010.  On the latter date, Judge Chan refused a further adjournment.  The judge was then informed that Hon’s counsel would apply for a permanent stay of the criminal proceedings.  The ground for the stay application would be that, without the evidence of the Mainland witnesses, the trial against Hon could not be a fair one. 

12.  Judge Chan directed that the hearing of the stay application commence on 31 May 2010.  That hearing has since been further adjourned to 16 August 2010.

13.  On 23 July 2010 Hon applied for the case to be mentioned before Judge Chan.  In doing so, Ho relied on evidence to the effect that certain witnesses were apparently prepared to give evidence on his behalf in the Mainland.  According to Hon, in light of this development, he might revisit his election not to give evidence.  By letter dated 8 August 2010 Judge Chan refused the application for a mention hearing. 

14.  Action 870 involves a claim by CSCPL against Chan for the return of misappropriated monies.  In support of its claim, CSCPL pleaded and relied on Chan’s guilty plea in the criminal proceedings against Chan.  On 19 January 2010 Deputy High Court Judge Burrell gave judgment in CSCPL’s favour on the strength of Chan’s admissions in the criminal proceedings.  Chan sought to appeal out of time against Judge Burrell’s judgment.  Chan’s application to appeal out of time was finally dismissed by the Court of Appeal on 29 July 2010.

15.  CSCPL essentially made 3 claims against Chan. 

16.  The first claim was for the reimbursement of $11.183 million paid by Henan Cable TV to CSCPL.  Chan was said to have diverted that sum to Sino Push, a company under his control.    

17.  The second claim was for the reimbursement of $4 million which Chan misappropriated by transferring the same from Sharpo Solutions Ltd. (a CSCPL subsidiary) to companies under Chan’s control.

18.  The third claim was for the reimbursement of $10 million which Chan misappropriated by transferring the same from Beijing Yuk Chak to Telegoal (a company controlled by a friend of Chan).

19.  In his Third Party Notice against Hon, Chan pleads that insofar as he appropriated CSCPL’s monies, Chan did so on the strength of representations by Hon.  Chan alleges that Hon (as then director and Chairman of CSCPL) represented to him that it was lawful to use CSCPL’s monies in settlement of debts alleged to be due from Hon to Chan.

20.  Hon says that the monies claimed in Action 870 are some of the very monies which he is accused in the criminal proceedings of having misappropriated.

21.  In Action 1234 Chan seeks the repayment of loans which he claims to have made to Hon between 2003 and 2005.  The loans claimed add up to some $230 million. 

22.  Hon suggests that, as far as the prosecution’s case in the criminal proceedings is concerned, the loans which are the subject of Action 1234 constitute the motive for Hon’s alleged misappropriations.  Hon is said to have been so heavily indebted to Chan that Hon was prepared to embezzle from CSCPL in order to reduce his indebtedness.

III.    Discussion

23.  I will assume that (as appears to be the case) there is a significant overlap between the subject matter of both Actions and that of the criminal proceedings against Hon.

24.  Where there is an overlap between a civil action and pending criminal proceedings, there is no general rule that the former should be stayed pending the outcome of the latter.  The Court has a discretion to stay the civil proceedings:-

“if it appeared to the court that justice - the balancing of justice between the parties - so required, having regard to the concurrent criminal proceedings, and taking into account the principle, which applies in the criminal proceedings itself, of what is sometimes referred to as the ‘right of silence’ and the reason why that right, under the law as it stands, is a right of a defendant in criminal proceedings.” [Megaw LJ in First Jefferson Ltd. v. Bhetcha [1979] 1 WLR 898, at 904 ff.].

25.  The authorities are adamant that there is:-

“no principle of law that a plaintiff in a civil action is to be debarred from pursuing that action in accordance with the normal rules for the conduct of civil actions merely because so to do would, or might, result in the defendant, if he wished to defend the action, having to disclose, by an affidavit under Order 14, or in the pleading of his defence, or by way of discovery or otherwise, what his defence is or may be, in whole or in part, with the result that he might be giving an indication of what his defence was likely to be in the contemporaneous criminal proceedings. The protection which is at present given to one facing a criminal charge - the so-called ‘right of silence’ - does not extend to give the defendant as a matter of right the same protection in contemporaneous civil proceedings.” [Megaw LJ in First Jefferson, at 904 ff.]

26.  The burden is on a defendant to show that it is “just and convenient that the plaintiff’s ordinary rights of having his claim processed and heard and decided should be interfered with”.  See Petroliam Nasional Berhad v. Tan Soon Gin [1990] 1 HKLR 4 (CA), at 8, citing First Jefferson with approval.

27.  Helpful examples (marked as Examples A, B and C in the passage below) of when a Court might grant a stay were provided by Megaw LJ in First Jefferson (at 905):-

“Of course, one factor to be taken into account and it may well be a very important factor, is whether there is a real danger of the causing of injustice in the criminal proceedings. There may be cases - no doubt there are - where that discretion should be exercised. In my view it would be wrong and undesirable to attempt to define in the abstract what are relevant factors. By way of example, a relevant factor telling in favour of a defendant might well be the fact [Example A] that the civil action, or some step in it, would be likely to obtain such publicity as might sensibly be expected to reach, and to influence, persons who would or might be jurors in criminal proceedings. It may be [Example B] that, if the criminal proceedings were likely to be heard in a very short time ... it would be fair and sensible to postpone the hearing of the civil action. It might be [Example C] that it could be shown, or inferred, that there was some real - not merely notional - danger that the disclosure of the defence in the civil action would or might, lead to a potential miscarriage of justice in the criminal proceedings, by, for example, enabling prosecution witnesses to prepare a fabrication of evidence or by leading to interference with witnesses or in some other way.”

28.  It will be noticed that Examples A and B identified above are not applicable in the present circumstances. 

29.  As to Example A, Hon’s trial is being heard by a District Court judge without a jury. 

30.  As to Example B, the progress of the trial has been beset by protracted adjournments.  It has run from April 2008 to the present without a conclusion in sight.  The trial can by no means be described as occurring over a “short” time.  If evidence is to be taken in the Mainland as Hon suggests might happen, the trial is bound to run for much longer before it reaches any end.

31.  That leaves Example C.  Here the specific situation identified by Megaw LJ is inapplicable.  The prosecution has closed its case against Hon.  There is therefore no question of evidence being “fabricated” or tailored to meet any Defences advanced by Hon in the Actions.

32.  Are there any other matters which might (adopting the language of Example C) lead to a miscarriage of justice in the criminal proceedings against Hon if a stay of the Actions is refused?  I am unable to see any.

33.  Ms Po Wing Kay (appearing for Hon) observes that Hon’s defence in the criminal trial is not yet closed and Hon may yet change his mind on whether or not to give evidence.  Ms Po asserts that, if the Actions proceed and Hon files Defences therein, “it will undermine his rights in the Criminal Proceedings”.  Ms Po’s submission is tantamount to saying that, merely because there are ongoing criminal proceedings, a defendant is entitled as of right to a stay of pending civil actions.  As noted above, there is no such general principle of law.

34.  On the contrary, it is for Hon to explain, realistically and not fancifully, why a stay of the Actions is necessary to avoid injustice.  But Hon has not even sketched out any details of alleged prejudice in his affidavit evidence.  It is not enough to state that Hon may elect to give evidence or may call witnesses (whether in Hong Kong or the Mainland) on his behalf.  That is stating nothing more than that a trial remains ongoing.

35.  In those premises, the balancing exercise which the Court has to conduct can only point towards the refusal of a stay.  The underlying claims in the Action concern events which took place some time ago in 2003, 2004 and 2005.  Civil claims need to be prosecuted with despatch.  It is not right that they should be stayed or warehoused for an indefinite period for no good reason.  On the other hand, any detriment to Hon is likely to be minimal, especially since the prosecution has closed its case.

36.  Ms Po notes that Chan has applied for a stay of bankruptcy proceedings against him pending the conclusion of the criminal trial against Hon and the other defendants.  Ms Po suggests that what is sauce for the goose, must be sauce for the gander.  Accordingly, if Chan wishes a stay of the bankruptcy proceedings against him, he must consent to the stay of the civil proceedings brought by him.

37.  The bankruptcy proceedings against Chan are not before this Court.  It is unclear what (if any) factors Chan is relying on in support of his application. Chan may be applying for a stay, for instance, insofar as he claims to have significant monies due to him from Hon.  Chan might be saying that he should not be prejudiced by a bankruptcy order unless and until he has a chance to recover those alleged debts from Hon.  It is presently unknown whether Chan’s application for a stay will succeed.  The application will apparently not come up for substantive hearing until at least 18 August 2010.

38.  But the result of Chan’s bankruptcy proceedings can have little (if any) bearing here. The Court has to decide whether to grant a stay on the facts before it and, in particular, in light of the factors adduced by Hon as potentially giving rise to some unfairness to him.  Here there is simply no cogent material before the Court upon which it can exercise its discretion to grant a stay.

IV.     Conclusion

39.  A stay of the Actions is refused.  The application to set aside Registrar Au-Yeung’s Order is dismissed.  I will now hear the parties on consequential orders, including whether the time specified in Registrar Au-Yeung’s Order should be extended.