HOI SING CONSTRUCTION CO LTD v. ITC CORPORATION LTD

HCA 11433/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 11433 OF 1998

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R U L I N G

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Introduction

1.  On the 22 April this year I dismissed the Defendant’s summons to strike out the action for want of prosecution.  It has appealed against that order to the Court of Appeal which will hear the appeal on the 6 December.  This is the Defendant’s summons to stay the action until the determination of its appeal.

2.  The basis of the application is that if it were to succeed in the appeal that would be dispositive of the whole action and accordingly, given the relatively short delay between now and the hearing of the appeal (9 weeks) it should not have to go to the trouble and expense of having to proceed with the action which will immediately involve it with inspection of documents and exchange of witness statements.

What is the test to be applied in determining an application of this sort?

3.  Surprisingly perhaps, there is a dispute as to the considerations that should be taken into account by the court in deciding whether or not to grant a stay in circumstances such as these.

4.  Mr Jin Pao for the Defendant, the applicant for the stay, submits that the matter, which ought to be determined under the court’s inherent jurisdiction, entails what is essentially a case management decision with the judge being enjoined to consider “the balance of convenience and fairness between the parties” per Mr Recorder Liao Q.C., S.C. in Clinton Engineering Ltd v B-Tech (Holdings) Ltd, unreported HCA 6608/1998 [para 9] or, expressed slightly differently but to the same effect by Reyes J. in SWE Ltd v Chong Lai Fun, unreported HCA 1064/2004;

“The court has an inherent jurisdiction to regulate its own procedures.  Where the court thinks appropriate, it may as a matter of discretion, grant a temporary stay to ensure that its procedures are being used in a logical fair and cost-efficient manner.” [para 27]

5.  Reliance is also placed on the English Court of Appeal’s decision in Alfred McAlpine Construction Ltd v Unex Corporation Ltd (1994) 70 BLR per Glidewell L.J. 45C-D where it was he who expressed the matter as being one to which “the balance of convenience and fairness between the parties would be determinative of an application of this sort” which was subsequently adopted by Mr Recorder Liao S.C. in Clinton Engineering, supra.

6.  In the case of Tan Man Kou v Chime Corporation Ltd, HCMP 4146/2001, Kwan J. who had these authorities before her analysed the matter as being one of case management.

7.  Mr Maurellet for the Plaintiff, resisting the application submits that the application has been put on an erroneous basis.  The summons which is at page 70 Bundle A is brought on the basis of Order 59 rule 13 of the Rules of the High Court, as well as the court’s inherent jurisdiction, but that in fact the matter has been argued entirely on the basis of the latter ground with no reference being made to Order 59 rule 13 which is the rule governing the practice on applications for a stay of execution pending appeal to the Court of Appeal.

8.  Mr Maurellet has sought to distinguish all the cases, which Mr Pao has referred to, on their facts as being cases which were determined in the way that they were due to the particular features which related to each of them.  This being his submission I should refer to the circumstances of each in order to understand the court’s reasoning in each of them.  In the Chime case which concerns massive litigation in the probate actions concerning the contested will of the late Mr Teddy Wang, Kwan J. had been asked to stay the action before her pending the outcome of an appeal to the Court of Final Appeal in the Wang probate action which would have a decisive effect on the related action before her.  This therefore was not a case concerned with a stay of execution pending an appeal from the case before her to the Court of Appeal.  In granting a stay she had regard to the remarks obiter by Lord Scott of Foscote, in a recent judgment of the Court of Final Appeal in Chime that, “if the Probate appeal were to be determined in Mrs Wang’s favour, the Chime B petition [which was before her] will be a pointless and inexcusable waste of money, time and judicial resources of Hong Kong.”  Mr Maurellet submits that the present case is wholly different, both procedurally and in terms of scale.  Proceeding with it, notwithstanding the forthcoming appeal will not entail such massive costs given what needs to be done under the summons for directions.  If the appeal fails, then progress will have been made towards bringing it to trial, if the appeal succeeds, then the Defendant will get its costs.

9.  In respect of this case, I consider that Mr Maurellet is correct insofar that Kwan J. was considering a wholly different proposition in arriving at her “case management” decision.  The task before me is a somewhat different one to be approached on the grounds set out in Order 59 rule 13, although that is not to say that considerations of case management have no place in the decision, which is a matter that I will need to return to presently.

10.  In the SWE case, Reyes J. had to decide which of the two fora was the most appropriate to deal with the dispute and in the circumstances he decided that the Family Court was the most suitable.  He was anxious not to bring about the risk of inconsistent findings between the two tribunals, the Family Court and the civil jurisdiction of the Court of First Instance.  The same reasoning motivated Mr Recorder Liao’s decision in Clinton Engineering.

11.  I have not had referred to me any case where a stay has been imposed in order to save time and money in the event that the appeal would succeed.

12.  Mr Maurellet has drawn my attention to a decision of the Singapore High Court reported at (2003) SLR 656 para 14 where Rajendra J. emphasising the importance of not departing from the prescribed rules of court observed that:

“Where a matter of procedure is covered by the Rules of Court and those rules are clear, the court should be more circumspect in declining to follow those rules.  Failure to follow the clear directions in the rules is tantamount to the court re-writing the rules to fit the justice of each case.  Such an approach will introduce uncertainty into court procedures and is undesirable.”

I respectfully agree with what Rajendra J. has said in this regard.

13.  Nevertheless, this having been said, there is no doubt that the court does retain an inherent jurisdiction to impose a stay of execution pending appeal to the Court of Appeal in suitable cases.  See Credit Lyonnais v SK Global Hong Kong Ltd (2003) 4 HKC 104.  Cheung J.A.

described the powers conferred by the rules and those arising out of the inherent jurisdiction as cumulative and concurrent referring to Halsbury’s Laws of England, 4^th Edition Reissue 2002 Vol 17(1) para 195 – see page 116D-H.

14.  What I get from this case therefore is that the court undoubtedly is able to make use of its inherent jurisdiction to grant a stay in the interests of justice.  See Rogers VP at 112H to 113A.

Order 59 rule 13

15.  The granting of a stay of execution under the rules is a restrictive one in that the applicant for the stay must show good reason why a stay should be granted.  The considerations were summarized by Ma J. (as he then was) in the surprisingly, as yet, unreported case of Star Play Development Ltd v Bess Fashion Management Company Ltd (2002) HCA 4726/2001.  The Judge held that good reasons can exist in a variety of forms, but as he put it; “commonly reference is made to factors such as whether the absence (or existence), of a stay would render an appeal nugatory (thus bringing into focus the relative prejudice that may be caused to the appellant and to the respondent by a stay of execution), and the merits of the appeal.”  At paragraph 9 of his judgment, Ma J. made 9 separate observations in the context of the two factors which I have just cited from the judgment and to which I have had regard.  He concluded at paragraph 10 by saying this; “Ultimately, the court embarks on a balancing exercise and uses its common sense, but bearing in mind at all times the starting point that the successful party is not to be deprived of the fruits of his success: see Winchester Cigarette Machinery, per Gibson L.J.”.

Conclusion

16.  I have found this to be a finely balanced matter.  Whilst it cannot be said that the appeal would be rendered nugatory if I were to refuse a stay – this is not one of those types of case – there is obvious force in Mr Pao’s submission that a stay would avoid wasted costs incurred by proceeding notwithstanding the relatively imminent appeal.  Although against that the successful appellant would be compensated by an order for costs where it will have brought the action to a conclusion in its favour.

17.  The other feature concerns the prospect of success of the appeal.  Where a successful outcome is on the cards, as it were, the more compelling the reasons for a stay.  In this case I would have thought, being as objective as I am able to, the appeal to be reasonably arguable.  Mr Maurellet says not so, having regard to Godfrey J.A.’s remarks in Kerry Foodstuff’s v Phulsawat (1999) 3 HKC 523 at 527 where he said that appeals from a judge who has refused to strike out an action for want of prosecution do need to be discouraged (as opposed to when one was made).  He went on to say;

“… it takes a very strong case to warrant an appeal to review an exercise by the judge of his discretion.  Where the case were one in which conditions in which the judge may strike out the action for want of prosecution are satisfied, it does not follow that he must do so.  It remains for him to exercise a judicial discretion whether or not to do so.”

In that case, the Court of Appeal asked itself; “… has a very strong case for reversing the judge been made out here?” (page 528d).

18.  It would appear therefore that whilst the appeal is reasonably arguable, the appellant has to take on a considerable burden in order to obtain the outcome that it seeks.

19.  In the exercise of my discretion, balancing all of these competing factors, I have decided to refuse a stay.  Whilst prima facie, Mr Pao’s application has its undoubted attractions, his submissions do not have sufficient regard to the considerations that are contemplated by the Rule.  At the end of the day, the appeal will not be rendered nugatory and the appellant does face distinct appellate difficulties as appear in Kerry Foodstuffs supra.   Any costs that turn out to be wasted in the event of a successful appeal can be compensated by an order for costs and where the action is so stale, no time should be lost in getting it to trial.  Ultimately, pure case management considerations which Mr Pao appeals to, are not so compelling as in the cases that he has relied on and do not outweigh the starting point of Order 59 rule 13 which is that an appeal will not operate as a stay.  This application ought, in my judgment, to stand dismissed.

20.  I have heard provisional argument on costs and I would have thought that these costs should be costs in the appeal itself.