惠陽市新墟合興製衣廠 v. Elbex Video (Hong Kong) Ltd

HCMP 2432/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 2432 OF 2015

(ON INTENDED APPEAL FROM HCA 1950 OF 2012)

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JUDGMENT

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Hon Poon JA (giving the Judgment of the Court) :

Introduction

1.On 26 August 2014, Master Lo dismissed the applicant’s application to strike out the action in HCA 1950/2012. The applicant then appealed to a judge in chambers.

2.On 23 June 2015, Anthony Chan J dismissed the appeal on the ground of lack of jurisdiction. The learned Judge took the view that the hearing before the master was a trial pursuant to Order 36, rule 1, of the Rules of the High Court, Cap 4A. Accordingly, an appeal against the master’s decision should, under Order 58, rule 2(a), lie to the Court of Appeal instead of a judge in chambers. The applicant’s application for leave to appeal to the Court of Appeal was refused by the Judge on 17 September 2015.

3.The applicant now applies to this Court for leave to appeal. Its main contention is that the Judge erred on the jurisdictional point. As a fall back, if this Court upholds the Judge’s decision, the applicant applied for leave to appeal against the master’s decision out of time.

Background

4.The background had been helpfully summarized by the master in her Reasons for Decision dated 16 September 2014, at [2] to [9], which the Judge adopted and repeated in [3] of his Decision dated 23 June 2015. We do not propose to repeat them here.

Hearing before the master

5.The only basis for striking out application was the applicant’s contention that the respondent did not have any locus to sue under the relevant PRC law after its business licence expired on 30 December 2011. The respondent disagreed and contended that it did have the locus to sue as it had never been deregistered. Both parties relied on their own PRC law expert to support their contention, having agreed that the issue turned on the contested expert evidence on PRC law.

6.By a consent order dated 14 March 2013, the master gave directions for the substantive hearing of the applicant’s application, including the filing of expert evidence and cross-examination of the experts. At the substantive hearing before the master (25 and 26 August 2014), the experts were called and cross-examined. For the reasons that the master gave in her Reasons for Decision, she preferred the opinion of the respondent’s expert and held that the respondent did have the capacity to sue under the PRC law. She then dismissed the applicant’s striking out application.

Hearing before the Judge

7.At the beginning of the hearing on 30 December 2014, the Judge asked the parties to explain the jurisdictional basis of the hearing before the master. The matter could not be resolved there and then. That resulted in an adjourned hearing on 28 April 2015 and another round of written submissions in May 2015. In the end, the parties conceded that the hearing before the master was a trial. The Judge took the view that the concession was rightly made. So Order 36, rule 1 applied. The appeal lied to the Court of Appeal.

8.For completeness, the Judge dealt with and roundly rejected the applicant’s submissions based on Order 32, rule 11, Order 14A and the so-called interlocutory nature of the master’s decision.

Jurisdiction

9.In Liquidation Committee of Foshan Hongda Development Ltd v East Legend Investment Ltd [2009] 1 HKLRD 169, Cheung JA stated :

“18. The principles concerning the challenge on the lack of standing by a plaintiff to commence an action are well established and they are :

(1) The challenge cannot be raised by way of defence.

(2) It must be raised at the outset or when it comes to the attention of the court or of the defence in the course of the proceedings.

(3) Once the issue has been raised it must be decided.

(4) It would be wrong to allow the action to go on without deciding the issue of standing: this is because the defendant will not have a further chance to challenge the issue.

(5) Once it is clear that the action was improperly constituted it must be brought to an end either by way of dismissal, striking out or stay.

…”

10.When an application to striking out is based on lack of authority to sue, it is quite different from an ordinary application to strike out a pleading under Order 18, rule 19. It is an application to strike out under the inherent jurisdiction of the court. The court has to determine the issue of capacity definitively. In Kammy Town Ltd v Super Glory Corporation Ltd, HCA 3524/2003, unreported, 14 January 2005, A Cheung J (as the Chief Judge then was) explained thus :

“13. However, unlike an ordinary application to strike out a pleading, the present type of striking out applications inevitably requires a definitive determination by the court seised of the application on the point. In other words, either the action was authorised by the company or it was not. There is no halfway house. The point has to be decided according to the burden and standard of proof – the burden lies with those suing in the name of the plaintiff to prove authorization. Subject to any subsequent ratification (where necessary) of the action by the company, the action will stand or fall depending on the court’s determination of the question of authority.

14. For those reasons, it is not appropriate for a court, seised of the application, to simply say on the affidavit evidence before it that it is not a ‘plain and obvious’ case of a lack of authority, and therefore the application should be dismissed and the action allowed to proceed to trial. Rather, at the substantive hearing, the court has to see whether the objection raised by the defendant can be summarily disposed of on the affidavit evidence that has been placed before the court for the purpose, and if not, how the objection can be determined and give directions accordingly.”

Resolution of the issue by the court one way or the other determines the respondent’s substantive right, in terms of capacity, to sue. Subject to appeal, such determination is final. It is not an interlocutory decision, as Mr Lo, counsel for the applicant contended.

11.A Cheung J went on to point out that when the court is unable to resolve the issue on affidavit evidence alone :

“18. However, where the court is unable to decide the question of authority – which is in essence a question of fact (or maybe a mixed question of fact and law), the court should not dismiss the application (as would have been the case in an ordinary application to strike out a pleading), nor should it try to attempt the impossible by making a finding of fact on affidavit evidence without cross-examination. Instead it should adjourn the hearing and give appropriate directions for the determination of the objection at an adjourned hearing, such as the cross-examination of the deponents of the affidavits/affirmations that have been filed by the parties in relation to the objection.”

12.In Kammy Town itself, A Cheung J in the end directed at [35] that since the issue of lack of authority could not be summarily disposed of on affidavit evidence alone, the applicant’s application to strike out was to be adjourned for trial of the issue before a judge with consequential directions.

13.Where the capacity is raised in a striking out application before a master, and it cannot be resolved summarily on affidavit evidence alone, the issue has to be tried as a preliminary issue. The issue can be tried by a master with the consent of the parties under Order 36, rule 1; or failing consent, by a judge. Either way, an appeal against the lower court’s decision lies to the Court of Appeal. In the case of the master, the appeal to the Court of Appeal is provided for by Order 58, rule 2(a).

14.Turning to the present case, the parties had rightly accepted that the hearing before the master was in fact a trial, despite the fact that it was only conducted in chambers (open to the public) without the formal attire. As rightly observed by the Judge, the parties’ ignorance of the applicable rule or even a mistake over the applicable rule does not detract from the fact that a trial did take place before the master at the hearing for her to determine the respondent’s capacity to sue. Further, the only jurisdictional basis for the master to conduct the trial is Order 36, rule 1. Any reliance by Mr Lo on other provisions of the Rules of the High Court, such as Order 32, rules 11 and 11A and Order 14A are all misplaced.

15.It follows that an appeal from the master’s decision must lie to the Court of Appeal under Order 58, rule 2(a). The Judge was right when he ruled that he did not have jurisdiction to hear it.

16.For the above reasons, we refuse leave to appeal against the Judge’s order.

Leave to appeal against the master’s order out of time

17.We now come to the applicant’s application for leave to appeal the master’s order out of time.

18.We first note that the delay is very substantial. The master gave her judgment on 26 August 2014. The present application is not taken out until 30 September 2015 when the present summons was filed. And the applicant has not offered any explanation for the inordinate delay. Presumably, the applicant did not apply for leave until now because of the legal advice that his lawyers gave him. If that were the case, such legal advice is hopelessly wrong and cannot possibly be a justifiable excuse for the delay.

19.Most importantly, the intended appeal lacks merits. Essentially, the applicant wishes to challenge the master’s acceptance of the respondent’s expert evidence that under the PRC law, the respondent has the capacity to sue. That being a question of fact, the applicant must overcome the very high threshold of showing that the master’s decision is plainly wrong. We have carefully considered the master’s Reasons for Decision and the matters relied on by the applicant in challenging the master’s finding. We are not satisfied that the master’s finding is plainly wrong. On the contrary, we think the master is entirely correct in her evaluation and analysis of the evidence and conclusion.

20.Mr Lo submitted that the master erred in not finding that the respondent could not fulfil the requirement of issue of writ in Hong Kong under Order 6, rule 5(1). But the respondent is legally represented, service on the respondent’s solicitor is good enough for the purpose of the rules.

21.Mr Lo also submitted that the master erred in failing to take sufficient accounts of the fact that it is against public policy and fundamental justice to allow the respondent to sue in Hong Kong when it cannot bear civil liability. This submission completely ignores the fact that the respondent can be sued under the PRC law, thus bearing civil liability if the court so orders. We cannot see any injustice as alleged.

22.We refuse to give the applicant leave to appeal the master’s decision out of time.

Costs

23.Since the respondent has not filed any statement in opposition, we make no order as to costs for the applicant’s application.

Written submissions by Mr Tommy Lo, instructed by Chan, Lam & Wan, for the applicant