Taching Petroleum Co, Ltd v. Meyer Aluminium Ltd

HCA 1929/2017 &
HCA 1069/2018

[2021] HKCFI 1690

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1929 OF 2017

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BETWEEN

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AND

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1069 OF 2018

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BETWEEN

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(Heard Together)

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REASONS FOR DECISION

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Introduction

1.This was the pre-trial review hearing.  The trial would commence in 7 weeks’ time on 27 July 2021 with 10 days reserved.

2.Meyer applied for a split trial of liability and quantum.  After hearing submissions, I dismissed the application.  These are my reasons.

Background

3.In its defence, Meyer sought to set off the unliquidated damages arising from the alleged anti-competitive conduct of Taching and Shell against the price of industrial diesel delivered to Meyer. 

4.At the Competition Tribunal (“the Tribunal”), Meyer has sought to, amongst others, adduce expert evidence on loss and damages it suffered, but it was refused by the Tribunal.  Meyer appealed to the Court of Appeal.

5.The Court of Appeal held that since only the allegation of contravention of the First Conduct Rule was transferred to the Tribunal for trial, Meyer had applied for expert evidence on loss and damages in the wrong forum (paragraphs 32-34 and 56 of the judgment dated 11 March 2021 [2021] HKCA 294.

6.The Court of Appeal further expressed the view that there would be sub-issues arising from the defence of set-off:

“58. … the Tribunal has no jurisdiction in the present proceedings to address if set-off should be available in the context of the High Court actions. It is a matter for the Court of First Instance. As further elaborated below, the Court of First Instance has to consider the question of set-off by addressing these sub-issues:

(a) As there is no express provision for conferring private right other than follow-on action, whether a contravention of the conduct rule under the Ordinance can give rise to cross-claims by Meyer against Taching and Shell on the basis of common law principles concerning breach of statutory duty;

(b) Whether there is an implied abrogation by the Ordinance of the common law cause of action by way of cross-claim as a defence;

(c) If a cross-claim for contravention of the conduct rule is sustainable in law, whether the common law criteria for equitable set-off can be satisfied in accordance with the test in Geldof Metaalconstructie NV v Simon Carbes Ltd [2010] EWCV Civ 667; [2010] 4 All ER 847; and

(d) The damages suffered by Meyer as a result of such contravention and the quantum thereof.”

7.Having given guidance as to the sub-issues above, the Court of Appeal refrained from dealing with those matters.  The Court of Appeal expressly stated that the application to file expert evidence on damages and split trial was a case management possibility for the Court of First Instance.

“66. In terms of the application to file expert evidence on damages and quantum, there is also another case management possibility. Assuming an application for expert evidence on damages and quantum is made in the Court of First Instance, it is open to the court to adjourn that application until the Tribunal made a determination of the allegations. Adoption of such option may entail the splitting of trials in the High Court actions. The court could still address sub-issues (a) to (c) and issues on illegality in the trials taking place at the same time of the trials in the Tribunal proceedings. If the Tribunal found against Meyer [on the contravention of the First Conduct Rule] or if the [Court of First Instance] ruled against Meyer on [the sub-issues in §58(a) to (c)] and the defence of illegality, judgments can be given in the High Court actions. On the other hand, in the event of determinations in favour of Meyer in the Tribunal and in the Court of First Instance (except on the issue of illegality), the court would have to hold the second part of the trials to consider the quantum of set-off.

67. We have not heard submissions on that option and these are again matters of case management of the High Court actions for the Court of First Instance.  It is therefore not right for Mr Lee [counsel for Meyer] to assume that the Tribunal would exercise the discretion in the same way as did the Court of First Instance.  This Court cannot speculate what would have been the outcome had there been no procedural mistake on the part of Meyer in issuing the expert evidence summons in the Tribunal instead of the Court of First Instance.”

8.Meyer invited this Court to adopt the Court of Appeal’s “cost-effective and practical approach”, so that the question of quantum of set-off, including expert directions, could be hived off to the second part of the trial.  Taching and Shell opposed that application.

Legal principles for ordering a split trial

9.The general rule is for all issues to be tried at the same time and the general rule will be departed from only if it would be just and convenient to do so.  The burden is on the party seeking a split trial to demonstrate why there are “exceptional circumstances” and “special grounds” to justify the departure: Ying Cheong Construction Co Ltd v Lam Woo & Co Ltd [2019] HKCFI 1654, at §3, Mimmie Chan J.

Analyses

10.Firstly, Meyer had previously suggested a stay of the High Court actions pending resolution of the competition issue in the Tribunal.  That suggestion was not accepted by the Court.  Instead, the Court specifically directed that the trial of these 2 actions should be carried out at the same time as the competition proceedings in CTA 1 & 2/2018, before the same judge constituting the Tribunal.  (See decision dated 22 February 2019 [2019] HKCFI 515).  Meyer has not begun to show why it was just and convenient to depart from the general rule and this specific direction. 

11.Secondly, Mr Lee submits that the only reason why the Tribunal refused to give leave to adduce expert evidence on loss and damage was due to Taching and Shell’s erroneous argument that the set-off defence was entirely bad. There was a change of circumstances since the Court of Appeal’s decision cited above.

12.With respect, Mr Lee has forgotten that his stance at the 3^rd CMC, if not earlier, was similar to Taching and Shell’s – that Meyer had no right of action without a determination of a contravention of a Conduct Rule (§7 of the decision dated 22 February 2019 [2019] HKCFI 515). At that time, Mr Lee considered that Meyer had to pay the amounts claimed even if the Tribunal were to rule in his favour on the competition issue, and resort to a follow-on action.  In any case, Taching and Shell’s stance on the set-off is yet to be adjudicated in the light of the Court of Appeal’s views on the sub-issues.

13.However, even if there was a change of circumstances brought about by the Court of Appeal’s decision, the Court of Appeal has left the case management issue to this Court.  It was incumbent on Meyer to make a timely application to this Court for a split trial or for expert directions. 

14.Thirdly, as a matter of case management,

(1) This was a late application made by submission, without a summons, 7 weeks before trial.  This was way beyond 6 December 2019, the deadline for taking out interlocutory applications laid down at the 3^rd CMC.  Late interlocutory applications may be dismissed on the basis of delay alone: PD 5.2, §34.  Unless there are exceptional circumstances and there are good reasons for the delay, one should not expect the courts to grant any late applications taken out shortly before the pre-trial review; Waddington Limited v Chan Chun Hoo Thomas, HCA 3291/2003, 7 May 2013, at §53, DHCJ Lok (as he then was).  No exceptional circumstances were shown.

(2) If, as Mr Lee submits, the Court had no difficulty understanding that the loss and damage to Meyer was the higher price paid for the diesel, there was no reason why Meyer could not have applied for expert directions in order for the trial on quantum to proceed at the same time as the trial in July.  The Court of Appeal had given guidance orally on 5 January 2021 after hearing the appeal, and the written reasons were handed down on 11 March 2021.  And yet nothing has been done by Meyer since January until this pre-trial review to seek expert directions.

15.Fourthly, as a matter of pleading, as early as 22 February 2019, this Court has observed that Meyer has pleaded nothing to set off against any sum to be awarded to Taching/Shell.  As the pleadings then stood, there was simply nothing left for the court to investigate on quantum after determination of the issue of liability.  The Court saw no basis for ordering a split trial.”  See §§7-8 of the decision dated 22 February 2019 [2019] HKCFI 515.

16.For 2 years and 3 months since, the defence has never been amended to plead a case that would justify investigation on quantum.

17.As rightly pointed out by Ms Lam (and Ms Xu) counsel for Taching:

(1) In a follow-on action, the statement of claim must set out with full particulars the loss and damage suffered under each head of loss and the respective amount of damages claimed as well as the aggregate amount claimed: CTPD 1, §99.  The defence must plead specifically with as full particulars as possible to each item of loss and damage allegedly suffered by the plaintiff under each head of loss and to the amount of damages claimed: CTPD 1, §103. I agree with Ms Lam that, by the same token, the same requirement applies where a defence of set off is premised on loss and damage caused by the plaintiff’s alleged anti-competitive conduct.  Meyer’s defence does not satisfy this requirement.

(2) The burden is on a defendant to particularize the amount of his set off or the manner in which the amount is to be computed. This is reinforced by the approach in a summary judgment application, where the Courts have held that a bare defence of set-off, without particulars, is insufficient to give rise to a triable issue: 浙江省鐵投國際貿易有限公司 v HK Zexin Resources Co Ltd, HCA 3243/2016, 16 October 2017, at §§21-24, DHCJ Alex Lee (as he then was); Legend Pacific Ltd v Ng Choi Chi, HCA 1320/2009, 11 August 2009, at §§15-16, Registrar Au-Yeung (as she then was).

(3) In the context of competition law, there can be different types of damages to compensate for being subject to a cartel overcharge, loss of profit, loss of opportunity or even exemplary damages. Various methods and models may be used to evaluate quantum, depending on the circumstances of each case: Brealey QC & George, Competition Litigation UK Practice and Procedure, 2^nd ed, §§16.01-16.14.  It is all the more important for a claimant to at least identify the type of loss he has allegedly suffered.

18.Fifthly, all 3 parties agreed that even if there was no trial on the quantum of loss and damages of Meyer, there would be no prejudice to Meyer, as it could have a follow-on action if the Tribunal were to rule in its favour. Even if Meyer has to pay the price for the diesel and costs to Taching and Shell now, any prejudice can be compensated for in money terms in the follow-on action.

Conclusion

19.Meyer’s application for a split trial was late and against the specific direction for 4 sets of proceedings to be tried together.  There was no good reason for the delay in application.  As a matter of case management and pleading, it has not been shown that it would be just and convenient to hive off the quantum issue to a second part of the trial.  There would be no prejudice to Meyer anyway even if the trial were to proceed without dealing with the quantum of Meyer’s alleged loss and damage.  For all the reasons given, I therefore dismissed the application for a split trial.

Ms Catrina Lam and Ms Cherry Xu, instructed by Herbert Tsoi & Partners, for Taching, the Plaintiff in HCA 1929/2017

Ms Eva Sit, SC, instructed by Clifford Chance, for Shell, the Plaintiff in HCA 1069/2018

Mr Kenneth K H Lee, Ms Nana Lui and Mr William Tse, instructed by Robertsons, for Meyer, the Defendant in both cases