Mascotte Holdings Ltd v. Deutsche Bank Aktiengesellschaft

HCA 1767/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1767 OF 2013

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DECISION
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1.This is the plaintiff’s appeal against a Master’s decision granting stay of proceedings pending the final determination of the strike-out summons to be heard in October 2015.

Background

2.The plaintiff sues the defendant for damages in the region of $127 million based on oral misrepresentation of the defendant’s employee in 2007.  The misrepresentation has allegedly caused the plaintiff to lend money to a third party and suffered loss as a result of the third party’s non-payment.

3.The defendant denies such allegation or that there was any duty or duty of care to the plaintiff.  The defendant also pleaded an intervening event.  That is an option which the plaintiff has failed to exercise to recoup the loan.  The intervening event broke the chain of causation of any breach of duty on the part of the defendant and the plaintiff’s loss. 

4.After the reply was filed on 3 December 2014, the defendant lost no time in taking out a strike-out summons on 23 December, relying on three limbs of Order 18, rule 19(1), ie limbs (a), (b) and (d).  In that summons, the defendant sought a stay.

5.The parties had agreed upon terms for disposal of their strike-out summons.  However, as admitted by Mr Lewis for the defendant, the defendant overlooked the issue of stay, and so the order made by the Master in respect of this summons did not contain a direction as to stay.  More than a month later, the defendant issued the present summons for a stay, and the Master allowed it.  This is the plaintiff’s appeal.

6.The applicable principles are not in dispute. An appeal operates as a rehearing.  The court has power under Order 1B, rule 1(2)(e) of the Rules of the High Court to grant a stay.  The correct approach has been laid down in the case of Tan Man Kou v Cheung Yat Ming in their capacity as the Joint Administrators Pendente Lite of the Estate of Wang The Huei v Chime Corporation Limited & Others, HCMP 4146/2001, HCA 2415/2002, HCCW 1050/2004, HCCL 73/2002, HCCL 63/2004, HCCL 64/2004 and HCA 3626/2003 (unreported, 11 March 2005) decided by Madam Justice Kwan (as she then was).  The correct approach is to consider the balance of convenience and the balance as between the parties.  The court should exercise its discretion in such a manner as to ensure that its procedures are used in a logical, fair and cost-efficient manner.

7.The question at hand is not a question of deprivation of the right of a litigant to proceed altogether but a question of case management.  It is trite that the issue of a striking-out summons will not automatically end up with a stay of proceedings.  The court has to consider the peculiar circumstances of the case. 

8.Mr Kim, counsel for the plaintiff, describes the defendant as having abandoned the application for stay under the first summons for strike-out.  However, in my view, it was more clearly an oversight as described by Mr Lewis.  Procedurally, their taking out this second summons for a stay reflected their fault but there was not of such a delay that the court should deny them the relief sought.  Any prejudice arising out of that second summons for a stay may be remedied by an order for costs. 

9.In this second summons for a stay, the court look at the overall picture to decide where the balance of convenience and fairness between the parties lies.  The purpose of a striking-out summons is to curtail an unmeritorious claim without the need to incur substantial costs in the meantime on matters like discovery and witness statements.  Proceeding with preparation for the trial whilst a striking-out summons is pending is on its face self-defeating but that, in my view, is not sufficient to grant the defendant a stay.

10.Look at the procedural history of the whole matter.  The writ was not issued until shortly before the six-year limitation period had expired on its face.  It was not served until the last day of its validity.  

11.Thereafter, the pleadings were filed promptly within three months.  The defendant took out the strike-out summons promptly, and the hearing date being fixed in October was through no fault of any party but simply reflected the state of the court’s diary.

12.With such procedural history, it lies ill in the plaintiff’s mouth that there is urgency to deal with matters given their delay before the action.  The claimed prejudice of, for example, loss of memory of witnesses can be remedied at this stage by taking proper proof of evidence. The fact that the plaintiff is a listed company and there is no suggestion that it may not be in a position to pay costs has been taken into account but is not a justification when considering the circumstances of this case to permit the parties to waste unnecessary costs pending resolution of the striking-out summons.

13.It is not for this court at this stage, without full consideration of even a set of skeleton arguments, to come to a tentative view of the outcome of the striking-out summons.  On the face of the summons, there may be grounds for the defendant to proceed, and I am not giving my views one way or another on the merits of that summons.

14.Overall, taking into account the circumstances of the case, I see no reason why I should disturb the exercise of discretion of the Master.  A stay would be appropriate given the background of this case.  The balance of convenience lies in favour of a stay, and I dismiss the appeal.

(Discussion re costs)

15.I am shocked by this level of costs which clients are asked to pay, especially if there is this certificate from solicitors stating that it does not exceed a party’s liability of costs to the firm.  I do not want to send the wrong message to litigants in Hong Kong that they should spend this level of fees for an application of this kind. If the costs that a Master would have allowed were $800, then in this present instance and noting that the defendant appeared by solicitors, well-prepared, had written submissions before me, things are neat and tidy with proper research, I still will not be granting the level of costs sought in the costs statement.

16.But looking at the costs statement of the plaintiff for comparison purposes, equally, such huge figures were incurred.  I exercise my discretion and I grant a sum of $35,000 for this appeal to be borne by the plaintiff.

Mr Minju Kim, instructed by Lam & Co, for the plaintiff

Mr Gavin Lewis, of Linklaters, for the defendant