Civil Procedure UpdatesEric TM Cheung

Assistant Professor, Faculty of Law,HKU

Consultant, ONC Lawyers

27 October 2006

Overview of Updates

1. Waiver of Irregularity and Submission to Jurisdiction

2. Jurisdiction of District Court and Transfer

3. Actions involving Mentally Incapacitated Person

4. Costs Order against a Non-Party

5. Partial Admissions and Payment-In

6. Security for Costs where there is a Counterclaim

7. Duty of Care on Mareva Injunction recipient

8. Video Conference Facilities

9. Automatic Stay for Legal Aid

10. Limitation Period for Adverse Possession

11. Interlocutory vs. Final Appeals

1. Waiver of Irregularity andSubmission to Jurisdiction

Case: CMIC FINANCE LTD v KE JUN XIANG, CACV 175/2005,15 Nov 2005

(Yuen JA and Sakhrani J)

� P, a licensed moneylender, claimed against debtor D for $2.6m+

Chronology of Events (2004)

� 23 July: Writ served by registered post to D’s two addresses

(later returned to P’s solicitors undelivered)

� 28 July: Writ served through the letter box at one of D’s two addresses in HK

� D was resident in Guangzhou and was not in HK when the writ was sent by registered post or inserted through the letter box

� No A/S

� 14 Sept: P issued a summons for final judgment under O.83A r.4, returnable on 1 Nov

� 27 Oct: P faxed a copy of the summons to D’s Guangzhou office

� 28 Oct: D’s solicitors filed notice to act

� 1 Nov: D’s solicitors applied to Master for an adjournment of P’s summons.

P consented and OIT made

� 15 Nov: D’s solicitors obtained further adjournment by consent before the Master, with an indication that D would dispute jurisdiction.

� 30 Nov: D filed A/S and issued summons under O 12 r 8 to set aside the service

Question: Any waiver?

Any waiver?

� SMAY Investments Ltd v Sachdev [2003] 1 WLR 1973

Patten J: the conduct of D amounting to a submission to jurisdiction and a waiver of the right to challenge jurisdiction must be unequivocal.

� “If the well-informed bystander had been left in doubt because what the defendants had done was equivocal, in the sense that it was explicable on other grounds in addition to agreement to accept the jurisdiction of the court, then the conclusion must be, on the authorities, that there would have been no submission to the jurisdiction.”

� Held: D’s (1) application for an extension of time to file a defence and (2) his opposition to the continuation of the freezing order with the offer of an undertaking not to dispose of his house without giving the claimants' solicitors 14 days' written notice NOT amounted to submission to jurisdiction

� D already stated in his affidavit prior to the hearing that he intended to contest jurisdiction

� D’s counsel indicated to the judge that the full inter partes hearing would involve a contest on jurisdiction, and the undertakings offered were only until that effective hearing.

Any waiver?

� Esal (Commodities) Ltd v Pujara [1989] 2 Lloyd's Rep 479 (CA) :

D acknowledged service, gave notice of his intention to defend the action and then, on the return date of an application to continue an injunction until trial, consented to an order in those terms without at the same time reserving his position on jurisdiction.

The Court of Appeal held that, on those facts, he had submitted to jurisdiction.

� Cf. Obikoya v Silvernorth Ltd, The Times, 6 July 1983 :

Parker J held that a challenge to a Mareva injunction did not, without more, amount to a submission to the jurisdiction.

Three distinctions in Obikoya:

(1) D's counsel expressly stated that her argument was without prejudice to the question of jurisdiction;

(2) D opposed the renewal of an injunction, not to consent to it;

(3) Nothing in the consent Order showed that there would be a trial

Decision inCMIC FINANCE LTD v KE JUN XIANG

� CA: there was submission to jurisdiction� Before 1 Nov, D’s solicitors already obtained the relevant docs from P’s

solicitors� At the hearing on 1 Nov, no indication by D’s solicitors that the jurisdiction of the

court was being disputed or that D wished to consider that question� D invoked the jurisdiction of the court to adjourn P’s summons and obtained an

advantage� Godfrey J A said in Lee Fai (t/a as Fai Kee Timber ) v Chan Kui [1997] 3 HKC

228 at 233:‘A defendant who invokes or utilizes the jurisdiction of the court with a view to his own advantage waives by doing so his right to object to any earlier procedural irregularity (unless fundamental). A defendant who wishes to dispute the jurisdiction of the court over him must be careful not to take any step in the action which may be regarded as a submission to the jurisdiction of the court.’

� Immaterial that on 15 Nov D's solicitors indicated to the master that P’s summons was being opposed on the ground of jurisdiction. By that time D had submitted to the jurisdiction of the court.

Some earlier HK cases

� 廣東里水鮮果批發市場有限公司 v Yip Lai Fong HCA2559/2003, 9 Dec 2003 (Deputy Judge Muttrie)

� D took out a Summons(1) under O 18 r 19 to strike out P’s claim for being instituted without proper authority,(2) alternatively for the trial of a preliminary issue as to whether P had the proper authority,(3) alternatively to stay the action pending trial or another action, and(4) alternatively a declaration under O 12 r 8 that the court has nojurisdiction over D

� Held: “to seek by way of primary relief, i.e. as a first choice to strike out the plaintiff's name, or to have the issue of authority tried as a preliminary issue, or to have the matter stayed pending the outcome of other proceedings must in my view amount to submission to the jurisdiction”.

Some earlier HK cases – cont.

� Winnitex Investment Co. Ltd v Oxford Products (International) Ltd [2004]

4 HKC 660 (District Court Judge Marlene Ng)

� D issued a summons for an order that the proceedings be struck out as frivolous, vexatious or an abuse of process and alternatively an order for a stay under the inherent jurisdiction on the ground of forum non-conveniens.

� Held: Refused to accept D’s argument to draw a distinction between an Order 12 r 8 application and a stay application under the inherent jurisdiction. Held that the making of the former strike-out application amounted to a submission to the jurisdiction resulting in the failure of the latter stay application.

Question: What should D have done?

� What D should have done was to take out Stay Application without prejudice to any argument it might have that it was not a proper party to the contract.

If the court were against D on Stay Application, it would not have precluded D from subsequently contesting that it was not a proper party to the contract and issuing Striking Out Application on that basis.

What D could not do was to take both inconsistent steps together, i.e. where he said it was only if the court did not accept D was not a party to the contract that he would invite the court to consider whether the action should be stayed.

Some earlier HK cases – cont.

� I have some reservations as regards the correctness of these two HK decisions

� Seems to be inconsistent with the English cases which focused on whether the steps taken were unequivocal and whether D made clear its intention to contest jurisdiction

� Cf. Eagle Star Insurance Co. Ltd v Yuval Insurance Co. Ltd [1978]

1 Lloyd’s Rep 357. Lord Denning MR:

“On those authorities, it seems to me that in order to deprive a defendant of his recourse to arbitration a “step in the proceedings” must be one which impliedly affirms the correctness of the proceedings and the willingness of the defendant to go along with a determination by the Courts of law instead of arbitration. Applying this principle, the defendants here were presented with a writ indorsed with a statement of claim which was very defective. They applied, quite properly, to strike it out. That was not an affirmation of the correctness of the proceedings. Quite the contrary. It was a disaffirmation of them. It was not a “step in the proceedings” such as to debar the defendants from applying for a stay.”

� But that case might be distinguishable as it was dealing with the situation whether by applying to strike out a defective statement of claim the defendant was debarred from applying for a stay of the proceedings for reference to arbitration.

Lessons to learn?

2. Jurisdiction of District Courtand Transfer

Question: If there may be a dispute as to liability and quantum, should a claim for unpaid solicitors’ bill for $200,000 be instituted in the DC or CFI?

Case: Oldham, Li & Lie v Wong Lin Chooi [2006] 2 HKC 397, 1 March 2006

(Woo VP and Barma J)

� Sep 2004: P sued D in DC on two unpaid bills issued in Jan and April

2004 (relating to D’s ex-husband’s case) for $208,661.

D resisted on the basis that the charge was unreasonable.

� Apr 2005: Summary judgment obtained before Master of DC.

D appealed to a DC judge and asked for a transfer of the action to the CFI

� Aug 2005: DC judge dismissed D’s appeal.

Noted that D had apparently given and subsequently withdrawn an undertaking to apply to the High Court for taxation of the bills pursuant to s.67 of the Ordinance.

Held that the reasonableness of the charge could “only become triable issues before a taxing master when section 67 is invoked, upon the necessary application off the party concerned.”

Dismissed the application for transfer to the High Court on the basis that the amount of the claim fell within the jurisdictional limits of the District Court.

� On appeal to the CA, D raised a new triable issue on liability as to the identity of the client and the person chargeable in respect of the bills.

CA’s Decision in Oldham, Li & Lie v Wong Lin Chooi

� Although positive case as to the identity of the client was not put forward by D in pleadings and affidavit, there was no reason why she should not be permitted to run such a case, when the issue had already come into existence on various contemporaneous documents and material.

� While a trial in DC would be likely to involve lower costs, taxing masters of the High Court were well-experienced in dealing with solicitor and client taxations.In all of the circumstances, although it would be possible for the action to proceed in the DC on liability, and, if established, leaving the appropriate court to determine the quantum, on balance it would be more preferable for the whole matter to be dealt with in a single court (at para 42, per Barma J)

� Woo VP: Since taxation of bills was within the jurisdiction of the CFI, the judge should either on his own motion had the matter transferred to the CFI or acceded to the application of D.

Although the claim was within the DC’s monetary jurisdiction, this could not be a valid reason for refusing the transfer, especially where the District Judge lacked jurisdiction to deal with the disputed quantum, an integral part of the claim.

� Costs Order: no order as to the costs of the appeal, and costs of summary judgment and transfer in DC should be costs in the cause.

3. Actions Involving MentallyIncapacitated Person

Question: What should you bear in mind if you act (through, say, the victim’s mother) for a victim of a traffic accident who has become mentally incapacitated and reached a settlement for, say, $3.5m?

Case: Re YCK, HCMP 2878/2004, 9 Feb 2006 (Lam J)

� PI claim by a MIP through his mother as the next friend settled for $3.5m plus costs with court’s approval under O. 80 r. 10

� Over $1m released to mother ($287,001.80 for past expenses and $871,531.54 for “accrued items” covering PSLA and past loss of earnings)

� Mother then paid $861,652 to a claims consultancy company pursuant to the terms of an contingency fee agreement she made with it

� Later the court was told about this payment when the mother applied for her appointment as committee for the estate of the victim under the Mental Health Ordinance as she wanted to obtain the insurance proceeds of two policies held by the victim.

Lam J’s decision and comments inRe YCK

� “The consultant company was not a solicitor firm and I have serious doubts about the legality of that agreement. Prima facie, it infringes the law of champerty and maintenance. In any event, as a matter of law, the mother did not have any authority to enter into that agreement on behalf of YCK who was mentally incapacitated at the material time. The agreement cannot bind YCK.” (para 6)

� On the law of champerty/maintenance, see author’s article “The Modern Application of the Medieval Law off Maintenance and Champerty” in Law Lectures for Practitioners 2005

� “It is trite law that a person who receives money on behalf of a mentally incapacitated person for the latter’s maintenance and benefit holds such money as a trustee and fiduciary. As such he has an obligation to see to it that the money is used for the maintenance of the mentally incapacitated person and for that purpose only. He also has a duty to account for the use of the money. That is the position in law irrespective of how the person came to receive the money. …The simple point is that it is the money of the mentally incapacitated person that he is holding and he could not, without prior authorization by the court, use it for purposes other than the ordinary maintenance of the mentally incapacitated person.” (para 10)

� “It is unfortunate that those advising her during the course of settlement did not foresee the undesirability of releasing a large sum to her and did not consider making application for appointment of committee [under the MHO] at the same time.” (para 12)

Lam J’s decision and comments inRe YCK - cont.

� Solicitor and counsel acting for person under disability has a duty to consider whether reasonable measures are in place to safeguard against the misuse of monies received for the benefit of that person. Instructions from the next friend cannot override the lawyers’ personal duty owed to the client, viz. the person under disability. When a lawyer detects some possible conflict of interests between a next friend and a person under disability, he should consider bringing the matter to the attention of the court and if necessary, applications should be made under Part II of the Mental Health Ordinance. Solicitors acting for persons under disability should realize that given the incapacity of their clients, they have to be more vigilant in ensuring that the interests of such clients are properly protected. That is the reason why Order 80 Rule 2(3) requires a next friend, other than the Official Solicitor, to act by a solicitor.” (para13)

� “In retrospect, I have difficulty in understanding why the compensation regarding the so-called “incurred items” had to be released to the mother in 2003. Those items were to compensate YCK for losses and injuries he suffered. There is no suggestion that the mother had immediate need for the use of these monies for the maintenance of YCK. It would have been better for them to be kept in court. Had that been so, the consultant company would not have got the money that easily.” (para 14)

� Held: appointed the Official Solicitor as the committee and directed him to take steps to recoup the $800,000.00 odd from the consultant. (para 15)

Any need to appoint a committee underMHO?

Case: Re CK, HCMP 1150/2006, 4 Aug 2006 (Lam J)

� Mentally handicapped child suffered injuries at school and sued by his mother as his next friend

� Settlement for $1.7m reached and approval sought under O. 80

� Master invited P’s lawyers to apply under Part II of MHO in view of the mental incapacity of P and adjourned approval of settlement

� Mother applied by OS for an inquiry under Part II and the appointment of her as the committee of P

� Queries raised by court: upon appointment of the committee, should the committee apply to this court for sanction in the context of the Part II proceedings before it could go ahead with the settlement?

Lam J’s decision and comments inRe CK

� Before settlement, normally no need to have the sanction of the court under MHO as to the conduct of the proceedings: A next friend must act by a solicitor and the solicitor has a duty to protect the interest of the MIP (para 9)

� Position may change upon the conclusion of the claim with a substantial award in favour of the MIP:

� (1) limitations as to the authority of the next friend in dealing with such award (e.g. moot question as to whether the next friend is functus after conclusion of litigation by a judgment; O.80 r.12(3) only authorises payment to the next friend “in respect of moneys paid or expenses incurred” and for his benefits; maintenance or gifts for family members or friends should not be an object of such payment out ).

� (2) solicitor would usually cease to have any role to play: cannot safeguard the interest of the MIP in the disposal or use of the monies awarded

� (3) the court may encounter difficulties in its supervision over the use of funds released to a next friend in the absence of clear statutory coercive powers to prevent or rectify misapplication of funds (intentional or otherwise) or other abuses.

� (4) Master in charge of the suitors fund usually has to deal with piece meal applications for release of funds without the benefit of sufficient up-dating as to the current condition of the MIP.

� (5) Unrepresented next friend might not appreciate his duty towards the MIP in terms of the use of such funds.

Lam J’s decision and comments inRe CK - cont.

� Advantages of a Committee under MHO:

� (1) Court can exercise tighter control in terms of selection of proper person to be appointed and removal of unsuitable person

� (2) The committee, being a statutory agent appointed by the court, owes a legal duty to account to the court as regards the affairs and properties he administered

� (3) The court may direct proceedings against a former committee to recover loss occasioned to the estate of the MIP by reason of mismanagement. In less serious cases, the court may, without removing the committee, direct the committee to take some remedial actions (cf. The only sanction that the Master can impose against a next friend who does not comply with the directions of the Master in the administration of monies received is tom withhold further release of funds or to reduce the monthly payment. )

� Possible downside: might not be cost effective.

� There are cases where funds could adequately and suitably be managed by the Master as suitors funds with monthly payments to a designated person for the maintenance of the MIP.

� In considering whether Part II proceedings should be required when approving a settlement under Order 80 involving MIP, the court will exercise its discretion by reference to what is in the best interest of that particular MIP in the context of the factual matrix of the case before the court.

Duty of Lawyers to MIP� Although they are lawyers engaged by the next friend, they should regard it as their duties to

protect the interest of the MIP in dealing with the disposal of the settlement monies.

� In the settlement terms presented to the court for approval, the lawyers should include measures and mechanism to ensure that the monies will be used for the benefit of the MIP.

� To advise the next friend that

(1) monies paid out pursuant to Order 80, unless the court otherwise directs specifically, should only be used for the maintenance of the MIP.

(2) his duty to keep the court informed about any material changes in circumstances that could have a bearing on the monthly sums to be paid out, e.g. recovery or deterioration of the MIP, changes in the relationship between the MIP and the next friend, changes in the needs of the MIP.

(3) he should keep account of the monies paid to him and if the court requests, such account should be produced for inspection.

(4) If monies were paid for a specified purpose, it should not be used for other purposes without any prior approval from the court.

� Good practice demands a solicitor acting for a next friend to render such advice both orally and in writing before recommending a settlement to the court for approval. In appropriate cases, the court may require assurance from the solicitor that such advice has been given before approving a settlement under Order 80.

Committee under MHO

Question: Should Committee under MHO be set up before approval of settlement?

� Answer: Generally no.

� Main reason: avoid duplication of approval and delay (If a committee is appointed before the settlement is sanctioned under Order 80, the committee should obtain the approval of the court in the context of Part II proceedings before committing the estate of the MIP unconditionally to a settlement, see Re L HCMP 1120 of 2003, 12 May 2006.)

� Where Part II proceedings are desirable but have yet to be commenced, may first obtain approval under Order 80 without requiring a committee to be in place as a prerequisite.

� The terms to be approved under Order 80 should provide for,

(1) Funds remaining in court pending Part II proceedings; and

(2) The disposal of the funds in court shall be in accordance with the directions of the court in the Part II proceedings.

� Held: Adjourned the application for committee so that the applicant can obtain the approval under O. 80 first.

� N.B. Suffiad J ruled in Sin Kam Hei v Transward Ltd, HCPI 293 of 2004, 14 July 2006 that if Part II application is appropriate, the defendant in the PI action should bear the costs of the Part II application and the setting up of a committee.

� See also Re YLC, HCMP 1190/2005, 25 Jan 2006, Lam J (and the earlier cases cited) as to whether (and whom) the committee should be appointed under Part II of the MHO regarding the estate of a MIP; and the role of the court and the duty of the payee (and his solicitors) under s 24 of MHO.

4. Costs Order Against a Non-party

Question: Can a successful party obtain a costs order against someone who is not a party on record but who has funded or agreed to indemnify the unsuccessful party’s litigation?

Case: Re Aurasound Speakers Ltd [2005] 4 HKLRD 382, 14 Nov 2005 (Deputy Judge Poon)

� Petitioner for a winding up order sought costs against the director of the Company who filed affirmations to oppose the winding up order

� s.52A(2) HCO: “… nothing in subsection (1) (i.e. the general power to award costs) shall authorize an award of costs against a person who is not a party to the relevant proceedings.”

� N.B. No similar provision in the section 51 off the English Supreme Court Act 1981 and, the House off Lords in Aiden Shipping Co. Ltd v Interbulk Ltd [1986] 1 AC 965, overruling previous decisions to the contrary, held that the English courts have the jurisdiction to order costs against any non-party.

� Held: the court does not have any general power to award costs against a non-party under section 52A HCO.

� s.2 of the HCO: ‘party’ is defined to include ‘every person served with notice of or attending any proceeding, although not named on the record.’

� Petitioner argued that the director was served with the Summons seeking costs against him, and so was a party within the meaning of s.2.

Question: Is it right?

Deputy Judge Poon’s decision andcomments in Re Aurasound Speakers Ltd

� Answer: No.� “The Summons made [the director] a party to the application for costs

against him. It does not have the effect of making him a party to the winding-up proceedings.”

� “The combined effect of sections 2 and 52A is this. In the absence of any specific statutory provision, a party who intends to seek costs against a non-party (in the sense that he is not named on record), has to either :

� (1) satisfy the court that the non-party is in fact a 'party within the meaning of section 2 of the High Court Ordinance; or

� (2) apply for a joinder to join the non-party to the proceedings in order to overcome the prohibition in section 52A(2).”

� Question: But can the court order a joinder under (2) in order to overcome the prohibition in section 52A(2)?

Costs Order Against a Non-party – cont.

� Answer: No binding decision in HK so far

Case: The Hong Kong Housing Authority v Hsin Yieh Architects & Associates Limited & Others [2006] 1 HKC 116, 5 Oct 2005 (Tang JA and Sakhrani J)

� HKHA obtained judgment for HK$553m against B+B (a company in liquidation).

B+B’s insurer, AXA, had denied liability to B+B under the insurance policy. But B+B had mounted a strenuous defence to HKHA's claim under the direction of and with funding from AXA.

HKHA was concerned that

(i) B+B’s defence had caused it to incur significant legal costs, and

(ii) HKHA would be unable to recover these costs from B+B if AXA successfully disclaimed liability under the insurance policy.

� HKHA applied to join AXA as a party and obtained leave for service outside the jurisdiction of the amended Writ and a Summons for costs against AXA.

� No cause of action against AXA, but sought leave under O.11 r.1(1)(c) on the ground that AXA was a necessary or proper party to the proceedings against B+B.

CA’s Decision inThe Hong Kong Housing Authority v Hsin Yieh

Architects & Associates Limited & Others

� RHC O.11 r. 4(1)(b) required P’s affidavit to state that in P’s belief P “has a good arguable cause of action”.

Vis-à-vis r.1(1) (c), P only needs to show a good cause of action against an existing defendant who was amenable to the court’s jurisdiction, but no need to show a good cause of action against the foreign party against whom joinder was sought.

� Para 33: “under s.52A no such order could be made except against a party to the proceedings. The issue therefore is whether it is permissible for a person to be joined as a party so that he might be made liable for the costs of proceedings. This is not an easy question. However, all we need to decide is whether there is a serious question to be tried. We believe there is.”

� See also the latest decision in the CFA in Nina Kung (FACV 12/2004, 25 Oct 2006), which may lead to a later decision by the CFA as to whether the court has the jurisdiction to award costs against a non-party funder, and if so how the discretion should be exercised.

5. Partial Admissions and Payment-in

� P claims against former solicitor D for $250,000 for refund of costs on account in DC.

D stated in an open letter that it agreed to pay $220,000 and rendered a final bill for $30,000.

D later paid into court $220,000.

Question: What should P do?

Case: Sincere’s Knitting Mills Ltd & Anor v Cheong Pui Fan [2005] 4 HKC 363 , 30 Nov 2005 (Yeung and Yuen JJA)

� P took out two summonses, one for judgment on admission for $220,000 plus interest and costs, and the other for discontinuance of the action on condition of judgment being entered. P indicated their wish to pursue the balance in the Small Claims Tribunal.

� D indicated consent to partial judgment being entered but opposed P’s application for costs of the action and contended that the matter should be determined only after adjudication of the claim for the balance.

� DC judge dismissed both summonses having taken the view that P’s intention to pursue the balance in the SCT would be “wholly at odds” with their application for leave to discontinue the action. The judge observed that P wished to accept the defence lodgment of $220,000 without suffering the cost consequence of late acceptance.

CA’s Decision inSincere’s Knitting Mills Ltd & Anor

v Cheong Pui Fan

� First, there is no objection in principle to a party seeking leave to discontinue an action with the intention of instituting a fresh action subsequently.

� Order 21 r 4 RDC provides: “subject to any terms imposed by the Court in granting leave [to discontinue] under rule 3, the fact that a party has discontinued an action ... shall not be a defence to a subsequent action for the same, or substantially the same, cause of action.”

� Secondly, there was a legitimate ground for the plaintiffs' application for leave to discontinue the action in the District Court. They were applying to enter judgment for 90% of their claim without opposition, and the amount of the balance was suitable for adjudication in the Small Claims Tribunal (it being in the interest of both parties for less costs to be incurred)

� If the plaintiffs had accepted the payment in, they would have given up their rights to challenge D’s bill of costs and could not pursue the balance in SCT.

� In any event, the payment in was inadequate because D had not provided for the interest element of the claim.

Lessons to learn?

� Why should D issue the open letter admitting liability in the first place?

If no such open letter, can P still apply for partial judgment on admission?

6. Security for Costs where there is a Counterclaim

� P sues D for an outstanding sum in contract, and D argued P was in breach of the contract and counterclaims for damages.Question: Can D obtain security for costs against P (e.g if P is a foreign party or a limited company with little assets)?

Case: Success Wise Ltd v Dynamic (BVI) Ltd [2006] 1 HKC 149, 1 Dec 2005 (Recorder Benjamin Yu SC)

� Recorder Yu referred to three lines of CFI cases:(1) the court should decline to order security where the claim and the counterclaim are really two sides of the same coin;(2) the courts looked upon the fact of substantial overlapping of issues between the claim and counterclaim as a reason for discounting the quantum of security to be ordered, rather than as a factor pointing against the exercise of discretion and(3) the fact that the counterclaim arose out of the same matters as the claim neither affected the court’s exercise of discretion to order P to give security nor the quantum for security

Position in English Case

� BJ Crabtree (Insulations) Ltd v GPT Communication Systems Ltd (1990) 59 BLR 46 (CA)

� Case involved a dispute between a small private company engaged in removing asbestos from the defendant’s premises. The claim was £78,000. The defendant contended that the work was defective and counterclaimed damages of £105,000. The Court of Appeal allowed the plaintiff’s appeal against an order for security.

� Parker LJ explained: “Here, the situation is that, if the money is not paid into court and the plaintiff’s claim is therefore stayed, the defendant will still raise issues on the counterclaim which are precisely the same as the issues which he would raise on the claim. In the result, findings might be made on the counterclaim which clearly showed that the plaintiff’s claim which had been stayed would be lifted and there would then be judgment for the plaintiff on the claim (notwithstanding the fact that he had not paid money into court) with appropriate orders as to costs. This being the situation, it appears to me that the only effect of the application for security will be that, if the money is not paid in, the defendant has the right to begin rather than the plaintiff. That seems to me to be nothing less than the use of the rule to obtain some tactical advantage rather than to obtain protection.”

Recorder Yu’s decision and comments inSuccess Wise Ltd v Dynamic (BVI) Ltd

� Recorder Yu: Crabtree was not apparently cited in any of the cases in (2) and (3).

� Another difference is whether the counterclaimant should be regarded as an ‘attacker’. If he is as much an ‘attacker’ as the plaintiff and it is merely fortuitous who started proceedings first, it would be a factor which should point the court towards treating both claimant and counterclaimant in the same way as far as security is concerned.

� N.B. This case also dealt with the evidence required to show a limited company “will be unable to pay the costs” under s 357 CO, with a reference to an apparently conflicting approach adopted in different HK cases.

� Recorder Yu held in this case that D failed to discharge the burden by relying only on the grounds that

(i) the total paid up capital of the plaintiff was only $10,000;

(ii) the registered office of the plaintiff was a domestic unit in a private residential estate; and

(iii) the plaintiff was likely to be a shelf company acquired for the purpose of entering into the first consultancy agreement.

He took into account the fact that P had derived $7.4m from D under the contract and there was no evidence that P had ever defaulted on any liability that it had been shown to be legally liable to pay.

7. Any Duty of Care on Mareva InjunctionRecipient?

� Question: If P served a Mareva Injunction on a bank to freeze the assets of D, is the bank liable to P for loss suffered as a result of the bank’s inadvertence in permitting funds to be taken out of the frozenaccounts?

Case: Customs and Excise Commissioners v Barclays Bank plc [2005] 1 WLR 2082 (CA) held that a third party, on whom a Mareva Injunction has been served, owes a duty of care to the applicant to take a reasonable care to prevent the dissipation of assets subject to the injunction.

� HL recently overturned this decision and held that no duty of care existed:[2006] UKHL 28;[2006] 2 Lloyd's Rep 327;[2006] 4 All ER 256 (21 June 2006)

8. Video Conference Facilities

� Question: Is a witness’s unwillingness to come to HK because he is a fugitive from justice a good reason for allowing his evidence to be given (and cross-examination conducted) using video conference facilities?

Case: Polanski v Condé Nast Publications Ltd [2005] UKHL 10, [2005] 1 All ER 945, HL

� P was found guilty by a US court of unlawful sexual intercourse with a 13 year old girl.

Fled before sentence and lived in France to avoid extradition.

P sued a French publisher in England for libel and applied later to testify by video-link.

� HL (by 3-2) overruled the CA and held in favour of P

Video Conference Facilities – cont.

� Query: whether the earlier HKCA’s decision in Re Chow Kam Fai David [2004] 2 HKLRD 260 will no longer be valid?

� The HL held that in general the risk of being arrested is a good reason for refusal to testify in court.

Also emphasised that Improvements in technology enable evidence to be tested as adequately if given by VCF as it could be if given in court. and giving evidence by VCF is a ‘readily acceptable alternative’ to giving evidence in person and an ‘entirely satisfactory means of giving evidence’ if there is sufficient reason for departing from the normal rule that witnesses give evidence in person before the court.

� Cf. HKCA proceeded on the basis that the giving of evidence by VCF was an exception rather than the rule and that it would be a matter of privilege accorded to the party and not a matter of right. Emphasised that the solemnity of court proceedings and its atmosphere is something which plays an important role in the way justice is administered.

9. Automatic Stay for Legal Aid

� Question: Does the 42-day stay under s.15(4) of LAO applies to just to the legal aid applicant, or to the defendants in the proceedings?

Case: Leung Shiu Cheong & Another v 868 Ltd & Another, HCA 307/2006, 27 June 2006 (Registrar C Chan in Chambers)

� Facts: Default judgment obtained against D1 after D2 had filed the legal aid application.

� s.15(4): “Where any memorandum is so filed, then, unless otherwise ordered by the court in which the memorandum is filed, all proceedings in the action… shall, by virtue of this section, be stayed…”

Registrar Chan’s decision and comments inLeung Shiu Cheong & Another v 868 Ltd & Another

� “5…. The application for legal aid does not concern the 1st Defendant: why should it be given such advantage?

As a reply, the 1st Defendant simply relies on the construction of subsection 4.

� 6. I accept that the application for legal aid relates to the applicant, the 2nd Defendant in this action only. However, the wording in that subsection (4) is very clear and unambiguous: all proceedings in the action shall be stayed. The stay should cover all proceedings, including the proceeding against the 1st Defendant in this action. If the Plaintiffs find the stay not reasonable, they should have applied for uplift of the stay but they have not done so.”

� Held: judgment irregular.

� I have some reservation about this judgment.

10. Limitation Period for Adverse Possession

� s.7(2) of Limitation Ordinance:

No action shall be brought by any other person to recover any land after the expiration of 12 years from the date on which the right of action accrued to him …

Case: Hong Kong Buddhist Association v Occupiers & Another, HCMP 4108/2003, 8 September 2006, CFI (Deputy Judge Saunders)

� applied the European Court's judgment in J. A. Pye v The United Kingdom (E Ct HR Aplic. No. 44302/02, 15 Nov 2005) and took the view that:

“In the absence of any compensatory provision to ameliorate the rights that the Basic Law requires the Hong Kong Special Administrative Region to protect, I am driven to the conclusion that s 7 of the Limitation Ordinance (i.e. the adverse possession provision), as it presently stands is inconsistent with the Basic Law.”

� It is arguable that his view is just obiter, as he found as a fact that there was no adverse possession in that case.

� Watch out for later development:

the judicial review application by Harvest Good (a subsidiary of Henderson) to be heard early next year.

11. Interlocutory vs. Final Appeals

� For details, see my article in the HK Law Journal 2005 “Interlocutory or Final Orders: Pouring New Wine into Old Wineskins”

� Two-member CA can only hear interlocutory appeal (subject to some exceptions – see s.34B(4) of the High Court Ordinance)

� Composition goes to jurisdiction

� A decision of a two-member CA on an order which is final instead of interlocutory is a nullity

(Shell Hong Kong Ltd v Yeung Wai Man Kiu Yip Co Ltd & Another (2003) 6 HKCFAR 222, [2003] 3 HKLRD 62; andHip Hing Timber Co Ltd v Tang Man Kit and Another [2005] 1 HKLRD 572, CFA)

Interlocutory vs. Final Appeals – cont.

� Under the “application” approach, an order is a final order if, whatever the outcome of the application on which it is made, it is finally determinative of the entire cause or matter, or 'a crucial issue‘ in the case or a point “that goes to the root of the case”

� A determination of the court under Order 14A is generally regarded as a final order as the court only proceeds to hear such an application if satisfied that its determination will have the effect of finally disposing of the cause or matter before it

� As recognised by Lord Millet NPJ, sometimes determining whether an order is a final or interlocutory one “is a notoriously difficult question and an unsatisfactory basis upon which to found the jurisdiction of an appellate court.”

(Hip Hing Timber Co Ltd v Tang Man Kit and Another [2005] 1

HKLRD 572, CFA)

Recent response by CA on Interlocutory vs. Final Appeals

� The 2-member CA in True Rank Holdings Ltd and Another v Lam Ka Chung, William and Others (2004) CACV 38 of 2004 (followed in Kong Wai Tsang v Hospital Authority (2004) CACV 76/2004) sought to avoid the jurisdictional problem being raised in future by volunteering an express statement in its decision:

� “this court has considered whether the appeal was against an interlocutory order and is of the view and so decides that it was against an interlocutory order.”

� It further stated that the provisions of section 14(5) of the High Court Ordinance “appear to have been overlooked” in the CFA decisions.

� Is CA correct?s.14(5): ‘No appeal shall lie from a decision of the Court of Appeal as to whether a judgment or order is, for any purpose connected with an appeal to that court, final or interlocutory’)

� Safer alternative: file a written consent pursuant to section 34B(4)(c) of the High Court Ordinance before the hearing to allow the appeal be heard by a two-member panel

IMPORTANT

The law and procedure on this subject are very specialized and complicated. This article is just a very general outline for reference and cannot be relied upon as legal advice in any individual case. If any advice or assistance is needed, please contact our solicitors.