MARCUS PRAETORIUS AND OTHERS v. HEAD ARCHITECTURE AND DESIGN LTD

HCA 1057/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1057 OF 2013

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BETWEEN
MARCUS PRAETORIUS 1st Plaintiff
JULIA ANNE STEPHENSON 2nd Plaintiff
CERATEC INTERNATIONAL (HK) LIMITED 3rd Plaintiff
CERATEC HOLDINGS LIMITED 4th Plaintiff
and
HEAD ARCHITECTURE AND DESIGN LIMITED Defendant
and
BARRY DARREN WILSON trading as INITIATIVES Third Party

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Before: Deputy High Court Judge Le Pichon in Chambers

Dates of Written Submissions: 12, 20 and 29 September 2016
Date of Decision: 6 October 2016

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D E C I S I O N

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1. This is Ceratec International (HK) Ltd (“International”) the 3rd plaintiff’s application for leave to appeal from this court’s dismissal of its appeal from an order of Master Chow dated 26 October2015 (“the Chow order”) requiring International and Ceratec Holdings Ltd, the 4th plaintiff (“Holdings”) to provide security of $700,000 to the 1st defendant (“Head”).

2. On 9 July 2016, Au‑Yeung J ordered that the leave application be dealt with on the papers. Accordingly the hearing fixed for29 September 2016 was vacated.

3. The factual background is fully set out in §§1 – 10 of the Reasons for Decision dated 13 May 2016 to which reference shouldbe made.

4. In dismissing the appeal, this court held that (1) the liability of International and Holdings under the Chow order was joint andseveral; (2) there was credible evidence of International’s inability to pay; (3) the sanctioned payment made should not have beendisclosed; (4) as a general rule, a sanctioned payment should not be disclosed even where there is an admission of liability (asin KJM Industries Ltd v JPM Resources [2005] 4 HKC 100) unless the payment in overtopped the amount of security that otherwise would have been ordered; (5) it would be wrong to equate apayment in by a party with admission of up to the amount paid in; and (6) in any event, if the sanctioned payment was a considerationto be taken into account, it would not result in a different outcome.

Whether leave application made out of time

5. Head raised a jurisdictional objection.

6. On 9 May 2016, the day of the Decision, International received notice of a legal aid application made by the third party Barry DarrenWilson trading as Initiatives (“Wilson”). The present summons was taken out on 29 June 2016, more than seven weeks after theDecision. Head submitted that as the leave summons was not taken out within the 14‑day period pursuant to the rules, the applicationis out of time and the court has no jurisdiction to entertain it.

7. International’s position is that the legal aid notification led to the 42‑day automatic stay pursuant to section 15 of the Legal Aid Ordinance (Cap 91) such that the 14‑day period to apply for leave to appeal did not commence until the expiration of the 42‑day periodon 20 June 2016. Accordingly the leave application was made within time.

8. It is necessary to set out a rather complicated and unusual procedural history so far as it relates to Wilson. The following isa chronological account:

(1) On 14 June 2013, the plaintiffs issued a writ naming Wilson as the 2nd defendant.

(2) On 25 June 2014, Wilson acknowledged service but without prejudice to his rights to dispute the validity and service of the writwhich were expressly reserved.

(3) On 5 September 2014, Wilson took out a summons for an order declaring that the writ had not been duly served on him.

(4) Pending the determination of Wilson’s summons under (3), on 28 October 2014, Head served a contribution notice on Wilson pursuantto Order 16, rule 8 of the Rules of the High Court.

(5) On 10 November 2014 Head issued a summons for directions on the contribution proceedings.

(6) On 27 May 2015 on Wilson’s summons under (3) above, Master Hui made an order declaring that the writ had not been duly servedon Wilson.

(7) On 2 October 2015, Master Hui gave directions in relation to the contribution proceedings.

(8) On 8 October 2015 Head applied for leave to issue a third party notice against Wilson “to supersede” its contribution noticedated 28 October 2014.

(9) On 27 November 2015 Master Ho made a consent order that leave be given to Head to issue a third party notice on Wilson.

(10) On 30 November 2015 Head issued a third party notice on Wilson.

(11) On 5 May 2016, a legal aid memorandum dated 4 May 2016 was filed in court of Wilson’s application but it seems copies werenot served on the parties till 9 May 2016.

9. Head’s argument is based on a distinction between the main action and a third party action. The submission is that the only actionto which Wilson was and is a party is the third party action and not the main action.

10. The writ issued well over three years ago has not been served on Wilson. Its validity has never been extended by an order of thecourt. In the rather unusual circumstances of this case Wilson, while a third party in the third party action between Head and himself,is not a party in the main action.

11. I accept that section 15 of the Legal Aid Ordinance (“the Ordinance”) should be liberally interpreted. Nevertheless, on therather unusual facts of this case, it is difficult to see the automatic stay under the Ordinance and regulations made under it shouldapply when Wilson was not involved in the security for costs application proceedings.

12. If the rationale of an automatic stay is to do justice between the parties to the action, it is difficult to see how Internationalcould be said to be affected by Wilson’s legal aid application which has no bearing on and does not impinge upon or affect thesecurity for costs application and subsequent proceedings flowing from that order. Any automatic stay to which Wilson is entitledas a result of his legal aid application has no impact at all on the security for costs proceedings.

13. Accordingly, there appears to be merit in Head’s submissions that the application was made out of time.

14. But if I am wrong and the court does have jurisdiction to entertain International’s application, as will become apparent, it willmake no difference to the outcome.

The grounds of appeal

15. The arguments put forward essentially repeat those already made on the last occasion. I have reconsidered the Reasons but see noreasonnot to stand by them.

16. I do not accept that the law concerning relevance of sanctioned payments in the context of a security for costs application requiresclarification by the Court of Appeal. In any event, that matter is best decided by the Court of Appeal itself.

17. The threshold point does not raise any question of law. Rather, it turns on the weight to be attached to the evidence before thecourt.

18. Finally, it is said that the Chow order breaches natural justice as it could potentially affect the 1st and 2nd plaintiffs who were not parties to the security for costs application when there is an issue for trial as to whether the 1st plaintiff has effectively assigned his causes of action to Holdings.

19. In arguing that the Chow order should be interpreted as imposing separate and not joint and several liability, International highlightedthe fact that if liability were joint and several, then should the security ordered not be paid, the entire action would be dismissedeven as against the 1st and 2nd plaintiffs who were not parties to the security for costs application. If natural justice had been a concern, International wouldhave asked for a variation of the Chow order to limit its scope of application to International and Holdings. That it never did.

20. As a practical matter, it is inconceivable that the 1st and 2nd plaintiffs would want to proceed with the action when they have no legal title to the site, that having been transferred to Holdingson 10 October 2008 and according to §§28 and 31 of the Statement of Claim, on 27 May 2013 the 1st plaintiff also assigned to Holdings all rights of action etc and all claims against Head in connection with the unauthorised buildingworks.

21. It will be seen that the point now raised is irrelevant and academic: the requisite security has been paid and Holdings has notappealed. In those circumstances, it is difficult to understand how the 1st and 2nd plaintiffs will be adversely affected.

Conclusion

22. For those reasons, I see no possible basis for granting leave. Accordingly, leave to appeal is refused and International’s applicationdismissed with costs to Head.

(Doreen Le Pichon)
Deputy High Court Judge

Written Submissions by Mr Julian Cohen, instructed by Haley Ho & Partners, for the 3rd plaintiff

Written Submissions by Mr Calvin Cheuk, instructed by Simmons & Simmons, for the defendant