INCHCAPE HONG KONG LTD T/A GILMAN BUSINESS SYSTEMS v. PERFORMA (ASIA) LTD

1992, No. A3254

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H E A D N O T E

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    A master does not have jurisdiction as a matter of administrative convenience to transfer an action from the High Court to the District Court when the claim is for liquidated damages within the District Court jurisdiction.

1992 No.A3254

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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BETWEEN

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J U D G M E N T

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1. At the hearing on the 16th July 1992, I allowed the plaintiff's appeal against a decision of Master Yam of the 27th May 1992 when he made an order absolute transferring the proceedings instituted in this action to the District Court. I said that I would give my reasons later and I now proceed to hand down my judgment in court as the appeal involves matters of practice and procedure that are of general interest.

2. On the 16th April 1992, Mr E.T.S. Woolley, a Deputy Registrar of the Supreme Court wrote to the President of the Law Society in the following terms :

                                        "                High Court Actions

within District Court jurisdiction

    In view of the increasing number of cases being commenced in the High Court which are within the jurisdiction of the District Court, it has been decided that, with effect from 27 April 1992, upon the issue of the writ in each such case, such proceedings will be referred to the Practice Master for consideration.

    The Practice Master may, if he considers it appropriate, make an Order Nisi for transfer to the District Court unless good cause is shown by the plaintiff or his solicitor within a set period likely to be 7 days.

    This will, of course, only apply to cases of liquidated damages clearly within the District Court jurisdiction.

    Perhaps you would notify your members accordingly."

A circular setting out details of this practice was sent to members of the Law Society by the Secretary General on the 27th April 1992. No authority was cited for this policy nor, as far as I am aware, was any discussion held with any interested bodies before it was implemented.

3. The plaintiff issued the writ in this action against the defendant on the 12th May 1992 claiming the sum of $21,926 for the price of goods sold and delivered. The claim was therefore well within the limit of the District Court's jurisdiction of $120,000 provided by s.32(2) of the District Court ordinance. Service of the writ was effected by registered post on the 13th May 1992. As no acknowledgement of service was filed by the defendant within the time limited,. the plaintiff would have been entitled to enter judgment before the end of May 1992. However, on the 13th May 1992, Master Yam, of his own volition and without hearing the plaintiff, made an order nisi for the transfer of the action to the District Court and the plaintiff's solicitors were informed by letter of the same date that the order would be made absolute unless good cause is shown within 7 days.

4. In response to this order, the plaintiff's solicitors wrote to the Registrar on the 18th May 1992 complaining about the action that had been taken. The letter reads as follows :

"             H.C. Action No.3254 of 1992

Proposed transfer of proceedings

    We refer to your letter dated 13 May 1992. In your letter, we are requested to 'show good cause within 7 days' for not having the above issued proceedings transferred to the District Court.

    We would like to put forward our views as to the appropriateness of bringing proceedings in the High Court even though the sum claimed is less than HK$120,000.00 in debt collection cases.

    Firstly, we would respectfully submit that the High Court has no power to transfer such proceedings once issued, from the High Court to the District Court save on application by the parties or by consent. There is no provision in the Hong Kong Rules corresponding to Order 107(2) of the Supreme Court Rules which latter power in any event can only be exercised on the summons for directions. Even if such a power existed, it should not be exercised where the Plaintiff intends if necessary to seek relief under Order 14 (see order 14 rule 7. page 166 of the Supreme Court practice).

    Secondly, whereas the High Court procedure requires the Defendant to file an acknowledgement and a defence, the district court rules provide for a defence only. Experience has shown that defence are more likely to be filed in the District Court,' where they are more difficult to dispose of (VCJ Action No.2760 of 1980 wherein His Honour Judge Jones (as he then was) ruled that the summary judgment procedure was not applicable to the District Court) except by procedural devices such as judgment in default of further and better particulars.

    The automatic strike-out procedure in the District Court discourages any negotiation being attempted given the limited time between the service of the writ and the setting down of the matter for trial.

    Finally, experience has shown that the most frequent applications made in the cases of debt collection are :

(a) Applications by the Plaintiffs to strike out a defence as showing no good ground in. law.

(b) Applications by the Defendants either contained in the acknowledgment or by summons, seeking instalment payments.

(c) Applications by the Plaintiff for further relief, e.g. garnishee, charging orders and prohibition orders.

    In cases as such, the High Court is actually a cheaper forum not only for our clientsbut for a substantial number of Defendants as well.

     For all the foregoing reasons, it is our view that it is quite appropriate for all our debt collection cases to be brought and pursued in the Supreme Court of Hong Kong instead of the District Court."

5. An oral hearing subsequently took place before Master Yam on the 27th May 1992 when Mr Wintle on behalf of the plaintiff, sought to have the order nisi discharged and repeated the submissions that were made in the letter of the 18th May 1992. However, the master declined to reverse his decision and made the order nisi absolute. In support of his ruling the master adverted to Fairview Park Property Management Ltd v. Lee Yun-yau [1988) 1 HKLR 290 where Hunter J.A. at 293 in considering the matter of public policy with regard to costs said :

"The basic policy is that it is in the public interest for the court to control costs. This control is achieved and maintained first by the exercise of the court's discretion in relation to orders for costs, and secondly by the taxation of those costs in accordance with the scale selected by the court."

There can be no doubt that this statement is correct provided that the court is acting within its jurisdiction.

6. The power to transfer an action from the High Court to the District Court is governed by s.40 of the District Court ordinance which provides :

"     Where an action or matter commenced in the High Court is within the jurisdiction of the Court or has been brought within such jurisdiction by payment, admitted set-off or otherwise, the High Court or a judge thereof may, if it or he thinks fit, order the transfer of such action or matter to the Court and thereupon the Court shall have jurisdiction and authority to proceed therein."

A master has jurisdiction to make an order for transfer under 0.32, r.11 of the Rules of the Supreme Court.

7. However, Mr Ng, counsel who appeared for the plaintiff upon this appeal contended that irrespective of any other argument the decision made by the master was in any event premature for such an order cannot be made until the hearing of the summons for directions having regard to 0.25, r.3(c), of the Rules of the Supreme Court which provides :

"3.     On the hearing of the summons for directions the Court shall in particular consider, if necessary of its own motion, whether any order should be made or direction given in the exercise of the powers conferred by any of the following provisions, that is to say

(c) section 40 of the District Court Ordinance."

8. My attention was drawn by Mr Ng to the position in England for the transfer of proceedings from the High Court to the County Court which is governed by s.40 of the County Courts Act 1984. Section 40 reads :-

"40. Transfer of proceedings to County Court

    (1) At any stage in any proceedings to which this section applies, the High Court may, in accordance with rules of the Supreme Court, either of its own motion or on the application of any party to the proceedings, order the transfer of the whole or any part of the proceedings to a county court if

    (a) the parties consent to the transfer; or

    (b) the High Court is satisfied

(i) that, after allowance has been made for any payment, set-off or other amount admitted to be due, the amount remaining in dispute in respect of the claim is within the monetary limit of the jurisdiction of the county court; or

(ii) that the amount recoverable in respect of the claim is likely to be within the monetary limit of the jurisdiction of the county court; ......

…………."

In considering whether a transfer should be made to the County Court, the court is required to take into account the provisions of 0.107, r.2(1) of the Rules of the Supreme Court which reads :

"          The court shall not order the transfer of any proceedings to a county court unless the parties have either (a) had an opportunity of being heard on the issue or (b) consented to such an order."

There is, however, no equivalent to this order in the Hong Kong rules. Nevertheless in the absence of this provision, it is contrary to natural justice to make an order without first hearing the parties.

9. The most important advantage to a plaintiff who institutes proceedings in the High Court for a liquidated claim is the summary procedure for judgment under 0.14 which is not available in the District Court, see Diners Club International (Hong Kong) Limited v. Wilson Cheung Wing Yim and Another, (unreported) VCJ 4760/1980, and the Court of Appeal decision The Kwangtung Provincial Bank v. Tang Chik Leung, (unreported) Civil Appeal No.2/1985.

10. In respect of the 0.14 procedure, Mr Ng cited Smith v. Hurlev [1884] WN 99 where Field J. upheld an appeal from a master who had adjourned an application by the defendant to transfer an action to the County Court until after the hearing of the plaintiff's summons for judgment under 0.14 which he had shown he had an honest intention to pursue.

11. There is no doubt that the master had no jurisdiction to make the order for the transfer of the proceedings to the District Court in what can only be described as an arbitrary manner for administrative convenience. That jurisdiction can only be exercised in Hong Kong in the absence of an earlier application by any of the parties, at the stage of the hearing of the summons for directions, and then only after the parties have been given an opportunity to make representations. If, of course, proceedings are instituted in the High Court when they should have been commenced in the District Court, the plaintiff can be penalised in costs.

12. The policy adopted for which there was no lawful justification has resulted in the plaintiff being deprived of his legal remedy to enter judgment for almost two months.

13. For the reasons that I have given, I allowed the plaintiff's appeal and set aside the order made by the master.