XCHRX HOI SING CONSTRUCTION CO. LTD. (IN LIQUIDATION) v. ITC CORPORATION LTD.

HCA 11433/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 11433 OF 1998

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J U D G M E N T

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Godfrey, J.A. :

1. The defendant here has advanced an argument for the trial of preliminary issues relating to its alleged right of set-off, and as to the quantum of that set-off, against the plaintiff's claim in the action. The plaintiff is a company in liquidation (by far the largest creditor in the liquidation is the defendant itself). The plaintiff, by its liquidator, has advanced an argument against the issues being tried as preliminary issues.

2. In my judgment, although there is force in the defendant's argument, I ought not to order trial of preliminary issues at this stage. First, the formulation of the issues (in the defendant's notice for directions) is far too uncertain to enable me to make such an order today. Second, I am of the opinion that I should attach greater weight to the submissions of the liquidator (representing what I may call the independent creditors, although the value of their claims are much less) who is not persuaded that the trial of these issues as preliminary issues would be a just and convenient course. Third, I consider that the dispute as to the size of the claim in respect of which the alleged set-off may be made (and in particular, the dispute as to interest which apparently has arisen) would best be determined not by directing a trial of preliminary issues but in the conventional way, by the rejection by the liquidator, if so advised, of the defendant's proof of debt, or part of it, and for the dispute to be determined in the course of the liquidation. Fourth, although I accept that there would, or might, be advantages in dealing with these issues as preliminary issues, these advantages are not so clear-cut as to mandate the orders for which the defendant asks. The circularity of the problems here ((1) if no set-off; guarantee irrelevant; and (2) if no guarantee; set-off irrelevant) makes it difficult for the defendant to demonstrate that the balance of justice and convenience comes down sufficiently clearly in favour of ordering the trial of these issues as preliminary issues. Lastly, the further question of the guarantee is itself a matter needing further clarification. The parties may wish to consider whether the issues as to whether the guarantee mentioned in para. 8 of the statement of claim was in fact given by the defendant to the plaintiff and if so, what were its terms might be referred to an inquiry. It does appear that these questions, of guarantee and set-off, do comprise the whole of the matter the subject of the action, and the court would not be unreceptive to proposals which might assist to reduce the costs and delay inevitable if the action goes to a trial.

3. But, as for the appeal before me today, from the order of the master in effect refusing to direct trial of any preliminary issues, I propose to dismiss it, with costs.