CEREBE DESIGN INTERNATIONAL LTD. v. KINCHENG BANKING CORPORATION

DCCJ 16284/2000

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 16284 OF 2000

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Reason for Decision

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1. This is an appeal against the decision of Master K.W. Wong given on 16 October 2002 whereby he ordered that in default of complying with the order made by Master C.K. Chan on 8 March 2002, the Plaintiff's claim be dismissed with costs to the Defendant. The order made by Master C. K. Chan on 8 March 2002 was that unless the Plaintiff shall comply with the order of HH Judge Carlson dated 27 July 2001 within 14 days from the date of service of the order, the Plaintiff's claim be dismissed. HH Judge Carlson's order was an order for security for costs to be paid by the Plaintiff.

2. It will be helpful at this stage to set out the chronology of events in the case.

Chronology of proceedings

3. In or about May 1999, Treasure Web Incorporated, a Bahamas registered company, applied to the Defendant to open a Hong Kong current account and a multi-currency savings account. But finally

on 9 July 1999 the Defendant declined to offer Treasure Web any banking facilities. Treasure Web then sued the Defendant in these proceedings in the Court of First Instance, alleging that by virtue of the Defendant's negligence, misrepresentation and breach of agreement, culminating in the Defendant's refusal to offer banking facilities, Treasure Web had suffered losses in the sum of $129,569.20.

4. The claim was denied by the Defendant and by virtue of the fact that Treasure Web was a foreign Plaintiff, an application for security for costs was made by the Defendant to Stone J, who ordered that Treasure Web, the then Plaintiff, should bring $50,000 into court. Treasure Web then amended the name of the Plaintiff by substituting Cerebe Design International Ltd, the present Plaintiff, for Treasure Web and the proceedings then continued. No money was paid for the security. As a result of a change of jurisdiction of the District Court, the proceedings were transferred from the Court of First Instance to the District Court.

5. In the District Court, the Defendant applied for security for costs on the ground that the Plaintiff's representative, Mr Elijah Saatori,was in effect running both companies (former Plaintiff and present Plaintiff) and that the present Plaintiff was a company with no financial standing and it would be unable to pay the costs of the Defendant if the Plaintiff's action failed. On 12 March 2001, HH Judge Carlson ordered the Plaintiff to provide security for the Defendant's costs by paying into court a sum of $83,000 within 3 month and the proceedings shall be stayed pending the provision of such security for costs.

6. The Plaintiff sought to file security in terms of a promissory note which did not satisfy the terms of that ordered by HH Judge Carlson.

7. On 13 June 2001, the Defendant took out a summons applying to dismiss the Plaintiff's claim on ground of default of payment of security by the Plaintiff. The summons came before Registrar Au-Yeung on 20 June 2001 who, upon hearing both parties, made the first Unless Order that unless by 4 July 2001 the Plaintiff provide security for costs pursuant to the order of HH Judge Carlson on 12 March 2001, the Plaintiff's action be dismissed with costs to the Defendant. On the application of the Plaintiff by way of summons dated 5 July 2001, Master Yu on 18 July, extended the time for payment to 25 July 2001, or the Plaintiff's action shall be dismissed with costs to the Defendant. On 27 July 2001, the Plaintiff applied to HH Judge Carlson for extension of time for payment and the judge extended the time to 15 October 2001. No payment was then made.

8. There was then an application by the Defendant to change the title of the Defendant to the "Bank of China (Hong Kong ) Limited in view of the merger of a number of banks into the Bank of China (Hong Kong) Limited by Ordinance.

9. The Defendant then took out a summons dated 21 February 2002 applying to dismiss the Plaintiff's claim for default of the Plaintiff in complying with the 27 July 2001 order of Judge Carlson. The application was heard by Master C. K. Chan on 8 March 2002 in the absence of the Plaintiff. Upon being satisfied of the service, Master C. K. Chan ordered that unless the Plaintiff shall comply with the order of HH Judge Carlson dated 27 July 2001 within 14 days from date of service of the order, the Plaintiff's claim shall be dismissed with costs to the Defendant. No security was then paid by the Plaintiff.

10. Then came the summons applied by the Defendant dated 19 April 2002 applying to dismiss the Plaintiff's claim for default in complying with Master C. K. Chan's order dated 8 March 2002. The application was heard on 15 May 2002 by Master C. K. Chan who granted the application in the absence of the Plaintiff and dismissed the claim with costs against the Plaintiff.

11. On 30 May 2002, the Plaintiff applied to set aside the order made on 15 May 2002. On 5 June 2002, upon hearing both parties, Master C. K. Chan dismissed the Plaintiff's application.

12. The Plaintiff then applied for appeal against the order of Master C. K. Chan given on 5 June 2002. On 13 August 2002, the appeal was heard by HH Judge C. B. Chan, who allowed the appeal on the ground that the service of the summons dated 19 April 2001 served on the Plaintiff for the hearing on 15 May 2002 was irregular. The order made on 15 May 2002 was therefore set aside and the summons dated 19 April 2002 taken out by the Defendant applying to dismiss the claim of the Plaintiff was ordered to be reheard.

13. The summons dated 19 April 2002 applied by the Defendant to dismiss the Plaintiff's claim was then re-heard by Master K. W. Wong on 16 October 2002. Again the Plaintiff was absent. Master K. W. Wong, having been satisfied that the Plaintiff was properly served with the notice of hearing, dismissed the Plaintiff's claim for his default in complying with Master C. K. Chan's Unless Order made on 8 March 2002.

14. The Plaintiff then applied to appeal against Master K. W. Wong's order. The appeal was heard on 2 December 2002 before Deputy Judge So. At the hearing, Plaintiff was again absent. When he was contacted by his phone, he said he was mistaken of the date. The application was then adjourned, and is now heard by me.

15. An appeal against the Master is by way of re-hearing of the application.

16. The Plaintiff's representative, Mr Saatori, said he had a bad headache the night before the day of hearing before Master K. W. Wong. So he was not able to attend the hearing. For the hearing of the appeal before Deputy Judge So, he was mistaken of the date. There was no suggestion by Mr Saatori that he was unaware of the date of these two hearings.

Plaintiff's argument

17. Mr Saatori submitted that the action had not come to trial yet and it should not be dismissed. He should have his day in court. He complained that HH Judge Carlson was wrong in making the order for security for costs and he was therefore blocked from having his day for trial. He stated that the Defendant was abusing the court process and barred him from taking this action against it.

Defendant's argument

18. The Defendant's solicitor submitted that the Plaintiff had been given more than enough time to pay into court the security for costs ordered by HH Judge Carlson on 12 March 2001. And the Plaintiff has failed and still fails to comply with the order.

Regular Judgment

19. At the hearing before Master K. W. Wong, the Plaintiff was absent. However on the affirmation of the Plaintiff, the service of the notice of hearing had been duly effected by post to the GPO box given by the Plaintiff for purpose of service and to the Plaintiff's registered address. The Plaintiff was aware of the date of hearing. The service of the summons on the Plaintiff for the hearing before Master K. W. Wong is therefore regular.

Power to dismiss claim

20. I now deal with the merits in this application. The power to dismiss an action for default by a Plaintiff in complying with an order for security derives from the inherent jurisdiction of the court. It has power to dismiss the action where it is satisfied that (i) the action is not being pursued with due diligence, (ii) there is no reasonable prospect that the security will be paid, and (iii) the time limit prescribed by the court for the giving of security has been disregarded (Speed Up Holdings Limited v Gough[1986] FSR 330; Multi Sky Ltd v Hong Kong Chinese Insurance Co Ltd [1994] 1 HKC 108).

21. Here the time limit prescribed by the order of Judge Carlson made on 12 March 2001 was 3 months. Master Au Yeung made the first unless order on 20 June 2001. The Plaintiff has been given 4 opportunities for extension of the time for it to comply with the order to pay security. Master C. K. Chan made the last Unless Order on 8 March 2002 for the Plaintiff to pay the security within 14 days. The time limit has been exceeded for a long time.

22. At this hearing, the Plaintiff did not offer to pay the security. Mr Saatori said the Plaintiff had no cash. Although the company had some assets, for his principle he would not sell them. It is therefore apparent that the security ordered will not be paid.

23. The circumstances in this case indicate clearly a lack of diligence on the part of the Plaintiff in pursuing the action. The conditions for dismissing the claim for failure to comply with an order to provide security for costs are satisfied.

24. The court also has power to strike out proceedings following a party's failure to comply with an Unless Order( Hytec Information Systems Ltd v Coventry City Council [1997] 1 WLR 1666 CA(Eng.)).

25. An Unless Order is the party's last chance to put its case in order. It is an order of last resort, not made unless there was a history of failure to comply with other orders. A failure to comply would ordinarily result in the sanction being imposed. The sanction is necessary in the interest of the administration of justice unless the most compelling arguments were advanced to exonerate the failure. The Unless Order of Master C. K. Chan dated 8 March 2002 still stands and the Plaintiff is still in default.

26. The present proceedings against the Defendant were initiated in August 1999. It has been suspended in the air for more than 3 year. There has been repeated failure to comply with HH Judge Carlson's order to pay security and the Masters' Unless Orders. Before this court there is simply no material on which the court can exercise discretion in favour of the Plaintiff. Given the length of time for which the Plaintiff's claim had been on foot, the Defendant had been prejudiced by the delay that had occurred, the continuing delay and the wasted costs, Master K. W. Wong was entirely entitled to dismiss the claim. In my judgment, his decision cannot be faulted and is not open to criticism.

27. Much grievances have been expressed by Mr Saatori at this hearing about the order for security for costs. He also indicated that he would like to appeal against that order. While I can understand his feeling, the order for security for costs still stands and I have no jurisdiction to interfere with that order. Whether he would appeal against that order and/or my order is entirely a matter for him.

Order

28. There is no merit in this appeal. I would therefore dismiss the application with costs to the Defendant.