SECRETARY FOR JUSTICE for and on behalf of the COMMISSIONER OF POLICE v. FIRST SUCCESS (HK) LTD AND ANOTHER

HCMP 1196/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1196 OF 2006

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REASONS FOR DECISION

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1. At the last hearing, just before pronouncing the order for provision of security, it occurred to me that the parties have not addressed me on what I call the principles of a counterclaiming defendant: para 23/____ of the Hong Kong Civil Procedure 2007.  I adjourned the matter for further written submissions, which the parties gave and which I have considered.

2. I was satisfied that, in theory, an order for security for costs can be made against the 2^nd Claimant who could be regarded as an attacker within the meaning of Brand Farrar Buxham LLP v. Samuel Rozenbaum Diamond Ltd and another [2003] 1 HKLRD 600.  I would add that I had equally found the 1^st Claimant to be an attacker.

3. Having read the further submission of Mr. Li for the 1^st Claimant, I am satisfied that, in theory, an order for security for costs against the 2^nd Claimant can be made so that if the 2^nd Claimant does not comply, he will be barred from pursuing his defence to the 1^st Claimant’s claim: Atkin’s Court Forms.

4. However, what I have to consider is whether the principle of a counterclaiming defendant applies to the 2^nd Claimant and what is just and fair to order in the circumstances.

5. There is, of course, no “counterclaim” as such in the present case.  The only difference between this interpleader application and an ordinary action is that in respect of the former, the relief is limited to an order for release of the subject matter to the claimant entitled whereas in the latter, the reliefs each party can pray for is at large. 

6. In the present action, both claimants are claiming the same subject matter.  The success of one claimant necessarily means the failure of the other.  If the interpleader relief had been sought in an ordinary action, one can reasonably anticipate that whichever claimant was the plaintiff, he would face a defence and counterclaim from the other claimant.  That counterclaim would be premised on the same facts as the defence.  If security were ordered against a claimant on terms that if he did not provide security within time, he would be barred from being heard in support of his or her claim, unless the court otherwise orders.  That would at the same time mean that the claim of the other party would succeed without going affording the claimant an opportunity to defend.  To apply such principles in the present case would be grossly unfair since neither claimant can be said to have a stronger case than the other.  In my view the principles of a counterclaiming defendant equally applies in the present case.  There is nothing in the claim of the 2^nd Claimant which cannot be put forth in defence of the 1^st Claimant’s claim.

7. Mr. Li has referred me to a number of authorities, the principles of which are not controversial.  No single principle has precedence over another.  The ultimate question is what is just and fair in all the circumstances: The Silver Fur [1980] 1 Ll Rep.

8. The Silver Fur case is distinguishable.  Both parties were keen to get on their respective claims.  Both were resident out of jurisdiction and it did not matter who started the proceedings first.  The dispute was such that the success of one would mean the failure of the other.  The Court of Appeal held that establishing that the same issues are likely to arise on both the claim and counterclaim was a decisive factor.  It was an important factor but not so decisive as to exclude the exercise of discretion.

9. In Melin v. Dumont, the Court was concerned with the enforcement of an order for security already made against one claimant in interpleader proceeding.  The case did not set out the circumstances giving rise to the interpleader proceeding.  Whilst I have no reason to disagree with the exercise of judge’s power in that case, I do not find that case useful in determining whether or not an order for security should be made.

10. Mr. Li has referred to paragraph 539 of The Laws of New Zealand ___ edition.  It is stated therein that “where such an order [for security] is made and is not obeyed, the claimant is debarred from being heard in support of his or her claim, unless the Judge otherwise orders.”  It appears to me that this is premised on statute which is not available in Hong Kong.

11. Mr. Li has also referred to Form No. 284 of Atkin’s Court Forms, ___ edition.  It appears to me from the contents that this form is intended for the situation where only the claimant is an attacker as opposed to the enforcement officer (who appears to be in the position of a bailiff).  In any case, it does not assist me in resolution of the issue now before me.

12. Having considered the further submissions and authorities, I find that it would not have been fair or just to make any order for security as I have indicated.  In the premises, I revoke the previous order and dismiss the application for security for costs against the 2^nd Claimant.

13. Costs should follow the event.  I note that the 1^st Claimant has good reason to think that it should take out this application and that the 2^nd Claimant has good grounds to contest.  The principle of a counterlciaming defendant was a point of law raised by me on my own volition and neither party has addressed its mind to it before the last hearing.  I consider it fair not to make any order for costs arising subsequent to the last hearing.  In the premises, I make an order nisi that the 2^nd Claimant should have costs of the application up to and including the hearing on 11 January 2007 in any event, to be taxed if not agreed.  There will be no order as to costs of and occasioned by the adjournment on 11 January 2007.