BRAND FARRAR BUXBAUM LLP v. SAMUEL-ROZENBAUM DIAMOND LTD

HCA5191/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 5191 OF 1998

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REASONS FOR DECISION

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1. This will be a short judgment. This is an appeal against the decision of a Master to grant security for costs against the plaintiff in respect of the plaintiff's application by summons of 21 July 2003 (the execution summons) for the oral examination of one Ilan Samuel.

2. First, a brief background. The plaintiff is, and has at all material times been, a legal practice based and carrying on business in the USA. Currently, it is under restructuring. At a material time it was licensed to operate in Hong Kong and did so. Nowadays it no longer practises law in Hong Kong; its presence here is limited to collecting unpaid fees from former clients.

3. In its former capacity to practise law in Hong Kong and represent clients the plaintiff received instructions primarily, as I read, from Samuel, to a lesser extent from someone called Asher Rozenbaum, to undertake the recovery of diamonds seized by the government of the PRC in China. Samuel represented that the owner of the diamonds was the first-named defendant, SRDL, a company registered in Israel of which he was a director.

4. As a result of this representation, the plaintiff proceeded to act for SRDL and to incur costs. It also did so for the second-named defendant but I am not concerned about that.

5. In the fullness of time the plaintiff demanded payment of its fees. When nothing was forthcoming, it issued a writ dated 1 April 1998. The proceedings were defended.

6. During the initial stages Samuel, by affidavit of 17 November 1998, deposed to being a director of SRDL and having the authority to make this affidavit on its behalf. On 18 March 2000, default judgment was entered against both defendants. On 28 March 2002 a Master ordered examination of Samuel (the examination order) in his capacity as director of both judgment debtors.

7. By summons of 26 March 2003 Samuel took out a summons to set aside the examination order. In the supporting affidavit he deposed:

"I never was and am not an officer of the 1st judgment debtor, that is, SRDL, because the 1st judgment debtor never was and is not a body corporate."

8. The examination order was set aside on 7 July 2003. On 21 July 2003 the plaintiff issued the execution summons referred to in the opening sentence of this judgment. On 25 July 2003, Samuel issued a summons for security of costs which gave rise to the order of the Master made on 11 November 2003 from which the plaintiff now appeals.

9. Three remaining events complete the history. On 22 September 2003, Samuel was being examined in his capacity of director of the second-named judgment debtor. He said under oath:

"SRDL has never been in existence."

10. On 11 October 2003, the plaintiff issued a summons to substitute Samuel for SRDL or add him as a defendant (the substitution summons).

11. And by order of 25 October 2003, the Master ordered the substitution summons and execution summons to be heard together.

12. The Master ordered security for costs under order 23 of rule 1 because, as he found, the plaintiff is ordinarily resident out of the jurisdiction and in exercise of his discretion. The order now being appealed, procedurally this amounts to a rehearing.

13. Like the Master, I am satisfied the plaintiff is ordinarily resident out of the jurisdiction. I am now required to exercise my discretion de novo.

14. Order 23, rule 1 states that provided that, as in this case, the plaintiff is ordinarily out of the jurisdiction:

"then if, having regard to all the circumstances of the case, the court thinks it just to do so, it may order the plaintiff to give such security for the defendant's costs of the action or other proceeding as it thinks just."

15. What I believe to be a significant feature of this long, drawn-out saga is that fees were incurred, were properly due, and for which judgment by default was entered.

16. The instructions were forthcoming from Samuel. He had represented himself to be a director of SRDL. If there is any dispute about this, common-sense indicates that it could not have been otherwise, for there can be no other explanation for the plaintiff's belief that it was acting for a body corporate of which Samuel was an officer.

17. Samuel perjured himself when, in his affidavit of 17 November 1998, he deposed to being a director of SRDL. The truth did not emerge until his affidavit of 26 March 2003 and statement under oath of 22 September 2003 that he was not, and never had been, a director of SRDL and that SRDL has never in fact existed.

18. In light of this, it seems to me that it would be a travesty if the plaintiff should have to be penalised in having to meet an order for security for costs before being entitled to remedy a mistake deliberately caused by Samuel.

19. As another factor of lesser importance, but significant nevertheless, is that there is evidence before me that the plaintiff is hard-up and that to provide security in the amount originally fixed by the Master or any other substantive figure would hinder its pursuit in the collection of the judgment debt.

20. In the circumstances, I allow the appeal and quash the Master's order and dismiss the application for security for costs.

(Submission on costs)

21. Costs here and below to the plaintiff, taxed if not agreed, payable on determination of the substitution and execution summonses. We'll have to give them their formal name in the order that's to be sealed, but you know what I mean. All right? I think that concludes everything.