XCHRX SOL INTERNATIONAL LTD. v. GUANGZHOU DONG JUN REAL ESTATE INTEREST CO. LTD.

1998, No. CT 107

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

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JUDGMENT

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1. There are proceedings in this court under number CT 107/98. The writ was issued on 17 October 1998. The plaintiff's claim is based on an award made on 15 October 1997 in an arbitration (the first arbitration) deciding that the defendant should pay the plaintiff $4,417,882.84 in respect of work on a shopping arcade, and the plaintiff should pay the defendant the sum of $2,847,743.90 for liquidated damages and remedial work and interest, leaving a balance due to the plaintiff of $1,570,138.94. The plaintiff also alleges that in another arbitration (the second arbitration) the defendant raised a counterclaim in respect of the shopping arcade in the same terms as had been made in the first arbitration. In the second arbitration, the defendant paid into court the sum of $1.5 million in satisfaction of the plaintiff's claim after taking into account the counterclaim. The plaintiff accepted this payment. In effect, the plaintiff alleges that the award to the defendant in the first arbitration was satisfied by the payment in and acceptance under the second arbitration so the defendant owes the plaintiff the full award of $4,417,882.84 under the first arbitration. The defendant disputes the plaintiff's claim.

2. On 21 February 1997 - so well before action CT 107/98 was even commenced - the defendant paid into court the sum of $2 million under the first arbitration. This was said to be in satisfaction of the plaintiff's claims after taking account of the defendant's counterclaims. That was its only purpose. It was not paid into court as any form of security for the plaintiff's claims. As may be obvious from the fact that the arbitrator proceeded to make an award, this payment into court was not accepted by the plaintiff.

3. On 19 December 1998, the defendant made an ex parte application to the Registrar for payment of an amount of $1,570,138.94, plus interest, to the plaintiff and the balance of the $2 million to the defendant's solicitors. The application was accompanied by a copy of the award in the first arbitration. This application was granted by the Master on 23 December 1998. The plaintiff learned of it this on 31 December 1998.

4. This application, understandably, was not made in action CT 107/98; it had nothing to do with that action.

5. I now have before me a summons dated 7 January 1999 issued by the plaintiff in action CT 107/98 asking for an order that the Master's order of 23 December 1998 be set aside and that the balance of $2 million be paid back into court. The summons is issued under Order 58, which deals with appeals from the decisions of Masters, not Order 32, rule 6, which provides for the setting aside of orders made ex parte. An application should have been made to the Master to set aside the order made ex parte. The Master would then have had the opportunity of reconsidering the matter in the light of all the material then placed before her.

6. As I have said, the payment into court in question was made in respect of the first arbitration, and it was not accepted. The arbitration was concluded. Order 73, rule 15 provides that, in this event, the money shall not be paid out except in pursuance of an order of the court. This jurisdiction may be exercised by a judge in chambers or a Master.

7. I can think of no reason why the Master should not have allowed the payment out. The arbitration in respect of which it was paid in had been finalised. It had been paid in as an offer of settlement, which had not been accepted. The arbitration proceedings having been concluded, there was no purpose in having the money sitting in court. Indeed, I am not even sure that an order authorising the payment of the whole amount to the defendant's solicitors would not have been legitimate in the circumstances. The amount was not being held by the court as any kind of security for the plaintiff's claim.

8. Mr Bell argues that there is a procedural flaw in the defendant's summons in that it is issued in action CT 107/98, whereas the payment was made in respect of the first arbitration. I am not concerned with technicalities; I am prepared to consider the matter as if the summons were issued in the same matter under which the payment into court was made. But the substance of Mr Bell's complaint would remain; that action CT 107/98 has nothing to do with the payment into court so the Master could not possibly have considered the existence of this action as material to any consideration of whether or not there should be a payment out of the money that had been paid into court in respect of arbitration proceedings that were over.

9. Miss Cheng complains that the application should have been made to the construction judge, not the Master. This may be so, but it is not a point that should affect the result of this application. The Master had jurisdiction.

10. Miss Cheng also says that the Master was told nothing about action CT 107/98. That is so, but, as I have said, I do not regard action CT 107/98 as material to the application. The Master could not possibly have even considered the possibility of refusing the application because of this action. The argument must be that the Master might have concluded that the money should stay in court because the plaintiff may succeed in that action, and that would have been a totally wrong decision.

11. The last point made by Miss Cheng is the only point made on behalf of the plaintiff that goes to the merits. This point is that, if the payment out of court is allowed to stand, by "allowing the defendant to deduct the sum of $1,570,138.94 in respect of the counterclaim in the first arbitration, there is double recovery of the same subject matter in relation to the counterclaim relating to the first arbitration . . . which has been settled under the second arbitration by reason of the payment out.". I have read Miss Cheng's written submission on this point several times. I do not understand it. The defendant did not "deduct the sum of $1,570,138.94 in respect of the counterclaim in the first arbitration". This sum was ordered to be paid to the plaintiff. Even if it was intended to refer to the balance of the $2 million paid into court, there is no "double recovery". What might be said in relation to the balance is that, if the plaintiff is successful in action CT 107/98, the defendant will not be entitled to enforce the award in its favour and set off the $2,847,743.90 against the sum of $4,417,882.84 awarded to the plaintiff. But that has yet to be decided, and the plaintiff is not entitled to say that the money paid into court as satisfaction of the plaintiff's claim in a concluded arbitration should stay there for another purpose; to provide security for the plaintiff's claim if it succeeds.

12. Miss Cheng says that all the plaintiff wants is to maintain the status quo. She says "This will then allow the [plaintiff's] claim in Action No. 107/98 to be resolved and the issue of whether the counterclaim in the first arbitration as adjudicated by the arbitrator has already been resolved by reason of the payment out of court in the second arbitration." It will not, of course, allow anything of the kind. That will happen in any event. What it will allow is the plaintiff's claim to be secured. That was not the purpose of the payment into court, and this court has no right to allow it to be so treated.

13. Miss Cheng argues that, if I grant this application, it "is not suggested that the return of the [money] would amount to a payment into court in Action CT 107/98. It will remain as a payment into court in respect of the first arbitration as set out in the notice of payment into court . . ." If this is the case, one must ask why it should remain as a payment into court in respect of the first arbitration. That arbitration is over, and the findings of the arbitrator are not being challenged. The only possible reason would be that, if the plaintiff is successful, it can ask for payment to it in satisfaction of the judgment debt. That would be a blatant abuse of the reason why the money was paid into court in the first place.

14. Whether this application is treated as one to reconsider the decision made ex parte or as an appeal, the result is the same. The application must fail. The application is dismissed.

15. As to costs, Mr Bell says that they should be on an indemnity basis, and be paid immediately. I am inclined to think that he is right. It seems to me that there is no sound basis for the application. It is not a matter of the exercise of a discretion; there was no proper reason why the money should remain in court. I can also see no reason why the order should be "in any event". The application is brought in action CT 107/98, but there is no real connection between the payment into court and that action. I do not think the defendant should await the outcome of the action before recovering the costs. Accordingly, I make an order nisi that the plaintiff pay the defendant's costs of this application on an indemnity basis and they be recoverable immediately.