DAYS INTERNATIONAL LIMITED v.NATHALAL KALIDAS MODI AND ANOTHER

IN THE HIGH COURT OF JUSTICE

HONG KONG

___________

BETWEEN

__________

JUDGMENT

__________

1. This is an appeal from a decision of the learned Master who granted conditional leave to the 2nd defendant to defend. Happily I am able to say that I need not dwell on the facts.

2. Solicitor for the 2nd defendant raises a three-fold complaint. First, it is proposed to be argued that the 2nd defendant ought to have been granted unconditional leave on the merits. In particular, it is proposed to submit that the 2nd defendant's defence is not one which is shadowy or the presentation of which has aroused suspicion. It is also proposed to argue that the learned Master, on an 0.14 application, erred in law in taking into account the feasibility of providing for security of the plaintiff's costs in the action. Both legal advisers for the plaintiff and the 2nd defendant have been more than candid and fair. Solicitor for the plaintiff, Mr. Large, conceded that the learned Master might have harboured such parity of reasoning in reaching his decision for imposing a condition to letting the 2nd defendant into defending this action. Concession so made by Mr. Large for the plaintiff cannot be said to be wholly clear and unambiguous; hence, I would have found it a little, to say the least, uncomfortable to entertain, in the instant appeal, that particular proposed ground on these general statements of both solicitors. Matters, if that particular ground were to be pursued and prosecuted, would have to be referred back to the learned Master for his precise rationale. It is necessary to do so as the very proposed ground itself is founded on his alleged application of wrong principle, on the basis of which conditional leave was allegedly granted, though it must be recognised that on an 0,14 appeal, the hearing is de novo.

3. It is also proposed to argue on the 2nd defendant's assertion, as now much better supported by her overseas legal adviser and further reference to some of the Exchange Control Regulations, of she not being able to meet any monetary condition imposed. Mr. Fraser for the 2nd defendant has been cautious enough to explain that he, himself, has not examined the relevant Exchange Control Regulations and is therefore not in a position, as an officer of the Court, to give his own view as to whether it would indeed be impossible for the 2nd defendant lawfully to arrange for any payment to be made in compliance with the order granting her conditional leave to defend. Mr. Fraser, therefore, rests content on the assertion of the 2nd defendant as corroborated by her overseas legal adviser's opinion.

4. The matter really boils down to this: it is claimed by the 2nd defendant that she is unable to meet any condition for a payment-in imposed in the 0.14 application. A defendant's inability to provide money by way of security in the sense as understood under and in the context of 0.14 has been examined and decided by the House of Lords in M. V. Yorke Motors v. Edwards⁽¹⁾. What has been decided is that it would be a wrongful exercise of discretion to order a sum of money by way of conditional leave under 0.14, the payment of which the defendant would never be able to make, "since that would be tantamount to giving judgment for the plaintiff notwithstanding the court's opinion that there is an issue or dispute which ought to be tried, and that is so even though the court might consider the defence 'shadowy' or doubt the defendant's bona fides." Not only would such observation in the speech given in their Lordships' House by Lord Diplock make good sense, it is an authority to which I must give proper respect on account of the decisions in de Lasala v. de Lasala⁽²⁾ and Tai Hing Cotton Mill Limited v. Liu Chong Hing Bank Ltd.⁽³⁾.

5. Mr. Fraser naturally supports Yorke v. Edwards⁽¹⁾. Mr. Large, as I understand it, has carefully perused the entire speech of Lord Diplock and after some preliminary remarks, the Court was informed that he was in no position to address me on the ratio of Yorke v. Edwards⁽¹⁾. The principle is clear as reflected in the passage I have just quoted, being part of the headnote in Yorke v. Edwards⁽¹⁾. In the circumstances, on the untraversed assertion of the 2nd defendant that she is unable to make any payment in compliance with the condition to her defending this action, in the exercise of my discretion, unconditional leave ought to be granted to the 2nd defendant.

6. The other two matters thus call for no determination as I am content to rely on Yorke v. Edwards⁽¹⁾ in only one of the three proposed submissions to be advanced on behalf of the 2nd defendant by Mr. Fraser. In the circumstances, I propose to set aside the order made by the learned Master insofar as it granted conditional leave to the 2nd defendant. I order that the 2nd defendant be granted unconditional leave to defend. The rest of the order made by the learned Master, not being in dispute, obviously must stand. I propose, subject to what Mr. Large and Mr. Fraser have to say, to make costs before the learned Master and costs of this appeal to be costs in the cause.

(Submissions on costs)

I have listened to the submissions on the question of costs. Before I come back to it, at the invitation of Mr. Fraser on behalf of the 2nd defendant, I should record the reason why I proposed not to deal with the other two matters. As far as I am concerned, that one of the other two matters cannot now be dealt with is evident. It would be highly undesirable for me to surmise the reasons of the Master, which are claimed to have given rise to a cause of complaint by the 2nd defendant. The conclusion I have reached would not justify, in the circumstances, the extra litigation time and legal expenditure to have the matter postponed so as to enable the parties to properly consult the learned Master. As far as the remaining proposed submission is concerned, I do not wish to appear to be over-confident but I am truly impressed by that decision of the House of Lords. That must be the guiding principle that would ultimately determine the crux of the disagreement between the plaintiff and the 2nd defendant on this 0.14 application. It is, therefore, not necessary for further time to be wasted on yet a further proposed argument. These matters, of course, would be open to the 2nd defendant in case of any appeal in which no party can conceivably be prejudiced on these remaining arguments.

7. Turning to the question of costs, there is much to be said in the submissions of Mr. Fraser. But the proceedings conducted before the Master yielded useful directions given for the proper conduct of these proceedings. Further, it could fairly be contended by Mr. Large on behalf of the plaintiff that the assertion of the 2nd defendant's inability to pay was not as reinforced as it is today. Afterall, Mr. Fraser on behalf of the 2nd defendant, has not himself been satisfied that the assertion of the 2nd defendant has left no stone unturned. It would not be unjust in my view that the order for costs made by the learned Master should not be disturbed. However the appeal should be dealt on a slightly different basis. The 2nd defendant has seen fit to take the matter on appeal. In the light of her assertion as corroborated by her overseas legal adviser's opinion, her stance would seem to be well supported by the decision in Yorke v. Edwards⁽¹⁾. No part of the speech of Lord Diplock could be called in aid of the plaintiff's request for conditional leave under its 0.14 application.

The 2nd defendant now succeeds, and costs should, I agree with Mr. Fraser, follow the event. Costs of the appeal before me should be costs for the 2nd defendant against the plaintiff. I order:

(1) [1982] 1 All E R. 1024

(2) [1980] A .C. 546

(3) [1985] 2 A.E.R. 947