XCHRX EMPIRE TREND ENTERPRISES LTD. v. DOUBLE MIND CO. LTD.

HCMP2425/98

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2425 OF 1998

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D I R E C T I O N S

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1. There are two summons before me. The first is the Defendant's summons for security for costs. The second is a summons for Directions.

Directions :

2. The action was commenced under s.12 of Cap.219, The Conveyancing and Property Ordinance. It is a vendor and purchaser summons in which the Plaintiff is claiming the return of a deposit of $38.2 million for the purchase of a building in Kowloon. Being a vendor and purchaser action, it was commenced by Originating Summons. The Plaintiff seeks directions on the continuation of the proceedings as an Originating Summons. The Defence, on the other hand, seek an order under Order 28, rule 8 that the proceedings be continued as if they had been begun by a Writ of summons and directions given as to the service of pleadings.

3. Both Counsel, Mr Denis Chang, SC, for the Plaintiff and Mr Edward Chan, SC, for the Defendant submit that the order they seek is for the purposes of case management. Mr Chang submits that by virtue of the very wide provisions of Order 28, rules 4 & 7 the Court can make any directions it deems fit and accordingly neither party will be prejudiced by the continuation of the Originating Summons. Furthermore, the matter will be ready for trial more speedily and at less cost.

4. Order 28, rule 4(3)-(5) state :-

"(3) Without prejudice to the generality of paragraph (2), the Court shall, at as early a stage of the proceedings on the summons as appears to it to be practicable, consider whether there is or may be a dispute as to fact and whether the just, expeditious and economical disposal of the proceedings can accordingly best be secured by hearing the summons on oral evidence or mainly on oral evidence and, if it thinks fit, may order that no further evidence shall be filed and that the summons shall be heard on oral evidence or partly on oral evidence and partly on affidavit evidence, with or without cross-examination of any of the deponents, as it may direct.

(4) Without prejudice to the generality of paragraph (2) and subject to paragraph (3) the Court may give directions as to the filing of evidence and as to the attendance of deponents for cross-examination and any directions which it could give under Order 25 if the cause or matter had been begun by writ and the summons were a summons for directions under that Order.

(5) The Court may at any stage of the proceedings order that any affidavit, or any particulars of any claim, defence or other matter stated in any affidavit, shall stand as pleadings or that points of claim, defence or reply be delivered and stand as pleadings."

5. Order 28, rule 7(1) states :-

"7(1) A defendant to an action begun by originating summons who has acknowledged service of the summons and who alleges that he has any claim or is entitled to any relief or remedy against the plaintiff in respect of any matter (whenever and however arising) may make a counterclaim in the action in respect of that matter instead of bringing a separate action."

6. Mr Chan argues that the reality of the case is that it is a breach of contract issue which could have been and should have been commenced by Writ. There are substantial factual disputes, there may be many witnesses to be cross-examined and the loss of time and money incurred by converting the proceedings at this stage would not be so great as to the cause the Court not to make the order sought. He says the issues would be better defined and it would be a "tidier" way of proceeding from now on.

7. The point was fully and helpfully argued. There are merits on both sides of the argument. Had the matter in fact been commenced by Writ, no criticism could have or would have been made and the pleadings would be well under way by now. However the Originating Summons was taken out almost a year ago and much work has been done by solicitors and counsel on both sides.

8. The factor which tips the balance in favour of my decision not to order the continuation of proceedings as if by Writ, is that I think Mr Chan is unduly optimistic in his contention that the additional costs and delay in bringing the matter on for trial will not be too great. In addition I am satisfied that everything which needs to be done can be done under the Originating Summons procedure. The trial Judge will hear the same witnesses and be apprised of the same issues and make the same judgment regardless of the procedure employed to get the matter before the Court. I do not think that either the Court or the parties will be at any disadvantage if I do not make the order sought by the Defendant.

9. I therefore make the following order :-

1. the hearing of the Originating Summons herein is adjourned to be heard in Court and be set down for hearing before a judge alone, the estimated duration of the hearing being five days;

2. unless otherwise ordered by the trial judge, the affidavits or affirmations filed on behalf of the parties hereto do stand as evidence for the hearing of the said Originating Summons;

3. subject to leave being granted for the filing of further affidavits or affirmations, the affidavit of Wong Wai Bui dated 17th July 1998 do stand on the Defendant's counterclaim;

4. the Plaintiff be at liberty to cross-examine the deponents named in the 1st schedule hereto upon their respective affidavits or affirmations sworn or affirmed in this Action;

5. the Defendant be at liberty to cross-examine the deponents named in the 2nd schedule hereto upon their respective affidavits or affirmations sworn or affirmed in this Action;

6. such cross-examination be taken before the court at the hearing in court of the said Originating Summons;

7. the Defendant shall produce the deponents named in the 1st schedule hereto for cross-examination accordingly and the Plaintiff do produce the deponents named in the 2nd schedule hereto for cross-examination and if any of the said deponents be not produced for cross-examination the party failing to produce such deponent is not to be at liberty to read or use the evidence of such deponent without the leave of the court, and, unless otherwise directed by the Court, if any of the said deponents be so produced for cross-examination, their respective affidavits or affirmations sworn or affirmed in this Action shall stand as their evidence in chief;

8. if either of the parties intends to place reliance at the hearing of the said Originating Summons on expert evidence it shall within 42 days from the date hereof disclose the substance of that evidence to the other party in the form of a written report which shall be agreed if possible;

9. unless such reports are agreed the parties shall be at liberty to call as expert witnesses those witnesses the substance of whose evidence has been disclosed as aforesaid, but not more than three expert witnesses shall be called for each party without leave of the Court;

10. the costs of this application are to be costs in the cause save that the costs of the hearing on 18th March 1999 be to the Plaintiff in any event with certificate for two Counsel.

10. It is to be noted that the estimated length of trial is now five days. This is an indication that the issues between the parties, both factual and legal, are significantly greater than as submitted by Mr Chang, SC, for the Plaintiff. However, whilst I have given the extent of the dispute careful consideration, it is not so great as to persuade me that proceeding by Writ is necessary to meet the justice of the case and that justice will not be achieved by continuing by Originating Summons.

11. I leave it to the legal representatives to compile the list of names which will appear in the schedules. Such leave as the Defence may seek to file further affidavits or affirmations from potential witnesses can hopefully be done by way of a consent summons.

Security for Costs

12. The Defence seek approximately $3 million as security for costs. The Plaintiff says a figure of about $1 million is nearer the mark, the parties agree that it is a case in which an order can be made.

13. Counsel for the Plaintiff has directed the Court's attention to certain items in the draft bill of costs, both incurred and estimated which they say are excessive and oppressive.

14. This is a substantial claim. The Plaintiff seeks repayment of $38.2 million, the Defendant counterclaims $60 million. Litigation such as this is expensive. The costs claimed are high but even accepting that there may be some reduction on taxation, they are still claimable.

15. I do not propose to consider each item in dispute seriatim. I think the Court must take a general view of the case and select a figure which seems proper bearing in mind the principles laid down in Keary Developments v. Tarmac Construction [1995] 3 All ER 539 by Peter Gibson LJ. In outline the more important principles are :-

1. The Court has a complete discretion.

2 That an order may deter the Plaintiff from pursuing its claim is not a reason not to order security.

3. It is a balancing exercise between the injustice to the Plaintiff in creating financial difficulties in pursuing its claim and the injustice to the Defendant should he win but never be paid his costs.

4. The Court must have regard to the Plaintiff's prospects of success.

5. The amount ordered should be more than nominal but not necessarily the full amount claimed.

6. Delay in making a claim for security is a matter which can be taken into account.

16. In my judgment the Defendant is entitled to an amount of security which is not far short of the sum requested. I am satisfied it can be met. I accept however that some discount should be made. I order a sum of $2.2 million to be paid into Court by the Plaintiff as security for costs. $1 million to be paid on or before 1st April 1999. $1.2 million to be paid seven days prior to the case being set down for trial. The costs of the hearing on the security for costs summons shall be the Defendant's in any event.

17. Thus the costs of the hearing of the Directions Summons has been awarded to the Plaintiff and the costs of the hearing of the security for costs summons has been awarded to the Defendant.

18. To assist on taxation, I consider the two summonses have occupied an equal amount of time.

19. The respective solicitors can draw up the appropriate orders which flow from this decision for approval by the Court.