CHOW MOW SHING METAL COMPANY LIMITED v. CROMAN INTERNATIONAL LIMITED

1986 No. A2879

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. This is an appeal against the decision of Master Jones whereby he ordered that the plaintiffs claim in Kowloon District Court, Action. No. 456 of 1986 be transferred to the High Court to stand as a counterclaim in this action.

2. The history of the matter is that on the 18th of January 1986, the plaintiffs in the District Court action "Croman" issued proceedings whereby they claimed from the defendant their "Chow" a sum of $6,568.10. However, the actual amount claimed by way of damages from Chow was $231,600.00. The smaller amount was reached after providing a set-off of $225,031.90 which had been done by Croman stopping payment on a cheque which they had issued in favour of Chow for that amount. If it was not for the set-off therefor, the claim would be well outside the jurisdiction of the District Court.

3. A defence and counterclaim were duly filed by Chow in which they denied their liability for the damages claimed and in turn, counterclaimed for the amount of the cheque. Croman themselves then filed a reply and defence to that counterclaim and alleged that the cheque had been given pursuant to a condition precedent in that Chow would strictly perform its obligations pursuant to the contracts between them. This they had failed to do.

4. On the 14th of February 1986, the claim was amended and in May the defence and counterclaim were also amended. However, in April 1986 Chow's solicitors wrote to Croman's solicitors stating that they were advised that the matter should be transferred to the High Court and seeking their agreement to that transfer. On the 7th of April, Croman's solicitors advised that they had no objection but, on the 28th of April, they were advised by Chow's solicitors that they no longer intended to so transfer the action.

5. On the 15th of May, while the matter was still being actively pursued, Croman's solicitors were notified by the Deputy Registrar of the District Court that pursuant to Rule 31 of the District Court Rules, the claim had been struck out on 2nd May. Steps were immediately taken to restore it and that was done. An amended defence and counterclaim were filed by Chow and then Croman applied to have the matter set down. However, when Croman's action in the District Court had been struck out by the Deputy Registrar and before it had been restored by an order dated the 23rd of May 1986, Chow issued these present proceedings in the High Court.

6. On the 30th of June, a summons was heard whereby Chow applied that either the entire action be transferred to the High Court to be consolidated with the High Court action or alternatively that Croman's claim be transferred to the High Court to stand as a counterclaim in the High Court action. An order was made on the basis of that alternative and it is from that decision that Croman now appeal.

7. Section 38(1) of the District Court Ordinance provides that in any action commenced in the District Court where any counterclaim or set-off and counterclaim of any defendant involves a matter beyond the jurisdiction of the court, any party to the action may apply to the High Court for an order "that the whole proceedings or the proceedings on the counterclaim or set-off and counterclaim be transferred to the High Court". Here, the Master has ordered that the claim in the District Court be transferred to the High Court and it is argued that firstly, he did not have power to do so and that secondly, the interest of justice lie in transferring all the proceedings to the High Court.

8. The proceedings in the District Court had reached an advanced stage before the claim was struck out. I am satisfied that it was struck out while matters were still being actively pursued and this was a matter of pure inadvertence on the part of Croman. The matter was almost immediately restored but in the meantime, Chow had commenced its proceedings in the High Court and have now taken out order 14 proceedings to obtain summary judgment on its cheque. It was argued on behalf of Croman that the proceedings in the High Court should now be struck out and that the matter should proceed in the District Court. It is submitted that S38(4) of the District Court Ordinance would give the Court unlimited jurisdiction in the matter notwithstanding that the claim and counterclaim exceed the sum of $60,000. Sub-section 4 appears, at first sight to provide that where no party to an action which is outside the jurisidiction of the District Court, applies to have it transferred to the High Court or if the High Court does not so order pursuant to a report made to it by a judge of the District Court, then the matter may be heard and determined in the District Court which shall "have jurisdiction to hear and determine the whole proceedings notwithstanding any enactment to the contrary. "  It is argued that therefore if the matter is heard in the District Court, it would have unlimited jurisdiction. I do not consider that is correct but in any event, I am satisfied that this is a matter which should be tried in the High Court. The question is therefore whether the whole of the proceedings or only Croman's claim should be transferred. I am satisfied that Section 38 only allows either the whole of the proceedings to be transferred or the proceedings on the counterclaim or set-off. It does not provide for the claim only being so transferred. I am also satisfied that there will be procedural difficulties and expense associated with the transfer of Croman's claim from the District Court to stand as the counterclaim in the High Court. The appeal will therefore be allowed to the extent that the whole of the proceedings in Kowloon District Court, Case No. 456 of 1986 is transferred to the High Court in place of and in substitution of these present proceedings.

9. There will be an order nisi for costs to Croman before the Master and of this application. There will be a certificate for counsel before the Master.