SANBEAU TRADING CO. LTD. v. GEMEX TRADING AG

HCA 7421/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. HCA 7421 OF 2000

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J U D G M E N T

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1. This is an appeal from a decision of the Master giving an interlocutory judgment under Order 14.

2. On the facts the plaintiff's claim against the defendant is unarguable and the defendant has virtually acknowledged that to me today. The defendant has however a claim for set off against the plaintiff which arises in relation to an alleged compromise made on 17 November 1999.

3. Unfortunately, the defendant chose to plead that as a counterclaim and when the matter came before the Master on the Order 14 application, the full consequences of the difference between set off and counterclaim were not appreciated by either of the parties, nor were they properly argued before the Master. A set off is a peculiar animal which enables a defendant not only to use it as a sword against a plaintiff to claim for the amount due, but also as a shield against the plaintiff's claim. It being entitled to the shield, it is entitled to say that an interlocutory judgment ought not to be entered.

4. Ms Lo has argued before me as strongly as she can that the set off is moonshine and ought not to be allowed to proceed. I cannot, having regard to the set off, the alleged compromise document at page 129 of the bundle, say that it is moonshine. On its plain face it is a compromise of a claim for defective goods in the sum of 153,000 Deutschmarks. The document opens with the expression "As discussed" which plainly is an avenue for the court to look at the discussions prior to the agreement to see whether or not there were any further terms agreed which were not recorded in the written document. But on its plain face it is more than merely arguable that it is a compromise document and I cannot say it is moonshine.

5. The appeal will be allowed and the Order 14 judgment is set aside. I am concerned, however, that the proceedings are not properly being brought to a conclusion.

Discussion re wording of the order

6. The unless order will be in these terms: the parties must exchange witness statements 21 days from today. If either party fails to deliver its witness statements to the other side on that day, that party's claim will be dismissed with costs to the other side.

7. The costs on the hearing of today will be in the cause.