CHINA NATIONAL ELECTRONICS IMPORT AND EXPORT SHENZHEN CO AND ANOTHER v. PRIME CARGO (H.K.) LTD AND ANOTHER

HCCL76, 77 & 78/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO.76 OF 2002

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(Cases consolidated with HCCL 78 OF 2002 as the leading Action
pursuant to the Order of Stone J dated 4 March 2003)

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DECISION

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1. I have two applications before me, both taken out by the defendants against the plaintiffs. The first one is for security or further security in relation to the defendants' costs in these actions in a sum to be assessed by the court. The other is for specific discovery of three categories of documents set out in the schedule to the summons. I will not set out here the documents save as necessary later on.

2. Turning first to the question of security for costs. The present claim is a claim for misdelivery of certain cargo in Germany consigned by the 1st plaintiff in HCCL 76 and 77 of 2002 and the plaintiff in HCCL 78 of 2002 ("the plaintiff") to a consignee in Germany but released without tendering the original of the combined transport bill of lading by the consignee. I need not go into the history of the matter save to say in the points of claim various causes of action have been pleaded including the claim under contract by the plaintiff as consignor. There are other causes of action pleaded in tort and in bailment for the misdelivery of the goods.

3. Various defences were pleaded including that the plaintiff had no title to sue, that it had not suffered any loss and the quantum was also put in issue.

4. There has already been an order for security for costs. That order was made by consent for the sum of $450,000 to cover the defendants' costs up to discovery.

5. Before me today, the application for security is resisted on the ground that the plaintiff has a virtually unanswerable case on the basis that the plaintiff was the consignor and therefore the contractual claim stands to be very strong. In response to that, Mr Lam on behalf of the defendants focused not on the question of title to sue but on the question of loss and whether the plaintiff will eventually be able to prove that it has suffered substantial damages.

6. In my view, in approaching a security for costs application the court should not, unless in an exceptionally clear case, come to a conclusion on the ultimate merits of the matter. Having said that, the merits of the respective parties' case must be a relevant factor in determining whether security for costs should be ordered. In that regard, I take into account that the plaintiff's case appears to be very strong although at this stage I am not prepared to say, and it will be wrong for me to say, that the plaintiff is bound to win. I, nevertheless, in the exercise of my discretion, will take into account what appears before me to be a very strong case on the plaintiff's part.

7. Secondly, as I have said there is already security in the sum of $450,000. The evidence put before me today is that the defendants' costs on a solicitors and own client basis up to the end of March was $234,000. The defendants have provided a further estimated costs of something like $460,000 to the end of the trial, included in that sum are fees of counsel, amounting to some $310,000.

8. I am informed today that the defendants intended to instruct Mr Charles Sussex, SC, at this stage on his own without a junior, to handle the trial. The trial has already been fixed for June of this year for two days.

9. Bearing in mind the issues in this case and the length of the trial, I am unable to say that for the purpose of the security for costs application that I can provide for full security for the defendants' estimated costs. That will be wrong in principle, bearing in mind that the defendants are not entitled to full security. I bear in mind that the costs that they are likely to recover at the end of the day would probably be taxed costs, therefore would not be the full $700,000 that they seek. Looking at the figures, in my view, $450,000 would already be sufficient to cover the defendants' costs position for the whole trial.

10. I also take into account the position of Dresdner Bank AG Shanghai Branch who is the 2nd plaintiff in HCCL 76 and 77 of 2002. Dresdner Bank Shanghai Branch is the assignee of the plaintiff's cause of action. They were joined as co-plaintiffs pursuant to the assignment. There is no evidence before me to suggest that the Shanghai Branch and the Hong Kong Branch of Dresdner Bank are separate legal entities, rather their titles suggest that they are branches of the same bank. I have before me the business registration certificate of Dresdner Bank Hong Kong Branch which would certainly lend weight to that observation. It seems therefore that the defendants, if successful, would probably be able to seek recovery of their costs over and above $450,000 from Dresdner Bank in Hong Kong.

11. For all these reasons, in the exercise of my discretion, I am not inclined to order further security to be provided by the plaintiffs.

12. Turning to the question of discovery, the documents sought are in relation to the arrangements between the plaintiff and an entity, Shanghai Kaixinda, regarding the sale and export of the goods in question. Discovery is also sought in relation to the payments of the shipment in dispute by the plaintiff to Kaixinda and also written instructions and purchase orders by another entity, CAT Electronic Sound (Shanghai) Company Limited, to the consignee and by these two entities to Kaixinda regarding the shipments in dispute. These documents are, on their face, relevant to at least the issues of title to sue and the loss and damage suffered by the plaintiff.

13. As noted earlier, the plaintiffs do appear to have a very strong case based on contract. Nevertheless, at the present stage the plaintiffs' claim does contain claims based in tort and in bailment and in relation to those causes of action, title to sue is of course relevant. Mr White for the plaintiffs before me has not really resisted the application very strenuously because these pleaded causes of action remain on file and are prima facie still relevant at the trial. Nevertheless he has expressed reservations over the width of the discovery sought in relation to the general arrangement documents.

14. It seems to me that as at present framed the discovery sought under paragraph 1 of the schedule to the summons could be potentially very wide-ranging and could be disproportionately oppressive to the issues that may be canvassed at trial. I therefore propose to amend paragraph 1 of the schedule so as to limit the discovery at this stage to only the agreement containing or evidencing terms of the general arrangement. I am not minded to order discovery of other documents evidencing such an arrangement because that could be potentially very wide-ranging and out of proportion to the relevance of these documents to the issues in dispute.

15. I would, at this stage, order discovery to be by way of affidavit stating/verifying whether these documents are in the custody, possession and power of the plaintiffs. Of course if the parties think after the provision of the affidavit that these documents could be easily retrieved and provided for inspection, no doubt the parties will put their heads together and deal with that. If there is any question as to whether there would be difficulty in producing the documents for inspection, then the parties would have to come back to court for a further order. I am not prepared at this stage to order inspection as well, bearing in mind that these documents may or may not be in existence and secondly, these documents may well be located on the Mainland and may not be easily retrieved for inspection. So depending on whether these documents are in effect in existence and the likely probative value at the trial the question of inspection would have to be dealt with later. And I so order.