SUNCHASE INTERNATIONAL GROUP (CHINA) LTD AND OTHERS v. VINCOR GROUP OF COMPANIES (INVESTMENT) LTD AND OTHERS

HCA1178/1995

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.1178 OF 1995

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(By Counterclaim)

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REASONS FOR JUDGMENT

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1. The plaintiffs (by Original Action) appealed against the order of Master Woolley made on 18 December 2003 that this action be dismissed. On 11 February 2004 I dismissed the appeal with costs to the defendant, to be taxed if not agreed. I now give reasons.

2. The background is as follows. The Writ was issued in 1995. In 1996 the action went to sleep. It started moving again in 1999. In March 2001 the defendants applied for an order for security for costs against the plaintiffs. Master Levy dismissed the application. It was appealed to Suffiad J who, on 7 April 2003, set aside the Master's order and ordered that the plaintiffs furnish security for the defendant's costs by paying $1,000,000.00 into court within 21 days. The plaintiffs appealed to the Court of Appeal but on 23 October 2003 the appeal was dismissed. The plaintiffs did not make any payment into court. On 17 November 2003 the plaintiffs applied for the action to be dismissed on the ground of failure to comply with the order for security for costs. On 18 December 2003 the Master made the order appealed against. In the meantime, on 19 November 2003 they applied for leave to appeal to the Court of Final Appeal against the decision of the Court of Appeal. That application is to be heard in March 2004.

3. The plaintiffs say that the action should not have been dismissed. They rely on the 3rd paragraph of the order of Suffiad J which reads :

"Should the 1st, 2nd and 3rd plaintiffs fail to furnish the said security within the said 21 days, all further proceedings herein be stayed until such time as the 1st, 2nd and 3rd plaintiffs furnish the said security or the action is dismissed for want of prosecution."

4. Their argument is that the order did not specify dismissal for non-compliance. As all further proceedings would be stayed for non-compliance, prosecution is impossible except by appeal. The defendants are prosecuting the action by applying for leave to appeal to the Court of Final Appeal. Therefore the action should not have been dismissed.

5. It is also argued that for an action to be dismissed for want of prosecution, serious delay must be shown. There has been no such serious delay here. The delay in giving security is only 10 months, and that delay is in part explained by the appeal to the Court of Appeal.

6. There is no evidence before the court that the defendants are likely to be able, if given further time, to give security. Counsel says that they may be able to do so if their commercial circumstances improve.

7. It would have been open to the court to specify a time within which security is to be given, stay all further proceedings until it is given, and provide for the action to be dismissed without further order if security is not given. Then, if security is not given, the action may be dismissed without further application. See the passage by Millet LJ in Clive Richard Brooks & Co. Ltd v. Baynard, CA, reported in The Times, 31 March 1998.

8. The order of Suffiad J appears to contemplate dismissal for want of prosecution though it does not specifically provide for it to be automatic. It provides that in the event that security is not given in the time allowed, i.e. 21 days, the action be stayed until security is furnished or it is dismissed for want of prosecution. It seems to me to follow that once security is not furnished within the time allowed, there is want of prosecution and it is open to the defendant to apply for dismissal on that basis.

9. In any event the court, though it has no statutory power under the relevant section of the Companies Ordinance to dismiss an action for failure to comply with an order under section 357 to give security for costs, has the inherent power to do so. See Multi Sky Ltd v. Hong Kong Chinese Insurance Co. Ltd & Anor [1994] 1 HKC 108, following Speed Up Holdings v. Gough & Co. (Handly) Ltd [1986] FSR 330.

10. In Multi Sky Ltd Kaplan J, in July 1993, ordered security for costs to be given within 21 days and that the Multi Sky Ltd's counterclaim be stayed unless and until security was provided. The order did not mention dismissal for want of prosecution. Security was not given. The plaintiff in the action applied for dismissal of the counterclaim. Mayo J heard the application in September 1993. He accepted that he should have regard to the general principles applicable to a strike-out situation rather than "adopting what amounts to being an automatic strike-out by virtue of non-compliance". He allowed further time, and on appeal the Court of Appeal also allowed further time.

11. In Speed Up Holdings, Deputy Judge Evans-Lombe, QC considered the circumstances under which the court could apply its inherent jurisdiction to dismiss an action in which a plaintiff had been ordered to give security for costs under the relevant section of the Companies Act but had failed to do so. He took the view that there were three principal areas in which the inherent jurisdiction could be applied; the first being where the action was not being pursued with due diligence; the second where the court was satisfied that there was no reasonable prospect that security would be given, and the third was where - as here, but not in the case before him - the court had prescribed a time limit within which the security was to be paid, but that time limit had been disregarded by non-payment.

12. The latter circumstance of course applies here. It is also the case that security has not been given, notwithstanding the fact that Suffiad J, on the materials before him, ordered a relatively small sum to be paid, and the fact that the appeal to the Court of Appeal was dismissed. As I have indicated, there is no evidence to suggest that if further time were allowed the plaintiffs might be able to find the money.

13. There remains the question of the application for leave to appeal. Does it amount to prosecution of the action? I note that the only ground put forward in the plaintiffs' Notice of Motion is that Suffiad J's order involves the question of a civil right amounting to the value of $1,000,000.00 or more, and accordingly the plaintiffs have an appeal as of right to the Court of Final Appeal under section 22 (1)(a) of the Hong Kong Court of Final Appeal Ordinance, Cap.484. That subsection provides :

"An appeal shall lie to the Court -

(a)

as of right, from any final judgment of the Court of Appeal in any civil cause or matter, where the matter in dispute on the appeal amounts to or is of the value of $1000000 or more, or where the appeal involves, directly or indirectly, some claim or question to or respecting property or some civil right amounting to or of the value of $1000000 or more;"

14. But this section only applies to a final judgment. See Re Tian Sheng No. 8, CACV 103 of 1999. In deciding whether a judgment is final, the Court of Final Appeal will apply the "application test"; i.e., whether or not the order made by the Court of Appeal is a final or interlocutory order. See B & B Construction Ltd v. Sun Alliance and London Insurance Plc [2001] 1 HKLRD. Per Chan PJ at 4C :

"For the purpose of obtaining leave under section 22(1)(a), we have adopted, as the Privy Council had under the old regime adopted, the application test in deciding whether an order of the Court of Appeal is a final or interlocutory order. This involves an examination of the nature of the application to see whether the order made upon such application would, whether it fails or succeeds, determine the whole action. In considering the nature of the application, it is necessary to look not only at its form, e.g., under which order or rule of court it is made, but also the purpose and substance of the application and the issues to be determined by the court."

15. As I understand the argument for the plaintiffs, the requirement for the order to be final only applies "where the matter in dispute on the appeal amounts to or is of the value of $1,000,000.00 or more" but does not apply "where the appeal involves, directly or indirectly, some claim or question to or respecting property or some civil right amounting to or of the value of $1,000,000.00 or more". With respect, it seems to me that this cannot be right. On any sensible construction the requirement that the order be final applies in both cases.

16. It follows that the plaintiffs' application for leave to appeal as of right to the Court of Final Appeal cannot succeed. It cannot therefore be regarded as prosecution of the action.

17. It seems to me therefore that it was open to the Master and it is open to me to regard the failure to give security within the time limit as amounting to want of prosecution. The fact that there is on foot an application for leave to appeal to the Court of Final Appeal makes no difference. Nor do I see that it makes any difference that the ground for dismissal in the summons is expressed as being failure to give security rather than want of prosecution. It amounts to the same thing.

18. The court has jurisdiction to order dismissal. Looking at the surrounding facts and circumstances so as to consider whether in the discretion of the court further time should be allowed, it appears that there is nothing to be gained by that. There is no evidence of any reasonable prospect of security being given.

19. It therefore appeared to me that the Master was entirely right to order that the action be dismissed.