XCHRX GOLDEN HARVEST (HK) LTD. v. TSUI MAN KWONG AND ANOTHER

HCA 16220/1998

Headnote

Appeal from Master - Master made an unless order the effect of which was that unless security for the Defendants' costs of the action were paid into Court by the Plaintiff within the specified time, the Defendants would be entitled to enter judgment on the claim as well as on the counterclaim.

Held, it was proper to provide that in default of providing security for the Defendants' costs of the action, the Plaintiff's claim should be dismissed but the Plaintiff should not be deprived of the right to defend the counterclaim - appeal allowed and judgment on the counterclaim set aside.

HCA 16220/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 16220 OF 1998

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J U D G M E N T

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1. On 27 October 1999, Master Poon made an order requiring the Plaintiff to give the sum of $500,000.00 as security for the Defendants' costs in the action within 14 days. This was purely for security for the Defendants' costs in the action. It had nothing to do with the costs of the counterclaim. The Plaintiff failed to provide the security as ordered by Master Poon.

2. On 10 December 1999, Master B. Kwan made an unless order. It was ordered that unless the Plaintiff by 4.00 p.m. on 23 December 1999 comply with Master Poon's Order by paying the sum of $500,000.00 into Court as security for the Defendants' costs in the action, the Plaintiff's Amended Statement of Claim and Defence to Counterclaim in the action be wholly dismissed and the Defendants be at liberty to enter judgment against the Plaintiff as per the Minutes of Judgment (as amended) attached to the Defendants' summons. The effect of this was that unless the Plaintiff paid the sum into Court, the Plaintiff's claim would be dismissed and the Defendants would also be entitled to judgment on their counterclaim against the Plaintiff.

3. The 2nd Defendant's counterclaims for, inter alia, the sum of $4,574,374.23. The 1st and 2nd Defendants' counterclaim for, inter alia, the sum of $3,093,843.56.

4. This is an appeal from the Order of Master B. Kwan.

5. The Plaintiff commenced voluntary liquidation on 16 June 1999 under section 228(A) of the Companies Ordinance. The Defendants lodged a proof of debt on or about 22 October 1999. The amounts counterclaimed were included in the proof of debt and the liquidators of the Plaintiff are in the course of adjudicating the Defendants' proof of debt. As the Plaintiff failed to provide security, the Defendants entered judgment on the counterclaim on 6 January 2000.

6. The Plaintiff seeks a variation of the unless order made by Master B. Kwan so that if the Plaintiff does not provide security by the date specified, the only consequence would be dismissal of the Plaintiff's Amended Statement of Claim without dismissing the Plaintiff's Defence to Counterclaim or giving the Defendants' liberty to enter judgment on the counterclaim.

7. I am satisfied that the Master erred in deciding that as a consequence of a failure to provide security for costs of the action within the time stated, the Defendants should be entitled not only to judgment on the claim but also to judgment on the counterclaim. It is, in my view, proper to provide that in default of providing security for the Defendants' costs of the action, the Plaintiff's claim should be dismissed. But as far as the counterclaim is concerned, the Plaintiff is in the position of a Defendant and should have the right to defend it without giving security. The Plaintiff should not be deprived of the right to defend the counterclaim by reason of failure to give security for the Defendants' costs of the action.

8. Furthermore, the Defendants have already lodged a proof of debt in respect of the amounts claimed in the counterclaim. That may well provide the Plaintiff with a defence to the Counterclaim, probably from the moment of proving (see Craven v. Blackpool Greyhound Stadium and Racecourse, Ltd [1936] 3 All ER 513 per Scott LJ at p.516).

9. In the circumstances, the appeal is allowed. I set aside the judgment dated 6 January 2000 and the Defendants are to be at liberty to enter judgment on the claim together with costs of the action. Master B. Kwan's Order is varied so that it should read:

10. I should also mention that the notice of appeal was issued on 23 December 1999, being 5 days late. I have been told that the reason why the Notice of Appeal was issued out of time is that the question of lodging an appeal was only discussed at a meeting of the Committee of Inspection of the Plaintiff on 17 December 1999. The liquidators confirmed instructions to issue the appeal on 20 December 1999 and the notice of appeal was issued on 23 December 1999. There is a short delay and I do not see any real prejudice caused to the Defendants by this short delay. I grant the extension of time for the issue of the Notice of Appeal.