RE QUE JOCELYN CO

HCB 612/99

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO.612 OF 1999

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REASONS FOR DECISION

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1. On 7 July 1999, I heard a Bankruptcy Petition issued by Broadair Express Ltd ("Broadair") against Que Jocelyn Co ("QJC").

2. After hearing arguments, I decided that I should direct that the Petition be adjourned to the judge hearing an appeal by Finley & Co ("F&Co") from the order of Master Cannon dated 16 June 1999 made in A3477/96, and that the Petition be heard at the same time as that appeal, or immediately thereafter, and that the costs of the hearing on 7 July 1999 be reserved to the same judge. I said I would hand down the Reasons for my decision later, and I do so now.

Background

3. The matter arose in this way. QJC had arranged for certain goods to be shipped to Hong Kong by Broadair. She says that the goods arrived in a damaged condition. She instructed F&Co with a view to getting compensation from Broadair.

The Unless Order

4. The writ (for a sum of $34,600 odd) was issued in March 1996. No Statement of Claim had been filed and served by September 1996, so Broadair issued a summons for an order dismissing the action for QJC's failure to file and serve a Statement of Claim.

5. On 7 October 1996, Registrar Betts made an order that unless by 4:15 pm on Tuesday 22 October 1996 QJC serve and file her Statement of Claim on Broadair, QJC's action against Broadair be dismissed with costs to Broadair.

The 1st Order on Costs - 23 May 1997

6. The Statement of Claim was filed in Court before 4:15 pm, but it was not served on Broadair's solicitors until after 4:15 pm.

7. That fact was found after a 2-day hearing by Master Cannon on 29 April 1997 with witnesses attending for cross-examination on their affidavits. On 23 May 1997, Master Cannon ordered the costs of the 2-day hearing to be paid by QJC to Broadair on an indemnity basis, to be paid forthwith, and to be taxed if not agreed ("the 1st Order"). These costs have been taxed and an allocatur has been issued allowing costs in the sum of a little over $254,000.

8. This 1st Order has not been appealed from and is a final order. Today, when asked by the Court what the status of this Order was, Mr Pedruco counsel for QJC said it is still valid as it has not been set aside, but that it had been "superceded" by the Master's Order dated 16 June 1999 ("the 2nd Order") to which I shall refer below.

9. The 1st Order on Costs was thus a Judgment Debt for which Broadair issued a Statutory Demand against QJC on 2 December 1998. The petition was presented on 18 March 1999, and it was listed for hearing before the Bankruptcy Judge on 5 July 1999 who adjourned it to 7 July 1999.

QJC's application against F&Co

10. Meanwhile on 8 January 1999, QJC (who had by then instructed new legal advisers) issued a summons against F&Co under O.62 rr. 7 and 8 and the inherent jurisdiction, for an order that F&Co be made personally liable for the costs of the 2-day hearing before Master Cannon in April 1997.

Master Cannon's order

11. The matter was first heard before Master Cannon who on 21 April 1999 dismissed the summons on the basis that she did not have jurisdiction to hear it. It was common ground between Mr Finley and Mr Pedruco (at the appeal from that decision) that the Master expressed that reason for her decision : what was not known was what the Master meant by those words.

Appeal

12. The matter then came before me on appeal on 6 May 1999. The orders sought were:-

1. The said Order made by Master Cannon and dated 21 April 1999 be set aside;

2. An order that Master Cannon had the requisite jurisdiction to hear the said application;

3. An Order in terms of the Plaintiff's Summons dated 8 January 1999 be granted;

4. Any other order/orders that the Court may deem fit, just or proper be made; and

5. The costs of this appeal be taxed and paid by Messrs Finley & Co to the Plaintiff in any event.

Order on Appeal

13. At the hearing of the appeal, Mr Finley made a preliminary submission that the Master had no jurisdiction because the matter was res judicata. At page 2 of the transcript of my 1st Decision on 6 May 1999, I explained why I disagreed. There was no res judicata as between QJC and F&Co.

14. The submission (as I understood it) was not based on the terms of the Order being sought, and how that might affect the 1st Order that QJC pay Broadair's costs.

15. At the conclusion of the appeal, I set aside the Master's order and remitted the summons to her for an early hearing.

The 2nd Order on Costs - 16 June 1999

16. Master Cannon then heard the matter on 16 June 1999 and gave an order in terms of QJC's summons. F&Co is appealing that order and the appeal is due to be heard on 22 July 1999. As it is an appeal from a master, no grounds of appeal are shown in the Notice.

The Bankruptcy Petition

17. Meanwhile, Broadair's Petition was heard on 5 July 1999, when it was adjourned to me for hearing on 7 July 1999.

18. The submission made by Mr Hingorani, counsel for Broadair, was simple. The 1st Order was a final order as between Broadair and QJC, and it has not been set aside on appeal. That was a judgment debt which still stands.

19. Insofar as QJC's application against F&Co was made under Order 62 r.8(1)(b), that only requires F&Co to indemnify QJC against costs that QJC has been ordered to pay Broadair. QJC is not thereby excused from having to pay Broadair.

20. Further Mr Hingorani submitted that insofar as QJC's application against F&Co was made under Order 62 r.8(1)(c), an order that F&Co indemnify Broadair for the costs it had to pay its own solicitors would only have been a viable option if the 1st Order on costs had not been made or had been set aside on appeal. But so long as the 1st Order still stands, at best QJC's liability to pay costs to Broadair is a joint and several liability with F&Co's - it is not extinguished.

21. As for the inherent jurisdiction, Mr Hingorani's submission is that the Court would not make an order under its inherent jurisdiction which defeats an earlier order which has not been set aside. So, Mr Hingorani says, if F&Co were to make these points on appeal, that appeal is bound to succeed. As for the Petition, because the 1st Order still stands, the Petition should either be granted or (if QJC asks for it) stayed pending F&Co's appeal.

22. As I understand it, Mr Pedruco's submission is that the Master was right to make the order of 16 June 1999. He accepted after some initial hesitation that O.62 r.8(1)(b) does not entitle him to the order he obtained from the Master on 16 June 1999. However he says that O.62 r.8(1)(c) and the inherent jurisdiction entitled the Master to make the order she did.

23. He further says that this order had the effect of cancelling QJC's liability to Broadair, so that there is no present debt now - the hearing of the Petition today.

Common Issue

24. It seemed to me that there is a common issue between F&Co's appeal and this Bankruptcy Petition: viz. whether the Master was right to grant an order in terms of QJC's summons under O.62 r.8(1)(c) and/or the inherent jurisdiction.

25. If the master was right to do so, the further question on the Bankruptcy Petition is what effect that order has on the 1st Order and QJC's liability to Broadair thereunder.

Order

26. It seemed to me on 7 July 1999 that given that fundamental common issue, and in fairness to Broadair, QJC and F&Co - each being interested in the outcome of that issue, I should in the exercise of my discretion adjourn the hearing of the Bankruptcy Petition to the judge hearing F&Co's appeal.

27. I am mindful however that this is a Bankruptcy Petition which should be heard in open court (subject to the Court's jurisdiction under the Bankruptcy Rules to adjourn into chambers), whilst F&Co's appeal is a matter for argument in chambers.

28. My order was therefore that the hearing of the Petition be adjourned to the same judge hearing the appeal, preferably to be heard at the same time or immediately thereafter. The mechanics of how the hearing of those matters are to be conducted should of course be left to the judge hearing the appeal and Petition. I further ordered that the costs of the hearing today be reserved to that judge.