1ST MANAGEMENT CONSULTANTS LTD. AND ANOTHER v. MULPHA(HONG KONG) LIMITED AND ANOTHER

1986, No. A3101

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

____________

BETWEEN

____________

___________

JUDGMENT

___________

1. This is an appeal from the decision of the learned Master.

2. I have had able assistance from as well Mr. Harris as Mr. Mok. I have also had the advantage of an additional authority submitted for my guidance.

3. The Plaintiffs sue the Defendants on a service contract. The Defendants deny liability. Suffice it for me to say that relying on the same allegations raised by way of defence, the Defendants counterclaim. In their Counterclaim, the Defendants further assert that by reason of the alleged breaches of duties and wrongful repudiation of the contract by the Plaintiffs, the Defendants are entitled to damages. The Defendants claim for these damages to be assessed on alternative bases and a further sum of US$60,000 as six months' service fees in lieu of notice.

4. In the course of the submissions, I invited Mr. Harris to give an illustration, for my benefit, of any fact which would be extrinsic to the substantive defence of the Defendants in these proceedings. Solicitor for the Plaintiffs declined. It would not be, so Mr. Harris sought to explain, a simple matter in an involved dispute between the Plaintiffs and the Defendants to isolate, at this stage, any particular matter within the exclusive area of the Defendants' Counterclaim.

5. Mr. Harris urged upon the Court to bear in mind the importance of judicial discretion. He relied heavily on the 1st Defendant's alleged inability to pay costs arising in these proceedings, hence, the same inability on the part of the 2nd Defendant on account of their association, AND on the 2nd Defendant being a foreign Plaintiff in the Defendants' Counterclaim.

6. It was further contended that the Defendants' reluctance to supply particulars reflects the nature of the Defence and Counterclaim which Mr. Harris described as a sham. The Plaintiffs sought particulars from the Defendants, and the requested particulars formed the subject-matter of an application before the learned Master, and the decision of an appeal. No particular were ordered of the Defendants who were required to give none. One should not, and is not entitled to draw any oblique inference from the absence of delivery of particulars asked of the Defendants. And if indeed, the Defence and the Counterclaim were tantamount to no more than a sham, it would be open to the Plaintiffs to have the Defence and Counterclaim struck out.

7. It is beyond dispute that the subject-matter of the Counterclaim is precisely that for the Defence. Not only are we concerned with the same transaction or transactions, but the matters in issue in the Counterclaim are, to all intents and purposes, virtually identical with those advanced by the Defendants for their Defence.

8. Mr. Mok was content to leave the allegations in the affidavit in support of the Plaintiffs' application unchallenged, in the sense that for the purpose of the present application and appeal, there is prima facie evidence that the Defendants would not likely be in a position to meet costs awarded against them in these proceedings. But the question to be decided is really whether the Counterclaim in this case is in substance matters of defence and more importantly, whether the subject-matter of the Counterclaim is substantially identical with the matters raised by the Defendants in their Defence. See Accidental And Marine Insurance Co. v. Mercati, 3 Eq. Cases 200, where in a following suit, the plaintiff company which had been wound up, was regarded as a nominal plaintiff but in truth a defendant; Mapleson v. Masini, 5 Q.B.D. 144, where no security for costs was ordered from a foreign defendant whose Counterclaim was "in respect of one subject-matter of action'' and arose "out of the same transaction". I think the matter can best be tested by asking oneself the question: Whether the same issues would still have to be adjudicated upon and determined if the Counterclaim were completely cast aside. In the circumstances of this case, the answer can be, but in the affirmative. This case is decidealy different from a Counterclaim on 4 years' settled accounts in an action simply for balances due as in New Fenix Compagnie Anonyme D'Assurances De Madrid v. General Accident, Fire, And Life Assurance Corporation, Ltd., [1911] 2 K.B. 619 at p.622. It remains for me, therefore to order :-