BRAND FARRAR BUXBAUM LLP v. SAMUEL-ROZENBAUM DIAMOND LTD. AND OTHERS

HCA5191/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.5191 OF 1998

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J U D G M E N T

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1. I have before me a summons brought by the applicant, Mr Ilan Samuel, for the court to recuse itself from continuing on with the appeal which the court has heard over three days earlier in July and which the court is going to resume today and, hopefully, that appeal can then be completed either today or, at the latest, tomorrow.

2. The application was brought on the basis that in the course of the appeal hearing over the previous three hearing days, there had been remarks made by the court amounting to some 24 instances set out in the affidavit in support of the application which may give apprehension to a reasonable observer that the court might be biased against Mr Samuel.

3. An application made in circumstances where there was an on-going interlocutory application with a view to abort that interlocutory hearing is, to say the least, highly unusual and, I hope in the future, would be discouraged and condemned and never recur again.

4. I accept for the purpose of the application that the correct test of apparent bias is that now referred to in Deacons v. White Case Limited Liability Partnership [2003] 3 HKC 374, where at p.375 under the Headnote it reads :

".... the court must first ascertain all the circumstances which had a bearing on the suggestion that the judge was biased. It must then ask whether those circumstances would lead a fair-minded and informed observer to conclude that there was a real possibility, or a real danger that the tribunal was apparently biased. ..."

5. I accept that is the applicable principle and it is by that principle the exercise will have to be undertaken. The undertaking of that exercise would involve in a situation such as this, a great deal of work.

6. The first question and the vital question I have put to Mr Acton-Bond when he commences his application is whether it is right that an interlocutory appeal, which is on-going, should be interrupted in this way by the present application. The observation of Mr Justice Peter Gibson in the case cited to me of Peter Simper & Co., Ltd v. Cooke (EAT) [1986] IRLR 19 in the penultimate paragraph is of the greatest significance. There, the learned judge said this :

" We think it right to stress the highly unusual facts of this case. Save in extraordinary circumstances, it cannot be right for a litigant, unhappy with what he believes to be the indications from the Tribunal as to how the case is progressing, to apply, in the middle of the case, for a re-hearing before another Tribunal. It is, in our view, undesirable that the Tribunal accused of giving the opinion of bias should be asked itself to adjudicate on that matter. The dissatisfied litigant should ordinarily await the decision and then, if he thinks it appropriate, he should make his dissatisfaction with the conduct of the case by the Tribunal a ground of appeal."

7. I think the wisdom of that paragraph is so clear, so obvious and so commensurate with commonsense that in relation to interlocutory hearings it is difficult to conceive the exceptional circumstances, or the most unusual circumstances where it can be right for a party, sensing that the case might not be going its way in the face of unfavourable remarks from the tribunal, to be allowed to launch an application for recusal of the court.

8. A court of appeal is there to correct the procedural errors. If a tribunal has over-reached itself and has shown apparent bias, it will be corrected on appeal.

9. What is now suggested in this case is that the court should indulge in the exercise proposed, that is, in the middle of an interlocutory appeal which is close to being completed, where the issues are of pure law largely turning on the provisions of Order 15, Order 20, the Limitation Ordinance and some of the case law and where all the evidence is on affidavit. It is suggested that in that kind of a case, the court should now stop the hearing of the appeal and indulge in this exercise.

10. To enable this exercise to be undertaken, there is firstly the question of the 24 alleged bias remarks which are disputed. There was a request for transcript by the applicant and there has to be also examined positive remarks by the same tribunal so that all the circumstances can be looked into. Then the court will be put into the invidious position of having to decide whether, having regard to all these matters (much of them disputed), the court could be said to be apparently biased.

11. There is, in these circumstances, every reason that the wisdom of Mr Justice Peter Gibson should be heeded. There is nothing which have been said to me which suggests that this is an exceptional circumstance. It has been said by Mr Acton-Bond, who was obviously acting on instruction and who was doing the best he can, that the rest of the hearing might last perhaps a bit longer than one day. Even if that is the case, that is not a justification for bringing this application in this way.

12. It seems to me that this is a case where the sooner we can get on with the appeal hearing the better it is. Who knows, at the end of the day, what would be the result, and there might not even be any appeal to the Court of Appeal by the applicant. As this appeal before me turns largely on questions of law, the court has very little scope to exercise party bias as opposed to deciding the point of law, rightly or wrongly. In reality, this is a case where the court can only decide on the true principle of law as it sees it. If the case goes against Mr Samuel, then he always has the right to appeal, both on apparent bias as well as on point of law decided against him.

13. Today's application is wholly a waste of time and expense, and I therefore have no hesitation, without even going into the question of the 24 alleged bias, to dismiss the application with costs. I propose to hear the parties on the matter of gross sum assessment.

Representation:

Mr Clive Grossman, SC, leading Mr Simon Woo, instructed by Messrs Weir & Associates, for the Plaintiff, the Respondent

Mr Jonathan Acton-Bond, instructed by Messrs Tai, Tang & Chong, for Mr Ilan Samuel, the Applicant

HCA5191/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 5191 OF 1998

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Coram: Deputy High Court Judge Gill in Chambers

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REASONS FOR DECISION

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1. This will be a short judgment. This is an appeal against the decision of a Master to grant security for costs against the plaintiff in respect of the plaintiff's application by summons of 21 July 2003 (the execution summons) for the oral examination of one Ilan Samuel.

2. First, a brief background. The plaintiff is, and has at all material times been, a legal practice based and carrying on business in the USA. Currently, it is under restructuring. At a material time it was licensed to operate in Hong Kong and did so. Nowadays it no longer practises law in Hong Kong; its presence here is limited to collecting unpaid fees from former clients.

3. In its former capacity to practise law in Hong Kong and represent clients the plaintiff received instructions primarily, as I read, from Samuel, to a lesser extent from someone called Asher Rozenbaum, to undertake the recovery of diamonds seized by the government of the PRC in China. Samuel represented that the owner of the diamonds was the first-named defendant, SRDL, a company registered in Israel of which he was a director.

4. As a result of this representation, the plaintiff proceeded to act for SRDL and to incur costs. It also did so for the second-named defendant but I am not concerned about that.

5. In the fullness of time the plaintiff demanded payment of its fees. When nothing was forthcoming, it issued a writ dated 1 April 1998. The proceedings were defended.

6. During the initial stages Samuel, by affidavit of 17 November 1998, deposed to being a director of SRDL and having the authority to make this affidavit on its behalf. On 18 March 2000, default judgment was entered against both defendants. On 28 March 2002 a Master ordered examination of Samuel (the examination order) in his capacity as director of both judgment debtors.

7. By summons of 26 March 2003 Samuel took out a summons to set aside the examination order. In the supporting affidavit he deposed:

"I never was and am not an officer of the 1st judgment debtor, that is, SRDL, because the 1st judgment debtor never was and is not a body corporate."

8. The examination order was set aside on 7 July 2003. On 21 July 2003 the plaintiff issued the execution summons referred to in the opening sentence of this judgment. On 25 July 2003, Samuel issued a summons for security of costs which gave rise to the order of the Master made on 11 November 2003 from which the plaintiff now appeals.

9. Three remaining events complete the history. On 22 September 2003, Samuel was being examined in his capacity of director of the second-named judgment debtor. He said under oath:

"SRDL has never been in existence."

10. On 11 October 2003, the plaintiff issued a summons to substitute Samuel for SRDL or add him as a defendant (the substitution summons).

11. And by order of 25 October 2003, the Master ordered the substitution summons and execution summons to be heard together.

12. The Master ordered security for costs under order 23 of rule 1 because, as he found, the plaintiff is ordinarily resident out of the jurisdiction and in exercise of his discretion. The order now being appealed, procedurally this amounts to a rehearing.

13. Like the Master, I am satisfied the plaintiff is ordinarily resident out of the jurisdiction. I am now required to exercise my discretion de novo.

14. Order 23, rule 1 states that provided that, as in this case, the plaintiff is ordinarily out of the jurisdiction:

"then if, having regard to all the circumstances of the case, the court thinks it just to do so, it may order the plaintiff to give such security for the defendant's costs of the action or other proceeding as it thinks just."

15. What I believe to be a significant feature of this long, drawn-out saga is that fees were incurred, were properly due, and for which judgment by default was entered.

16. The instructions were forthcoming from Samuel. He had represented himself to be a director of SRDL. If there is any dispute about this, common-sense indicates that it could not have been otherwise, for there can be no other explanation for the plaintiff's belief that it was acting for a body corporate of which Samuel was an officer.

17. Samuel perjured himself when, in his affidavit of 17 November 1998, he deposed to being a director of SRDL. The truth did not emerge until his affidavit of 26 March 2003 and statement under oath of 22 September 2003 that he was not, and never had been, a director of SRDL and that SRDL has never in fact existed.

18. In light of this, it seems to me that it would be a travesty if the plaintiff should have to be penalised in having to meet an order for security for costs before being entitled to remedy a mistake deliberately caused by Samuel.

19. As another factor of lesser importance, but significant nevertheless, is that there is evidence before me that the plaintiff is hard-up and that to provide security in the amount originally fixed by the Master or any other substantive figure would hinder its pursuit in the collection of the judgment debt.

20. In the circumstances, I allow the appeal and quash the Master's order and dismiss the application for security for costs.

(Submission on costs)

21. Costs here and below to the plaintiff, taxed if not agreed, payable on determination of the substitution and execution summonses. We'll have to give them their formal name in the order that's to be sealed, but you know what I mean. All right? I think that concludes everything.

Representation:

Mr Simon Woo, instructed by Messrs Weir & Associates, for the Plaintiff

Mr Jose Maurellet, instructed by Messrs Tai, Tang & Chong, for the Intended Defendant

HCA 5191/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 5191 OF 1998

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BRAND FARRAR BUXBAUM LLP. v. SAMUEL-ROZENBAUM DIAMOND LTD

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Coram: Master Kenneth Wong in Chambers

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REASONS FOR DECISION

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Application

1. There was before me a Summons taken out by Mr. Ilan Samuel ("Mr. Samuel") on 25 July 2003 for security for costs incurred and to be incurred by him in another Summons issued by the Plaintiff (the Judgment Creditor) on 21 July 2003 for leave to issue execution against Mr. Samuel and for oral examination of him, not in the capacity as a director or officer of the Defendants (the Judgment Debtors) but as a judgment debtor himself. On 25 October 2003, I allowed Mr. Samuel's application and reserved the reasons for the decision, which I now give.

2. This case has a complicated history. I shall set out below only those events which are relevant to the present application:-

(1)	On 18 March 2000, a default judgment was entered against the Defendants, namely Samuel-Rozenbaum Diamond Limited ("SRDL") and Samuel-Rozenbaum Diamond (1992) Limited ("SRDL(1992)").
(2)	On 28 March 2002, Master Ho ordered examination of Mr. Ilan Samuel under Order 48 of the Rules of the High Court. In this order, Mr. Samuel was described as "the director of above-named Judgment Debtors", i.e. both SRDL and SRDL (1992).
(3)	On 26 March 2003, Mr. Samuel took out a summons to set aside the said order in so far as Mr. Samuel was concerned as a director of SRDL. The ground of this application was set out in Mr. Samuel's Affirmation affirmed on 25 March 2003, at paragraph 2 where he deposed as follows:
	"I never was and am not an officer of the 1st Judgment Debtor [i.e. SRDL] because the 1st Judgment Debtor never was and is not a body corporate."
(4)	On 7 July 2003, Master Woolley set aside Master Ho's said order made on 28 March 2002 in so far as Mr. Samuel was concerned as a director of SRDL.
(5)	On 21 July 2003, the Plaintiff issued the said Summons for leave to issue execution against Mr. Samuel and for oral examination of him as a judgment debtor. The application was stated to be made under Order 45 and Order 49B, Rule 1 of the Rules of the High Court. It should be noted that no reference was made to which rule under Order 45 this application was based upon, despite Order 45 covers a variety of matters concerning different aspects of execution. I shall refer to this application below as "the Execution Summons".
(6)	On 25 July 2003, Mr. Samuel took out the present application for security for costs of the Execution Summons.

Grounds of the Application

3. In the present Summons, it was stated that the application was made under Order 23, rule 1 of the Rules of the High Court and the inherent jurisdiction of the Court. At the hearing, Mr. José-Antonio Maurellet, Counsel for Mr. Samuel told the Court that he did not rely on the inherent jurisdiction of the Court. In respect of Order 23, rule 1, Mr. Maurellet said he relied on Order 23, rule 1(a) ("that the plaintiff is ordinarily resident out of the jurisdiction") and Order 23, rule 1(d) ("that the plaintiff has changed his address during the course of the proceedings with a view to evading the consequences of the litigation").

4. Of course, the proof of rule 1(a) or rule 1(d) meets the threshold of granting the security only. Having had the jurisdiction, I need to pay regard to all the circumstances of the case. If I think it just to do so, I may then order the security to be furnished. I have drawn parties' attention to the case of Wing Hing Provision, Wine & Spirits Trading Co. Ltd. V. Hanjin Shipping Co. Ltd. [1998] 4 HKC 461. Parties agree that I should follow the relevant principles summarized in Keart Developments Ltd. V. Tarmac Construction Limited & Anor. [1995] 3 All ER 534 at 539-540 and cited with approval by Mr. Justice Godfrey JA at 464 of the Wing Hing case, which are reproduced as follows:-

"	1.	The court has a complete discretion whether to order security, and accordingly it will act in the light of all the relevant circumstances.
	2.	The possibility or probability that the plaintiff company will be deterred from perusing its claim by an order for security is not without more a sufficient reason for not ordering security.
	3.	The court must carry out a balancing exercise. On the one hand it must weigh the injustice to the plaintiff if prevented from pursuing a proper claim by an order for security. Against that, it must weigh the injustice to the defendant if no security is ordered and the defendant finds himself unable to recover costs from the plaintiff in due course.
	4.	In considering all the circumstances, the court will have regard to the plaintiff company's prospects of success. But it should not go into the merits in detail unless it can clearly be demonstrated that there is a high degree of probability of success or failure.
	5.	The court may order any amount up to the full amount claimed by way of security, provided that it is more than a simply nominal sum; it is not bound to order a substantial amount.
	6.	Before refusing to order security on the ground that it would unfairly stifle a valid claim, the court must be satisfied that, in all the circumstances, it is probable that the claim would be stifled. There may be cases where this can properly be inferred without direct evidence. The court should consider not only whether the plaintiff company can provide security out of its own resources to continue the litigation, but also whether it can raise the amount needed from its directors, shareholders or other backers or interested parties. It is for the plaintiff to satisfy the court that it would be prevented by an order for security from continuing the litigation."

Is Mr. Samuel a "defendant" under Order 23, rule 1?

5. The Plaintiff raised a more fundamental challenge to Mr. Samuel's application, which was that Mr. Samuel was not even "a defendant to an action or other proceedings in the Court of First Instance" within Order 23, rule 1. If this was correct, Mr. Samuel had no locus to make the application at all.

6. The strongest challenge as I can see on this argument is the reliance on a passage in paragraph 23/3/2, Hong Kong Civil Procedure 2002:

"'Action or other proceeding' (rr.1-3) - The proceedings referred to in r.1 are required to be an action or in the nature of an action and r.1 is wide enough to include any matter in which the jurisdiction of the court is invoked by originating process and consequently includes a petition: Re Unisoft Group (No.1) [1993] B.C.L.C. 528 ... Thus a defendant in an action or other substantive proceedings who makes an interlocutory application within such proceedings, for example an application by summons or motion, is not in the position of plaintiff for the purposes of r.1 in relation to the interlocutory application, and cannot be ordered to give security for the other party's costs of resisting such application (Re B. (Infants) [1965] 1 W.L.R. 946; 2 All E.R. 651n.). Similarly there is no jurisdiction to order a plaintiff to give security for a third party's costs of defending interlocutory applications for specific discovery and interrogatories made by the plaintiff directly against the third party. The third party is in the position of a defendant in relation to the third party proceedings brought against him by the original defendant, but not in relation to the interlocutory proceedings brought against him by the plaintiff, because the latter proceedings are not an action or in the nature of an action (Taly N.D.C. International N.V. v. Terra Nova Insurance Co. Ltd. [1985] 1 W.L.R. 1359; [1986] 1 All E.R. 69, CA)." (emphasis added)

7. In a nutshell, the argument was:-

(1)	Mr. Samuel applies for security for costs incurred and to be incurred in the Plaintiff's Execution Summons.
(2)	The Execution Summons is only an interlocutory application.
(3)	Therefore, Mr. Samuel is not "a defendant to an action or other proceeding" within the meaning of Order 23, rule 1.

8. I reject the argument for the following reasons:-

(1)	Adopting the test of Scrutton LJ in Maatschappij Voor Fondsenbezit v. Shell Transport & Trading Company Limited [1923] 2 K.B. 166 at 173, 177-8 as cited with approval by Mr. Justice Ma (as he then was) in the Judgment of another application by the Plaintiff for security for costs against the Claimant in the present action delivered on 15 October 2002 at paragraph 18 (that is, "Who is the attacker and who is the defender in this case?"), looking at the substance of the Execution Summons, there is no doubt that the Plaintiff is the attacker and Mr. Samuel is the defender.
(2)	It is clear from the said passage in Hong Kong Civil Procedure 2002 and Taly N.D.C. International N.V. v. Terra Nova Insurance Co. Ltd. that Order 23, rule 1 covers proceedings which are "in the nature of an action". To distinguish it from "interlocutory proceedings", I draw assistance from the following passage in Gilbert v. Endean (1878) 9 Ch. D. 259 at 269, applied in Rossage v. Rossage [1960] 1 W.L.R. 249; [1960] 1 All E.R. 600, CA; Re J. (An Infant) [1960] 1 W.L.R. 253; [1960] 1 All E.R. 603 and cited at paragraph 41/5/2, Hong Kong Civil Procedure 2002:
	"For the purpose of this rule [Order 41, rule 5] those applications only are considered interlocutory which do not decide the rights of parties, but are made for the purpose of keeping things in status quo till the rights can be decided, or for the purpose of obtaining some direction of the court as to how the cause is to be conducted, as to what is to be done in the progress of the cause of the purpose of enabling the court ultimately to decide upon the rights of the parties." (emphasis added)
	Although this passage is in relation to Order 41, rule 5 of the Rules of the High Court, I see no reason as to why this test cannot be adopted as the test for the purpose of Order 23, rule 1, namely, whether the proceedings underlying the application for security for costs are "an action or in the nature of an action" within Order 23, rule 1.
(3)	In the Execution Summons, the Plaintiff seeks leave to issue execution against Mr. Samuel personally. This is a determination of substantive rights and liabilities between the Plaintiff and Mr. Samuel. Plainly the Execution Summons is not within the meaning of "interlocutory proceedings" adopting the test in Gilbert v. Endean. Rather, it is in the nature of an action where the liability of Mr. Samuel will be determined.
(4)	In reaching this conclusion, I also draw reliance from the said Judgment of Mr. Justice Ma in the present action delivered 15 October 2002 at paragraph 16, where His Lordship, in considering the fundamental requirement under section 357 of the Companies Ordinance as to whether the company against which security is sought, is the "plaintiff in an action or other proceeding" under that section, held that:
	"There is no doubt that the words "legal proceeding" are wide enough to cover interpleader proceedings (c.f. Hong Kong Civil Procedure 2002, Vol. 1, at paragraphs 23/3/2 and 23/3/14)".

9. Therefore, in my view, Mr. Samuel is a "defendant" under Order 23, rule 1.

The Plaintiff: Foreign Plaintiff?

10. At one stage, the Plaintiff sought to suggest that this was the same issue to be decided in another Summons taken out by the Claimant dated 23 July 2003 for leave to execute against Mr. David C. Buxbaum ("Mr. Buxbaum") for costs of the interpleader proceedings ordered against the Plaintiff, "who was at all material times a partner of the Plaintiff". And the material times according to that Summons were respectively (1) 15 October 2002, the date of the Order of Mr. Justice Ma, (2) 28 November 2002, the date of the Order of Mr. Justice Sakhrani and (3) 17 December 2002, the date of another Order of Mr. Justice Sakhrani. I rejected this suggestion. For the purpose of security for costs, the Court was concerned with the present status and residence of the Plaintiff and not its status and residence at any time in the past.

11. In his affirmation filed with this Court on the Plaintiff's behalf recently on 9 August 2003, Mr. Buxbaum deposed (at paragraph 2) as follows:

"The Plaintiff is an American law firm, established in Los Angeles, USA, in November 1997, as a limited liability partnership, pursuant to California law and the California Corporation Code, Section 16951 et seq."

12. In the evidence exhibited by Mr. Samuel, the business registration record of the Plaintiff showed that it has ceased the business in Hong Kong on 21 January 2003, whereas a letter from the Law Society to Mr. Samuel's solicitors showed that the Plaintiff ceased practice on 30 June 2003 and its "contact" address (not business address) is a residential address in Hong Kong.

13. In another affirmation filed belatedly on 23 October 2003 (which parties agreed that I could look at it de bene esse), Mr. Buxbaum deposed further on the status of the Plaintiff at paragraph 4(a):

"The Plaintiff is properly registered and carries on some business in USA, while undergoing re-organization. Its status in Hong Kong is that Plaintiff has withdrawn its registration with the Law Society. The Plaintiff is not practicing law, but it is pursuing those who owe the Plaintiff money and using said funds to pay its debts."

14. The evidence was overwhelming: that the Plaintiff was an American law firm and has no business in Hong Kong. I was satisfied that the Plaintiff is a foreign plaintiff.

15. This finding sufficiently gave me the jurisdiction to consider whether discretion should be exercised to grant security for costs. For completeness sake I express the view that the evidence however cannot demonstrate on balance of probability that the Plaintiff changed its address (in effect it ceased business) during the course of proceedings with a view to evading the consequences of the litigation under Order 23, rule 1(1)(d). This is because firstly the present proceedings in the present context refer to the Execution Summons, which was issued on 21 July 2003, but long before that in January 2003 the Plaintiff had ceased business (and the practice ceased on 30 June 2003). As such its address was not changed "during the course of proceedings". Secondly, there is simply insufficient evidence produced to me showing, whether objectively or subjectively, the intention of the Plaintiff, in ceasing business, was to avoid the consequence of the present proceedings.

Discretion to allow security

16. After looking at all the relevant circumstances, I was satisfied that security should be given by the Plaintiff, for the following reasons:-

(1)	In the said belated affirmation of Mr. Buxbaum, the Plaintiff has sought to introduce the point, albeit belatedly, that the Plaintiff's financial position is weak and any security to be ordered would be severe hamper on the Plaintiff. I agree with the submission of Mr. Maurellet that this was no more than a bare assertion. The "Income Statement" exhibited was totally unhelpful because it was not audited and even signed. The Court did not know who prepared it. Moreover, its contents were confused.
(2)	Therefore, I was not persuaded that on balance of probability the Plaintiff would be deterred from pursuing its claim by an order for security.
(3)	I have also broadly considered the Plaintiff's prospect of success. I have reminded myself that I should not go into the merits in detail. The Plaintiff might have substantial grievances against its former clients. However, I have doubt as to whether proper procedural steps have been taken to enforce its rights (if any as against Mr. Samuel personally). This is because I have doubt as to whether the Execution Summons, basing on Order 45 generally and Order 49B, rule 1 as stated therein, would enable the Plaintiff to obtain leave to execute the judgment debt against Mr. Samuel personally, in the event that the Court finds that SRDL has never been in existence as alleged by the Plaintiff. I say no more than this save the conclusion that I reached for the present purpose was that the Plaintiff could not demonstrate to me that there was a high degree of probability of success.
(4)	The result of the balancing exercise that I have done, after also taking into account the injustice to Mr. Samuel if no security is ordered and Mr. Samuel finds himself unable to recover costs from the Plaintiff in due course if he succeeds in the Execution Summons, was that Mr. Samuel should have the protection of the security.

Quantum

17. I followed the practice of this Court as set out in paragraph 23/3/32 of Hong Kong Civil Procedure 2002 in estimating Mr. Samuel's costs on a broad-brush approach. Looking at the skeleton bills submitted by Mr. Samuel's solicitors, many items were in my view excessive. I have also considered that the amount ordered should be proportional to the judgment debt at stake (which was US$92,919.60 plus interest). Bearing all these factors in mind, I took the view that HK$150,000 is a just sum of which security should be furnished.

Result

18. After hearing parties on the terms of the order, I made the following order:-

(1)	The Plaintiff do furnish security for costs incurred and to be incurred by Mr. Ilan Samuel in the Plaintiff's Summons dated 21 July 2003 in the sum of HK$150,000.00 by way of payment into court or other mode to be determined by the Court if not agreed within 42 days from the date of the Order [i.e. 25 October 2003].
(2)	The proceedings in respect of the Plaintiff's said Summons dated 21 July 2003 be stayed until the said security is given by the Plaintiff.
(3)	Liberty to apply for directions on the mode of giving the security as referred to in paragraph (1) above.
(4)	Costs of this application including costs of today's hearing be paid by the Plaintiff to Mr. Ilan Samuel with certificate for counsel in any event after the determination of the Plaintiff's said Summons dated 21 July 2003.

Representation:

Mr. Simon Woo instructed by Messrs. Weir & Associates for the Plaintiff

Mr. José-Antonio Maurellet instructed by Messrs. Tai, Tang & Chong for Mr. Ilan Samuel

HCA 5191/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 5191 OF 1998

____________________

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J U D G M E N T

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1. The background to the matters before me is the claim made by the plaintiff ("Judgment Creditor") in this action against the defendants Samuel-Rozenbaum Diamond Limited and Samuel-Rozenbaum Diamond (1992) Limited ("the Judgment Debtors"). The Judgment Creditor obtained judgment in respect of legal services rendered to the Judgment Debtors between September 1995 and December 1997. The action was initially defended with a defence filed and served but on 18 March 2000 the Judgment Creditor obtained a default judgment in the sum of US$102,278.40 with interest .

2. On 14 January 2002 a writ of fieri facias was issued directing the Bailiff to seize the Judgment Debtors' goods, chattels and other property in execution of the said judgment. The execution took place on 27 February 2002 at two locations. One was at a jewellery exhibition at the Hong Kong Convention and Exhibition Centre ("the Convention Centre") and the other was at the offices of the Claimant at Unit 1302, 13/F, Chinachem Cameron Centre, 42-44 Cameron Road, Tsimshatsui, Kowloon ("the office premises").

3. At the jewellery exhibition the Bailiff Ms. Chan Pui Kuen ("Ms. Chan") seized ten lots of diamonds. At the time of the seizure the Claimant protested that the diamonds belonged to it and not to the Judgment Debtors and should not be seized. The Judgment Creditor and their solicitors undertook to indemnify the Bailiff and the Bailiff seized the diamonds. At the office premises Mr. Li Ka To ("Mr. Li") another Bailiff also seized furniture and office equipment.

4. Because of the rival claims of the Judgment Creditor and the Claimant the Bailiff took out an Interpleader Summons on 4 March 2002. Directions were given by Master C. B. Chan on 22 March 2002 .

5. The substantive hearing of the Interpleader Summons was before Master S. Wong on 9 April 2002. At that hearing some of the deponents were cross-examined. The Master dismissed the Claimant's claim to or in respect of the goods and chattels seized by the Bailiff and further ordered that the writ of fieri facias be proceeded with. He also ordered that the furniture and office equipment be returned to the Claimant on condition that the Claimant pays HK$13,470 to the Judgment Creditor or its solicitors.

6. The Claimant appealed against the order of Master S. Wong. The matter came before me on 23 May 2002. At that hearing the Claimant applied for leave to rely on fresh evidence on the appeal. After hearing arguments I granted leave to the Claimant to rely on the fresh evidence. By my order of 23 May 2002 the appeal was allowed and an issue was ordered to be tried namely, whether the Claimant was the owner or was otherwise entitled to the goods and chattels as at the date of the seizure on 27th February 2002 ("the Issue"). Save that the order in relation to the furniture and office equipment was to remain in force upon the Judgment Creditor's undertaking that it would repay the said sum to the Claimant if the Issue would be determined in favour of the Claimant, the Master's order was set aside. His ruling that the burden of proof of the ownership of the goods and chattels seized by the Bailiff be on the Claimant was also set aside. Directions were also given for the filing of further evidence.

7. The trial of the Issue was fixed for hearing on 28 and 29 November 2002. On 14 November 2002 the solicitors for the Judgment Creditor wrote to the solicitors for the Claimant informing them that the Judgment Creditor was not maintaining its claim to the goods and chattels seized under the writ of fieri facias but that it wished to be heard on the question of costs. The Claimant's solicitors responded that at the trial of the Issue they would seek relief from the court as set out in the list enclosed with the letter.

8. At the outset of the hearing before me on 28 November 2002 Mr. Smith SC leading Mr. Maullerett, for the Claimant, asked for the relief as follows:

(1) An order be made on the Interpleader Summons that the Claimant is entitled to all the goods and chattels seized by the Bailiff on 27th February 2002 and that all the said goods and chattels be released to the Claimant forthwith.

(2) The Bailiff do repay to the Claimant the sum of HK$60,000 forthwith, which was paid by the Claimant to the Bailiff pursuant to the order of Master S. Wong dated 9th April 2002.

(3) The Plaintiff do repay to the Claimant the sum of HK$13,470 forthwith, which was paid by the Claimant to the Plaintiff pursuant to my order of 23rd May 2002.

(4) Application made by the Bailiff for relief under O.17 R.3 (i.e. a protection order) be dismissed.

(5) Costs of the Claimant of and incidental to the Interpleader Summons, together with the costs of the Claimant of and incidental to the hearing before Master S. Wong herein on 9th April 2002, be paid by the Plaintiff to the Claimant on the highest possible basis as the Court deems fit.

(6) Costs of the Bailiff of and incidental to the Interpleader Summons be paid by the Plaintiff to the Bailiff on such basis as the Court deems fit."

9. Mr. Graham for the Judgment Creditor agreed that the Claimant was entitled to the relief sought under (1) and (3) above and accordingly, I made an order in terms of the relief sought under (1) and (3) above. The rest of the relief sought was disputed.

Application for protection orders

10. Mr. Lam on behalf of the Bailiffs Ms. Chan and Mr. Li sought protection orders in respect of the execution of the writ of fieri facias on 27 February 2002. Ms. Chan was the Bailiff who levied execution at the jewellery exhibition at the Convention Centre and Mr. Li was the Bailiff who levied execution at the office premises.

11. It is not disputed that the Court has jurisdiction to grant a protection order under 0.17, r.8 of the RHC which provides as follows:

“ Subject to the foregoing rules of this Order, the Court may in or for the purposes of any interpleader proceedings make such order as to costs or any other matter as it thinks just."

12. As stated in 17/8/3 of the Hong Kong Civil Procedure 2002 Vol. 1 a protection order in favour of a Bailiff who has interpleaded ordering that no action may be brought against him is ordinarily made. It is important to bear this in mind.

13. As the Claimant is entitled to the goods seized, it is clear that the execution was wrongful amounting to a trespass to the Claimant's goods. Although this would give rise to a claim by the Claimant against the Bailiff it is important to bear in mind that a Bailiff has a unique common law defence. This is available to Bailiffs or other executing officers in the execution of their duties.

14. The unique common law defence was stated by Suffiad J. in Fu Lok Man James v. Chief Bailiff of the High Court [1998] 2 HKC 1 @ 15 as follows:

“ Common law protection

A Bailiff very often finds himself in the position, when levying execution, that the goods are claimed by a third party. In such a situation, if the Bailiff withdraws and it turns out that the goods were indeed the execution debtor's, he may be liable for breaches of his duties in the execution. On the other hand, if he seizes the goods and it turns out to be in fact belonging to the Claimant, he may be liable to an action by the Claimant. The common law therefore has provided for a unique defence to Bailiffs or other executing officers in such situations that if the Bailiff or executing officer has only made an honest mistake in executing the process of the court and in all the circumstances no 'real grievance' or 'substantial grievance' has been caused to a Claimant beyond the mere entry and seizure of the goods, then the Bailiff or executing officer should be protected from an action for damages. It would be otherwise if the Bailiff or executing officer were guilty of insolent or oppressive conduct in excess of his duty and not justified by the writ of execution (see Smith v. Critchfield (1885) 14 QBD 873 and also Neumann v. Bakeaway Ltd. [1983] 1 WLR 1016). "

(my emphasis).

15. Mr. Lam submitted that the proper approach of the Court in deciding whether a protection order should be made was whether or not the Claimant could show that it was fairly arguable that he can defeat the common law defence open to the Bailiff.

16. Mr. Lam relied on Observer Ltd. v. Gordon [1983] 1 WLR 1008. Glidewell J. said at 1011 as follows:

“ First of all, what is the proper approach of the court to an application on behalf of the sheriff that the court should order 'no action' be brought? The court, in this sense, means the master in the first instance and, on appeal, the judge. In my view, one can properly draw the analogy of Order 14 proceedings in reverse, i.e. to be allowed to proceed with his action it is for the claimant to show that he has a real chance of defeating both defences available to the sheriff. If he shows this, a "no action" order should not be made and the claimant should be allowed to continue with his action".

17. At page 1012, Glidewell J. said that he proposed to adopt "fairly arguable" as the proper test.

18. I accept Mr. Lam's submission. In my judgment the proper approach to adopt is whether the Claimant can show that it has a fairly arguable case that he can defeat the Bailiff's unique common law defence. The Claimant has to show that it has a fairly arguable case of a 'real' or substantial 'grievance' caused to it beyond the mere entry and seizure of the goods.

19. And in dealing with 'substantial grievance' Rogers J.A. (as he then was) said in the Court of Appeal in the Fu Lok Man James case [1999] 3 HKC 742 @ 747:

“ It is accepted by both sides that an action against a Bailiff is only maintainable if the plaintiff has suffered a substantial grievance. It is unnecessary for the purposes of this case to explore the breadth of the concept of substantial grievance. For the purposes of the present case, it is not disputed that the plaintiff would have suffered a substantial grievance if he has suffered a substantial financial loss in terms of damages recoverable in law. Our attention has been drawn in this respect to the case of Neumann v. Bakeaway Ltd. [1983] 1 WLR 1016."

20. The Claimant initially opposed the making of protection orders for both of the Bailiffs. However, Mr. Smith in the course of his submissions informed me that he could not oppose a protection order in favour of Mr. Li in respect of the execution process at the office premises. That being so, I see no reason why I should not grant a protection order to Mr. Li.

21. Although the evidence filed on behalf of the Claimant was to the effect that Ms. Chan in the execution process was guilty of oppressive or insolent conduct, Mr. Smith in the course of his submissions, if I may say so very properly and correctly, abandoned such allegations and did not rely on the same. Mr. Smith relied solely on the fact that the Claimant had actual financial loss amounting to a substantial grievance, namely, loss resulting in an award of more than nominal damages. This was the only basis on which it was argued that the Claimant had a real or substantial grievance.

22. As the allegations of oppressive or insolent conduct on the part of the Bailiff were abandoned, the only matter to consider is whether the Claimant has shown that it has a fairly arguable case that he has suffered actual financial loss resulting in an award of more than nominal damages.

23. The writ of fieri facias directed the Bailiff to seize the goods, chattels and other property of the Judgment Debtors at the office premises. By letter dated 7 February 2002 from the solicitors for the Judgment Creditor to the Chief Bailiff instructions were given that the writ be executed at the office premises as well as at the jewellery exhibition at "Booths 2C24 and 2C26 of Samuel Rozenbaum".

24. Ms. Chan was accompanied by Mr. Wong Chi Kwong ("Mr. Wong") a legal executive of the Claimant's solicitors at the time of the execution at the jewellery exhibition. Mr. Wong was instructed by his principals to accompany Ms. Chan. The booths that they were led to by a security guard at the Convention Centre had a logo and name appearing on the entrance and inside as follows "Samuel-Rozenbaum Israeli Diamond Manufacturers."

25. Ms. Chan identified herself to the two foreigners there, namely Mr. Hadad and Mr. Rozenbaum. She explained that she intended to levy execution and seize the property there. Mr. Hadad claimed that the diamonds on display at the booths belonged to the Claimant, a Hong Kong company, and which had no relation with the Judgment Debtors whatsoever. The brochure at the booths, which was available to the public, gave the office addresses of "Samuel-Rozenbaum". It had the heading "Samuel-Rozenbaum, Israeli Diamond Manufacturers". The Head office was said to be in Israel with an address at Maccabi Diamond Exchange Building, Suite 840, Ramat-Gan 52520, Israel ("the Israeli address"). That is the same address as that of the Judgment Debtors as stated in the writ of summons in this action and as given by Mr. Payne, the former solicitor for the Judgment Debtors, in para. 4 of his first affidavit. This was also confirmed by Mr. Samuel in his first affirmation when he confirmed that the contents of Mr. Payne's said affidavit were true and correct.

26. Apart from the brochure at the booths there were also business cards placed there. Ms. Chan noticed the name 'Samuel-Rozenbaum' and that the Israeli address which was the address of the Head Office matched the address of the Judgment Debtors. The address of the 'Hong Kong Office' was the same as the office premises.

27. The Claimant's name was neither mentioned in the brochure nor in business cards placed at the booths. It was also pointed to me that the exhibitor was simply described as "Samuel-Rozenbaum" in the website for the jewellery exhibition. The Claimant was not mentioned as the exhibitor.

28. Both Mr. Hadad and Mr. Rozenbaum told Ms. Chan that there were no goods and chattels at the booths which belonged to the Judgment Debtors. She asked for the production of their Business Registration certificate but was told that it was in the office premises. Ms. Chan also said that although Mr. Hadad and Mr. Rozenbaum alleged that none of the goods at the booths belonged to the Judgment Debtors, they were not able to produce documentary evidence in support.

29. She then asked Mr. Wong to take further instructions which he did. She was informed that the Judgment Creditor was certain that the Judgment Debtors' goods were at the booths and that the Judgment Creditor and its solicitors offered to indemnify the Bailiff against all liabilities arising from the seizure. She reported the matter back to her superior and it was decided not to proceed with the execution until the indemnity and the Business Registration certificate reached the Bailiff's office. These were later received by the Bailiff's office. After speaking with her superior over the telephone she started the seizure.

30. She believed that it was not necessary to seize all the diamonds placed in the show case. She said that Mr. Hadad opened the showcase and requested her not to seize the raw diamonds there. He took out some golden bracelets from another shelf and asked her to seize them instead. As she had some doubts on the value of the golden bracelets she did not accede to his request. Mr. Hadad then took out some other diamonds and asked her to seize them in substitution of those placed in the showcase. Ms. Chan finally agreed to seize some diamonds from the showcase and some from those taken out by Mr. Hadad from the other shelf. This has not been disputed by the last affirmation of Mr. Rozenbaum made on 27 November 2002 in reply.

31. An inventory of the diamonds seized was prepared after she ascertained the unit price of the diamonds from Mr. Hadad and Mr. Rozenbaum. List A was prepared. At their request she added a note that Mr. Hadad claimed that the listed items did not belong to the Judgment Debtors but to the Claimant and that item nos. 3 and 6 of the listed items had been sold to a customer who would have to go to buy them elsewhere. He also claimed "big damage" had been caused to the Claimant.

32. The question to consider is whether there is a fairly arguable case that the Claimant has suffered actual financial loss resulting in an award of more than nominal damages. Mr. Smith submitted that the Claimant could show this in two ways:

(1) loss which flowed directly from the fact of the diamonds being seized ; and

(2) loss of sales arising out of the fact that there was a disruption of business at the time of seizure.

33. The first can be said to be direct loss and the second consequential loss. It is necessary to examine these.

34. As to direct loss, it is said that the diamonds in List A have been locked up for 9 months during which period no sales could be made for those diamonds. The Claimant is a trader in diamonds. It is also said that there is specific evidence in respect of two items, namely, item nos. 3 and 6 in List A. The evidence does show that at the time of the execution the Claimant stated that these had been sold to a customer who would have to go elsewhere to buy the same. This was recorded in List A.

35. It is obvious that Ms Chan was in an invidious position. The brochure and the business cards at the booths at the jewellery exhibition gave the name "Samuel-Rozenbaum, Israeli Diamond Manufacturers". The address of the Head office was the same address as that of the Judgment Debtors namely, the Israeli address and the office premises were described as the Hong Kong office. The Judgment Creditor through its solicitors said that the Judgment Debtors' diamonds were at the booths but Mr. Hadad and Mr. Rozenbaum alleged that none of the diamonds at the booths belonged to the Judgment Debtors but that they belonged to the claimant. They were, however, unable to provide any documentary evidence in support. Ms Chan took instructions from her superior and after her superior received an indemnity from the Judgment Creditor and its solicitors he instructed her to proceed with the execution which she did. She was in an invidious position. If she failed to seize the diamonds she might well have been subject to complaint from the Judgment Creditor. She took the only reasonable course open to her namely, to seize the diamonds in List A on 27 February 2002. Shortly thereafter on 4th March 2002 the Bailiff took out the Interpleader Summons. The matter was thus left to the court to decide as a matter of judicial process. It seems to me that although the execution was wrongful Ms. Chan made an honest mistake in the execution of her duties.

36. It cannot be said that Ms. Chan has deprived the claimant of the diamonds in List A for the last 9 months. She promptly took out the Interpleader Summons and the matter was thus left to the court to decide as a matter of judicial process. I fail to see how Ms. Chan can be blamed for keeping the Claimant out its goods for 9 months.

37. There is in any event no merit in the complaint that because the Claimant was deprived of the diamonds for 9 months it has suffered loss of sales. There is no evidence at all that the diamonds have diminished in value during that period of time or that they have somehow become unsaleable.

38. It is also said that the Claimant has lost the sale of item nos. 3 and 6 in List A because of the seizure and that is direct loss flowing from the tortious act. However, these items can be sold elsewhere. There is no evidence at all that any of the items in List A have diminished in value or are unsaleable. As regards items nos. 3 and 6 on List A, Mr. Rozenbaum said that the Claimant has exposed itself to a potential claim by its customers for failing to sell those diamonds (para. 7 of his third affirmation). That, however, is a bare assertion with no particulars or supporting documents provided. The Claimant has not even been able to produce a letter threatening such a claim from its customers who remain unidentified. This so-called potential claim is in my view fanciful.

39. I fail to see how there can be anything more than an award of nominal damages in any claim against Ms. Chan in respect of the seizure of the diamonds. The Claimant fails to show a fairly arguable case on the first ground of direct loss.

40. I turn to consequential loss. It is said that there is a claim for consequential loss of sales arising out of the fact that there was a disruption of business on the day of the execution which deterred customers from making purchases on that day.

41. The Claimant's evidence is to the effect that it only made US$17,102.58 of sales on 27 February 2002 which was the first day of the jewellery exhibition. The exhibition lasted from 27 February to 2 March 2002. On the three days following the execution the Claimant made US$937,595.12 of sales, roughly at US$312,530 per day. The Claimant's case is that the loss of sales on the day of the execution was about US$295,427 (i.e. US$312,530 less US$17,102.58).

42. It is however important to see the way the Claimant put its case on the evidence. Para 20 of the first affirmation of Mr. Rozenbaum states as follows:

“ On the day of seizure, the Claimant only made US$17,102.58 of sales. A copy of the invoices for that day is now produced and shown to me marked "AYR-7". The amount of diamonds and jewellery sold on that day was considerably less than those on previous occasions and indeed less that those on the days following the day of seizure. A copy of the invoices for the transactions at the 2002 Exhibition from 28th February 2002 to 2nd March 2002 are now produced and shown to me collectively marked "AYR-8". Altogether, for the three days after the seizure, the Claimant made US$937,595.12 of sales, roughly at US$312,530 per day. These invoices evidence sales by the Claimant as principal to customers of the Claimant. The invoices were issued by the Claimant as seller. The reason for the reduction in sales on the day of seizure is simple. The high handed manner in which the seizure was effected had deterred a large number of potential customers from doing business with the Claimant on that day. The exhibitions which the Claimant had participated had always provided the Claimant with an excellent medium to promote sales. The first day of the 2002 Exhibition was, however, completely ruined by the seizure." (my emphasis).

43. Thus it can be readily seen that according to the Claimant "the high handed manner in which the seizure was effected had deterred a large number of potential customers" and this was the reason for the reduction in sales on the day. That being the reason, with the abandonment by Mr. Smith of the allegations of insolent or oppressive conduct on the part of Ms. Chan the complaint of loss of sales on that day is no longer sustainable against Ms. Chan.

44. It must be obvious that in almost all cases of execution of process there must be some inconvenience and annoyance caused. That in itself is not sufficient to deprive the Bailiff of a protection order.

45. I do not think that it is sufficient to simply state that for the first day of the exhibition only two sales were concluded whereas for subsequent days many more transactions were conducted and therefore an inference should be drawn that the Claimant has lost substantial sales on the first day of the exhibition which was caused by the seizure of the goods by the Bailiff. The evidence of Mr. Sherman and the third affidavit of Mr. Rozenbaum makes the assertion that the seizure ruined the Claimant's business for that day. Although it is asserted that during the time that Ms. Chan was carrying out the execution process potential customers were scared away from the booth there is no evidence to show that they would indeed have made any purchases on that occasion. It was after all only the first day of the exhibition. There is no evidence to show that these persons did not subsequently return to make purchases. It is in my view pure speculation to suggest that potential customers were scared away and therefore the Claimant has suffered substantial financial loss because of lost sales. It is clear that the actual execution process lasted shortly over two hours. Ms. Chan arrived at about 12.30 pm at the Convention Centre and together with a security guard met Mr. Wong at the lobby. They proceeded to the booths. Ms. Chan identified herself to Mr. Hadad and Mr. Rozenbaum and they spoke. She deals with this in her affirmation. At some point she waited outside the booths to wait for the indemnity and the Business Registration certificate to arrive at the Bailiff's office. She could not have been engaged in conversation in the booths for very long before withdrawing to outside the booths. At about 1.30 pm she was instructed to proceed with the execution which she did. The whole process lasted until 3.30 pm and she left the booths with the seized diamonds. Thus the execution process lasted slightly over two hours. There were still about 21/2 hours to go before the end of the first day's exhibition.

46. As was pointed out by Mr. Lam, the Claimant's own evidence shows that Madam Minh, a Vietnamese lady, was negotiating with the Claimant's staff for the purchase of some diamonds when Ms. Chan arrived at the booths. On seeing the Bailiff she stopped negotiations and left the booths. However, according to the Claimant she did subsequently return and carried on with her negotiations on 1 March 2002 and concluded a sale. On the Claimant's own evidence a particular potential customer who was actively in negotiations with the Claimant at the time of execution did subsequently return and concluded a sale. Rather than sustaining a loss in respect of Madam Minh's transaction, the Claimant was able to conclude the sale to her.

47. Mr. Smith relied on Brewer v. Dew (1843) 11 M & W 625 as authority in support of his contention that consequential loss can be claimed. However, the facts there were very different. The facts of that case as set out in the declaration were that the defendants broke and entered two dwelling houses belonging to the plaintiff and they continued staying there making a great noise and disturbance for the space of ten days and greatly disturbed the plaintiff and his family in the possession and enjoyment of the said dwelling house. With force and arms they took and seized goods and chattels in the dwelling houses and in certain parts used as shops by the plaintiff in the way of his trade and business of a bookseller and which said goods were part of the plaintiff's stock in trade and converted and disposed of the same to their own use under a false and unfounded claim that the defendants were then entitled to seize and take possession of the said goods and chattels to enforce payment of the alleged debt. The plaintiff was greatly annoyed, prejudiced, injured and disturbed in carrying on and conducting his trade and business and was believed and considered by others including customers of the plaintiff to be incapable of carrying on his business and to be insolvent and incapable of paying his just debts. Divers persons residing in certain rooms in the dwelling houses were induced to believe that the plaintiff was in needy and embarrassed circumstances and that the defendants were entitled to seize the goods for monies due and left and ceased to reside as lodgers or boarders. The Court considered that vindictive damages could be given. Brewer v. Dew is clearly distinguishable on its facts.

48. As stated in para. 1439 of McGregor on Damages 16th Edn., Brewer v. Dew appears to have been interpreted as a case of exemplary damages in Owen & Smith (trading as Nuagin Car Service) v. Reo Motors (Britain) Limited 151 LT 27.

49. It was made clear in Owen & Smith that exemplary damages may be awarded for trespass to goods due to the manner of the trespass. Scrutton L.J. said @ 277:

“ I have no doubt myself that a judge or jury may give punitive damages in view of the nature of the trespass, and that they may do so in trespass to goods or land. The example usually given is that of a harmless wanderer where the damages are nominal. If he makes contemptuous gestures in the course of his trespass, the judge may give damages for the nature of the trespass."

50. And in the same case Maugham L.J. said @ 278:

“ In the first place it seems to me clear upon the authorities up to the House of Lords that there may be exemplary damages given for trespass to goods arising out of the manner of the taking, just as every student knows that there may be damages for breaking into a man's close even though no damage was done there. A malicious motive, an arrogant or insolent manner are things which justify exemplary damages being given by judge or jury. The cases seem to show that the same rule applies as to a trespass to goods ............................................................................................................................................................ But the case of Brewer v. Dew (1843, 11 M. & W. 625 is an authority that the jury may, in a case upon a claim for trespass to goods, where the seizure of the goods was made under a false pretence of a legal claim, the plaintiff being thereby annoyed and disturbed in the carrying on of his business, give vindictive damages beyond the value of the goods."

51. Mr. Lam also referred me to Interoven Stove Co Ltd v. Hibbard & others [1936] All E R 263 where Owen & Smith was applied. It was held that where there was an illegal distress which was a trespass to goods and even though no actual damage be proved the court was entitled to give substantial damages if the circumstances justified it. The circumstances there were that the plaintiff was treated in a very high-handed manner.

52. As stated in para. 1439 of McGregor on Damages, Lord Devlin in Rookes v. Barnard [1964] AC 1129 @1229 has interpreted the award in Owen & Smith as being one of compensatory damages rather than exemplary damages.

53. It is also stated at para. 14-113 in Clerk & Lindsell on Torts 18th Edn. that aggravated damages may be awarded for the circumstances of a conversion, citing Owen & Smith.

54. It seems to me to be clear on the authorities that aggravated damages may be awarded for the circumstances or nature of a conversion or trespass to goods. I accept Mr. Lam's submission that in the cases where it was held that such damages may be awarded the circumstances and the nature of the tort were such that insolent or oppressive conduct, such as high-handed action, was involved. As those allegations have been abandoned the claim for consequential loss against Ms. Chan is in my judgment not fairly arguable.

55. The fact that the Judgment Creditor and its solicitors provided an indemnity to the Bailiff is no bar to the making of a protection order although it is something to be taken into account. In the circumstances it was reasonable for the Bailiff to seek extra protection in the indemnity given as a precautionary measure. That should not prevent the Court from making a protection order. Ms. Chan has acted reasonably and has made an honest mistake. In my judgment a protection order should also be made in favour of Ms. Chan.

Costs

56. The Judgment Creditor having conceded that the Claimant was entitled to the goods and chattels seized by the Bailiff on 27 February 2002 and that the same be released to the Claimant forthwith it would appear that costs should follow the event. However, Mr. Graham argues for a different order namely, that the Claimant should be deprived of its costs.

57. There is no doubt that costs should follow the event except when it appears to the Court that in the circumstances of the case some other order should be made as to the whole or any part of the costs (O.62, r.3 R.H.C.).

58. Mr. Graham did not seek to disturb any earlier orders for costs which had already been made. As was pointed out, three costs orders have already been made in favour of the Judgment Creditor to be paid by the Claimant forthwith namely:

(1) on 17 April 2002 by Master Rimsky Yuen in respect of an application to discharge an ex parte order for stay of execution of Master S. Wong's order of 9 April 2002;

(2) on 26 April 2002 by Ma J. (as he then was) in respect of an application by the Claimant for the continuation of an interim stay of execution of the said order of Master S. Wong granted ex parte by Hartmann J. The costs were awarded on an indemnity basis.

(3) on 23 May 2002 by my order in respect of the costs of the application to adduce fresh evidence on the appeal from the said order of Master S. Wong and for the costs of the hearing before me.

59. The costs in issue before me are:

(1) the costs of a directions hearing before Master C.B. Chan on 22 March 2002 which were reserved; and

(2) the costs of the hearing before Master S. Wong on 9 April 2002 which by my order of 23 May 2002 were ordered to be reserved to the Judge dealing with the Issue.

(3) the costs of the trial of the Issue.

60. The Bailiff also seeks its costs of and occasioned by the execution of the writ of fieri facias on 27 February 2002 and the Interpleader Summons including its costs at the hearings as follows:

(a) before Master C. B. Chan on 22 March 2002;

(b) before Master S. Wong on 9 April 2002;

(c) before Ma J. on 26 April 2002;

(d) before me on 23 May 2002;

(e) before me at the hearing commencing on 28 November 2002.

61. It was Mr. Graham's contention that the Claimant had put forward false and contradictory evidence as to the Claimant's entitlement to the diamonds that were seized. The evidence of the corporate structure of what was loosely described as the Samuel-Rozenbaum Group was unclear and confusing. It was said that one of companies, namely Samuel-Rozenbaum Diamond Limited, one of the Judgment Debtors was actually non-existent. It was also said that the other Judgment Debtor Samuel-Rozenbaum (1992) Limited ceased business at the time that another company namely, Samuel-Rozenbaum Diamond (1999) Limited was formed presumably with a view of evading the liabilities of the former. Mr. Graham submitted that the Group which included the Claimant displayed a low standard of commercial morality.

62. I have considered all of Mr. Graham's submissions. However, I am unable to accept that the Claimant should be deprived of its costs.

63. Mr. Smith correctly emphasized that the Judgment Creditor's case has all along, until the concession made by letter dated 14 November 2002, been on the basis that the corporate veil should be pierced and hence the goods and chattels at the office premises and at the Convention Centre on 27 February 2002 were liable to be seized in execution of the judgment against the Judgment Debtors. That this is so is in my view clear from the first affidavit of Mr. Buxbaum in particular paras. 28 and 29. It is also clear from the Skeleton Submissions of then Counsel for the Judgment Creditor at the hearing before Master S. Wong where it is stated in para. 15:

“ The [Judgment Debtors] are in fact the alter ego of the exhibitor of the diamonds on List A, the Samuel-Rozenbaum group; thus the [Judgment Creditor] sought execution against the diamonds".

64. The stance that the corporate veil should be pierced and that the diamonds could be seized in execution was maintained right up to the time of the letter of 14 November 2002.

65. The fresh evidence filed pursuant to my order of 23 May 2002 clearly established with supporting documentation that all the diamonds at the Convention Centre were supplied to the Claimant by Samuel-Rozenbaum (1999) Limited. The Judgment Creditor was unable to pursue to trial its case that the corporate veil should be pierced and made the concession by letter dated 14 November 2002. That being so, it seems to me that having started out with an allegation that the corporate veil should be pierced, which the Judgment Creditor was unable to pursue successfully to the end, it ought to pay the costs of the Interpleader Proceedings and the trial of the issue. In my view costs should follow the event.

66. As regards the hearing before Master S, Wong, it must be remembered that the Master had ruled that the burden of proof rested with the Claimant and that the Claimant had failed to discharge the burden of proof that it owned the diamonds. It is, of course, true that the invoices and sale documents in respect of the diamonds seized were only produced by the Claimant later in the fresh evidence filed pursuant to the leave granted on 23 May 2002. That evidence showed that all the diamonds seized on 27 February 2002 were sold to the Claimant by Samuel-Rozenbaum (1999) Ltd. Although Mr. Hadad did not mention this entity in the proceedings before Master S. Wong, he was adamant that the diamonds belonged to the Claimant and did not belong to and were not supplied by the Judgment Debtors or either of them.

67. It seems to me that the Master was in error in ruling that the burden of proof was on the Claimant. The diamonds were never in the possession of the Judgment Debtors but were in the possession of the Claimant. By my order of 23 May 2002 the Master's ruling on the burden of proof being on the Claimant was set aside.

68. In his Judgment dated 15 October 2002 on the Judgment Creditor's application for security of costs at page 10, Ma J. also held in effect that the burden of proof rested with the Judgment Creditor.

69. The Judgment Creditor is unable to discharge the burden of proof that it was entitled to levy execution on the goods in the possession of the Claimant in respect of the judgment entered against the Judgment Debtors. I am not persuaded that the usual order as to costs should not be made even in respect of the hearing before Master S. Wong.

70. The Claimant asks for indemnity costs. It is said that the issue of the writ of fieri facias and the execution process was an abuse of process and therefore indemnity costs should be ordered. Although the Judgment Creditor has been unable to persist in its allegation that the corporate veil of the Claimant should be pierced I do not consider that there has been an abuse of process of the Court. The obscure way in which the Samuel-Rozenbaum Group operated might well have led the Judgment Creditor to allege that the corporate veil should be pierced. I am not persuaded that the Judgment Creditor was guilty of an abuse of process so as to justify an order for indemnity costs.

71. It seems to me that the Judgment Creditor should also pay the Bailiff's costs of and occasioned by the execution of the writ of fieri facies on 27 February 2002, the Claimant's claim to the goods and chattels seized by the Bailiff on 27 February 2002 and the Interpleader Summons including the hearings on 22 March 2002, 9 April 2002 and 23 May 2002. These are to be taxed on a party and party basis. As regards the hearing on 26 April 2002 before Ma J., Mr. Maurellet accepted that the Claimant should pay the Bailiff's costs. Such costs are to be on an indemnity basis which was the basis for the costs order made by Ma J in favour of the Judgment Creditor against the Claimant.

72. As the Bailiff has succeeded in the application for protection orders for Ms. Chan and Mr. Li such costs should be borne by the Claimant. The Judgment Creditor who supported the Bailiff's application is also entitled to its costs.

The HK$60,000

73. There was also the issue of the HK$60,000 ordered by Master C. B. Chan to be paid by the Claimant as security. It is reasonably clear to me from the attendance note of the Judgment Creditor's solicitors that the said sum was ordered to be paid because the Claimant had broken the tape sealing off the safe without the prior consent of the Bailiff. I appreciate that at the hearing before Master S. Wong he ruled, if I may say so correctly, that the contents of the safe were not seized. Despite this it is obvious that the Claimant ought not to have broken the tape sealing off the safe without the prior consent of the Bailiff and this may well have been contumelious conduct. It was for this reason that Master C. B. Chan ordered security for the Bailiff's costs inclusive of guard fees. In my view in the circumstances the Claimant should pay for the guard fees incurred which I have been told amounted to HK$21,850. The balance of HK$38,150 should be returned to the Claimant.

Conclusion

74. To sum up, I make the following orders that:

(1) No action may be brought against Mr. Li and Ms. Chan in respect of the execution process on 27 February 2002;

(2) The Bailiff do repay to the Claimant the sum of HK$38,150;

(3) The Claimant do pay the Bailiff and the Judgment Creditor their costs in the application for protection orders for Ms. Chan and Mr. Li. I would indicate that this application took up about half the time before me for the assistance of the taxing master;

(4) The costs of the Claimant of and incidental to the Interpleader Summons, together with the costs of the Claimant of and incidental to the hearing before Master C.B. Chan on 22 March 2002 and before Master S. Wong on 9 April 2002 be paid by the Judgment Creditor to the Claimant.

(5) The Claimant's costs of the trial of the Issue and of the hearing before me on 28, 29 November and 2 December 2002, save for the time spent on the application for the said protection orders, be paid by the Judgment Creditor to the Claimant;

(6) The Bailiff's costs of and occasioned by the execution of the writ of fieri facias on 27 February 2002 and the Interpleader Summons including its costs at the hearings before Master C.B. Chan on 22 March 2002, before Master Wong on 9 April 2002 and before me on 23 May 2002 be paid by the Judgment Creditor.

(7) The Bailiff's costs of the hearing before Ma J. on 26 April 2002 be paid by the Claimant such costs to be taxed on an indemnity basis.

(8) The Bailiff's costs of the hearing before me on 28, 29 November and 2 December 2002, save for the time spent on the application for the said protection orders, be paid by the Judgment Creditor.

(9) Save for the costs order under (7) above, all the costs orders are for taxation on a party and party basis.

Representation:

Mr. Peter Graham instructed by Weir & Associates for the Plaintiff

Mr. Clifford Smith S.C. and Mr. Jose Maurellet instructed by Tai, Tang & Chong for the Claimant

Mr. Paul Lam instructed by Department of Justice for the Bailiffs

HCA 5191/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 5191 OF 1998

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D E C I S I O N

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1. As a preliminary matter the claimant applies for leave to rely on fresh evidence at the hearing of the appeal. This is by way of the two affirmations of Mr. Asher Rozenbaum which were not before the master at the hearing on 9 April 2002. This application is opposed by the plaintiff.

2. The background facts are that on 1 April 1998 the plaintiff brought this action against the defendants claiming the sum of US$102,278.40 with interest for legal services rendered. On 18 March 2000 the plaintiff obtained default judgment in the said sum together with interest and costs.

3. On 14 January 2002 a writ of fieri facias was issued directing the Bailiff to seize the defendants' goods, chattel and other property in execution of the judgment.

4. On 27 February 2002 the Bailiff seized a quantity of goods at the Hong Kong Convention and Exhibition Centre during the course of a jewellery exhibition. The seized goods consisted of ten lots of diamonds listed in what has been referred to as list A. At the time of the seizure the claimant protested that the diamonds belonged to it and not to the judgment debtors and should not be seized. The plaintiff's solicitors undertook to indemnify the Bailiff. The Bailiff also seized furniture at the claimant's office as listed in what has been referred to as list B.

5. Because of the rival claims of the plaintiff and the claimant the Bailiff took out an interpleader summons on 4 March 2002. Directions were given by Master C B Chan on 22 March 2002 and the substantive hearing of the interpleader summons was heard by Master Stewart Wong on 9 April 2002. The master dismissed the claimant's claim and the claimant has appealed against that decision.

6. It is clear that the decision of the master was by way of summary determination under O.17, r.5(2) of RHC and not by way of a trial of an issue which was ordered to be stated and tried under O. 17, r.5(1)(b). At the hearing before the master the claimant's deponents, Mr. Hadad and Miss Hui, were crossed-examined pursuant to leave given at the directions hearing before Master C B Chan on 22 March 2002. I would observe that the order of Master C B Chan only permitted cross-examination of Mr. Hadad and Miss Hui and that such cross-examination was to be limited to half an hour for each deponent. There is no doubt that this was a summary determination and not a trial.

7. Mr. Chow, for the plaintiff, pointed out that the order of Master Stewart Wong was a final and not an interlocutory order. That may well be so but it is important to bear in mind that the appeal from the order of Master Stewart Wong to a judge in chambers is an actual re-hearing of the application which led to the order. The judge treats the matter as though it came before him for the first time unlike the situation where there is an appeal to the Court of Appeal (marginal note 58/1/2 Hong Kong Civil Procedure 2002). The position is the same whether the order is a final or an interlocutory order.

8. The following passage also appears in marginal note 58/1/2 Hong Kong Civil Procedure 2002 :

“ It is common practice for the judge in chambers, subject of course to the question of costs, to admit further or additional evidence by affidavit to that which was before the master or district judge; but if a party has taken his stand on the evidence as it stood before the master or district judge, the judge in chambers may in his discretion, by analogy with the practice in the Court of Appeal, refuse to allow him to adduce further evidence (see Krakauer v. Katz [1954] 1 W.L.R. 278; [1954] 1 All E.R. 244, CA; Core Resources (Far East) Ltd. v. Sky Finders Ltd., above; Wai Cheong Co. Ltd. v. Kiu May Construction Co. Ltd., above; Chan Wah (t/a Ka Wah Silk Flower Factory) v. Ng Man Ming (t/a Sin Fu Trading Co.), above. "

It is because the judge treats the matter as though it came before him for the first time that the court more readily allows fresh evidence to be adduced. This is a matter of the exercise of the court's discretion.

9. In Core Resources (Far East) Ltd. v. Sky Finders Ltd. [1992] 1 HKLR 193 Kaplan J. refused the application for leave to adduce the fresh evidence on an appeal from a master on an O.14 judgment but that was because the fresh evidence sought to place before the court a completely different defence. Kaplan J. however recognized that the court would usually allow the appellant to put additional documents or another deponent to deal with matters which should have been dealt with below. He said at page 198 :

“ What usually happens in these cases is that the losing party before the Master finds some additional documents or another deponent to deal with the matters which should have been dealt with below. The court will usually allow this to happen. But what I am dealing with here is not the placing before the court of additional information which was available but not used, but placing before the court of a completely different defence which it is said arose only after the hearing before the Master. "

10. I was referred by Mr. Smith SC to Payen International Ltd. v Quality Engine Parts Ltd., a judgment of the Court of Appeal on 26 May 1995. In that case the Court of Appeal was dealing with an appeal where the judge hearing an appeal from a master had refused to allow the plaintiff to adduce fresh evidence on the striking out application. Balcombe LJ at page 3 of the Lexis Report said as follows :

“ But her other ground, and I think it would not be unfair to say her principal ground, for objecting to this evidence being put it in is that it could and should have been obtained earlier, that it is incumbent upon a party in the position of the plaintiffs here to put it best evidence forward the first time round. There must be finality even in interlocutory matters and the courts should be slow to allow parties to improve their evidence at the stage of appeal to the judge in chambers from the district judge in chambers. I have to say that does not accord with my experience. Appeal to the judge in chambers in cases is by way of rehearing, particularly in a case such as this - a strike out for want of prosecution. It seems to me that the court should be slow to preclude a party putting before the court material which on the face of it could be relevant. "

11. Krakauer v. Katz is cited in the Hong Kong Civil Procedure 2002 as authority for the proposition that where a party has taken his stand on the evidence as it stood before the master, the judge in chambers may in his discretion refuse to allow him to adduce the further evidence. The report of that case Krakauer v. Katz makes it plain that at the hearing of the appeal before the judge, counsel sought to read further affidavits and the judge at the time asked the defendant's counsel whether he wished for an adjournment to answer the plaintiff's evidence. Counsel then stated that he did not want to answer that evidence. It was in that context that Denning LJ (as he then was) said at page 279:

“ At the hearing below the judge in chambers asked his counsel whether he wanted to answer the affidavit of the plaintiff and whether he wanted an adjournment so to do, and the counsel said that he did not. Counsel thus took his stand on the evidence as it then stood before the judge; and it would be contrary to the right exercise of our discretion if we were to allow counsel for the defendant to go back on that position and to introduce further evidence in this court. "

12. I do not regard the letter of the claimant's solicitors dated 4 April 2002 relied on by Mr. Chow or the evidence in cross-examination of Mr. Hadad referred to by Mr. Chow as a stand having been taken on the evidence by the claimant so that the discretion should not be exercised in its favour to adduce the fresh evidence.

13. Mr. Chow referred to Hertfordshire Investments Ltd. v. Bubb and another [2000] 1 WLR 2318. In my view that case is of no assistance to the plaintiff. The Court of Appeal held that where an application was made to a county court for a re-hearing on the grounds of fresh evidence after final judgment following a trial on the merits the principles to be applied were the same as those applicable to the power of the Court of Appeal to order a re-hearing from the High Court. This has, in my view, no application to an appeal from a master to a judge in chambers which is an actual re-hearing of the application. I agree with Mr. Smith that the Ladd v. Mashall conditions as set out at page 821 of the Hong Kong Civil Procedure 2002 are inapplicable to such an appeal unlike an appeal to the Court of Appeal. There is no need, in my view, for the claimant to show special reasons for the adducing of the fresh evidence.

14. The fresh evidence does not, in my view, and as is accepted by Mr. Chow, set up a new case. It seeks, as Mr. Smith submitted, to fill in gaps and to exhibit documents such as invoices, shipping documents, import declarations, invoices of sales of diamonds by the claimant, exhibition expenses paid by the claimant. It also seeks to clearly set out the corporate structure of the various Samuel-Rozenbaum companies. As Mr. Smith submitted, all of this is to bolster up the claimant's case that it was the owner or at the very least in possession as the buyer of the diamonds that were seized by the Bailiff. There is no doubt that the fresh evidence is highly material and relevant evidence in support of the claimant's contention that it was the owner or at the very least the buyer in possession of the seized diamonds at the material time.

15. Mr. Chow has criticized the quality of the fresh evidence but these are matters to be fully investigated when dealing with the full merits of the claim. I see no reason why the fresh evidence should not be adduced in evidence at the hearing of the appeal. In the exercise of my discretion I grant leave to the claimant to rely on the two affirmations of Mr. Rozenbaum. It is accepted by counsel that if I were to grant leave to adduce the fresh evidence then an issue ought to be stated and that there ought to be a trial of that issue. I will hear counsel on the order and directions that I should make.

Representation:

Mr. Anderson Chow instructed by Messrs Weir & Associates for the plaintiff

Mr. Clifford Smith SC and Mr. Jose Maurellet instructed by Messrs Tai, Tang & Chong for the claimant

Mr. Paul Lam instructed by Department of Justice for the Chief Bailiff

HCA5191/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.5191 OF 1998

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REASONS FOR DECISION

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The application before the court

1. The application before the court is for the continuation of an interim stay of execution granted to the claimant ex parte by Hartmann J on 16 April 2002, pending the hearing on 23 May 2002 of both a substantive appeal (from the decision of Master Stewart Wong dated 9 April 2002 in which he held against the claimant, Samuel-Rozenbaum HK Limited, on an interpleader summons) and another appeal (again from the decision of Master Wong on that day whereby he refused the claimant's application for a stay of execution on the substantive decision). In other words, by the present application, the claimant seeks a stay of execution pending the hearing of an appeal against Master Wong's refusal to grant a stay of execution until the hearing of the substantive appeal. It is necessary to go into the procedural background of this case in some detail in order fully to appreciate the nature of the rather unusual application before the court.

2. On 1 April 1998, the plaintiff issued a writ against the defendants, Samuel-Rozenbaum Diamond Limited and Samuel-Rozenbaum Diamond (1992) Limited, claiming the sum of US$102,278.40 and interest, being the amount due for legal services rendered. On 18 March 2000, the plaintiff obtained default judgment against the defendants in that sum together with interest and costs.

3. On 14 January 2002, a writ of fieri facias was issued directing the Bailiff to seize the defendants' goods, chattels and other property in execution of the said judgment. On 27 February 2002, the Bailiff seized a quantity of diamonds ("the Diamonds") at a jewellery show held at the Hong Kong Convention and Exhibition Centre. The Diamonds, numbering in total about 48 pieces, are said to be worth in the region of US$132,000. The judgment debt as at the end of February 2002, together with accrued interest and costs, is said to be about US$231,000, thus exceeding the value of the Diamonds.

4. The claimant contends that the Diamonds belong to it and not the defendants and therefore the Bailiff should not have seized them. In view of the rival claims to the Diamonds, on 4 March 2002, the Bailiff issued an interpleader summons, serving it on the plaintiff and the claimant. At a directions hearing on 22 March 2002, it was ordered that the claimant be made the 2nd defendant in the proceedings. For convenience, however, I will continue to refer to Samuel-Rozenbaum HK Limited as "the claimant".

5. The substantive hearing of the interpleader summons took place on 9 April 2002 before Master Stewart Wong. The claimant's witnesses were cross-examined by the plaintiff on their affidavits. After hearing argument and testimony from the claimant's witnesses, the learned Master dismissed the claimant's claim to the Diamonds and further ordered that the said writ of fieri facias and the sale of the Diamonds be proceeded with.

6. After the learned Master's decision was announced, counsel for the claimant (who was not Ms Teresa Wu who now appears for the first time on behalf of the claimant before me) asked for a stay of execution on his order, it being his client's intention to appeal. This was opposed by the plaintiff's counsel, Ms Yvonne Cheng (who appears for the plaintiff). After hearing argument on this aspect, Master Wong dismissed the application for a stay (and this is recorded in the learned Master's notes of the proceedings that day and also reflects Ms Cheng's recollection of the matter).

7. At this stage, some confusion arose on the part of the claimant's legal representatives. The solicitor in charge of the case for the claimant has deposed in an affirmation that both he and counsel believed that Master Wong had not dealt with the application for a stay.

8. On 10 April 2002, a notice of appeal against Master Wong's decision on the interpleader summons was filed (and the appeal is stated in the summons to be returnable on 23 May 2002). On 11 April 2002, upon the claimant's instructions, an application was made ex parte before Mr Registrar Chan for an interim stay of execution. The solicitor in charge deposes in his affirmation that both he and counsel acted in good faith believing that Master Wong had not dealt with the claimant's application for a stay of execution. In my view, the application made ex parte before Mr Registrar Chan constituted a clear abuse of process by the claimant. I shall have more to say about this first ex parte application later.

9. Following this ex parte order, the claimant issued an inter partes summons on 12 April 2002 returnable on 17 April 2002 to continue the interim stay of execution. This was served on the plaintiff. Upon receipt of this summons, the plaintiff's solicitors wrote to the claimant's solicitors demanding clarification as to why the claimant had proceeded ex parte and further stating that the question of stay of execution had already been determined by Master Wong on 9 April 2002. It was not until 15 April 2002 that the claimant's solicitors contacted Master Wong's clerk for the first time to inquire whether or not the learned Master had dealt with the claimant's application for a stay. At about 4:30 pm that day, the claimant's solicitors were informed by Master Wong's clerk that the learned Master had in fact dismissed the application for a stay, whereupon the claimant withdrew the said summons returnable on 17 April 2002 and also wrote to the clerk to Mr Registrar Chan seeking to have the order for interim stay of execution discharged.

10. On the next day (16 April 2002), the claimant issued a notice of appeal against Master Wong's refusal to stay execution. I would just observe here that this was the correct procedure to adopt. In the case of appeals from the Court of First Instance to the Court of Appeal, there is concurrent jurisdiction to grant stays of execution, so that if a judge at First Instance refuses a stay, an application can be made to a judge in the Court of Appeal without the need to appeal (see Hong Kong Civil Procedure 2002 at paragraph 59/13/7). This concurrent jurisdiction exists on appeals to the Court of Appeal by reason of the wording of Order 59 rule 13(1). The same wording does not exist, however, in relation to appeals from masters to the Court of First Instance. Here, the applicable rule is Order 58 rule 1(4), which differs in wording to Order 59 rule 13(1).

11. Regarding this second notice of appeal, quite extraordinarily, the appeal was stated to be heard also on 23 May 2002, at which time of course, it would be academic. In my view, the better course for the claimant was to ask for an expedited hearing date for the appeal rather than ask for an interim stay of execution pending this appeal.

12. Even more startling was that on the same day, the claimant again applied ex parte for an interim stay of execution. This was granted by Hartmann J. It is the claimant's application for a continuation of that interim stay that was before me on 26 April 2002. I also regard that ex parte application before Hartmann J as an abuse of the ex parte procedure, for reasons that I shall explain presently.

13. Finally, I should record the fact that on 17 April 2002, Master Rimsky Yuen awarded costs against the claimant in respect of the said summons dated 12 April 2002 returnable before him on that day. Although the plaintiff had asked for costs on an indemnity basis and the learned master accepted that there was no justification for the claimant to have obtained ex parte relief before Mr Registrar Chan, he only gave costs on the normal basis. The learned Master also awarded the costs of the hearing before him to the plaintiff, remarking that it was reasonable for the plaintiff to have asked for costs on an indemnity basis.

The orders made on 26 April 2002

14. At the hearing on 26 April 2002, I invited the parties to consider having the appeal from Master Wong's refusal to grant a stay of execution heard that day. It seemed to me somewhat pointless for this appeal to be heard on 23 May 2002. However, Ms Cheng, who appeared for the plaintiff, said that she was not prepared to argue the appeal proper, since the plaintiff was considering the need to put in evidence in relation principally to the question of the appropriate mode of sale of the Diamonds. Accordingly, the application before the court that day was only whether the interim stay granted by Hartmann J should be continued or a fresh order granted.

15. After hearing argument from Ms Cheng and Ms Wu (who, it must be said, was instructed late and made the best out of the near impossible situation she found herself in), I set aside Hartmann J's order and dismissed the claimant's application for an interim stay of execution. As for costs, I ordered that the costs of and occasioned by Hartmann J's order and of the hearing on 26 April 2002 be to the plaintiff to be paid by the claimant on an indemnity basis, such costs to be taxed forthwith if not agreed.

16. After making the said order, I briefly indicated that there were essentially two reasons for these orders :

(1) There was insufficient material before me to exercise my discretion in favour of granting an interim stay of execution.

(2) The conduct of the claimant, in particular in twice obtaining ex parte relief in circumstances when it was clearly an abuse of the court's process to have done so, was such as to debar the claimant from continuing to benefit from the order granted by Hartmann J and from obtaining a fresh order, and also was such as to attract a stringent order as to costs.

17. I now set out in fuller form these reasons.

No good reason to grant an interim stay of execution

18. An appeal from a master to a judge in chambers does not operate to stay the proceedings in which the appeal is brought : see RHC Order 58 rule 1(4). This is the same as an appeal from the Court of First Instance to the Court of Appeal : see Order 59 rule 13(1)(a).

19. It is equally important to bear in mind that stays are not readily granted either. Good reasons have to exist before the court grants a stay of execution, the rationale being that the court will not deprive a successful litigant of the fruits of his success : see Hong Kong Civil Procedure 2002 at paragraph 59/13/1.

20. A good reason exists to order a stay of execution where the appellant can demonstrate that serious prejudice will be caused to him, such as where an appeal would be rendered nugatory or if there was a realistic prospect of the appellant being ruined if a stay were not granted. The passage I have referred to above provides a number of examples in this regard.

21. The present application is of course not for a stay proper, for the appeal from Master Wong's refusal to grant a stay is due to be heard only on 23 May 2002. Rather, as I have said, the present application is for an interim stay pending the appeal against the refusal of a stay. The court is therefore one stage removed. What then is the approach to be adopted in such applications?

22. In my judgment, in situations where the court is faced with multiple applications (and possible multiple appeals which may even go to the point of absurdity) which in essence involve the same or a similar point, the proper approach of the court must be simply to deal with the point in issue and not be intimidated by the possibility that the same point may arise in another application not yet before the court or before another court. The present application for an interim stay of execution pending the hearing of the appeal against the Master's refusal to grant a stay is an illustration of this. The court must deal with the main question whether or not as a matter of justice between the parties a stay of execution should be granted on the evidence available at this stage and not simply postpone dealing with this question until the appeal proper and grant, as the claimant urges, a stay in the meantime. This is not to say that the court is then somehow pre-empting the appeal because technically the two matters are different. The court is simply dealing with the matter before it on the available evidence and circumstances prevailing at the time of the application.

23. In the present application, the main question before me is whether a stay of execution should be granted pending the appeal on 23 May 2002. The starting point must be that a stay is not automatic on account of there being an extant appeal. Good reasons therefore need to be demonstrated by the claimant. The fact that there is an existing appeal against Master Wong's refusal to grant a stay of execution cannot by itself be a good reason. Were it to be so, the granting of a stay effectively ensures that the appeal is successful without any other reasons being shown. In my view, some other good reasons must independently exist. In the present case, the claimant has failed to discharge the burden on it in this regard :

(1) The claimant's main contention is that if a stay were not granted, the subject matter of the interpleader summons (that is, the Diamonds) would be liable to be sold by the Bailiff before its appeal against Master Wong's decision was resolved. Ms Wu's argument was not that the Diamonds were in any sense unique (although she did say that they were valuable gems, which I accept) so that they were somehow irreplaceable nor was it suggested that they were required by the claimant for its personal use or enjoyment. Afterall, the claimant is a diamond dealer and the Diamonds were just, as Ms Cheng puts it, trading stock. Rather, the claimant's fear was their being sold at an undervalue. In support of this, Ms Wu asked me to take judicial notice of the fact that if the Diamonds were sold by the Bailiff possibly by public auction, this would inevitably fetch a lower price than otherwise would be the case, say, if the Diamonds were sold privately. The point was essentially that, through the Bailiff, the Diamonds would be sold in a "forced sale" or "liquidation sale" situation. I am unable to accept this contention. There is no evidence before me to suggest that a sale by the Bailiff would fetch less than otherwise would be the case. There is, moreover, no certainty that in fact the Bailiff would sell the Diamonds at a public auction anyway because, as I have already said, one of the reasons for Ms Cheng being unable to deal with the stay of execution appeal proper was that the plaintiff needed more time to consider putting in evidence with regard to the ideal mode of sale of the Diamonds. In this context, I would also add that in view of the fact that the amount of the judgment debt exceeds the value of the Diamonds, it would not be in the plaintiff's interest to have the Diamonds sold at anything less than their true worth. In any event, the claimant has not put in any evidence to suggest what other mode of sale it had in mind that would ensure that the Diamonds would be sold at a higher price that what the Bailiff would be able to obtain for them.

(2) Ms Wu also submits that the claimant has a good chance of succeeding in its substantive appeal against Master Wong's decision. At first, it was argued that the claimant's appeal had a strong probability of success. However, given that the learned Master had serious misgivings about the credibility of the claimant's witnesses (or at least one of them) and on the evidence before me, I can only accept that the claimant has an arguable appeal, as indeed Ms Cheng accepts. I emphasise though that nothing I have said should be taken as anything more than a tentative view of the merits and should not in any sense bind or influence the court that hears the substantive appeal.

(3) Finally, Ms Wu submitted that since the two appeals were to be heard on 23 May 2002, a stay would not prejudice the plaintiff. With respect, I agree with Ms Cheng's submission here that this is the wrong way of looking at the matter. The burden is on the claimant to show good reasons why a stay should be granted; the burden is not on the plaintiff to demonstrate why a stay should not be granted. Of course, once good reason or reasons are shown to exist by the party seeking the stay, it will then be relevant to consider any particular prejudice that the other side may suffer if a stay were granted. But until good reasons are shown, the court does not even begin to embark on a balancing exercise for there is nothing to balance.

The claimant's conduct in obtaining ex parte relief

24. I start with the applicable legal principles. One of the facets of equality before the law (a fundamental right guaranteed under Article 25 of the Basic Law) is that no order ought to be made by a court against anyone without his first being given a reasonable opportunity of being heard. An exception to this fundamental rule is where ex parte orders are made by the court. At the risk of repeating the obvious, ex parte orders are only made "where the situation is of such extreme urgency that there is literally no time to warn the defendant of what is proposed or where the purpose of the injunction will or may be frustrated if the defendant is informed of what is proposed or where the defendant simply cannot be found" : see TRP Limited v. Thorley, unreported, 13 July 1993, English Court of Appeal, per Bingham LJ. I should perhaps out of completeness add that this salutary rule does not apply where express provisions are made in the Rules for the ex parte procedure to be used : see Hong Kong Civil Procedure at paragraph 32/6/5.

25. It is of course well-known that it is incumbent on an applicant for ex parte relief to disclose to the court all material facts going to the exercise of the court's power. And where there been material non-disclosure, the court can and often will set aside the ex parte order. A lack of candour may also justify the court in refusing to make a new order, although it is within the court's discretion to make a fresh order notwithstanding the material non-disclosure : see for example Brink's Mat Limited v. Elcombe [1988] 1 WLR 1350, at 1357E-G. The discretion to make a fresh grant also carries with it the discretion not to make one. One of the factors which a court can legitimately take into account is whether the original material non-disclosure was innocent : see Lloyds Bowmaker Limited v. Britannia Arrow Holdings Limited [1988] 1 WLR 1337, at 1343H-1344A. In order to enable the court to decide whether or not the original material non-disclosure was innocent, it is imperative for the party who has prima facie abused the process of the court to explain fully its actions. I am of the view that these principles apply generally in all cases of abuse in obtaining ex parte relief.

26. Afterall, material non-disclosure provides but one species of an abuse of process in ex parte applications. Any sanctions imposed by the court in such circumstances are to ensure that abuses of its process do not occur. Which of these sanctions (whether the setting aside of the ex parte order, the refusal to make a fresh order or a punitive order as to costs, among others) that the court will impose, depends on the circumstances and the seriousness with which the court regards the abuse.

27. In the present case, there have been two instances where an abuse of the ex parte procedure has taken place :

(1) First, there was no justification for the claimant to have gone ex parte to Mr Registrar Chan on 11 April 2002 to obtain an interim stay of execution. If the claimant and its legal advisers had any doubts as to how Master Wong dealt or intended to deal with the claimant's application for a stay pending appeal, they should have clarified the matter with the learned Master himself or sought a further hearing before him. The claimant did neither. Instead, the claimant's legal advisers went to another master (Mr Registrar Chan) ex parte. The only explanation given for going ex parte was that there was urgency. This is not made out on the evidence. In the affirmation of Mr Yosef Hadad (the manager of the claimant), made on 10 April 2002 in support of the application for ex parte relief, it was said only that "the Bailiff will sell the ... [Diamonds] in a matter of days unless an Order for a stay of execution is granted" (emphasis added). This is repeated in the affirmation of the claimant's solicitor. If only a matter of days was involved, there was no justification not to have notified the plaintiff of this application. Accordingly, no acceptable explanation was provided to the court as to why the claimant proceeded ex parte. As to why the matter was not referred back to Master Wong in the first place, Ms Wu informed me (although this was not in any affidavit before the court) that the reason was that it was felt by the claimant's legal advisers that it would be appropriate to apply for an interim stay of execution before Mr Registrar Chan because he was the Practice Master on the relevant day. Again, I find this explanation unacceptable.

(2) Secondly, having already in my view abused the process of the court by obtaining ex parte relief on 11 April 2002, this error was exacerbated by the application for ex parte relief before Hartmann J. Again, there was no justification for not first contacting the plaintiff. The supposed urgency was again stated to involve "a matter of days". At no stage would it appear that the claimant even attempted to contact the plaintiff to see whether any agreement could be reached as regards a stay of execution. In the absence of any explanation for this conduct, I am driven to the conclusion that the claimant saw more benefit by proceeding stealthily than by proceeding by conventional means.

28. In my judgment, such abuses of the ex parte procedure are to be deplored. Even if there was genuine urgency (and I do not accept that there was), the proper course was for the claimant to take out an inter partes application, if necessary with time abridged, or if that was somehow not possible, to make an ex parte application on notice to the plaintiff. The claimant chose to adopt neither of these courses.

29. I have also found unsatisfactory the lack of any proper explanation given (even now) for the claimant's conduct in seeking ex parte relief on both the said occasions. By itself, this conduct was sufficient in my view to deprive the claimant of the interim relief which it sought, whether by way of the continuation of Hartmann J's order or by way of a fresh order.

Costs

30. As stated earlier, I awarded costs to the plaintiff on an indemnity basis. This reflects the view taken by the court of the claimant's conduct which I have described in some detail. It is hoped that this type of conduct will not recur again.

Representation:

Ms Yvonne Cheng, instructed by Messrs Weir & Associates, for the Plaintiff

Ms Teresa P.C. Wu, instructed by Messrs Tai, Tang & Chong, for the Claimant