Wing Siu Co. Ltd. v. Goldquest International Ltd.
Read the full judgment text of CACV 225/2002 on BabelCite. This Court of Appeal judgment was delivered on 17 January 2003 before Rogers VP, Le Pichon JA.
Civil procedure – amendment of pleadings – addition of cause of action accruing after issue of writ – rule in Eshelby v Federated European Bank Ltd – whether absolute rule or subject to discretion – three-year lease of office premises in Dah Sing Financial Centre, Wanchai, dated 11 October 1999 – defendant ceased paying rent and purported to terminate lease unilaterally in January 2001 – plaintiff accepted repudiation – first action (HCA 4145/2001) commenced 19 January 2001 – summary judgment obtained for rent and charges – application to amend first action to add wrongful repudiation claim refused by Master Au-Yeung – second action commenced July 2001 seeking damages for wrongful repudiation – Master Wong dismissed second action as abuse of process – Ma J dismissed appeal – whether second action was abuse of process – whether Eshelby rule absolute – whether Master Au-Yeung's refusal of amendment was binding and correct – whether wider res judicata principle (Henderson v Henderson / Yat Tung Investment v Dao Heng Bank) applied – Court of Appeal held that the Eshelby rule has not disappeared but English courts have adopted more flexible approach permitting amendment to introduce subsequent events clarifying existing cause of action – no authority permits amendment over opposition introducing wholly new cause of action not existing at date of writ – Master Au-Yeung's refusal was correct and binding – wider res judicata principle inapplicable because the repudiation cause of action could not be raised in the first action – appeal dismissed with costs and $100,000 immediate payment on account under Order 69 rule 9(2)(a).
Legal issues: Whether the rule against adding a cause of action by amendment that accrued after the date of issue of the writ is absolute · Whether the second action was an abuse of process under the wider res judicata principle · Whether Master Au-Yeung's refusal of the amendment to the first action bound the parties and justified striking out the second action
Outcome: Appeal dismissed with costs; immediate payment on account of $100,000 ordered under Order 69 rule 9(2)(a).
Cited by 9 cases · Cites 2 cases
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CACV000225/2002 CACV 225/2002 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL CIVIL APPEAL NO. 225 OF 2002 (ON APPEAL FROM HCA NOS. 3183 AND 4145 OF 2001) ____________________
____________________ Coram: Hon Rogers VP and Le Pichon JA in Court Date of Hearing: 17 January 2003 Date of Judgment: 17 January 2003 Date of Handing Down Reasons for Judgment: 13 February 2003 _________________________ REASONS FOR JUDGMENT _________________________ Hon Rogers VP: 1.This is an appeal from a judgment of Ma J, as he then was, given on 15 April 2002 with the reasons for the decision given on 23 April 2002. At the conclusion of the hearing this court dismissed the appeal with costs and ordered that there be an immediate payment of costs on account under Order 69 rule 9(2)(a) of $100,000. In doing so, this court indicated that it would give its reasons in writing which we now do. The decision below 2.The application in the court below was an appeal from the order of the Master dismissing the action on the basis that the action was an abuse of process. There was also an application to appeal out of time a decision in another action refusing an amendment which had sought to raise the matter that was said should not be raised in this action. That aspect will be referred to below. 3.The defendant's argument that this action was an abuse of process stems from the fact that it is the second action brought by the plaintiff arising out of a lease of office premises in Dah Sing Financial Centre, Wanchai. The lease was dated 11 October 1999 and was for a period of three years finishing on 10 October 2002. Towards the end of the year 2000, the defendant found that the premises were too small for its requirements. It wished either to take additional premises or, if it could not take additional premises which were convenient, to assign its existing lease. It was unable to obtain the plaintiff's cooperation in this regard. The defendant then ceased paying rent, office rates, management fees and other charges. It did not take the plaintiff very long before the first action was started in the District Court on 19 January 2002. That action was eventually transferred to the High Court and was numbered HCA 4145 of 2001. That will referred to as the "first action". 4.Shortly after the first action was commenced the defendant sought to terminate the lease unilaterally. It returned the keys to the premises to the plaintiff under cover of a letter dated 22 January 2001. The plaintiff considered that this was a repudiation of the lease and accepted the repudiation by a letter dated 6 February 2001. 5.The statement of claim in the first action was served on 14 February 2001. Although in paragraph 5 of the statement of claim reference is made to the acceptance of the defendant's repudiation, that, as Ma J said, was in the context of limiting the claim for damages and rates to the period up until 6 February. The statement of claim also claimed damages based on the plaintiff's legal costs on an indemnity basis. A defence and counterclaim was filed in March 2001 and, thereafter, the plaintiff sought summary judgment. That application came before Master S. Kwang in May 2001. The order made on the application was for payment of a sum of $354,252.00 together with interest. That was in respect of the rent and other amounts claimed other than the legal costs on an indemnity basis. Execution of the judgment was stayed pending the determination of the counterclaim. 6.In June 2001, the plaintiff applied to amend the statement of claim in the first action by adding a claim for damages for wrongful repudiation of the lease. Master Au-Yeung refused the amendment on the basis that the repudiation alleged by the plaintiff had occurred after the date of issue of the writ. In might be added that the application was heard on a three-minute hearing and the defendant's solicitors did not object to the amendment. 7.In July 2001, the plaintiff commenced these proceedings ("the second action"). The writ claimed damages for wrongful repudiation. In addition to rental and other charges the plaintiff claimed the cost of reinstatement and restoration of the premises. In August 2001, immediately on service of the statement of claim in the second action, the plaintiff applied for summary judgment. This prompted the defendant to apply to have the second action dismissed on the basis that it sought to raise matters which should have been raised in the first action. When the matter came before Master Wong in January 2002 she dismissed the second action. From that dismissal the appeal was brought before Ma J. 8.Ma J's decision was clear. He held that Master Au-Yeung's decision was, in the first place, binding on the parties and, in the second place, was correct. The proposition that a cause of action cannot be added by amendment, without consent of the parties, if it arose after the issue of the writ was one which had been stated by the Court of Appeal in Lark International Finance Limited v Lam Kim Marisa [2000] 4 HKC 688. On the basis that the cause of action in respect of repudiation could not be included in the first action, the principle based on what has been termed the wider meaning of res judicata, as contained in Henderson v Henderson (1843) 3 HARE 100 at 115 per Wigram V-C, and more recently described as an abuse of process by the Privy Council in Yat Tung Investment Co. Limited v Dao Heng Bank Limited [1975] AC 581 see Lord Kilbrandon at 590A, was inapplicable. 9.Mrs Chan, on behalf of the defendant, took issue with the proposition stated by Keith JA in Lark International Finance Limited v Lam Kim Marisa and Another [2000] 4 HKC 688. He had stated at 699I-700A:
Whilst Keith JA expressed that view in absolute terms that might give rise to the impression that it were a rule of law, the very fact that the formulation used included an exception where there was the consent of the defendant would indicate that the rule is, on its face, not an absolute rule. Indeed Swift J's statement in the Eshelby case at page 262 was as follows:
10.The rule that a cause of action which arose after the date of the issue of the writ cannot be included in the claim is linked with the "relation back" theory, namely that the amendments to a pleading relate back to the date of the pleading. Although the relation back theory is the normal rule, it cannot be regarded as absolute in all situations. Brandon L.J., as he then was, in the case of Liff v Peasley and Another [1980] 1 WLR 781, pointed to some of the limitations in the theory when he said at page 803D-E:
11.Lord Brandon referred to this statement in respect of the relation back theory in his speech in Ketteman and Others v Hansel Properties Limited and Others [1987] 1 AC 189 at 210D-H. What was said in those cases does not, of course, impinge upon the question of whether a cause of action which had arisen after the date of the writ could be included as part of the claim by later amendment. 12.In the case of Vax Appliances Limited v Hoover Plc [1990] RPC 656, Mummery J, as he then was, dealt with an application to amend a counterclaim in a patent action. The defendant had been sued in respect of infringement of a patent for a cleaning head. Initially the counterclaim had sought revocation of the patent. Later the defendant had redesigned the cleaning head which it manufactured and sought a declaration of non-infringement by the redesigned head as part of the counterclaim. The application to amend the counterclaim met with the argument that the cause of action for a declaration of non-infringement had arisen after the date of the original counterclaim. Mummery J said at page 661, lines 27-29:
He then went on to distinguish those cases where a plaintiff had no cause of action at all at the date of the writ, specifically a situation where if the cause of action was subsequently acquired and the original writ would be incurably bad. He also distinguished cases such as Eshelby where the amendment had to be made to the writ which, by reason of the application of the "relation back" doctrine, meant that the writ would pre-date the cause of action. 13.In the Vax case, Mummery J adopted a benevolent view towards the amendment sought in the counterclaim in that he came to his decision on the basis that it did not constitute a wholly new cause of action. He clearly regarded it as convenient to allow the introduction of the claim of non-infringement because the same arguments might also have affected the form of the injunction which would be granted. 14.There were two further decisions which Ms Chan relied upon. The first was Hendry v Chartsearch Limited [1998] CLC 1,382. That case concerned breaches of three agreements which had been entered into by the defendants with a company owned by the plaintiff and his wife. The plaintiff alleged that the defendants had also induced the company's employees to break their contracts. Amongst other applications which were made, was one by the plaintiff to amend the pleadings to rely on an assignment of what was termed the third contract. The assignment had been taken after the date of the writ. The third contract contained no provision restricting assignment. In paragraphs 19 to 23 of the judgment Evans LJ considered the cases of Vax and Eshelby. At paragraph 24 he said:
15.That decision of the Court of Appeal was referred to and followed in the case of Maridive & Oil Services (SAE) and Another v CNA Insurance Co. (Europe) Ltd [2002] 2 Ll. Rep. 9. Mance LJ referred to paragraph 23 of the judgment in the Hendry case which read:
16.But after referring to that passage he then encapsulated what was said in paragraph 24 of Hendry case, specifically, the parts which have been underlined above, and said
17.The distinction which was thus drawn by the Court of Appeal in the case appears to be between permitting an amendment which allows the real dispute in the case to be determined and one which introduces into the action a cause of action which could be said to be incurably bad because it did not exist at the date of the original claim. Both Ward LJ and Chadwick LJ in the Maridive case expressed the view that there should be a flexible attitude dependent on the justice of the case. 18.In the light of those cases it cannot be said that the original rule in the Eshelby case has disappeared. The courts in England have clearly been disposed to adopt a more flexible attitude, specifically, where they have permitted the pleading of subsequent events which clarify why a claim could be made based on a cause of action which existed at the date of the issue of the writ. No decision has been brought to our attention which has gone so far as permitting, in the face of opposition, an amendment which would introduce into a writ a cause of action which simply did not exist at the date of the issue of the writ. 19.In those circumstances Master Au-Yeung was clearly justified in refusing the amendment whereby the plaintiff had sought to plead the cause of action based on repudiation. Indeed, even if Master Au-Yeung's decision had simply been an exercise of discretion it was an exercise of discretion which was justifiably exercised and was, as Ma J said, binding upon the parties. In those circumstances any suggestion that this action, the second action, was an abuse of process was and is entirely groundless. 20.It should finally be mentioned that the application before Ma J was not only an appeal against the order of Master Wong striking out the statement of claim in the present action but was also an application for leave to appeal out of time against the order of Master Au-Yeung. Those applications were quite understandably brought on together since it was the plaintiff's case that it should be allowed to bring a claim in respect of the wrongful repudiation of the contract in one or other of the actions. Ms Chan's answer to this was that the claim should have been brought in the first action but that, because the plaintiff had already sought summary judgment in the first action and obtained an order, it was too late for the cause of action for wrongful repudiation to be added to that action. That argument was wrong for two reasons. In the first place, Master Au-Yeung refused the application because the cause of action had arisen after the date of the writ. In any event, the order on the summary judgment application was only in partial satisfaction of the plaintiff's claim. Part of the plaintiff's claim, namely that for damages based upon the indemnity costs which the plaintiff claimed, was left over to be decided later. Hon Le Pichon JA: 21.I agree.
Representation: Ms Roxanne Ismail, instructed by Messrs Herbert Smith, for the Plaintiff/Respondent Mrs Dora K H Chan, instructed by Messrs Darin Leung & Partners, for the Defendant/Appellant |
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