Dragon Capital Partners L.P. v. Merrill Lynch Capital Services Inc.

HCA010161/1994

1994 No. A10161

Headnote

[(i) No action or miscellaneous proceedings no. should be assigned to any proceedings until the proceedings have been begun by some form of originating process.

(ii) Where an application for urgent interlocutory relief is made prior to the filing of originating process, the applicant should undertake to file the appropriate originating process as soon as reasonably practicable. That applies even if no order is made on the application, and even if it is decided not to continue with the proceedings.]

1994 No. A10161

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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Coram: The Hon. Mr. Justice Keith in Chambers

Date of Hearing: 14 November 1996

Date of Delivery of Judgment: 14 November 1996

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J U D G M E N T

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INTRODUCTION

1. This is an appeal by Merrill Lynch Capital Services Inc. ("Merrill Lynch") against the refusal of Mr. Registrar Betts on 1st October to consolidate two sets of proceedings. The circumstances are unusual. Indeed, in my experience, they are unique. It is therefore necessary to identify the course which the proceedings have taken with some precision.

THE COURSE OF THE PROCEEDINGS

2. On 7th October 1994, Dragon Capital Partners L.P. ("DCP"), a company incorporated in the Cayman Islands, applied for interlocutory injunctions against Merrill Lynch. Although the application was made ex parte, Merrill Lynch's solicitors were given notice of the application, and they attended the hearing. Since Merrill Lynch is incorporated in the State of Delaware, leave to serve the writ out of the jurisdiction was necessary. The application came before Woo, J. He felt unable to hear the application as he had been a client of Merrill Lynch. The application was adjourned for an appointment to be obtained before another judge.

3. In due course, DCP thought better of its application, and no application for interlocutory injunctions was ever made. However, four days after DCP's application had come before Woo, J., DCP issued its writ against Merrill Lynch. It was assigned an action number, High Court Action No.10161 of 1994. Leave to serve the writ out of the jurisdiction was duly granted by Master Chan on 24th October. That action is now proceeding in the normal way. A comparison of the draft indorsement on the writ which was prepared for the hearing before Woo J. and the Statement of Claim which was indorsed on the writ in HCA 10161/94 shows that HCA 10161/94 relates to the same subject-matter as the draft writ, even though the relief sought in the draft writ and the Statement of Claim is slightly different. When Rogers J. had to consider the matter subsequently in circumstances which I shall describe, he clearly thought that HCA 10161/94 related to the same subject-matter as the draft writ, because he said that "it is clearly the same set of facts and the same claims that are being made".

4. Merrill Lynch had incurred legal costs in connection with the aborted ex parte application which was to be made against it. It therefore applied to the court for its costs. That application came before Rogers J. over a year later on 14th November 1995. That application could only have been made in HCA 10161/94. There were no other proceedings on foot between the parties at the time. The only originating process which had been issued was the writ in HCA 10161/94. Merrill Lynch's solicitors had not issued any other originating process in order to make that application for costs. The summons for costs issued by Merrill Lynch's solicitors was an ordinary summons, not an originating summons.

5. The problem is that that summons bore another number, High Court Miscellaneous Proceedings No. 2827 of 1994. That was because the Registry had assigned that number to the pre-action application for interlocutory injunctions. That was wrong. There was no originating process to which that HCMP number could be assigned. Accordingly, the absence of any originating process, apart from the writ in HCA 10161/94, meant that Merrill Lynch's application for costs was being made in that action, even though it purported to have been made in other proceedings marked HCMP 2827/94. Rogers J. himself recognised that. He regarded "what has been termed as the miscellaneous proceedings ... as the prelude to the main action." Indeed, he expressed the view that the separate proceedings had been opened "wrongly". In the event, Rogers J. made an order that DCP pay to Merrill Lynch its costs of the application made to Woo J. and of the application to him, to be taxed if not agreed and paid forthwith. In due course, Master Jones taxed Merrill Lynch's costs at $185,829.00. DCP has not complied with Rogers J.'s order. The order for costs remains unsatisfied.

CONSOLIDATION

6. That is the background against which Merrill Lynch sought the consolidation of HCA 10161/94 with HCMP 2827/94. Merrill Lynch believes that consolidation will make it more difficult for DCP to continue to ignore the order for costs. The application for consolidation is made pursuant to Ord.4 r.9(1). That gives the court power to order consolidation where "two or more causes or matters are pending."

7. In my judgment, the application for consolidation is fundamentally flawed. My summary of the history of the proceedings explains why. There are not two or more causes or matters, and there never have been. There has been only one cause, and that is HCA 10161/94. Once the writ in that action was issued, the pre-action application which was made before Woo J. can only be said to have been made in HCA 10161/94. The application for costs which was made to Rogers, J. can only have been made in HCA 10161/94 because there was no originating process in any other proceedings to justify that application being regarded as having been made in any other proceedings. The belief that there were two sets of proceedings - a belief which DCP's skeleton argument for today's hearing shows that DCP's lawyers had as much as Merrill Lynch's - was regrettably caused by the incorrect assignment of an HCMP number to the pre-action application for interlocutory injunctions.

8. In their defence, I should add that Merrill Lynch's solicitors had initially taken the view that there was but one set of proceedings. They had applied in HCA 10161/94 for security for costs on the ground that DCP was a foreign plaintiff. The amount for which they sought security included the amount incurred in the pre-action application for interlocutory injunctions. In other words, they were asserting that those costs, ostensibly incurred in HCMP 2827/94, were actually incurred in HCA 10161/94. They were, in effect, arguing that there had been just the one set of proceedings. Master O'Donnell ordered security for Merrill Lynch's costs, but not in relation to the amount incurred in the pre-action application for interlocutory injunctions. He must therefore be taken to have concluded that HCMP 2827/94 and HCA 10161/94 were separate proceedings. It was open, of course, to Merrill Lynch to appeal that part of Master O'Donnell's order, but the fact remains that Merrill Lynch had initially taken the view which Rogers, J. was inclined to take, and which I have decided is the correct one.

9. I appreciate that, in deciding this appeal on this basis, I am approaching the case in a way in which neither of the parties' lawyers had put the case in their skeleton arguments. When I expressed to Mr. Andrew Hughes for Merrill Lynch and Mr. Jeffrey Lane for DCP the provisional view I had formed on reading the papers, neither of them were inclined to dissuade me from that provisional view. Indeed, I regarded both of them as agreeing with the view which I had provisionally formed.

CONCLUSION

10. It follows that, for the reasons I have given, this appeal must be dismissed. I should add, though, that Merrill Lynch has achieved what it set out to do by seeking consolidation, since the proceedings are all but consolidated because I have in effect declared that there is in truth only one set of proceedings. I shall hear counsel on whether I should make any ancillary directions to regulate the status of those steps in the proceedings which have erroneously been treated as having been taken in HCMP 2827/94 and also on the question of costs, but one should not overlook the lessons to be learnt from this case. They are as follows:

(i) No action or miscellaneous proceedings no. should be assigned to any proceedings until the proceedings have been begun by some form of originating process.

(ii) Where an application for urgent interlocutory relief is made prior to the filing of originating process, the applicant should undertake to file the appropriate originating process as soon as reasonably practicable. That applies even if no order is made on the application and even if it is decided not to continue with the proceedings. Once the originating process has been issued, it can then be assigned an action or miscellaneous proceedings no. In that way, the pre-action proceedings will have acquired the appropriate action or miscellaneous proceedings no. The proceedings can then be discontinued, either without leave under Ord.21 r.2 if the originating process was a writ, or with leave under Ord.21 r.3 whatever form of originating process was used.

In view of these observations, I give leave for this judgment, though delivered in chambers, to be circulated and reported.

Representation:

Mr. Jeffrey Lane, of Messrs. Johnson Stokes & Master, for the Plaintiff.

Mr. Andrew Hughes, of Messrs. Linklaters & Paines, for the Defendant.