Asian Master Enterprises Ltd and Another v. Idmiston Ltd and Other
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1. These appeals spread over four actions. They are High Court Actions Nos. A7889 of 1987, A7891 of 1987, A7892 of 1987 and A7375 of 1986. In High Court Action No. A7375 of 1986, the appeal is one exclusively from the Master's Order reserving costs in respect of a date fixed, but vacated two days before the hearing. In the other actions, it was agreed on all hands that a determination on the issues raised in the Notice of Appeal in High Court Action No. A7889 of 1987 would wholly dispose of the
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HCA007892B/1987 [Appeals in High Court Actions Nos. A7891 of 1987, 1987 No. A7889 IN THE SUPREME COURT OF HONG KONG HIGH COURT ------------------- BETWEEN
AND BETWEEN
---------------------- Coram: Hon. Liu J. in Chambers Dates of hearing: 25th July, 1983 Date of delivery of judgment: 6th August, 1988 ------------------ JUDGMENT ------------------ 1. These appeals spread over four actions. They are High Court Actions Nos. A7889 of 1987, A7891 of 1987, A7892 of 1987 and A7375 of 1986. In High Court Action No. A7375 of 1986, the appeal is one exclusively from the Master's Order reserving costs in respect of a date fixed, but vacated two days before the hearing. In the other actions, it was agreed on all hands that a determination on the issues raised in the Notice of Appeal in High Court Action No. A7889 of 1987 would wholly dispose of the proceedings taken to this Court. 2. I shall deal first with the question of costs for the vacated date in High Court Action No. A7375 of 1986. The application was one by summons issued by the 7th defendant in that action for security for costs against the appellant/plaintiff. At the time when Master Chan was considering the other Orders from which the appellant/plaintiff now appeals, a suggestion was made to have the 7th defendant's summons for security for costs stood over by reason of possible repercussions brought about by a Court of Appeal decision given in a different action. The Court of Appeal's decision was expected to be further tested. The Master acceded to the suggestion and vacated the hearing date coming up in two days' time with costs reserved. 3. Mr Chang rallied to the support of the Master with an explanation that time being then pressing, the Master sensibly adopted a pragmatic approach. 4. No point was taken on whether leave was required to appeal against a master's decision on costs. The parties readily assumed, the appeal as falling within the Court's de novo jurisdiction. Mr Barlow also conceded that the matter could have been or, perhaps, should be restored before the Master. However, it is a short point, and I yielded to Counsel's joint invitation but not without some reservations. 5. On that basis, Mr Barlow complained that the appellant/plaintiff had committed themselves in legal fees and was ready to proceed and that the appellant/plaintiff resisted the proposed vacation of the hearing date except upon payment of costs. 6. The law, as it then stood, was apparently in favour of the appellant/plaintiff. Issues decided by the Court of Appeal and said to be relevant to the application for security for costs were expected to be re-ventilsted. Pending a final adjudication, the 7th defendant would not wish its summons to be prejudiced. The vacation at short notice and against the opposition of the appellant/plaintiff was for the indulgence of the 7th defendant. The appellant/ plaintiff insisted on costs. The disagreement should have been resolved with costs awarded against the 7th defendant. The appellant/plaintiff feels aggrieved by the Master's Order. The appellant/ plaintiff was entitled to costs for an indulgence granted to its adversary. I order accordingly, and insofar as the Master's order reserving costs for the vacated date, the same is varied. The appellant/plaintiff should have costs of this appeal in High Court Action No. A7375 of 1986. An order nisi is made. 7. Next I turn to High Court Action No. A7889 of 1987. There are three grounds of appeal. Grounds l and 3 complain of the joinder of Tomax Investments Corporation as an additional defendant in the action and of the amendments effected to the Defence and Counterclaim consequential upon such joinder. The appellant/plaintiff otherwise accepts the newly introduced defences. That costs of the joinder being reserved is not a matter independently challenged. If the appeal on grounds l and 3 succeeds, Tomax Investments Corporation would be removed as an added defendant and cannot be a plaintiff with Asian Master Enterprises Limited in the Counterclaim. A possible further side effect would be that the Counterclaim may be reduced to one against the appellant/plaintiff alone. 8. Ground 2 of the appeal is against the Master's Order adjourning the summons of Asia Master Enterprises Limited for leave to file and serve a Rejoinder, with liberty to restore and costs reserved. 9. Mr Barlow submitted for my perusal a copy of the draft Rejoinder. It seeks to raise exclusively illegality based on the allegation that loans to Asian Master Enterprises Limited exceeded 25% of the Deposit Taking Company's paid-up capital and reserves in breach of S. 22(1) of the Deposit-Taking Companies Ordinance Cap. 328, then in force: 10. The allegation of illegality was not pursued, but Mr Chang, Counsel for Asian Master Enterprises Limited, maintained that for the allegations of fraud and sham as well as a web of improper control over various companies, a Rejoinder would necessarily have to be filed after service of the amended Defence and Counterclaim and whatever consequential amendments made to the Reply; hence it was a good common sense approach for the Master to adjourn the then summons for leave to file and serve a Rejoinder. 11. Mr Barlow, Counsel for the appellant/plaintiff, contended that the summons of Asia Master Enterprises Limited was sought to be solely supported by an allegation of illegality which was then abandoned and that it should be dismissed or withdrawn with costs to his client. Any Rejoinder, if found necessary thereafter, would have to be applied for on a fresh summons, not only-by the Asian Master Enterprises Limited but also by the successfully added defendant. I agree with Mr Barlow that the summons ought to have been dismissed with costs. The Master's order adjourning that summons with costs reserved must, therefore, be set aside. The summons to file and serve a Rejoinder is accordingly dismissed with an order nisi for costs to the appellant/plaintiff. 12. Subject to what Counsel have to say, I would certify these summonses fit for counsel. 13. In essence, the complaint of the appellant/plaintiff on Grounds 1 and 3 is that Tomax Investments. Corporation should not be added as defendant against the wishes of the plaintiff who has no desire to prosecute any action or seek any remedies against Tomax. 14. I will set the scene that gave rise to the joinder of Tomax Investments Corporation and the consequential amendments to the Defence and Counterclaim : Lu's (Hong Kong) Finance Limited lent $5 m. to Asian Master Enterprises Limited under a Pledge Agreement dated 29th January 1986 on the security of, inter alia, certain share certificates. I shall call them "Lu's" and "Asian Master" respectively. 15. On the 27th August 1986, Lu's purported to assign to the plaintiff its loan portfolio, including the $5 m. owed by Asian Master. On the same day, Lu's was sold as a company to another company. On the 23rd March 1987, notice of the assignment was given to Asian Master. Both Lu's and the plaintiff had been wholly owned subsidiaries of Mandarin Resources Corporation Limited. I shall call it "Mandarin Resources". Mandarin Resources allegedly owed Singapore $12m. to Tomax Investments Corporation. I shall call it "Tomax". 16. In a letter dated the 26th July 1986, by pre-arrangement, Tomax informed Mandarin Resources that Tomax agreed to repay Lu's on behalf of Asian Master by debiting or setting off $5 m. against an equal amount in the Singapore $12m debt due from Mandarin Resources. 17. By a letter to Asian Master dated the 6th August 1986 from Mandarin Resources and countersigned by Lu's it was confirmed that the $5 m. owed to Lu's by Asian Master had been deducted from Master Resources' outstanding $12 m. Master Resources then wholly owned Lu's, the creditor of Asian Master. The share certificates held under the said Pledge Agreement were caused to be released and returned by Mandarin Resources' to Asian Master. 18. In the plaintiff's existing Reply, fraud is alleged against Mandarin Resources and Tomax. The plaintiff claims that one Mr Ho and his nephew, Mr Cheng, through Mr Sam Kwong, caused to be made in the books of Mandarin Resources false entries to reflect an alleged indebtedness of the Singapore $12 m. to Tomax. The plaintiff further asserts that Messrs Ho and Chang, through Mr Wong Chung Kit, caused to be manufactured the above two letters dated respectively the 26th July 1986 and the 6th August 1986 which are now both said to be shams. As a counter-signatory to the latter, Lu's is therefore also implicated as a party to the alleged fraud. 19. In conclusion, the plaintiff now maintains that there was not and, in fact could not be, any repayment by way of debit against or deduction from the said Singapore $12 m. or at all; hence, the alleged repayment by Asian Master to Lu's is also denied. 20. As for Asian Master, the original defendant to the action, it has alleged that the assignment of its $5 m. debt by Lu's to the plaintiff was a sham and further that Mandarin Resources must indemnify Tomax and Asian Master if the plaintiff should succeed in its claim as assignee of the $5 m. owed by Asian ilaster to Lu's. 21. As for joinder of a party as defendant against the will of a plaintiff, the law has developed n this way in Amon v. Raphael Tuck 6 Sons, Limited, [1956]1 Q.B. 357, at page 380, Devlin J., as he then was, suggested an even narrower interpretation of the rule for adding s defendant after his purvey of the previously decided cases. In Gurtner v.Circuit [1968] 2 Q.B. 587, the English Court of Appeal took a more liberal view and favoured a wider discretion for adding a party as defendant against the wishes of a plaintiff "if he would be affected in his legal right or his pocket by the determination of the dispute" so as to enable all controversies "to be effectually and completely determined and adjudicated upon" between all those directly concerned in the outcome. The stricter construction of Devlin, J. in Amon's case was considered by the Appellate Committee of the Privy Council to have been rightly overruled by Gurtner v. Circuit. See Pegang Mining Company v. Choong Sam (1969)2 M.L.J. 52, PC. 22. The former rule for joinder has been widened by sub-paragraph (ii) in our 0.15, r. 6(2)(b). Both sub-paragraphs are set out below :
"Under this sub-paragraph the Court has power to add a person as a party where a question or issue arising out of or relating to or connected with any relief or remedy claimed in the action may exist between him and a party to the action which the Court thinks it would be just and convenient to determine between him and that party as well as between the parties to the actions." "The Court has power to add a party between whom and one of the parties to the action, there is an issue." See generally, the last paragraph at page 186 arid the first paragraph at page 186, marginal reference 15/6/7, of Vo1. 1, 1988 White Book. 23. In Pegang Mining Company, the Law Lords found "the Dichotomy" between "legal" and "commercial" interests unhelpful and formulated a "better way" of expressing the test : "will his right against or liabilities to any party to the action in respect, of the subject matter of the action be directly affected by any order which may be made in the action?". Page 56B, ibid. 24. Nevertheless, mere commercial interest still provides no valid ground for joinder of a defendant against a plaintiff's wishes. See In re I.G. Farbenindustice A.G. Agreement [1944]1 Ch. 41. And jurisdiction to add a party as defendant against the wishes of a plaintiff will riot be exercised where the sole purpose of the application is to enable the intervener to counterclaim. See Atid Navigation Co. Ltd. v. Fairplay Towage 6 Shipping Co. Ltd. [1955]1 W.L.R. 336. 25. Examples of interveners not having a sufficiently direct interest to be joined were given me, such as the patentee in Prussia who unsuccessfully applied to be joined in an English action for an infringement of an English patent against the user of a machine manufactured in Prussia under his Prussian patent (Moser v. Marsden [1892]1 Ch 487) and a co-trustee who failed in his attempt to be added to an action for an alleged breach of trust by both but against the other trustee alone (McCheane v. Gyles (No.2) [1902]1 Ch 911). Another case commended for my consideration is Norris v. Beazley (1877) II C.P.D. 80, where the defendant on record as an acceptor of a bill of exchange was not permitted to bring in a company to whom the plaintiff allegedly made fraudulent representations in the sale of their vessel paid by said bill of exchange. At page 84, Lord Coleridge, C.J., had this to say :
26. Whilst sentiments expressed in these cases decided long ago may be criticised as too rigidly narrow in view of the significant extension of the rule by sub-paragraph (ii), the underlying principles applied remain good law. Generally, a plaintiff cannot be compelled to be saddled with another defendant against whom no relief or remedy is sought. Even after the extension, the discretionary jurisdiction of joinder should not be invoked unless the party to be added will be directly affected in his legal or financial rights, not only by any order made but also by, as widened by sub-paragraph (ii), any question or issue arising out of or relating to or connected with any relief or remedy claimed. Thus the focal point is on direct consequence as well as related or connected issue. What must not be overlooked is : the related or connected question must be an existing one between the existing parties and not an indirect issue likely to arise and call for a determination in the future. Mere commercial interest, as I have said, also would not suffice. 27. In the instant case, the plaintiff has made allegations of fraud against Mandarin Resources and Tomax in relation to the indebtedness of Singapore $12 m. The two letters dated the 26th July 1986 and the 6th August 1986 are also claimed to be shams implicating Mandarin Resources, Tomax, Asian Master and Lu's. In addition, irregular manipulation of various companies by Messrs Ho and Chang is suggested. The plaintiff seeks to rely on these allegations and must prove them ultimately. Falsified company accounts and sham letters would and must directly affect the companies and signatories involved both in their respective legal and pecuniary rights. These are existing issues raised by the plaintiff related to or connected with its claim for $5 m. as an alleged assignee from Lu's. The plaintiff "has some cause of complaints, which ought to be determined in the action" directly affecting Tomax, Mandarin Resources or Lu's although it has no desire to proceed against them. Moreover, these serious allegations of fraud, sham and improper control cannot, in justice, be determined in the absence of these companies. 28. Asian Master, as the original defendant, also claims that the purported assignment of loan portfolio to the plaintiff is a sham thus implicating Lu's. However, the indemnity claimed by Tomax and Asian Master against Mandarin Resources in respect to the $5 m. would not arise until the plaintiff finally succeeds in its present claim against Asian Master. Although the claimed indemnity could be conveniently dealt with and disposed of at the same trial, it is not a related or connected issue. See Carpenter v. Ebblewhite [1939]1 K.B. 347, 358 per Greer, L.J. 29. There is no doubt in my mind that Tomax is a necessary and proper party to be added as defendant under 0.15, r. 6(2)(b) RSC. The consequential amendments and new parties to the amended Counterclaim are also properly included in these proceedings. Counsel did not specifically address me on my residual discretion. Evidently, there is a need for preventing the same related or connected issues being tried again with possibly different results. The facts warrant an avoidance of multiplicity of proceedings. In the light of the background information I have earlier set out, the circumstances call for my discretion to be exercised in favour of Asian Master and Tomax on their applications for joinder and consequential amendments. 30. The appeal founded on Grounds 1 and 3 is, therefore, dismissed. Subject to what Counsel have to say and except for the other orders nisi for costs, I propose to award costs against the appellant/plaintiff to the extent of 4/5ths of these appeals and against the respondents/defendants 1/5th. The Master's Orders, insofar as they affect costs for Grounds 1 and 3, are to stand. Needless for me to say that the appeals in all the other actions are similarly decided.
Representation: Mr B. Barlow instructed by M/s. Hampton, Winter & Glynn for all Plaintiffs in all actions. Mr D. Chang, Q.C. & Mr A. Yau instructed by M/s. Tai, Tang & Chong for 7th Deft in A. No. 7375/86 and all Defendants in A. Nos. 7889, 7891 & 7892/87. |