The Hong Kong Housing Authority v. Hsin Yieh Architects & Associates Ltd and Others

CACV 85/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 85 OF 2005

(ON APPEAL FROM HCCT 39 OF 2001)

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BETWEEN

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Before:  Hon Tang JA and Sakhrani J in Court

Date of Hearing:  13 September 2005

Date of Judgment:  5 October 2005

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J U D G M E N T

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Hon Tang JA (giving the judgment of the Court):

1.On 16 December 2004, Reyes J granted leave to the plaintiff to add the 4^th defendant (AXA) as the 4^th defendant in these proceedings.  He also ordered:

“The plaintiff do have leave pursuant to O. 11 r. 1(1)(c) to serve upon AXA, the Re-Amended Writ and Re-Re-Amended Statement of Claim herein together with the Summons dated 18 November 2004, within 14 days”

By the summons dated 18 November 2004 the plaintiff had sought, as an alternative, joinder of AXA.

2.In this action, the plaintiff claimed against B+B, the only effective defendant who were piling contractors in relation to design and/or construction of foundations works at Tin Shui Wai, Area 31, Phase 1.  Since the hearing of the summons before the judge following a trial which lasted 34 hearing dates, the learned Judge gave judgment against B+B in the sum of approximately $553,000,000.00 as well as making a costs order nisi against B+B.  The judge also granted the plaintiff’s liberty to apply in respect of AXA’s liability for those costs.

3.By summons filed on 19 January 2005, the 4^th defendant applied pursuant to O. 12 r. 8(1)(a)-(c), (g), (h); and under O. 15 r. 6(2)(b), RHC to set aside the order granting leave to serve the 4^th defendant out of the jurisdiction and for an order that the 4^th defendant should cease to be a party to the proceedings.

4.On 7 February 2005, the judge dismissed AXA’s application under O. 12 r. 8.  AXA’s application under O. 15 r. 6(2)(a) was, we believed, with the agreement of the parties, adjourned sine die with liberty to restore.  Mr Chua, SC who appeared for AXA, has informed us that, should this appeal fail, AXA will proceed with the application under O. 15 r. 6(2)(a).

5.This is AXA’s appeal against the judge’s decision of 7 February 2005.

6.The basis of the joinder and service out of the jurisdiction relied on by the plaintiff was that “The plaintiff wishes to obtain a costs order under section 52A of the High Court Ordinance against the 4^th defendant”.

7.Section 52A provides:

“	(1)	Subject to the provisions of rules of court, the costs of and incidental to all proceedings in the Court of Appeal in its civil jurisdiction and in the Court of First Instance, including the administration of estates and trusts, shall be in the discretion of the Court, and the Court shall have full power to determine by whom and to what extent the costs are to be paid.
	(2)	Subject to specific provision made in this or any other Ordinance (other than subsidiary legislation) nothing in subsection (1) shall authorize an award of costs against a person who is not a party to the relevant proceedings.”

8.Section 52A is modelled on section 51 of the 1991 Supreme Court Act.  However, it is important to note section 51(3) of the Act provides:

“

(3)

The Court shall have full power to determine by whom and to what extent the costs are to be paid.”

9.Since the decision of the House of Lords in Aiden Shipping Co. Ltd v Interbulk Limited [1986] 1 AC 965, it is clear that under section 51 of the Supreme Court Act, the court can made costs orders against non-parties.

10.However, in Hong Kong, under section 52A(2), no costs order can be made against a person who is not a party to the relevant proceedings.

11.The joinder of AXA was made on the basis that, unless AXA was joined as a party, no order for costs could be made against AXA under section 52A.  In the plaintiff’s application for leave, it did not assert that it had a cause of action against AXA.  For the purpose of this appeal, we proceed on the basis that there is none.

12.As noted, leave to serve out of the jurisdiction was granted under O. 11 r. 1 sub-paragraph (1)(c) to permit:

“Service of writ out of the jurisdiction … if in the action begun by the writ –
(c)	the claim is brought against a person duly served within or out of the jurisdiction and a person out of the jurisdiction is a necessary or proper party thereto.”

13.O. 11 r. 4 is also relevant.  It provides where relevant as follows:

“4.	(1)	An application for the grant of leave under rule 1(1) must be supported by an affidavit stating –
		(a)	the grounds on which the application is made;
		(b)	that in the deponent’s belief the plaintiff has a good cause of action;
		(c)	in what place the defendant is, or probably may be found; and
		(d)	where the application is made under rule 1(1)(c), the grounds for the deponent’s belief that there is between the plaintiff and the person on whom a writ has been served a real issue which the plaintiff may reasonably ask the Court to try.
	(2)	No such leave shall be granted unless it shall be made sufficiently to appear to the Court that the case is a proper one for service out of the jurisdiction under this Order.”

14.However, Mr Chua SC argued that service under O. 11(1)(c) was not permissible unless the plaintiff can and has asserted a cause of action against AXA. 

15.He submitted that the requirement of O. 11 r. 4(a), (b), (c) and (d) are cumulative, such that for example that deponent has to depose to his belief:

“That the plaintiff has a good cause of action.”

16.It is not in dispute that an applicant for leave under O.11 r. 1(1)(c) has to comply with O. 11 r. 4.

17.It is not disputed that the plaintiff has a good cause of action against the contractor B+B.  So, the question is not whether an application made under rule 1(1)(c) must comply with O. 11 r. 4, but whether the plaintiff needs to have a good cause of action against the party sought to be served (the foreign party).

18.The judge was of the view that on an application under rule 1(1)(c), rule 4(1)(b) does not require the plaintiff to show an arguable cause of action against the foreign party (para. 21 of his judgment).  With respect we agree.

19.Mr Chua also relied on Siskina (Cargo Owners) v Distos [1979] AC 210, HL (The Siskina) and Mercedes Benz v Leiduck [1996] 1 AC 284, PC (Mercedes Benz).  He argued that leave could not be granted under O. 11 r. 1(1) where a plaintiff only seeks ancillary relief against the person sought to be served.  As the judge has correctly pointed out, this argument is effectively the other side of the coin to the argument that a cause of action must be pleaded against the foreign party.

20.The judge dealt with this argument in para. 64 to 70 of his reasons which we gratefully adopt and repeat below:

“	64.	“SISKINA” and Mercedes Benz involved applications to obtain ancillary relief (Mareva injunctions) against persons abroad where no good cause of action could be asserted in the domestic forum against such persons or against any other person.  Both cases were “2-party situations”.  Party 1 claims ancillary relief against Party 2, but is unable to mount any justiciable claim for final relief against Party 2 (or any other party) in the domestic forum.  In both “SISKINA” and Mercedes Benz, it was held that Order 11 could not be used to advance a merely ancillary claim.
	65.	Contrast the “3-party situation” which is the present case.
	66.	The Authority (Party 1) has a good cause of action against B+B (Party 2) which is justiciable in Hong Kong.  Ancillary to its claim against B+B, the Authority seeks relief against AXA (Party 3) in consequence of AXA's conduct in relation to the existing action.
	67.	The relief sought against AXA may indeed be “ancillary”.  But it is ancillary to a valid cause of action within the domestic forum.  It is not a bare claim for ancillary relief that we have seen advanced in the 2-party situations which arose in “SISKINA” and Mercedes Benz.
	68.	Mr. Chua accepted that the following dictum of Lord Mustill in Channel Tunnel Group Ltd. v. Balfour Beatty Construction Ltd. [1993] AC 334 (at 362C-D) was an accurate statement of the “SISKINA” doctrine:-
		“For present purposes it is sufficient to say that the doctrine of The Siskina, put at its highest, is that the right to an interlocutory injunction cannot exist in isolation, but is always incidental to and dependent on the enforcement of a substantive right, which usually although not invariably takes the form of a cause of action.  If the underlying right itself is not subject to the jurisdiction of the English Court, then that Court should never exercise its power under s. 37(1) by way of interim relief.”
	69.	Apply Lord Mustill's dictum here.  The right being asserted by the Authority against AXA is ancillary, in the sense of being “incidental to” and “dependent on” the enforcement of the Authority's substantive rights against B+B.  Therefore, the “SISKINA” doctrine (as pithily summarised by Lord Mustill) can be no barrier to the Authority's claim against AXA.
	70.	For the foregoing analysis of “SISKINA” and Mercedes Benz, I have followed Aikens J's reasoning in C Inc. Plc v. L [2001] 2 Lloyds Rep 459.”

21.Furthermore, we agree with counsel for the plaintiff, Mr Pennicott’s submission that what Lord Mustill said in the Mercedes Benz, when giving the majority judgment at page 296c is also against Mr Chua’s contention.

22.Lord Mustill said:

“… but once the matter was explored it became obvious that leave to serve the writ on the first defendant in the form which it then took should not have been granted, except perhaps on the ground alleged to fall within sub-paragraph (c) of rule 1(1); and this ground disappeared once the proceedings against I.R.C. were abandoned.”

23.There, Mercedes Benz, the plaintiff, issued a writ against the 1^st defendant, Leiduck, who was outside the jurisdiction, and the 2^nd defendant, IRC which was a company registered in Hong Kong.  The plaintiff had pleaded a claim against IRC for restitution or repayment of monies paid to it in breach of trust.  One of the basis relied on for leave to serve the 1^st defendant was O. 11 r. 1(1)(c).  However, the plaintiff later abandoned its claim against the 2^nd defendant.  As for the 1^st defendant, the pleaded causes of action against him were held by the judge, the Court of Appeal by a majority and the House of Lords, again by a majority, as not coming within O. 11 r. 1(1).  So that in so far as the plaintiff sought to assert a cause of action against the 1^st defendant, none of those causes of action supported an order for leave to serve out of the jurisdiction.

24.It was in this context that the dictum of Lord Mustill has to be considered.  We agreed with Mr Pennicott that this dictum supports the judge’s view that provided a proper cause of action has been alleged against a defendant, such as B+B here, leave to serve the writ on AXA could be granted under O. 11 r. 1(1)(c), if AXA “is a necessary or proper party” to the claim.  Of course, the plaintiff has also to satisfy the judge that there is a “real issue which the plaintiff may reasonably ask the court to try” between the plaintiff and AXA.  O. 11 r.4(1)(d).

25.Mr Chua further submitted that on an application for leave to serve outside the jurisdiction, a plaintiff must show:

(a)	a good arguable case that the matter falls within one of the sub-rules of O. 11 r. 1(1);
(b)	a serious question to be tried on the merits; and
(c)	that Hong Kong is a appropriate forum for the trial of the action.

26.Mr Chua has also submitted, relying on Seaconsar Ltd v Bank Markazi [1994] 1 AC 438, HL and Canada Trust Co. v Stolzenberg [1998] 1 WLR 547 CA, per Waller LJ at 555F-G on the meaning of a good arguable case.  These authorities are well known.  We do not accept that the judge has overlooked them.

27.As we have said there is no dispute over the applicability of O. 11 r. 4 in its entirely.  The issue is whether a cause of action against the foreign party was required.  We have no doubt the judge was right.  The requirement of a good arguable case is clearly satisfied.

28.Mr Chua has also submitted that the judge has overlooked elementary principle such as, that service out is “an exceptional measure”, or that the sub-rules in O. 11 “are to be strictly construed”.  That is a bold submission.  We reject it completely.

29.Mr Chua’s argument on “necessary or proper party” relied again on whether a cause of action against the foreign party was needed.  We will not deal with that again. 

30.However, the more important point is this whether a party could be joined as a party to proceedings if there are grounds upon which he could be ordered to pay the costs of the proceedings.  On this, the judge has referred to the case of TGA Chapman Ltd & Another v Christopher & Another [1998] 1 WLR 12, the headnote of that case shows:

“… since the insurers had determined that the claim would be fought, had funded the defence of the claim, had had the conduct of the litigation, had fought the claim exclusively to defend their own interest and had failed entirely, a claim for costs against them was justified; …”

31.TGA Chapman was a case on section 51 of the English Act.  As noted above, in England, an order for costs could be made against a person whether within or without the jurisdiction, notwithstanding that the person was never a party to the proceedings.

32.However, under section 52A no such order could be made except against a party to the proceedings.  The issue therefore is whether it is permissible for a person to be joined as a party so that he might be made liable for the costs of proceedings.  This is not an easy question.  However, all we need to decide is whether there is a serious question to be tried.  We believe there is. 

33.It is the plaintiff’s case that the circumstances fall within the decision of TGA Chapman.  On the available information, we are of the view that there is a serious question to be tried on the merits.

34.We are also of the view that Hong Kong is the proper forum because one is concerned with the costs of an action in Hong Kong and the issue is whether under our legislation a costs order could be made under section 52A.

35.In England, the claim for costs against such a person, whether within or without the jurisdiction, could be effected by means of a summons in the action.  For the service of such a summons out of the jurisdiction, leave could be obtained under the equivalent of RSC O. 11 r. 9(4).  The Ikarian Reefer No. 2 [2000] 1 WLR 603, CA.

36.Here, we do not believe that O. 11 r. 9(4) has any application.  The Order of 16 December 2004 gave leave to serve the Re-Amended Writ (the writ) out of the jurisdiction, although it was to be served together with Re-Re-Amended Statement of Claim and the summons dated 18 November 2004.  The summons dated 18 November 2004 was not the summons for a costs order against AXA.  It seeks first a declaration that AXA was already a party to the proceedings “within the meaning of section 2 of the High Court Ordinance, although not on the record” and alternatively for an order that AXA be added as a party and for leave to serve AXA.

37.Having regard to section 52A, the plaintiff sought leave to join AXA as a party to the action, which would necessitate amending the writ by adding AXA as the 4^th defendant.  That is why the judge ordered the joinder of AXA as the 4^th defendant and for service of the writ out of the jurisdiction.

38.The defendant also relied on the case of Deak v Deak Perera Far East Ltd [1990] 2 HKC 198, CA, and, in particular, the following passage from the judgment of Kempster JA:

“On the basis of the cause or causes of action pleaded a party seeking, as here, an order for service of a writ out of the jurisdiction on persons alleged to be proper parties to a claim made against persons already duly served must satisfy the court that in the light of all the evidence and of the law, he has a good arguable case on the merits as against the parties already served as well as against those sought to be served and that there is a strong probability that the jurisdictional provisions of O. 11 r. 1(c) of the Rules of the Supreme Court are satisfied.  He must further persuade the court that its discretion should be exercised in his favour.”

This authority was not cited to the judge.

39.However, we agree with Mr Pennicott that the Court of Appeal was not considering the type of situation which arises in the present case.  It was not a decision that an applicant for leave under O. 11 r. 1(1)(c) must assert a cause of action against the parties sought to be served. 

40.For the reasons stated above, it is unnecessary for us to consider whether the plaintiff might have a separate cause of action against AXA.  We are of the view that leave was properly given under O. 11 r. 1(1)(c) although no cause of action was asserted against AXA.

41.Accordingly, the appeal is dismissed.  We also make an order nisi for costs against the 4^th defendant, such costs to be taxed if not agreed.

Mr Ian Pennicott, instructed by Messrs Johnson, Stokes and Master, for the Plaintiff.

Mr Chua Guan-hock, SC, instructed by Messrs Wilkinson and Grist, for the 4^th Defendant/Appellant.

The 3^rd Defendant, absent.