Bowardley Enterprises Ltd and Another v. Millennium Group Ltd
Read the full judgment text of CACV 242/2005 on BabelCite. This Court of Appeal judgment was delivered on 11 July 2006.
1. This case raises a very important issue on the application of the principle of stare decisis which in modern language means ‘to stand by things decided’.
Cited by 1 case · Cites 2 cases
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CACV 242/2005 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL CIVIL APPEAL NO. 242 OF 2005 (ON APPEAL FROM DCCJ 3039 OF 2004 ) ______________________ BETWEEN:
Before: Hon. Cheung and Yuen JJA and Chu J in Court Date of hearing: 4 January 2006 Date of Judgment: 11 July 2006 ---------------- JUDGMENT ---------------- Hon. Cheung JA: 1.This case raises a very important issue on the application of the principle of stare decisis which in modern language means ‘to stand by things decided’. Facts 2.The facts of the case are set out in the judgment of Yuen JA. For present purpose it is sufficient to provide this summary. The plaintiff sued the defendant for damages for breach of contract. The writ of summons was issued on 4 August 2003. The parties agreed that the limitation period for the cause of action expired on 20 January 2005. On 3 November 2004, before the expiration of the limitation period, the plaintiff issued a summons to amend the writ. The proposed amendment was found by HH Judge Ng who heard the application to amend, to amount to a substitution of a new party. By the time the application was heard by the judge (the first hearing was on 23 February 2005 and the second hearing was on 2 March 2005) the limitation period had expired. An issue then arose on whether the court could still allow the amendment. This in turn depended on whether the appropriate time to determine the limitation period was at the time when the summons to amend was lodged or at the time when the application was heard. The judge chose the earlier time and granted leave to the plaintiff to amend on 24 June 2005. The case of Lim Ban Thoon 3.The judge applied the judgment of this Court (Yang CJ, Fuad VP and Penlington JA) in Lim Ban Thoon v. Chintung Securities Ltd [1991] 2 HKC 204 (judgment of the court being delivered by Fuad VP) which held that the appropriate time to consider the limitation was when the application to amend was lodged. In that case, the plaintiff issued a summons to amend his writ by joining three other parties to the action. At that time the cause of action had not expired but had become so when the application to amend was heard. Subsequent English decisions 4.Subsequent to Lim Ban Thoon, the English Court of Appeal adopted a different approach. In Welsh Development Agency v. Redpath Dorman Long Ltd [1994] 1 W.L.R. 1409, in a situation similar to Lim Ban Thoon, it held that the relevant time to consider whether the limitation had expired was at the time when the amendment was actually made. This result was based on the wording of section 35(3) of Limitation Act of 1980 which provided that,
5.Glidewell LJ held that a new claim cannot be “made” by amendment until the pleading is actually amended. He held that the wording of the section 35(3) was so clear as to admit of only one interpretation. Similar construction of section 35(3) was adopted in cases such as The Kyriaki [1994] 1 All ER 401, Paragon Finance plc v. DB Thakerar & Co. (a firm) [1999] 1 All ER 400, Rowan v. VOF [1999] 2 Lloyd’s Rep. 443 and Furini v. Bajwa & Ors [2004] 1 WLR 1971. The Hong Kong section 35(3) 6.Section 35(3) of the English Act is the equivalent of section 35(3) of the Limitation Ordinance (Cap. 347) which provides that :
7.The defendant who lodged the present appeal argued that Lim Ban Thoon was wrongly decided and should not be followed by this Court. Principle of stare decisis and its exceptions 8.Lim Ban Thoon is a decision of this Court and is binding on us unless it comes within the recognised exceptions, see : Ng Yuen Shiu v. A.G. [1981] HKLR 352 and Cheung Lai Wah (an infant) & Ors v. Director of Immigration (No. 2) [1998] 2 HKC 382. As explained in Cheung Lai Wah the exceptions are :
These exceptions have their origin from the English case of Young v. Bristol Aeroplane Co. Ltd.[1944] 1 K.B. 718. The per incuriam exception 9.In respect of the ‘per incuriam’ exception (which literally translated means ‘through the want of care’), it includes the following : the previous decision was given in ignorance and forgetfulness of some inconsistent statutory provision or some authority binding upon it or when the decision involved a manifest slip or error. The best exposition of this topic came from the judgment of Lord Donaldson of Lymington M.R. in Rickards v. Rickards [1989] Fam. 194. Because of its importance, I shall set out the relevant part at p. 203 in full :
Decision not given in ignorance or forgetfulness of section 35(3) 10.Mr. Pao, counsel for the plaintiff, had argued that this Court in Lim Ban Thoon had ignored or forgotten section 35(3) in arriving at its decision. I do not agree. The Court there had referred to other provisions of section 35 which clearly bear a cross-reference to section 35(3) and on that basis it must have considered this particular subsection. The likely situation 11.What I think is more likely to have happened in Lim Ban Thoon is that the close scrutiny of section 35(3) which had been done in the English decisions and in the present appeal had not taken place in that case. I do not regard that to be particularly unusual : there are indeed occasions where one finds that a specific issue was not addressed in a case but was explored in detail in another one. Further, if I may say so respectfully, Fuad VP was a meticulous lawyer and was a member of an eminent bench. For those who had the experience and pleasure of appearing before him, it would be most unusual for him not to have discussed the wording of section 35(3) if the topic had been addressed before him. This would be more so when he had dealt with the arguments on the ‘anomalies’ which could arise if the relevant time was based on the date of hearing of the application to amend. As apparent from the judgment, the wording of section 35(3) was not addressed. Instead the Court stated that :
Was there a manifest slip or error? 12.The question then becomes whether the decision involves a manifest slip or error. Mr. Pao in a very persuasive argument, submitted that this case falls within the principles relevant to the issue of ‘manifest slip or error’ : it involves a procedural decision which goes into the jurisdiction of the court. It also involves the practical consideration of appealing to the Court of Final Appeal where the sum at stake is less than $1 million. My approach 13.If I were to approach the matter afresh, my focus will be on section 35(3) which after all is the prohibition section. The wording in section 35(3) is that ‘the court shall not allow a new claim ... to be made ...’ In my view the emphasis is on the words ‘the court shall not allow’. It is for the court to make the decision, then the decision can only be made at the hearing and not before, such as when the application to amend was lodged. If a properly formulated amendment is before the Court, then in my view the relevant time for the limitation is when the court made the decision on the application. 14.I understand in Welsh Development Agency, when Glidewell LJ had said that a new claim cannot be “made” by amendment until the pleading is actually amended, this can be interpreted as meaning that it is made when an engrossed amended pleading is filed with the Court. For my part, I prefer to say that a new claim is made when the court granted leave to include a new claim which is properly formulated before it. But it is not necessary to go into the debate on this topic because even on Glidewell LJ’s approach, he recognized that it cannot be earlier than the date at which leave is granted to make the amendment. The crucial issue here is whether an even earlier date i.e. the date when the application was lodged should be used as the relevant date. To that the answer must be no. The anomaly argument 15.There is no doubt certain sympathy to a plaintiff who has lodged an application to amend before the expiration of the limitation period but finds himself time barred by the time the application is heard. In such a situation when the application is lodged, the defendant does not have an accrued right on limitation. In Aly and Another v. Aly and Another (unreported dated 8 December 1983), the English of Appeal, in considering the meaning of Order 12 Rule 8, held that,
16.That case was relied upon by this Court in Wo Fung Paper Making Factory Ltd v. Sappi Kraft (Pty.) Ltd [1988] 2 HKLR 346 which in turn was referred to in Lim Ban Thoon. 17.However, I do not regard the present situation as an anomaly because it is clearly within the power of the plaintiff to safeguard his position by issuing a fresh writ pleading a new cause of action or naming a new party before the expiration of the limitation period. This risk-free exercise outweighs any argument of procedural inconvenience of applying for consolidation of the two actions. 18.In any event how far can one go in considering the issue of anomaly? In the course of hearing, I gave the example of an applicant who only lodged the application to amend the writ with a new cause of action one day before the expiration of the limitation period. Clearly there is no possibility of having the application heard before the expiration of the limitation period. In such a situation, is a further distinction going to be drawn as to the length of time between the date of the lodging of the application and the date of the hearing? In my view the focus should only be on the wording of section 35(3) instead of what may or may not have happened in a case. There was no manifest slip or error 19.While this is my approach on the matter, I would not, however, go as far as to say that this Court in Lim Ban Thoon would necessarily have reached the same conclusion if the arguments on section 35(3) were fully raised before it. I approached the matter with caution. One must proceed on the basis that it is only in rare and exceptional cases that one may invoke the ‘manifest slip or error’ exception. This is not so much a deference to the individuals who made the decision : judges are human beings and are susceptible to mistakes, but a recognition of the system upon which the court operates. The Hong Kong Court of Appeal sits in different divisions but there is ultimately only one court. Consistency of the decisions of the Court is vital to those who have to rely on the system. 20.In this case Yuen JA is of the view that the Lim Ban Thoon approach is the correct one. If even within this bench there is a difference in views on the topic, it would be too bold to say that this Court in Lim Ban Thoon, after hearing argument on this issue, would necessarily have reached a view different from the one it had made. To say otherwise would only mean that the stringent conditions in departing from a precedent of the same court are not being observed in substance. 21.I am not persuaded that the decision in Lim Ban Thoon was made with a manifest slip or error. This means the decision is binding on this Court and will be applied. The recourse for the defendant is to seek redress in the Court of Final Appeal : see Cheung Lai Wah. Others 22.In relation to the appeal on amendment, I agree that it should be dismissed with the order proposed by Yuen JA. I agree with her decision on the ambit of Order 15 Rule 6(6)(a). In relation to the appeal on discovery, I also agree with the judgment and orders of Yuen JA. Hon Yuen JA: 23.This is the Defendant’s appeal from an order of District Judge Marlene Ng made on 24 June 2005 giving the Plaintiff leave to amend its claim, first to add a qualifying date to the list of persons the Plaintiff claims to represent, and secondly, to add the 2nd Plaintiff. 24.The judge also made a specific discovery order on the Defendant’s summons, but only giving it part of the order it sought. By this appeal, the Defendant also sought an order in respect of the rest of its summons, although it accepts that the discovery appeal stands or falls with the amendment appeal. Background 25.Briefly, the Plaintiff had claimed in the original Statement of Claim that on 9 August 1997, a sponsorship agreement (‘the 1st agreement’) was entered into between the Hong Kong Badminton Association (of which the 2nd Plaintiff was the president) and the Defendant. The agreement was for the sponsorship of the Hong Kong Open Badminton Championships for 1997 and 1998, with the Defendant agreeing to pay prize money and organization fees in the total sum of US$350,000 for the event for each of those years. 26.The Defendant paid the sum for the 1997 event but in 1998, the Defendant allegedly informed the 2nd Plaintiff that it was unable to pay. 27.It is alleged that consequently another agreement (‘the 2nd agreement’) was entered into on 28 September 1998 with the Defendant’s subsidiary, for the subsidiary to sponsor the 1998 event in the sum of US$350,000. 28.However the subsidiary did not pay any part of this sum. It is alleged that subsequently yet another agreement (‘the 3rd agreement’) was entered into on 20 November 1998 for the Defendant to pay a reduced sum of US$300,000 by instalments. 29.Between 16 November 1998 (a date prior to the alleged 3rd agreement) and 1 January 2001, various sums were paid by the Defendant, leaving a balance of HK$750,000 outstanding. 30.On 4 August 2003, the Plaintiff issued a claim against the Defendant in the District Court for the balance outstanding. (Apparently in the meantime, the subsidiary had been wound-up). Original Plaintiff 31.As can be seen from the title of the proceedings, the original name of the plaintiff was ‘Bowardley Enterprises Limited suing on behalf of itself and all other members of Hong Kong Badminton Association’. Summons for discovery 32.On 14 August 2004 the Defendant issued a summons for discovery of the membership lists of the Hong Kong Badminton Association as at 9 August 1997 (the date of the 1st agreement) and as at 4 August 2003 (the date of writ). The Defendant argued that it needed the lists to see if the membership had changed between those dates, so that it could ascertain whether the action had been properly constituted. It was probably as a result of this summons that the Plaintiff issued a summons to amend on 3 November 2004. Summons to amend 33.The Plaintiff issued the summons under Order 20 rule 5 and Order 15 rule 6 for leave to amend the writ and claim, first to add the qualifying date ‘9 August 1997’ (the date of the 1st agreement) to the list of persons the Plaintiff claims to represent, and secondly, to add the 2nd Plaintiff. 34.On 8 November 2004, there was a call-over of the summons. On 23 November 2004, the summons was heard by a master who gave directions that it be heard by a judge. 35.The summons was first heard by the judge on 23 February 2005, when it was adjourned part-heard to 2 March 2005. There were then further written submissions from both parties in March and June before the judge handed down her decision on 24 June 2005. 36.In the meantime, however, the limitation period had expired. Expiry of limitation period 37.Although the date 20 January 1999 did not appear anywhere in the Statement of Claim, the judge held that 20 January 2005 was the date when the limitation period expired, apparently because 20 January 1999 was the date of the first default in payment. Counsel for the Defendant accepts in his skeleton submissions before us that this was the date when the limitation period expired and there is no respondent’s notice from the Plaintiffs asserting a different date. 38.In other words, it is now accepted by both parties that the limitation period expired 2 months after the summons was issued and 1 month before the hearing before the judge. Issues on amendment 39.The first issue before this court was whether the judge could grant leave to amend on 24 June 2005 notwithstanding the expiry of the limitation period. In holding that she had power to do so, the judge applied the decision of this court (Yang CJ, Fuad VP and Penlington JA) in Lim Ban Thoon v Chintung Securities Ltd [1991] 2 HKC 204. Counsel for the Defendant argued that that case was decided per incuriam. 40.The second issue was: irrespective of the decision in Lim Ban Thoon, could the Plaintiff make the amendments sought in this case under Order 15 rule 6(6)(a)? 41.The Defendant also challenged the amendments on the ground that they contained mutually inconsistent allegations of fact, but counsel for the Defendant was content to reserve this argument for trial and I need say no more about it. Discussion 42.In his judgment, Cheung JA has set out the principle of stare decisis and the limited circumstances in which this court may depart from its own previous decision. Lim Ban Thoon not decided per incuriam 43.It is clear in my view that the decision in Lim Ban Thoon was not decided per incuriam. With respect, I do not agree with counsel for the Defendant that it was decided in ignorance or forgetfulness of s.35(3). Although s.35(3) was not explicitly referred to in the judgment, s.35(5) was (p207H); and since s.35(5) expressly refers and applies only to "a new claim to which subsection (3) applies", there can be no doubt but that the court must have been aware of the provisions of s.35(3). 44.Further, it cannot be said in any event that the decision in Lim Ban Thoon involved a ‘manifest slip or error’ (Rickards v Rickards, p203-E). As Lord Donaldson said in Rickards, manifest slips or errors will be of the rarest occurrence (p203-F) and the court must have very strong reasons if any departure from its own previous decisions is to be justifiable (p204-A). Even if it is assumed that the literal interpretation in Welsh Development Agency is to be preferred to the purposive interpretation adopted in Lim Ban Thoon, there was simply a difference of opinion which could not be regarded as involving a ‘manifest slip or error’. 45.Accordingly this court is bound by the decision in Lim Ban Thoon. That is enough for present purposes but in my respectful opinion, the purposive interpretation of s.35(3) by the court in Lim Ban Thoon is in any event to be preferred. Section 35 46.First, I consider the context in which that subsection appears. As the heading of s. 35 indicates, the section provides for "New claims in pending actions: rules of court". It was obviously clear to the draftsman that the procedural framework of the rules of court was important to the making of new claims, and rules of court were expressly referred to in ss.(5). Retrospective effect of amendments to add new claims 47.The first and most important provision of s.35 is that amendments containing new claims are to have retrospective effect – to the date of the writ: s.35(1). Protection of defendants with accrued limitation defence 48.However, in order not to deprive a defendant of an accrued defence of limitation, the legislature prescribed that the court shall not allow a new claim having retrospective effect to be made in an action after the expiry of the limitation period: s.35(3). Nevertheless it enables rules of court to provide for certain exceptions: s.35(6), s.35(7) and s.35(8). For the sake of completeness, the exceptions (and the rules which cater to them) may be conveniently set out in a table:
49.To return to s.35(3), it is clear that its purpose is to avoid a defendant with an accrued defence of limitation from being ‘trumped’ by a plaintiff making a new claim by means of an amendment with retrospective effect. To this end, the legislature has stipulated that "the court shall not allow a new claim [having retrospective effect] ... to be made in the course of any action after the expiry of any time limit under this Ordinance ..." : s.35(3). Procedural framework for making amendments 50.What do those words mean? In my view, as this provision is in the context of parties making new claims in pending actions, we must first consider the procedural framework within which they would make such claims. 51.Longstanding rules of court provide that a plaintiff can make a first amendment, even where a new cause of action is involved, without applying to court for leave if the writ has not been served: O.20 r.1. If it is a later amendment, he has to apply to court normally by way of filing a summons. Interpretation of s.35(3) within procedural framework for amendments 52.Those longstanding rules of court must have been known to the draftsman when he drew up s.35(3). The language he chose: "the court shall not allow a new claim ... to be made in the course of any action after the expiry of any time limit under this Ordinance" is apposite to apply to both the scenarios I have referred to in the preceding paragraph. 53.In a first amendment scenario, those words direct the court to strike out a new claim which is made after the time bar. In other words (unless the exceptions in the table apply), there is no discretion. 54.In a subsequent amendment scenario (again unless the exceptions in the table apply), those words direct the court to refuse an application to amend if the summons is filed after the time bar. This interpretation is supported by Order 20 rule 5(2) which starts with the words:
55.The purpose of s.35(3) – to protect a defendant’s accrued defence of limitation – is thus achieved, within the existing procedural framework in which plaintiffs seek to effect amendments. 56.Accordingly, applying that purposive interpretation, the relevant date is not the day on which the court decides the amendment, but the day on which the application to amend is made, i.e. the day of the summons. This was the decision reached by the court in Lim Ban Thoon. Welsh Development Agency - literal interpretation 57.In Welsh Development Agency Glidewell LJ (giving the decision of the court) said (at p1421D):
58.In my respectful view, it has first to be said that even on a literal interpretation, the date on which the court grants leave to amend is not necessarily the date when a new claim is made. The new claim is made when the actual amended document is filed in court, which may be the day when leave is granted, but (depending on individual factual circumstances) may be on a later date, as Glidewell LJ recognised. A situation may therefore arise where a court grants leave to amend during the limitation period, but the new claim is only made after it has expired. There was no exploration of this problem in Welsh Development Agency. 59.Although counsel for the Defendant has referred us to other reported English cases where Welsh Development Agency was applied, those were decisions of courts of equivalent or subordinate standing, so that decision was binding on them. Further, in some cases the application to amend was only made after the limitation period had expired (Paragon Finance plc v DB Thakerar & Co [1999] 1 All ER 400) or the plaintiff did not provide specific amendments until after the limitation period had expired (Furinin v Bajwa and others [2004] 1 WLR 1971). Purposive interpretation 60.In my view there is more fairness, certainty and practical sense if s.35(3) is read purposively. It is only when an application to amend to add a new claim is made after the time bar that the court must disallow it, to protect the defendant’s accrued defence of limitation. When an application to amend is made before the time bar, the defendant has no accrued defence. 61.There is no good reason why the time taken by the court to hear the application should work in one party’s (the defendant’s) favour and not the other’s. On the contrary, the courts have said:
62.There is also more certainty when the day when the summons is filed is taken as the relevant date, precisely because the literal interpretation adopted by Glidewell LJ does not take into account the possible difference between the date of the order allowing an amendment and the date when the amendment is actually made by the lodging of the amended claim. 63.It also means that the court would not need to be pressed into making hasty decisions. In the present case, the summons was actually heard by a master before the limitation period expired. He decided to adjourn the application to be heard by a judge on a date after the expiry of the limitation period. If instead he had decided to reserve his decision to the same date, the bizarre result would be that by reserving his decision allowing an amendment, he would have deprived himself of the power to exercise that discretion. 64.Of course, it has been said that a party can protect his position by issuing a protective writ. (In fact that was done in Lim Ban Thoon but the court’s decision was not affected by that fact). In my view no real purpose is served by requiring a party to do that. The party has to pay the extra costs of issuing a new writ, and the parties and the court then have to deal with time-wasting and cost-wasting applications for consolidation of the two actions. That does not serve the purpose of s.35(3) - which is simply to avoid the retrospective effect of amendments being abused to deprive a defendant of an accrued defence. 65.In my view therefore, even if this court had not been bound by the decision in Lim Ban Thoon, I would have held that the judge was entitled to grant the amendment, as the application had been made before the expiry of the limitation period. Not an Order 15 rule 6(6)(a) situation 66.As a matter of completeness, I will deal with the second issue which is whether the Plaintiff would have been entitled to amend in any event on the basis of Order 15 rule 6(6)(a). 67.Order 15 rule 6(6)(a) provides that the addition or substitution of a new party shall be treated as necessary for the purposes of Order 15 rule 5(a) if property is vested in the new party at law or in equity, and the plaintiff’s claim in respect of an equitable interest in that property is liable to be defeated unless the new party is joined. 68.Counsel for the Plaintiff has submitted that a chose in action is included in the definition of “property” under the Interpretation and General Clauses Ordinance, and that the “rights and interests under the 3rd agreement ... are intangible property rights vested in the 1st Plaintiff or alternatively the 2nd Plaintiff”. 69.I do not agree that Order 15 rule 6(6)(a) applies in the present case. It applies only to a situation where a plaintiff’s claim is “in respect of an equitable interest” in property. Even if one were to assume that the breach of contract claim is a chose in action and is thus “property”, the Plaintiff’s claim is not in respect of an “equitable interest” in it. Discovery summons 70.Finally there is the appeal on the discovery summons. As counsel for the Defendant accepts in his skeleton submissions, this stands or falls with the amendment appeal. As the Defendant has not succeeded in overturning the judge’s decision, there is no ground for ordering the full extent of discovery sought in the summons, and a redacted list consistent with the amended claim has already been supplied. Order 71.For the reasons discussed, I would dismiss the appeal with an order nisi that the Defendant bear the Plaintiffs’ costs of the appeal. Hon Chu J: 72.I agree that the appeal should be dismissed with costs against the defendant. 73.For the reasons given by Cheung and Yuen JJA, this court is bound by the decision in Lim Ban Thoon v. Chintung Securities Ltd [1999] 2HKC 204. The case was not decided per incuriam. Neither did it involve a manifest slip or error. I agree with Yuen JA’s views on the application of Order 15 rule 6(6)(a) and that the present case falls outside it. I also agree with Yuen JA’s reasons on the appeal on discovery. Hon Cheung JA: Conclusion 74.The appeal is dismissed with an order nisi that the defendant bear the plaintiff’s costs of the appeal.
Mr Francis K M Yip instructed by Fairbairn Catley Low & Kong for the Plaintiffs (Respondents) Mr Jin Pao instructed by Susan Liang & Co for the Defendant (Appellant) |
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