Wu Yi Development Co Ltd v. Big Isalnd Construction (HK) Ltd

DCCJ5174/2005

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 5174 OF 2005

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BETWEEN

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Coram : Her Honour Judge H.C. Wong in Chambers

Date of Hearing : 20^th November 2006

Date of Handing Down Decision : 8^th December 2006

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DECISION

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1.The Defendant applies by summons of 6 June 2006 for this action to be transferred to the High Court to be consolidated with HCA 2134 of 2005 under s. 42 District Court Ordinance Cap. 336.  The Plaintiff is opposed to the summons to transfer.

2.In this action, the Plaintiff claims against the Defendant for the return of three sums of money: $150,000, $300,000 and $50,000 lent by the Plaintiff to the Defendant on 9 January, 1 March and 21 April 2004.  The Plaintiff relies on three letters from the Defendant and three receipts signed by the Defendant of the same dates as evidence of the loan agreements (“the said letters and receipts”).

3.The Defendant admitted to having received the three sums of money but denied they were loans to the Defendant.  The Defendant in its Defence alleged that the three sums of money were contributions by the Plaintiff to one FBC Construction Company (“FBC”), which is a joint venture company between the Wu Yi Group of companies (“Wu Yi Group”) and the Big Island Group of companies (“Big Island Group”) pursuant to a joint venture agreement entered in 1991 (“the joint venture agreement”).  The Defendant relied on its letter to Wu Yi Construction Co. Ltd.’s manger Mr. Huang Limin on 22 January 2003 copied to the managing director of the controlling company China Wu Yi Co. Ltd. and a letter of 14 June 2005 from Big Island Asia Co. to Wu Yi Construction’s chairman of the board of directors Mr. Cheng, copied to Mr. Huang (the then managing director of Wu Yi Construction) and the Fujian Construction Co. Ltd. (“Fujian Construction”).

4.The Defendant’s case is that in breach of the joint venture agreement, the Wu Yi Group failed to finance the operation of FBC since September 2002.  At the three meetings held on 9 January, 1 March and 21 April 2004 between Mr. Ben Lee of the Defendant and the managing director of FBC and Mr. Huang Limin who was also the managing director of Wu Yi Construction at the time, Mr. Huang informed Mr. Lee that the new management of Fujian Construction as the controlling company of the Wu Yi Group had refused to make further cash injection into FBC.  The Defendant alleged that Mr. Huang on behalf of the Plaintiff and Wu Yi Construction agreed to effect payments to FBC through the Defendant dressing up the payments as loans to the Defendant to avoid litigation with the Defendant and permission from Fujian Construction.

5.As a result, at the specific instructions of Mr. Huang, the said letters and receipts were issued on the understanding that they were in fact contributions to FBC pursuant to the joint venture agreement by Wu Yi Construction, a wholly owned subsidiary of China Wu Yi, rather than loans to the Defendant.

6.The High Court Action 2134 of 2005 is taken out by Wu Yi Construction against Big Island Asia Ltd. as the defendant.  Wu Yi Construction in those proceedings claims against Big Island Asia the sum of $2,056,466.33 for failure to contribute to the operations of FBC in accordance with the shareholdings by Big Island Asia of 40%.

7.In para. 4 of Big Island Asia’s defence in HCA 2134 of 2005, it relies on the joint venture agreement that the Wu Yi Group had agreed to provide all of FBC’s operational expenses.  Big Island Asia further counterclaims against Wu Yi Construction for its contribution to FBC in the sum of $5,020,221, relying on Mr. Huang’s assurances.

8.The Defendant therefore claims that it is just and convenient to transfer this action to the High Court to be consolidated with the High Court action for there are common questions of fact and law.  The Defendant submitted it would save time and costs to have the two actions heard together to avoid duplicity of evidence in the High Court and the District Court and further avoid possible inconsistent findings.

9.The Plaintiff objects to the Defendant’s application on the basis that this action had reached a pre-trial review stage when the Defendant decided to take out the transfer application.  It claimed that because the Defendant had no defence to the action, it is employing delaying tactics.

10.The Plaintiff’s Mr. Lian had in his affirmation disclosed that the three sums of money were genuine loans to the Defendant upon the Defendant’s promise to repay within a short time.  He further denied any truth to the allegation by the Defendant that the ‘Wu Yi Group’ would be responsible for all operational funds of FBC.

11.In para. 3 (c) of the Plaintiff’s Amended Reply in this action and in para. 3 (1)(b)(i) of Wu Yi Construction Co. Ltd.’s reply in HCA 2134 of 2005, they admitted that Wu Yi Construction is a wholly owned subsidiary of China Wu Yi Co. Ltd. (“China Wu Yi”). Furthermore, Fujian Construction Engineering (Group) Ltd. holds 66.59% of China Wu Yi.  That the Plaintiff is 50% owned by China Wu Yi and 50% owned by Fujian Construction Engineering (Group) Ltd.  Further, 99.99% of the Defendant’s shares is held by Big Island Asia Ltd. with 99.99% of its shares owned by one Mr. Ben P. Lee (李信) who is also the managing director of FBC. 

12.The history of the shareholdings of FBC since August 1991 is set out in para. 2F of the Defendant’s amended Defence.  It is identical to para. 4a of the defence and counterclaim of Big Island Asia Ltd. in HCA 2134 of 2005.  This history of shareholdings of FBC is not disputed by the Plaintiff.

13.It is not disputed, therefore, the plaintiff in the HCA 2134 of 2005 holds 60% shares in FBC.  It is also clear from the pleadings in HCA 2134 of 2005 that Wu Yi Construction claims against the Big Island Asia Ltd. for repayment of contributions to FBC in the proportion of 60% and 40% based on their respective shareholdings in FBC.  Big Island Asia pleaded an identical defence as the Defendant’s Defence in this action alleging Wu Yi Group to have agreed to be fully responsible for the operational expenses of FBC.

14.Miss Tong, Counsel for the Defendant, submitted that even though the parties in this action and the High Court action are different, the two Plaintiffs belong to the same Wu Yi Group of companies and the two Defendants belong to the same Big Island Group of companies.  The nature of their dispute is the same, that of the operational expenses of FBC.  She submitted that if the present action is allowed to be transferred to the High Court, it may be consolidated with the High Court action.  She relied on the authority of Horwood v. British Statesman Publishing Co. Ltd. (1929) W.N. 38 per Sankey LJ at p. 59, “actions may be consolidated where the plaintiffs are the same and the defendants are the same, or where the plaintiffs or defendants or all are different.”

15.The main purpose of consolidation is to save costs and time, therefore it will not usually be ordered unless there is “some common question of law or fact bearing sufficient importance in proportion to the rest” of the subject matter of the actions “to render it desirable that the whole should be disposed of at the same time. (Order 4/9/2 p. 48 of Hong Kong Civil Procedure 2006).

16.Whether the two actions should be consolidated is of course a matter for the High Court since the Defendant by its summons is only seeking to transfer this action to the High Court to enable an application be made which may involve an Order 15 rule 4 application.

17.The Defendant’s application before me is concerned with Section 42 of the District Court Ordinance:

“S. 42 Transfer to the Court of First Instance of proceedings within the jurisdiction of the Court.  The Court may, either of its own motion or on the application of any party, order the transfer to the Court of First Instance of all or part of any action or proceeding within the jurisdiction of the Court.”

18.Mr. Ng, Counsel for the Plaintiff, referred me to Section 43 of the Ordinance which deals with transfers to the Court of First Instance of proceedings within the jurisdiction of the District Court.  Strictly speaking, it has no relevance to the present application, save that should the present action be allowed to transfer to the Court of First Instance, it may be re-transfer back to the District Court because the claim is under $1 million.  On this basis, the Court of First Instance’s considerations should be taken into account.

19.In this regard, I agree that in my considerations of the Defendant’s application.  I shall have to take into account the issue as to whether the CFI would allow the two actions to be consolidated if the present action is transferred to the CFI.

20.There is no doubt, this Court possesses the jurisdiction to transfer this action to the CFI under S. 42, the crucial question is whether the transfer would result in its consolidation with the High Court action.

21.I do not agree that in the present application, one should consider S. 43 in isolation and the criteria for transfer should be whether the present action is of “such exceptional nature” and of such importance and complexity for the action to be transferred to the CFI.  Such criteria are matters for the judges and masters of the CFI to consider in a High Court action application for transfer to the District Court.

22.In my consideration of the present application, I take into account that the plaintiff in the High Court action holds 60% share in FBC, that there was an agreement of contribution of operational expenses raised in the Defendant’s defence.  Though the Plaintiff in this action is technically a different entity to the plaintiff in the High Court action, they are controlled by the same management team mainly from Fujian Construction Engineering Co. Ltd., the major shareholder of Wu Yi China.  I am further aware that the Plaintiff’s claim in this action, and the claim in the High Court action are both based on a dispute over the operational expenses of FBC.  The common nature of the two claims, the almost identical defences and the similarity in the evidence from witnesses to be called in both actions provided strong support that the two actions ought to be tried by the same court whether they be consolidated or not to avoid inconsistency in the findings of law and facts.

23.I am convinced there are sufficient common questions of law and facts in the present action and the High Court action in proportion to the whole action to render it desirable that both actions should be disposed of at the same time.  It is, however, a question for the Judge or the Master in the High Court to decide if the two actions should be consolidated.  I am persuaded that time and costs would be saved if the present action is transferred to the CFI to be tried by the same court.

24.For the aforesaid reason, I allow the Defendant’s application to transfer this action to the High Court for a consolidation application to be made.  I order the costs of this application be costs in the cause with certificate for Counsel.

Parties:

Mr. Lawrence Ng instructed by Messrs. Ford, Kwan & Co. for the Plaintiff.

Miss Sara Tong instructed by Messrs. Stephenson Harwood & Lo for the Defendant.

Plaintiff's application for leave to appeal against this decision dismissed. Please refer to DCCJ5174/2005 dated 15 February 2007