RICHLY BRIGHT INTERNATIONAL LTD v. DE MONSA INVESTMENTS LTD

CACV 247/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 247 OF 2012

(on appeal from HCA NO. 548 OF 2012)

________________

____________________

____________________

J U D G M E N T

____________________

Introduction

1.  This is an application by 823 Investment Ltd (“823”) to be added as a party to this appeal.  It has also applied for leave to file some affirmations.  It was agreed that I could read the affirmations de bene esse, and that the disposal of the latter application would depend on the determination of the joinder application.

Background

2.  The background, very briefly, is that there was a series of “confirmor” sales of a property in New Mandarin Plaza.  The owner Win Profit agreed to sell the property to World Orient (“WO”), which in turn agreed to sell to 823, which in turn agreed to sell to Richly Bright International Ltd (“RB”), which in turn agreed to sell to De Monsa Investments Ltd (“DM”).  Each of the buyers in the series had paid a deposit and each would have made a profit if the transaction was completed.  All the sales were to have been completed on 17 September 2008. 

Actions

3.  DM did not pay the balance of the purchase price, which led to the confirmors up the line also defaulting on their purchases.  This led to a number of actions: WO sued 823 in HCA24/2009, 823 sued RB in HCA1452/2010 and RB sued DM in HCA548/2012. 

RB’s action against DM

4.  In RB’s action against DM, RB applied for summary judgment.  DM resisted the application on a number of grounds, but one of them was maintenance and champerty.  DM argued before Deputy High Court Judge Le Pichon at the O.14 hearing on 27 September 2012 that 823 and RB were shell companies with no assets, and that a shareholder/director of WO had acquired 823, which then joined forces with RB against DM.

5.  The learned judge held that 823 and RB shared a common interest in the litigation and no impropriety had been established.  On 15 October 2012 summary judgment was given against DM.  The appeal against that judgment is due to be heard in 4 months time.   

823’s judgment against RB

6.  Going back in time, on 1 April 2011, 823 obtained judgment by consent in its action against RB. 

Garnishee orders

7.  After DHCJ Le Pichon gave judgment in favour of RB, 823 started garnishee proceedings to attach the judgment debt owed by DM to RB. 

8.  On 10 April 2013, Master De Souza granted a garnishee order absolute ordering DM to pay $8,092,339.50 to 823 on the latter’s undertaking not to enforce the order until DM’s stay of execution application was determined.

9.  On 24 April 2013, Louis Chan J made a number of orders in the RB v DM action including the following:

(1) DM was to pay a total of $19m into court, with no payment out to be made without leave of the court;

(2) RB was not to enforce the judgment given by DHCJ Le Pichon pending determination of the appeal;

(3) 823 was not to enforce the garnishee order absolute pending determination of the appeal;

(4) 823 was added as a party in the RB v DM action in the Court of First Instance;

(5) RB and DM were to notify 823 immediately of the result of the appeal.

823’s application to join as party in DM’s appeal

10.  Meanwhile, on 1 November 2012, DM had filed a Notice of Appeal.  The order sought included an order that the judgment given by DHCJ Le Pichon be set aside.  The first ground of appeal is maintenance and champerty by 823, amongst others.

11.  On 3 May 2013, 823 issued the present summons for leave to be added as a party to the appeal, it having been added as a party to the first instance proceedings the month before.

12.  There were two reasons for the application: (1) that as 823 has obtained a garnishee order absolute, it has a legal proprietary interest (and not merely a financial interest) in the judgment, which is the subject matter of the appeal; (2) in any event, it is in the interests of justice that it be joined as a party in the appeal, as the grounds of appeal allege that 823 is implicated in maintenance and champerty.   

13.  DM objected to the joinder, arguing that 823 has no legal interest in the matter, that the payment-in orders sufficiently protect 823 and so its joinder is unnecessary, and that it was not just and convenient to join 823 at this stage since it was not a party below.

14.  RB has taken a neutral stance in the application and has not appeared at the hearing before me.

Discussion

15.  In my view it is clear that 823 should be allowed to be joined as a party to the appeal.  First it cannot be said that it had chosen to allow the action below to proceed without applying to be joined as a party.  The evidence from its solicitors was to the effect that he did not know about the maintenance and champerty allegations against it until the day after the conclusion of the hearing when he read about it in a newspaper.  

16.  Moreover I am satisfied that it now has a proprietary interest in the judgment because “a garnishee order ... is a proprietary remedy which operates by way of attachment against the property of the judgment debtor [RB], the property so attached being the chose in action which represented the garnishee’s [DM’s] debt to the judgment debtor [RB]” (Astro Nusantara International BV v PT Ayunda Prima Mitra [2012] 4 HKLRD 855, para. 21).

17.  DM’s argument that 823 has no “legal” interest because the garnishee order is an equitable charge is not valid, as it was held in In re I G Farbenindustrie AG Agreement [1944] Ch 41 at 43 that when considering whether an applicant has a “legal interest in the subject-matter” for it to be joined as a party, what is meant by “legal interest” is an interest which the law recognizes, with no distinction made between a legal and an equitable interest.

18.  The protection offered to 823 by the payment-in orders is limited.  They are mere mechanisms to preserve the money pending determination of the appeal.  If 823 is not joined as a party to the appeal, and RB fails to appear or concedes the appeal (DHCJ Le Pichon not having determined the nature of RB’s relationship with 823), the judgment may be set aside, and with it the judgment debt and consequently the garnishee order absolute, to the detriment of 823.

19.  In any event, I am satisfied that in light of DM’s grounds of appeal, 823’s joinder application satisfies Order 15 r. 6(2)(b) RHC, bearing in mind that the cause or matter now is the appeal.  DM’s grounds include assertions that “the conduct of ... 823 ... pose a genuine risk to the integrity of the Court’s process”, that “the conduct of ... 823 ... constituted a clear abuse of the Court’s process”, that “ the conduct of ... 823 ... was contrary to public policy”, and that DM was “entitled to sue ... 823 ... as co-tortfeasors by way of counterclaim in this action” (emphasis added). 

20.  Since 823 is now a party to the action (and a likely defendant to the forewarned counterclaim), I am satisfied that it would be just and convenient to join 823 as a party to the appeal, so that it can try and nip these assertions in the bud at the appeal stage, instead of having to stand aside to wait and see if DM succeeds in the appeal and if it does, challenge those assertions in the action later. 

Order

21.  For the reasons above, in the exercise of my discretion, I would make an order in terms of 823’s summons including the filing of its affirmations.  It follows that I would also make an order in terms of its summons filed on 8 July 2013.

22.  The parties having agreed that costs should follow the event and that there should be a certificate for two counsel, I would order that the defendant (De Monsa Investment Ltd) pay the costs of both summonses to the intended interested party (823 Investment Ltd) with certificate for two counsel, to be taxed if not agreed.