REVELRY GAINS LTD v. JOY RICH DEVELOPMENT LTD AND OTHERS

HCMP 430/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 430 OF 2013

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D E C I S I O N

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Introduction

1.  This court dismissed the application of Madam Chen MuHua (“Madam Chen”) and Madam Chan Yuen Wa (“Madam YW Chan”) (collectively “C& C”) to intervene in this mortgagee action by summons dated 18 September 2015 (“the Summons”) by the Decision handed down on 20 December 2016 (“My Decision”). In My Decision, I further made an order nisi that costs of and occasioned by the Summons be paid by C & C on an indemnity basis to be taxed if not agreed by a taxing master with certificate for two counsel.

2.  C & C subsequently took out two summonses both dated 3 January 2017. One is for their application for leave to appeal against My Decision (“the Leave to Appeal Summons”) and the other one is for a variation of the costs order nisi to change the basis of taxation from an indemnity basis to a party to party basis only without prejudice to their intended appeal (“the Costs Summons”).

Leave to appeal Summons

3.  I shall first deal with the Leave to Appeal Summons. The threshold is that C & C have to show that either their appeal has a reasonable prospect of success or there is some other reason in the interests of justice why the appeal should be heard: section 14AA(4) of the High Court Ordinance, Cap. 4.

4.  Reasonable prospect of success involves the notion that the prospects of success must be “reasonable” and therefore more than “fanciful” without having to be “probable”: SMSE v KL [2009] 4 HKLRD 125 at §17 per Le Pichon JA.

5.  In this Decision, I shall adopt the abbreviations used in My Decision.

6.  The draft grounds of appeal focus on paragraphs 28 and 29 of My Decision. It is contended that this court erred in law in holding that there is jurisdiction to entertain the C & C’s application to intervene (“the Intervention Application”) under O.15 r. 6 such that the merits of the proposed defence were even not considered. It is also contended that this court has mistaken that C & C have accepted that O.15 r.6 did not apply.

7.  Mr Bernard Man SC, together with Mr James Man, for C & C at the hearing also makes an attractive submission that this matter should best be disposed of by the Court of Appeal in the absence of any authority for or against an application made under O.15 r.6 to intervene in an action involving a company in liquidation with its liquidator’s neutral position. 

8.  Thus, the core complaint is that I held that apart from section 200(5) of the Companies Ordinance, this court had no jurisdiction under O.15 r.6 to allow the Intervention Application. Mr Man submits that there can be concurrent jurisdiction under the RHC and the Companies Ordinance in respect of the application of C & C to take part in the present action. By the Summons, C & C apply to intervene in these proceedings for the purpose of defending these proceedings for and on behalf of Joy Rich.

9.  In My Decision, from paragraphs 18 to 27, I set out my reasons why I think the court in the winding up is in the best position to determine whether C & C should intervene in the present action with the arguments of all the necessary parties. I then made the conclusion that C & C should make a proper application in the winding-up of Joy Rich. Mr Man does not expressly disagree with any of such reasons I have given.

10.  The said conclusion was made as a result of my agreement with the first ground of opposition advanced by Revelry, that is, the Liquidators’ decision not to defend the present action is binding on Joy Rich. I believe there are good and cogent reasons why C & C should make an application in the winding up of Joy Rich instead to impugn the decision of the Liquidators and/or to apply to intervene in the present action despite the decision of the Liquidators.

11.  Mr Man’s submission is that still this court can consider the Intervention Application in the context of O.15 r.6. I did consider the applicability of O.15 r.6 in paragraph 29 of My Decision. I pointed out that this is not an ordinary joinder application and C & C now seek to step into the shoes of Joy Rich in liquidation to defend the present action for and on behalf of Joy Rich when the Liquidators decided not to do so. I concluded that O.15 r.6 did not cover this particular situation. In other words, I am not convinced that C & C have brought the Intervention Application within the ambit of O.15 r.6 and have satisfied its requirements in light of the particular facts of this case.

12.  Much has been eloquently said about the merits of the proposed defence of C & C on behalf of them by Mr Man, this court has however heard little as to which limb of O.15 r.6(2)(b) the Intervention Application is actually based on and how the requirements are satisfied. To establish the standing of C & C to intervene, Mr Man at the previous hearing relied on the fact that Madam YW Chan is the sole shareholder of Joy Rich and so she would have an interest in the distribution of the assets of Joy Rich after the creditors are paid off and that both of them are creditors of Joy Rich.

13.  This could hardly suffice. In University of Hong Kong v. Hong Kong Commercial Broadcasting Co Ltd [2016] 1 HKLRD 536 at §23, G Lam J reiterated the established principle relating to intervention by a non-party in the following terms:

“Order 15 r.6(2)(b) requires some interest in the matter by the would-be intervener which is directly related to the subject matter of the action. A mere commercial interest in its outcome divorced from the subject matter of the action is not enough: Sanders Lead Co Inc v Entores Metal Brokers Ltd [1984] 1 WLR 452, 460; Building Authority v Appeal Tribunal (Buildings) [2013] 3 HKC 70 (15 March 2013) at [15]; Re IG Farbenindustre AG Agreement [1944] Ch 41.”

14.  Mr Man refers this court to Man Whi Chung v Man Ping Nam & Anor [2003] 1 HKC 549 where DHCJ A Cheung (as the Chief Judge then was) allowed a member of a Wui to intervene to defend a claim made against the Wui under O.15 r.6. There, the defendant was the manager and hence trustee of the Wui and the plaintiff claimed against him in such a capacity in respect of the equitable or beneficial interest in Sheung Tong, a piece of land in the New Territories registered in the name of the Wui. The successful intervener applied to be joined as a second defendant on the ground that he, as a member of the Wui, had sufficient interest in the subject matter of the action.

15.  This ground was held to be valid. The learned deputy judge was satisfied that the intervener, as a member of the Wui, had shown a sufficient interest which was a legal (i.e. equitable) and direct (as opposed to a pure commercial) interest in Sheung Tong. He would not only be affected commercially and his beneficial interest in Sheung Tong was at stake[1].

16.  I do not think Man Whi Chung assists C & C at all. If anything, it makes it clear that pure commercial interest is not enough to justify intervention. I note that C & C have never claimed any beneficial interest in the subject matter of this action, namely, the Property registered in the name of Joy Rich.

17.  That being my conclusion, I do not think the neutral stance of the Liquidators and the offer of C & C to pay any costs of Joy Rich would be liable in these proceedings if their intervention is allowed are relevant. I should add that though I did not give a detailed analysis of the merits of the proposed defence of C & C in My Decision, which I do not think I should, I stated that I could not say at this stage that it was mere moonshine and I did not refuse the Intervention Application because of the lack of merits of the proposed defence.

18.  I am not convinced that any of the draft grounds of appeal shows that the intended appeal has a reasonable prospect of success. The particular facts of this case in any event cannot meet the threshold of O.15 r.6 at all. I cannot accept that the jurisdiction issue suffices to be a reason in the interests of justice why the appeal should be heard.

Costs Summons

19.  I made the order nisi to allow indemnity costs on the basis that C & C should not have made the Intervention Application in these proceedings. Thus, the costs of and occasioned by Revelry were unnecessarily incurred and Revelry should be allowed total recovery of its costs.

20.  Mr Man invites my attention to Overseas Trust Bank Ltd v Coopers & Lybrand [1991] 1 HKLR 177 for the established principles relating to indemnity costs. I do not think I need set them out here. I am aware that the circumstances in which an indemnity award might properly be made are not restricted to circumstances such as those described in Overseas Trust Bank Ltd.

21.  Mr Chen, for Revelry, submits that C & C made this application so as to evade the heavy burden to be discharged in an application in the winding up of Joy Rich. He submits that this court should mark its disapproval of this kind of litigation tactics.

22.  I agree with Mr Man that there is no special feature in this particular matter calling for an order for indemnity costs. I expressly made known my lack of a strong feeling against the Intervention Application in My Decision. Mr Chen’s submission is unable to change my feeling. I do not think that I should make an indemnity costs order against C & C. The usual basis, i.e. party to party, is appropriate in all the circumstances.

Conclusion and order

23.  For the reasons given, I dismiss the Leave to Appeal Summons and allow the Costs Summons only to the extent that the basis of taxation is varied from an indemnity basis to a party to party basis.

24.  C & C should pay Revelry’s costs of the Leave to Appeal Summons, to be taxed if not agreed.

25.  On the other hand, I make an order nisi that Revelry should pay C & C their costs of the Costs Summons (without certificate for two counsel), to be taxed if not agreed.

26.  Lastly, I thank all counsel for their assistance.