TERRIAN LTD AND OTHERS v. ORIENTAL PEER CO LTD

Civil Appeal
No. 23 of 1987

Headnote

(1) The power of the court to grant declaratory relief under Order 15 rule 16 defining the rights of two parties is very wide but limited by the court's discretion which should be exercised judicially.

(2) It is not the practice of the court to exercise its discretion to grant declaratory relief to a party who has no legal or equitable interest in the subject matter of the declaration sought but is seeking to obtain that declaration in order to help him in another transaction.

(3) Where a defendant who is a plaintiff by counterclaim seeks leave to add two additional defendants by counterclaim in order to claim only declaratory relief against them which it would not have been proper for the court to grant in the judicial exercise of its discretion under Order 15 rule 16 if joinder had been effected without leave under Order 15 rule 3(1), the court will not entertain the possibility of giving leave to effect such joinder under Order 15 rule 6(2)(b)(i) or (ii). (Principles enunciated in Guaranty Trust Company of New York v. Hannay & Company [1915] 2 K.B. 537 (A.C.); Hanson v. Radcliffe Urban Council [1922] 2 Ch. 490; Ibeneweka v. Egbuna [1964] 1 W.L.R. 219 (P.C.) and Malone v. Metropoliton Police Commissioner [1979] 1 Ch. 344 considered and applied.)

IN THE COURT OF APPEAL

Civil Appeal
No. 23 of 1987

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JUDGMENT

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Clough. J.A.:

1. This is the judgment of the court.

2. Oriental Peer Company Limited ("Oriental"), the defendant and plaintiff by counterclaim in this action, appeals against the interlocutory order of Mortimer J. made on the 5th February 1987, striking out Oriental's amended counterclaim and dismissing its cross action against Polly Jack Company Limited (“Polly Jack”) and Zeta Estates Limited ("Zeta") who were respectively the 4th and 5th defendants by counterclaim in these proceedings.

3. The order was made on an application by Polly Jack and Zeta under Order 18 rule 19(1)(a), (b) and (d) but the application and the appeal also gave rise to questions concerning joinder and causes of action under Order 15 rules 3(1), 6(2)(b) and 16.

4. The action is concerned with a preliminary agreement embodied in a Memorandum of Agreement ("the Agreement") dated the 23rd July 1985 and made between (1) three members of a group of companies, namely Staveley Limited ("Stavely"), Terrian Limited ("Terrian") and Wah Kwong Properties Limited (“Wah Kwong”) who are respectively the 1st, 2nd and 3rd plaintiffs and defendants by counterclaim and (2) Oriental. Under the Agreement Oriental sought to enter a joint venture for the development of a site ("the Redhill site") in Hong Kong by acquiring from Terrian its one third shareholding in Polly Jack, which Oriental understood to be entitled to a beneficial undivided half share in the Redhill site.

5. The title of Polly Jack to its interest in the Redhill site derived from a Declaration of Trust ("the Polly Jack Declaration") made on the 14th March 1984 by Mightyton Limited ("Mightyton"). After reciting that Mightyton had acquired the site for $55 million, half of which sum had been provided by Polly Jack, the Polly Jack Declaration declared that Mightyton held the Redhill site in trust for Mightyton and Polly Jack as tenants in common in equal shares.

6. Polly Jack is a private limited company incorporated in Hong Kong with an authorised capital of $10,000.00 divided into 10,000 shares of which 9,999 have been issued and are fully paid up. The issued shares of Polly Jack are held by Harte Estates Limited (“Harte”), Chime Corporation Limited ("Chime") and Terrian. Each of those companies holds one third (3,333) of the issued and paid up shares in Polly Jack.

7. Each of the companies holding the equity in Polly Jack is a member of a group. Harte is a member of the Sino Realty Group. Chime is a member of the Chinachem Group. Terrian is a member of the Wah Kwong Group, being a wholly owned subsidiary of Stavely, which in turn is a wholly owned subsidiary of Wah Kwong.

8. Oriental is itself a subsidiary company. Its holding company is Nan Fung Development Limited ("Nan Fung"). Under the Agreement Oriental was thus proposing to acquire for the ultimate benefit of Nan Fung, a one sixth interest in the joint venture development of the Redhill site through the medium of a shareholding in one of the companies participating in the venture. The Agreement provided for this end to be achieved by the transfer to Oriental of Terrian's shareholding in Polly Jack. There were further provisions in the Agreement to cover the eventuality of an actual transfer of the shares not being viable, but it is not necessary to elaborate on those provisions for the purposes of this appeal.

9. In addition to the beneficial interest in Terrian's shares in Polly Jack, the Agreement provided for the transfer to Oriental of the benefit of a loan of $9.46 million which was recited to have been made to Polly Jack by Terrian. An unaudited balance sheet of Polly Jack as at the 12th July 1985 was annexed to the Agreement, showing that Polly Jack had by that date paid out $28.4 million for its interest in the Redhill site and development and confirming the recital in the Agreement that Harte, Chime and Terrian had each made an advance of an equal one third share ($9.46 million) of that sum to Polly Jack. Terrian and Staveley jointly and severai1y covenanted that the matter recited in the Agreement was true and correct.

10. The purchase price payable by Oriental for Terrian's shares in Polly Jack together with the benefit of the loan of $9.46 million was $65 million. The price was payable by instalments. $6.5 million was payable on the execution of the Agreement as a deposit to be held by Terrian's solicitors as stakeholders. A further $6.5 million was payable on the 23rd August 1985, to be held tn the same way as the first deposit. The balance of $52 million was payable on or before the 23rd October 1985 or on completion of the transaction.

11. The Agreement provided for completion on or before the 23rd October 1985 and that in the meantime the parties were to sign a Sale and Purchase Agreement "for the said shares and the loan incorporating the terms herein and other usual terms and warranties", to be prepared by the Wah Kwong Group's solicitors within 14 days of the date of the Agreement. The Agreement concluded with a provision to the effect that pending the preparation and signature of the Sale and Purchase Agreement within 14 days of the date of the Agreement the latter's terms were to constitute a binding agreement between the parties thereto. No Sale and Purchase Agreement has ever been signed, for reasons which hereinafter appear.

12. At the time the Agreement was entered into Oriental had no knowledge of a Declaration of Trust (“the Zeta Declaration”) made on the 14th April 1984 by Polly Jack. That Declaration recited that half the purchase price (27.5 million) of the Redhill site had been provided by Zeta and it went on to declare that Polly Jack held its beneficial half share in the Redhill site and future development thereon in trust for Zeta.

13. Zeta is a private company whose issued shares are held as to one third each by Harte, Chime and Dawna Range Company Limited ("Dawna"). Dawna is a wholly owned subsidiary of Wah Kwong. On the face of it, it would not therefore seem to matter to the relevant holding companies whether Polly Jack or Zeta holds a beneficial undivided half share in the Redhill site and development. However the difficulties which the Zeta Declaration puts in the way of the transaction comprised in the Agreement are obvious, particularly as Zeta owns another development site.

14. The existence of the Zeta Declaration was made known to Oriental on the 2nd August 1985. A proposal emanating from the Wah Kwong Group that the Agreement might be varied to provide for the transfer of Dawna's shareholding in Zeta instead of Terrian's shareholding in Polly Jack came to nothing. The impasse could not be resolved, despite a considerable volume of correspondence.

15. The sequel was that the Wah Kwong Group of companies, the plaintiffs Terrian, Staveley and Wah Kwong, and not Oriental, took proceedings in this matter. The proceedings took the form of an originating summons issued on the 24th October 1985, naming Oriental as the defendant and seeking declarations that the Agreement had become impossible of performance and had thereby been discharged. On the 20th December 1985 Rhind J. acceded to Oriental's application under Order 28 rule 8 and directed that the proceedings be continued as if the action had been commenced by writ. Rhind J. also gave specific directions for pleadings and discovery and directed that there be an early trial.

16. The statement of claim filed on the 14th January 1986 by the plaintiffs has received more criticism than adulation as these proceedings have progressed. We do not think we should dwell on its merits or demerits as we understand that there is a pending or contemplated application by Oriental to strike it out.

17. Suffice it to say that the pleading explains the background of the case and alleges that whereas at the time the Agreement was signed the plaintiffs regarded the Zeta Declaration as no longer valid, it subsequently transpired that first Chime and then Harte (who had on the 30th October 1985 cancelled an agreement made on the 17th July 1985 to transfer to Sino Land Company Limited their shareholding in Polly Jack and the benefit of their loan to Polly Jack) regarded the Zeta Declaration as valid. It is further pleaded that since the 2nd August 1985 when Oriental was informed of the Zeta Declaration it had refused to accept a transfer of Dawns's shares in Zeta in lieu of Terrian's shares in Polly Jack and had failed to perform any of its obligations under the Agreement. These allegation are the basis for the pleading and the prayer for declarations that the Agreement became impossible of performance and had accordingly been discharged.

18. By its defence and counterclaim filed on the 22nd February 1986 Oriental in substance denied the validity of the Zeta Declaration and counterclaimed for a declaration to that effect and specific performance of the Agreement and/or damages in lieu of specific performance. In the alternative the defence alleged inter alia that the plaintiffs were in breach of their obligations under the Agreement and Oriental counterclaimed for damages for such breach.

19. By their reply and defence to counterclaim filed on the 8th March 1986 the plaintiffs, in the reply, joined issue on the defence and denied certain matters alleged therein. In the defence to counterclaim the plaintiffs pleaded inter alia that no declaration that the' Zeta Declaration was invalid or order for specific performance should be made for two reasons, namely that neither Harte nor Chime were parties to the action and that by the trial substantial expenditure would have been incurred on the development of the Redhill site.

20. In this somewhat perplexing state of the pleadings and after they had , on the 15th April 1986, filed their list of documents for. discovery, the plaintiffs issued a summons on the 5th May 1986 under Order 15 rule 6 to join Polly Jack and Zeta as defendants to Oriental's counterclaim. Matters were further complicated by the failure to serve the summons on either Polly Jack or Zeta. Such service is not actually required by the rules but in a case like the present where reasoned opposition to the making of the order is to be expected it is the better course to effect such service so as to enable the joinder issue to be dealt with directly before the joinder takes place: Gawthrop v. Boulton(1) at p.273 G-H.

21. Be that as it may, on the 22nd May 1986 when the plaintiffs' summons was before the master, Oriental consented to the proposed joinder of Polly Jack and Zeta as respectively the 4th and 5^th defendants by counterclaim. The master accordingly made a consent order permitting the joinder and directed Oriental to file and serve an amended counterclaim within 14 days.

22. On the 3rd June 1986 Oriental filed and served its amended counterclaim which is the subject of this appeal together with forms of acknowledgment of service. The amended pleading altered the heading of the original defence and counterclaim by adding Oriental's name as plaintiff by counterclaim and adding the names of the three plaintiffs and Polly Jack and Zeta as the 1st to 5th defendants by counterclaim. The only other amendment was to paragraph (a) of the prayer of the original pleading which was amended to claim a declaration against all the defendant's by counterclaim (instead of only the three plaintiffs) that the Zeta Declaration was invalid.

23. On the 17th June 1986 Polly Jack and Zeta acknowledged service of the amended counterclaim and gave notice of their intention to contest the proceedings. It would have been open at this stage for Polly Jack and Zeta (lithe applicants") to dispute the joinder by applying under Order 15 rule 6(2)(a) to be struck out as a party to the action. However, having been served with an amended counterclaim naming them as defendants and claiming relief in the form of a declaration that the Zeta Declaration was invalid, they were also fully entitled to apply, as they did by their summons issued on the 10th October 1986, to strike out the amended counterclaim and for judgment pursuant to Order 18 rule 19(1)(a), (b) and (d).

24. Furthermore the judge was in our view obliged to decide the strike out issue first and then, if he decided that issue in favour of the applicants, to go on to consider whether, in the exercise of his discretion, he should dismiss Oriental's cross action against the applicants or whether there were any grounds based on principles of joinder or possible curative amendments to the amended counterclaim which justified a less drastic order.

25. The applicant's summons to strike out the amended counterclaim was supported by two affirmations of Mr. T.H. Wong, a director of each of the applicants. This evidence was answered by two affirmations of Mr. D.H. Chen the managing director of Nan Fung, Oriental's holding company. Nothing turned on this evidence and it is in any event not admissible in relation to the question whether the amended counterclaim discloses no reasonable cause of action for the purposes of Order 18 rule 19(1)(a).

26. At the hearing below the plaintiffs appeared by leading counsel to oppose the application but they elected to play no part in the present appeal.

27. Mortimer J. was firmly of the view that on the face of the matters pleaded in the action Oriental could have no cause of action that could be proper or could succeed. By this we apprehend he meant that the amended counterclaim did not and could not be amended to plead a reasonable cause of action. He observed:-

“What is the cause of action that the Oriental Peer could have against Polly Jack and Zeta? I am unable to answer that question. So far as Oriental Peer is concerned, its rights in this matter are under the contract. The contract is with the Plaintiffs. What right, therefore, has Oriental Peer to bring an action against two strangers for a declaration as to the rights between those two strangers concerning the declaration of trust? Well I know of no cause of action that could be proper or could succeed.”

28. Later in his judgment he had this to say:-

“It would be a strange thing indeed if a person having simply a contract to purchase shares could seek a, declaration against the company whose shares are the subject of the contract and against another company in relation to which there has been a possible declaration of trust. In my judgment he would be seeking remedies unknown to the law.”

29. At the end of his judgment Mortimer J. made it clear that he was first deciding that Oriental's claim for relief against the applicants should be struck out because the counterclaim disclosed no cause of action against them. We emphasise that the issue before him under Order is rule 19(1)(a) was whether there was a reasonable cause of action. However, we are satisfied from the passages cited above from his judgment that he concluded that Oriental's counterclaim was claiming declaratory relief against the applicants which the court had no power to grant on a proper exercise of its discretion to grant or refuse declaratory relief. Such a finding amounts to holding that the allegations in the amended counterclaim disclosed no reasonable cause of action.

30. Mr. Ching for Oriental assembled an able and elaborate argument which put the initial emphasis on issues of joinder and contended that the judge was wrongly preoccupied with the question whether Oriental's amended counterclaim had disclosed a cause of action against the applicants. He stressed that the authorities showed that joinder of an additional party under Order 15 rule 6(2)(b) was permitted even where no cause of action existed between that party and any of the other parties to the action.

31. He went further and contended that Oriental's rights were not simply contractual and not simply against the plaintiffs. Oriental was, he contended, entitled under Order 15 rule 16 to seek a declaration against the applicants even if no further relief was sought against them. He submitted that there was no authority that Order 15 rule 16 did not permit declarations as to the existence or non-existence of a trust and maintained that even if Order 15 rule 3(1) required there to be a cause of action against the applicants there was in fact a good cause of action for a declaration against them.

32. In our judgment the central and decisive issue in this appeal is whether, assuming all the allegations pleaded in Oriental's amended counterclaim (or in the draft re-amended counterclaim contained in the appeal bundle) to be established, it would be a proper exercise of the court's power under Order 15 rule 16 to make the declaration sought in the prayer to Oriental's amended counterclaim against the applicants. The answer to this question is vital to both the strike out and the joinder issue because the only reason for adding the applicants as defendants to Oriental's amended counterclaim is to obtain a binding declaration against them determining which of them has a beneficial interest in the Redhil1 site.

33. If the court can properly grant such a declaration against the applicants there can be no ground for striking out the mended counterclaim against the applicants and the joinder issue falls away. If, on the other hand, the court cannot properly grant the relevant declaration, the amended counterclaim against the applicants should be struck out and the court should not permit the joinder of the applicants to continue solely for the purpose of maintaining a claim for a declaration which the court cannot properly make against the applicants.

34. Mr. Ching relied upon the well settled practice of the court adverted to by Lord Maugham in London Passenger Transport Board v. Moscrop(2) at p.344 in the following dictum:-

“… the courts have always recognised that persons interested are or may be indirectly prejudiced by a declaration made by the court in their absence, and that, except in very special circumstances, all persons interested should be made parties, whether by representation or otherwise, before a declaration by its terms affecting their rights is made. In the Chancery Division, in which this case started, the rule would seem to be almost invariable, and the well-established practice in actions by shareholders and debenture holders may be mentioned as instances of the rule.”

However, as Mr. Litton rightly emphasized, that dicta concerning joinder was not dealing with the principal issue decided in the appeal. The decision of the House of Lords on the principal issue was that there had been no interference by the appellants with the private right of their employee, the respondent to the appeal, who was not therefore entitled to declaratory relief without joining the Attorney General as a party. It was also held that a declaration should not have been granted to the respondent in an action in which the persons really interested, namely the Transport and General Workers' Union, had not been joined as parties.

35. The ratio decidendi of Moscrop's Case⁽²⁾ in the House of Lords was therefore that since no private right of the respondent had been the subject of interference, he was not entitled to the declaratory relief or injunction sought by him in his action. Accordingly Moscrop's Case⁽²⁾ does not provide authority to support Mr. Ching's argument on Orient's behalf unless it can be shown that Orient has a sufficient interest in the subject matter of the relevant declaration sought by it against the applicants.

36. Mr. Litton cited Malone v. Metropolitan Commissioner(3) and Jackson v. Attorney General(4) for the proposition that the court's jurisdiction to make declaratory judgments under Order 15 rule 16 was confined to justiciable matters relating to legal or equitable rights. There could not, he submitted, be any justiciable issue between Oriental and either of the applicants because Oriental, as a mere purchaser of Terrian's minority shareholding in Polly Jack under the Agreement, had no interest in Polly Jack's property.

37. In his reply Mr. Ching stressed that Malone's Case⁽³⁾ did not relate to private rights. He cited the leading case of Guaranty Trust Company of New York v. Hannay & Company(5) for the proposition that the court has jurisdiction to grant a declaration which is declaratory of a party's rights even if that party has no legal cause of action. He contended that Orient was clearly entitled to clarify its rights under the Agreement against the plaintiffs. This necessarily involved the determination of the validity or otherwise of the Zets Declaration by the declaratory relief sought by Oriental in the prayer of its amended counterclaim. There was thus a common justiciable issue, not only between the contracting parties Oriental and the plaintiffs, but also between Oriental and the applicants.

38. In our judgment this argument is fundamentally unsound. The answer to it lies in the limitations recognized in the majority judgments in the Guaranty Trust Company Case⁽⁵⁾ on the exercise of the court's power to grant declaratory relief under Order 15 rule 16. Although the court was divided in that case, there being a powerful dissenting judgment by Buckley L.J., the majority decision has never been doubted or overruled and it has frequently been applied by the English and Hong Kong courts. In that case the majority decision of the English Court of Appeal was that the rule was not ultra vires and was to be interpreted as extending the practice of the court to permit the granting of declaratory relief under Order 15 rule 16 where the party seeking, such relief had no legal cause of action apart from the rule.

39. Both Pickford L.J. (at p.562) and Bankes L.J. (at p.571) also held that the rule was so framed as to permit the court to make, not only what had previously been known as a "declaration of right" (made at the instance of a party seeking to maintain and if necessary assert a right against the other party), but also a declaratory judgment which defined the obligations of the party seeking that judgment in relation to the other party to the proceedings.

40. The wide scope of the court's jurisdiction under the rule where relief in the fullest sense was claimed was emphasised by Bankes L.J. in his often cited dictum at p.572 where he also defined in general terms the limitations on the exercise of that jurisdiction. He observed:-

"It is essential, however, that a person who seeks to take advantage of the rule must be claiming relief. What is meant by this relief? When once it is established, as I think it is established, that relief is not confined to relief in respect of a cause of action it seems to follow that the word itself must be given its fullest meaning. There is, however, one limitation which must always be attached to it, that is to say, the relief claimed must be something which it would not be unlawful or unconstitutional or inequitable for the Court to grant or contrary to the accepted principles upon which the Court exercises its jurisdiction. Subject to this limitation 1 see nothing to fetter the discretion of the Court in exercising a jurisdiction under the rule to grant relief, and having regard to general business convenience and the importance of adapting the machinery or the Courts to the needs of suitors I think the rule should receive as liberal a construction as possible."

41. In the Malone Case⁽³⁾ at p.352 G-H Sir Robert Megarry V.C. commented on the width of the language of Bankes L.J. in the Guaranty Trust Company Case⁽⁵⁾ and said he found the language in same respects a little puzzling. However in the present case, when considering what limiations, if any, ought to be impose on the exercise of the court's jurisdiction under the rule in accordance with “the accepted principles upon which the Court exercises its jurisdiction” we derive considerable assistance from the following dictum of Pickford L.J. in the Guaranty Trust Company Case⁽⁵⁾ at p.562 from which Bankes L.J. expressed no dissent:-

"I think therefore that the effect of the rule is to give a general power to make a declaration whether there be a cause of action or not, and at the instance of any party who is interested in the subject-matter of the declaration. It does not extend to enable any stranger to the transaction to go and ask the Court to express its opinion in order to help him in other transactions."

42. Subsequently when Pickford L.J. had become Lord Sterndale he referred in Hanson v. Radcliffe Urban Council(6) at p.507 to his judgment in the Guaranty Trust Company Case⁽⁵⁾. He said that he adhered to it and added the following observation on the scope of what is now Order 15 rule 16:-

"In my opinion, under Order XXV., r.5, the power of the Court to make a declaration, where it is a question of defining the rights of two parties, is almost unlimited; I might say only limited by its own discretion. The discretion should of course be exercised judicially, but it seems to me that the discretion is very wide. I think that the order of Russell J. was also right on this point, and that the appeal should be dismissed."

43. This dictum of Lord Sterndale was cited with evident approval by Viscount Radcliffe in Ibeneweka v. Egbuna(7) after he had referred, in the following passages at pp.224 to 225, to the practice regarding the exercise of the wide power under the English rule to grant declaratory relief:-

"Much has been said in various reported judgments about the nature of the power thus vested in the court, but none of these observations detracts from the two primary considerations, that the power to make declarations is conferred, surely not by accident, in wide and general terms, and that what is conferred is a discretion to be exercised according to the facts of each individual case.

The general theme of judicial observations has been to the effect that declarations are not lightly to be granted. The power should be exercised ‘sparingly,’ with ‘great care and jealousy,’ with ‘extreme caution,’ with ‘the utmost caution.’ These are indeed counsels of moderation, even though as, Lord Dunedin once observed, such expressions afford little guidance for particular cases. Nevertheless, anxious warnings of this character appear to their Lordships to be not so much enunciations of legal principle as administrative cautions issued by eminent and prudent judges to their, possibly more reckless, successors. After all, it is doubtful if there is more of principle involved than the undoubted truth that the power to grant a declaration should be exercised with a proper sense of responsibility and a full realisation that judicial pronouncements ought not to be issued unless there are circumstances that call for their making."

44. In the light of the authorities cited above the decision of Mortimer J. that on the facts pleaded in the present case the court could not properly exercise its discretionary jurisdiction to grant the declaration sought by Oriental against the applicants, was plainly and obviously right. The subject matter of the declaration sought was the beneficial interest in an undivided half share of the Redhill site which is the property of one or other of the applicants. Terrian, as a shareholder of Polly Jack, has no legal or equitable interest whatsoever in the property (if any) of that company.

45. This is trite law but it is too often overlooked and, as Lord Russell of Killowen observed in E.B.M. Co. Ltd. v. Dominion Bank(8) at p.564 it is “of supreme importance that the distinction should be clearly marked, observed and maintained between an incorporated company's legal entity and its actions, assets, rights and liabilities on the one hand, and the individual shareholders and their actions, assets, rights and liabilities on the other hand.”

46. As the English Court of Appeal emphasised in Prudential Assurance Co. Ltd. v. Newman Industries Ltd(9) at p.223A-B, shares are merely a right of participation in the company on the terms of the articles of association. The same point was made by Lord Buckmaster in Macaura v. Northern Assurance Co Ltd(10) at p.626 where he indicated that the shareholder has no right to any item of the company's property, but is entitled to a share in the profits while the company continues to carry on business and a share in the distribution of the surplus assets when the company is wound up.

47. If Terrian is not entitled to any interest in Polly Jack's property by virtue of its shareholding in that company, then a fortiori Oriental, which has contracted to acquire Terrian's shares and to take an assignment of the benefit of Terrian's alleged loan to Polly Jack, has no such interest, nor can Oriental have any interest in the subject matter of the declaration which it seeks to obtain against the applicants in furtherance of its contractual rights against Terrian.

48. In our judgment it is plain and obvious, on final analysis, that the facts of this case fall within the dictum of Pickford L.J. in the Guaranty Trust Company Case⁽⁵⁾ at p.562 (with which we respectfully agree) indicating specifically circumstances where the court should not exercise its discretion to grant declaratory relief, namely circumstances where the party seeking such relief has no legal or equitable interest in the subject matter of the declaration and is seeking the opinion of the court regarding the beneficial ownership of that subject matter in order to help him in other transactions. Put another way by reference to the dictum of Lord Sterndale M.R. in Hanson v. Radcliffe Urban Council⁽⁶⁾ at p.507 cited above, there are no rights as between Orient and either of the applicants which are capable of definition by reference to the beneficial interest of either of the applicants in the Redhill site. For the same reason, in the language of Sir Robert Megarry V.C. in the Malone Case⁽³⁾ the declaration sought by Oriental against the applicants in its amended counterclaim is not concerned with a matter which is justiciable as between Oriental and either of the applicants.

49. Furthermore nothing is pleaded in the amended counterclaim which provides the basis for any derivative claim by Orient on behalf of Polly Jack in relation to the Redhill site; nor is anything pleaded to indicate that if Orient were to acquire Terrian's minority shareholding in Polly Jack, the rule in Foss v. Harhottle(11) would not stand in the way of similar derivative proceedings by Orient.

50. Accordingly it follows that Orient has no reasonable cause of action either apart from Order 15 rule 16 or under that rule against the applicants and the judge was right to strike out the amended counterclaim against them. As we have already indicated above, if the court cannot properly grant the declaratory relief sought by Orient there can be no proper purpose in permitting the continued joinder of the applicants solely for the purpose of maintaining a claim for a declaration against them which can never properly be made.

51. Criticisms were made of the judge's judgment by Mr. Ching in relation to some aspects of the joinder rules, but we do not deal with them now because we consider that, for the reasons given above, the judge came to the right, plain and obvious conclusion when deciding to strike out the amended counterclaim against the applicants and to dismiss the cross-action against them.

52. Mr. Ching asked rhetorically, in the course of his argument, what was the purpose of Order 15 rule 6(2)(b) and why could it not be applied in the present case even if there was no cause of action as between Oriental and the applicants. The authorities certainly permit intervention under rule 6(2)(b)(i) by an added party who has no cause of action against any party to an action if his rights against or liabilities to any party to the action in respect of the subject matter of the action will be directly affected by any order which may be made in the action: Gurtner v. Circuit(12); Pegang Mining Co. Ltd. v. Choong Sam(13). Likewise a cause of action is not necessary to permit intervention by an added party under rule 6(b)(2)(ii): Sanders Lead Co. Inc. v. Entores Metal Brokers Ltd.(14) per Kerr L.J. at p.460 D-E, where the earlier relevant authorities on this new rule are cited.

53. However we do not consider that any useful purpose will be served in this appeal by exploring the niceties of the joinder issues to determine in what circumstances, if any, rule 6(2)(b) can be successfully invoked in order to add unwilling additional defendants to a counterclaim in the absence of a cause of action against such defendants permitting joinder without leave under Order is rule 3(1).

54. Suffice it to say for the purposes of this appeal that, it being clear from the terms of the amended counterclaim and the proposed re-amended counterclaim that Oriental's sole purpose for the continued joinder now sought by it is to obtain declaratory relief against the applicants which cannot properly be granted, we consider that the fudge took the only available proper course when he dismissed Oriental's cross action after striking out its amended counterclaim.

55. Accordingly we dismiss this appeal and we make an order nisi for Oriental to pay the applicants’ costs of the appeal.