KOO MING KOWN v. HO KIN CHUNG AND OTHERS

DCCJ 2747/2015

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 2747 OF 2015

____________

____________

________________

DECISION
________________

1.  This is an appeal from the decision of a master granting the application of the Baptist Convention of Hong Kong (“Convention”) to join in these proceedings as the 4^th defendant.

Background

2.  The plaintiff and the 1^st to 3^rd defendants are all alumni of Pui Ching Primary School and Pui Ching Middle school (“Primary School”, “Middle School” or collectively “Schools”) of which the Convention is the sponsoring body. 

3.  For the present purpose, I can be brief about the background facts.  The present dispute has its origin in the legal proceedings initiated at the instance of the plaintiff to protect the name of the Schools (“Proceedings”).  It is the plaintiff’s case that he has donated no less than HK$15 million towards this cause.  For the purpose of settling the legal fees and expenses of the Proceedings, a legal fund (“Legal Fund”) was set up and managed by a working committee (“Committee”) of which the 1^st to 3^rd defendants were presidents and/or members.  

4.  There is no dispute that the plaintiff has contributed HK$2 million to the Legal Fund.  The dispute between the alumni centres around the balance of the Legal Fund.  The plaintiff avers that as an incoming trustee of the Legal Fund, the 1^st to 3^rd defendants as the outgoing trustees should hand over the balance to him. 

5.  According to the 1^st to 3^rd defendants, however, the balance of the Legal Fund in the sum of HK$103,527.60 (“Balance”) was paid over to the Primary School on 14 December 2012 and the Committee has since been disbanded.  In their defence, the 1^st to 3^rd defendants aver that, the HK$2 million donated by the plaintiff were used up in 2008.  As the balance of the Legal Fund was insufficient to cover the outstanding legal fees, the Primary School advanced to the Committee two loans totalling HK$3.5 million, hence the subsequent paying over of the Balance to the Primary School. 

6.  In support of its joinder application, the Convention admits to the receipt of the Balance, as Mr Kenneth Lam, counsel for the Convention, puts it, as creditor.  Mr Lam submits in his written submission that in law the 1^st to 3^rd defendants were agents of the Convention.  Indeed, the plaintiff himself describes them as having been assigned by the Convention to the Committee.

7.  The 1^st to 3^rd defendants have no objection to the joinder of the Convention.  Indeed, the affidavit in support of the joinder application was made by the 2^nd defendant.

Legal principles

8.  An appeal from any decision or order of a master is conducted by way of rehearing as though it came before the court for the first time.  See Hong Kong Civil Procedure 2016 §58/1/2.

9.  The Convention’s joinder application is made under Order 15, rule 6(2)(b), Rules of the District Court the material parts of which are these:

“Subject to the provision of this rule, at any stage of the proceedings in any cause or matter the Court may on such terms as it thinks just and either of its own motion or on application —

(a) …

(b) order any of the following persons to be added as a party, namely —

(i) any person who ought to have been joined as a party or whose presence before the Court is necessary to ensure that all matters in dispute in the cause or matter may be effectually and completely determined and adjudicated upon, or

(ii) any person between whom and any party to the cause or matter there may exist a question or issue arising out of or relating to or connected with any relief or remedy claimed in the cause or matter which in the opinion of the Court it would be just and convenient to determine as between him and that party as well as between the parties to the cause or matter.”

The Convention’s position

10.  In his written submission, Mr Lam submits, and I agree, that the only issue for my determination is whether there exists a question or issue arising out of or relating to or connected with the plaintiff’s claim herein which in the opinion of the Court it would be just and convenient to determine as between the Convention and one of the parties herein.

11.  Mr Lam says there is one, namely, whether the 1^st to 3^rd defendants should have paid the Balance over to the Convention or to the plaintiff.  Mr Lam says the answer to this question or issue directly affects the Convention because the 1^st to 3^rd defendants were merely acting as agents for the Convention and could either commence a fresh indemnification action against the Convention or serve a third party notice herein on the Convention to seek indemnity from the latter had the joinder application been refused.    

12.  Mr Lam submits that in the absence of the Convention’s participation and in the event of the 1^st to 3^rd defendants having to sue the Convention upon their being found liable herein, the Convention will lose and will have to pay back to the 1^st to 3^rd defendants not just the Balance but also the legal costs reasonably incurred by and ordered against them in this action, which amount could be rather substantial.  On the other hand, if the Convention steps into this action right now and “nip the future indemnity claim in the bud”, there will be substantial savings of time and costs for everyone involved herein because there will be just one set of proceedings. 

13.  Mr Lam further submits that if the payment of the Balance to the Convention was wrong, the Convention’s liability to the 1^st to 3^rd defendants would arise by operation of law.  The Convention’s interest in this action is therefore not contingent at all – it is an interest which currently exists and relates to an issue which currently exists. 

14.  Mr Lam concludes by submitting that this court should exercise its discretion to allow the Convention’s joinder application to avoid multiplicity of proceedings and to avoid inconsistent findings in different proceedings as well as to save time and costs for all parties in making sure that there will only be one set of proceedings and one set of findings.  He describes this appeal as being counterproductive as it is highly likely that the 1^st to 3^rd defendants will issue a third party notice against the Convention should the order of the learned master be set aside and the Convention’s joinder application be refused.  I pause here to note that it is indeed the expressed intention of the 1^st to 3^rd defendants as revealed by the said affidavit of the 2^nd defendant.

The plaintiff’s position

15.  For the plaintiff, Mr Victor Dawes, SC submits in his written submission that (i) the Convention fails to satisfy Order 15, rule 6(2); and (ii) in any event, the court should exercise its discretion to refuse the Convention’s joinder application.

16.  On the first ground of opposition, Mr Dawes submits that the Convention fails to satisfy either limb of rule 6(2)(b).  Relying on the leading case of Gurtner v Curcuit [1968] 2 QB 587, Mr Dawes submits that it is settled law that in order to fall within either provision, it must be shown that the intervener will be directly affected by the proceedings, that is, the determination of the dispute or an issue of the case will automatically and immediately affect the intervener’s legal liability or pecuniary interest.

17.  To demonstrate the application of the law in this regard, Mr Dawes draws this court’s attention to Spelling Goldberg Productions v BPC Publishing Ltd [1981] RPC 280; Idmiston Ltd v Asian Master Enterprises Ltd [1988] HKC 588; Chan Tat Man v Tsoi Yuk Ming (HCA 2028/2007) unreported, 18 April 2008; and Chong Kai Man v Kwan Yau Hang & Ors (HCA 1298/2011) unreported, 30 September 2013.

18.  Mr Dawes submits that the issue in this action is whether the 1^st to 3^rd defendants had a duty in trust or otherwise to account for and pay over to the plaintiff the balance of the Legal Fund and this has nothing to do with the Convention.  Likewise, the claim that the 1^st to 3^rd defendants might make against the Convention raises wholly separate issues which have nothing to do with the plaintiff or his claim against the 1^st to 3^rd defendants.  He adds that even if the 1^st to 3^rd defendants do sue the Convention, there is nothing to suggest they would necessarily succeed or there being any valid cause of action against the Convention under the law of agency.

19.  Before me, Mr Dawes emphasizes the pleaded case of the plaintiff as set out in paragraphs 47 to 54 of his statement of claim, namely, that the plaintiff’s claim against the 1^st to 3^rd defendants is one of failure to account and pay over to the plaintiff the balance of the Legal Fund thereby breaching their duty as outgoing trustees.  He further highlights the mere reference in the defence of the 1^st to 3^rd defendants to the fact of their having paid over the Balance to the Primary School/Convention without saying they did so as agents of the Convention.  He stresses that the plaintiff’s claim against the 1^st to 3^rd defendants is not built on their paying over the Balance to the Convention, hence his submission that the question or issue posed by Mr Lam is non-existent in this action as is presently constituted. 

20.  The Convention’s position, Mr Dawes submits, is therefore no different from the intervener in Chong Kai Man, supra and its concern as to what may happens if the 1^st to 3^rd defendants are found liable in this action is no more than a consequent issue and something entirely between the 1^st to 3^rd defendants and the Convention.

21.  As regards the court’s discretion, Mr Dawes says the same should be exercised in the plaintiff’s favour.  For one thing, the plaintiff should not be compelled to sue the Convention whom he has no desire to sue: Hong Kong Civil Procedure 2016 §15/6/7.  For another, joinder of the Convention will result in a substantial increase in time and costs whereas the Convention will suffer little, if any, prejudice if it is not joined as they can still be called as a witness and testify as to the source of the Balance. 

22.  Mr Dawes adds that it is impractical to force the plaintiff to claim against the Convention by adding the latter as the 4^th defendant when he has no claim against the latter.  He opines that the proper procedure to adopt should be for the 1^st to 3^rd defendants to commence third party proceedings against the Convention under Order 16, rule 1, Rules of the District Court.

Discussion

23.  When it comes to joinder applications, one must bear in mind what Liu JA (as he then was) said in Chu Yuen Wah v Lee Kwok Kee & Anor [1995] 2 HKLR 280, namely, that in entertaining an application for joinder and exercise of discretion, each case has to be judged on its own facts.  That being so, precedents serve no more than to demonstrate how the court would determine a joinder application in a particular set of facts.

24.  In Spelling Goldberg Productions, supra, the interveners’ joinder application was refused as they failed to satisfy the requirement that there already exists a question or issue between them and one or other of the parties already involved in the litigation when there was simply no present threat by the defendants in the action to publish any material taken from their films. 

25.  Applying the principles enunciated in Spelling Goldberg Productions, Liu J (as he then was) was able to allow a joinder application in Idmiston Ltd, supra, where the learned judge highlighted the importance of the related or connected question being an existing one between the existing parties and not “an indirect issue likely to arise and call for a determination in the future” or a mere commercial interest. 

26.  In Chan Tat Man, supra, the interveners’ joinder application failed because at best they might have an indirect interest in the outcome of the action but this was not the nexus to the subject matter of the action which was “all about an internal management/shareholder dispute within (a certain corporate body) in which the interveners have absolutely no part to play, despite the fact that they will have an indirect interest because the outcome of the action will decide whether they will need to face (the corporate body’s) derivative counterclaim.”   

27.  The intervener’s case in Chong Kai Man, supra, was even weaker.  There the intervener had concerns about what might happen to the land on which it had established a temple if the plaintiff succeeded in the action and therefore sought to intervene. This, as the court said at §21, “goes to the use of the land thereafter which…is really a consequential issue and is not therefore directly and absolutely integral to the claim itself.”  In refusing the joinder application, Deputy Judge Hartmann (as the NPJ then was) took into account the limited extent of the action “as it is presently constituted.”  

28.  With respect, I consider Mr Dawes to have placed too narrow a construction on the phrase “as it is presently constituted”.  As can be seen from the above, he is practically equating this phrase with the pleadings of the existing parties and dissecting the act of paying over of the Balance (or whatever balance there might be of the Legal Fund) from the plaintiff’s claim as it is presently pleaded without regard to the position of the Convention, or for that matter, that of the existing defendants. 

29.  I do not think this narrow construction is supported by the authorities cited by counsel.  Indeed, it does not sit comfortably with Chu Yuen Wah, supra.  There the Court of Appeal looked at not just the contingent liability of the insurer in the personal injury action between a husband (driver) and his wife (injured passenger) which an insurer sought to join in but also another set of proceedings between the husband and the insurer regarding the validity of the insurance policy in question.  Given the wide ambit of what the court may take on board in exercising discretion to grant a joinder application as demonstrated in Chu Yuen Wah, the court’s hands are clearly not tied by the pleadings of the parties and may look beyond the same to take on board all relevant circumstances. 

30.  In this connection, it is pertinent to refer to what Clough JA said in Wong Chun Loong Tony v Ada Ltd [1991] 1 HKC 86 at p94 D-I:

“ In my view, the rule requires some interest in the would-be intervener which is in some way 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. It may well be impossible, and would in any event be undesirable, to attempt to categorize the situation in which the interests of would-be interveners are sufficient to satisfy the requirements of the rule.”

31.  In the present action, the Balance clearly provides the necessary nexus for the Convention to join in.  I am unable to dissect, as Mr Dawes did, the paying over of the Balance by the 1^st to 3^rd defendants to the Convention from the plaintiff’s claim against the 1^st to 3^rd defendants, especially when the relief sought by the plaintiff as per his statement of claim includes a claim for payment of any balance of the Legal Fund. 

32.  For the present purposes, no meaningful distinction can be drawn between the balance actually paid over to the Convention and whatever may be the correct balance of the Legal Fund.  The fact remains that the paying over of the Balance to the Convention as creditor is very much in the picture and the correctness or otherwise of the paying over of the Balance will necessarily arise for determination in this action.  If it was a wrongful act and the 1^st to 3^rd defendants are found liable for paying over to the plaintiff the Balance or any other balance as may be ascertained, I can see no reason why the 1^st to 3^rd defendants would not look to the Convention for return of the Balance when they were mere office bearers assigned by the Convention to the Committee, there being no allegations against them personally. 

33.  That being so, the Convention’s concern about the result of this action can hardly be categorized as a mere consequential issue and the Convention has every reason to join in these proceedings.  And I agree with Mr Lam that the resolution of the question or issue he poses will directly affect the Convention in the way he puts it in terms of legal liability and pecuniary interest.

34.  I should add that in order for the court to determine the source of the Balance and to whom it should go, the Convention’s participation is clearly necessary, not just as a witness but as a contending party given its likely claim to entitlement to the Balance (or any balance of the Legal Fund) as a creditor. 

35.  While accepting that in considering a joinder application the court must have regard to how the action is presently constituted, I do not think an intervener is necessarily barred from joining in simply because the way an existing party pleads his case does not appear to accommodate his position.  The court must take into account all relevant circumstances of the case at hand. 

36.  Here, while the 1^st to 3^rd defendants may not have specifically pleaded the legal relationship between them and the Convention when the Balance was paid over to the Primary School/Convention, I do not think the court can pay no regard to how the Convention sees its legal relationship with the 1^st to 3^rd defendants.  If the Convention says the 1^st to 3^rd defendants are/were their agents, the court need not concern itself with the merits of such an assertion for the purpose of the joinder application once satisfied there is a nexus for the purpose of Order 15, rule 6(2).  See Wong Shan Shan v The Incorporated Owners of Yue Wah Mansion (HCA 1086/2013) unreported, 28 January 2015 at §§31-32 cited in Hong Kong Civil Procedure 2016 at§15/6/1. 

37.  I therefore find the Convention to have satisfied the requirements of Order 15, rule 6(2) and that the question or issue posed by Mr Lam above is a question or issue arising out of or connected with the plaintiff’s claim herein which it would be just and convenient to determine as between the existing parties as well as between the Convention and either of the existing parties depending on how the Convention may plead its case in due course.   

38.  I do not share Mr Dawes’ view that the 1^st to 3^rd defendants must commence third parties proceedings in order for the Convention to join in.  I agree with Mr Lam’s observation that Order 15, rule 6(2) and Order 16, rule 1 are intended to complement each other. As the learned editor says in Hong Kong Civil Procedure 2016 at §15/6/7, the terms of Order 15, rule 6(2)(b)(ii) bear a close affinity to those of Order 16, rule 1(1)(c) and that the objects of rule 6(2)(b) as to joinder of parties are broadly the same as the objects of the rules relating to third party proceedings.  The difference is that a non-party can himself apply under the former rule to be added as a party but he cannot apply under the latter to be joined as a third party.  As Mr Lam puts it, the Convention wishes to be the driver when it has no control as to how the 1^st to 3^rd defendants may conduct this litigation and may therefore suffer financial impacts not readily appreciated by the 1^st to 3^rd defendants.

39.  Nor do I think there is any real practical difficulty in terms of pleadings as Mr Lam has indicated that the Convention may well be filing, along with its defence, a counterclaim for declaratory relief in relation to the Balance and the plaintiff will be able to plead in his reply and defence thereto in due course.

Conclusion

40.  In light of the above, I am satisfied that the joinder application of the Convention should be allowed and the plaintiff’s appeal is dismissed accordingly.

41.  I see no reason why costs should not follow the event.  I make an order nisi that the plaintiff do pay to the Convention costs of the appeal with a certificate for counsel, which order shall become absolute unless an application is made for variation thereof within 14 days from the handing down of this decision.

42.  I do thank counsel for their able assistance.