CHAN SHU KONG v. KWONG HING TRADING CO LTD AND ANOTHER

HCA 1152/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1152 OF 2006

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J U D G M E N T

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Introduction

1.  This is the adjourned hearing of this appeal that was first heard on 18 May this year.  At the end of the argument I reserved my judgment which I handed down on 21 June.  In order to understand what I am now going to say here, it is essential to read that judgment as a result of which the Plaintiff has now taken out a summons under O.18 r.19 of the Rules of High Court as well as of O.14A r.1.

2.  The factual background and the issues raised in the appeal have been explained in my previous judgment as have the Master’s reasons for refusing to allow the amendments.

The Issue

3.  This appeal concerns the principle that a partner cannot set off his personal debt against a debt owed to the partnership.  This principle is stated in section 11, Partnership Ordinance (Cap.38) in the following way:

“	Every partner in a firm is liable jointly with the other partners for the debts in obligations of the firm in which he is a partner … ”

A partner’s obligations are only joint and not several.  As I stated in paragraph 19 of the previous judgment what the Defendants are seeking to do by these proposed amendments is to set off a debt allegedly owed by the Plaintiff and his partner, Mr Wong, who has no connection with this action, against their liability to Mr Chan alone.

4.  As he must, Mr Chai for the Defendants, accepts the quite basic principle enshrined in section 11 supra.  He also accepts Rule 4 in Lindley (18^th edition), para. 14-80 that:

“	Except under special circumstances, a debt due to or from several persons jointly cannot be set off against debt due from or to one of such persons separately.”

5.  I have already traversed the factual issues raised in the District Court action and how it is alleged that Mr Chan and Mr Wong are indebted to the two Defendants in this action.

Analysis

6.  It seems to me that for all his best efforts, Mr Chai has not been able to surmount this basic principle.  The Defendants before me will need to pursue Mr Chan (the Plaintiff) in this action and Mr Wong and their company under their current action in the District Court.  The present proposed amendments as well as the original pleading purport to do precisely what section 11 and Rule 4 say cannot be done.  In my judgment, the Master was absolutely correct to have refused leave to amend and now that I have before me the Plaintiff’s summons under O.18 r.19, I also propose to strike out the remaining part of paragraph 9 of the Defence as originally pleaded because it raises precisely the same point without the particulars that the proposed amendments seek to add.

Conclusion

7.  This being my view, the appeal from the Master must be dismissed and the order sought under the O.18 r.19 summons will also be made.  I make no order under paragraph 2 of that summons which seeks a determination under O.14A r.1.  This now falls away.  I should say that I very much doubt that it would have been possible to make any order in the alternative under O.14A r.1 had Mr Ho failed to hold the appeal or failed to succeed on his O.18 r.19 application.

Costs

8.  I have already heard provisional argument as to costs.  The Master’s order will stand and in addition I make the order under O.18 r.19.  In these circumstances, the Plaintiff will have his costs of the appeal.  I had considered making some allowance in respect to the application under O.14A r.1 but as it has hardly been touched upon. I do not believe that the Defendants have been prejudiced in costs by its inclusion in the summons.