XCHRX ALLSON CLASSIC HOTEL (H.K.) LTD. v. HARVEST STAR INTERNATIONAL LTD. and Another

1995 No. CL 106

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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1. These are two applications for leave to amend the writ and pleadings to join Sun Asia Pacific Hotels Ltd. as a Plaintiff in the two actions.

2. In action CL 108 of 1994, which is consolidated with CL 19 of 1994, Allson Classic Hotel (H.K.) Ltd. sues Abundance Assets Ltd. CL 19 has Abundance Assets Ltd. as the Plaintiff suing Allson Classic with Sun Asia Pacific already as a co-defendant. In CL 106 of 1995 Allson Classic sues Harvest Star International Ltd.

3. A short extract from the helpful chronology provided on behalf of Harvest Star International Ltd. sets the background to these series of actions.

4. They arise out of a management agreement relating to the Ramada/Hong Kong Renaissance Hotel. Sun Asia was a party to the agreement as operator for the management of the hotel. Sun Asia assigned the benefit of the agreement to Sutton Wick Ltd. who became Allson Classic. The hotel itself was assigned by Sunyou in favour of Abundance Assets who in due course sold to Harvest Star International.

5. It is Allson Classic's case that it derived its entitlement under the agreement by way of a legal assignment. In that event, there would be no need for Sun Asia to be joined in the action. My view is that the assignment was a legal one. However, Harvest Star contends that the assignment is an equitable one rather than a legal one. In that event, Sun Asia would need to be joined as a party - as a Plaintiff if the company consents, or as a Defendant if it does not. Sun Asia has filed a consent.

6. Under Order 15 rule 6, the Court has power to order the joinder of a party "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." [Order 15 rule 6(2)(b)(i)].

7. Under rule 6(5) :

"no person shall be added or substituted as a party after the expiry of any relevant period of limitation unless [either] -

(a) the relevant period was current at the date when proceedings were commenced and it is necessary for the determination of the action that the new party should be added."

8. Mr. Kwok's argument against giving leave for the amendment in CL 106 of 1995 is essentially based upon the limitation point and in particular on Section 9 of the Transfer of Businesses Ordinance, Cap. 49.

9. He contends that under that section there is a 12-month limitation period which runs from the date upon which the transfer in respect of which the liability arose, took effect and that the date of the transfer was the 8th July 1994. In my view, he is obviously correct. Section 9 is subject to Section 6 which gives the transferee of the business a right to indemnity by the transferor.

10. However the action "instituted to recover any debt from or to enforce any obligation against any person liable therefore under this Ordinance" (the wording of Section 9) had in fact been commenced by writ on the 30 June 1995 within the 12-month period.

11. My attention has been directed to the Court of Appeal decision in what is known as the "Aiolos", Lloyds Law Reports 1983 Vol. 2, p. 25 by Mr. John Griffiths Leading Counsel on behalf of the Plaintiffs and specifically to parts of the judgment of Lord Justice Oliver, as he then was, which themselves form a significant proportion of the headnote. At p. 32 (column 1), he said :

"As I understand the practice of the court, the insistence upon the joinder of the assignor under an equitable assignment, as a party, the reason and necessity for which I will consider in a moment, is dictated simply by the desirability of having him before the court and thus bound by the order. It is not because his presence as a plaintiff is essential to the prosecution by the assignee of the cause of action assigned to him. The purpose of joining is equally well served by his being a defendant and indeed, if he refuses to join as a plaintiff, he can and should be made a defendant simply in order to be bound by the result."

This reflects the provisions of Order 15 rule 6 referred to earlier. Lord Justice Oliver re-asserts these considerations at page 33 column 2. At page 34 column 1 (bottom) he goes on :

"In a case in which there is a dispute between the parties as to whether the documents relied on constitute assignments at all, the ordinary requirements that the assignors should be before the court is not one which I feel could be dispensed with and they should in my judgment be before the court as defendants, even though no relief is claimed against them, save possibly a declaration as to the effect of the documents. The necessity of their joinder does not however affect the validity of [the] point that the amended claim does no more than assert the position existing at the date of the writ.

The joinder is a purely procedural requirement and, on the assumption that the receipts were effective assignments, the cause of action thus vested in the plaintiffs was effectively asserted by the writ. No question of depriving the defendants of any vested right to rely on the time bar therefore arises, the suit having been properly begun within the period permitted by the rule."

12. In my view, these dicta are particularly apposite to the matters I am considering. Lord Justice Oliver goes on to set out in the next paragraph (column 2) :

"The only other point is whether, having regard to the unexplained lapse of time, amendment to plead an assignment should be refused as a matter of discretion. This is not a case in which the defendants have been in any way misled as to the nature of the claim made, nor has any evidence been adduced to suggest that they have been prejudiced by the delay in any way which cannot be compensated in costs."

13. Mr. Kwok on behalf of the Defendants does not make such a contention although as I expressed in my judgment on the initial issue, I have some sympathy for the position in which the Defendants find themselves.

14. But he further contends that Order 20 rule 5 does not avail the Plaintiffs on the basis that the Hong Kong Court of Appeal decision in Mohan v. McElney & Others [1983] HKLR 308 decided that Order 20 rule 5 in the Hong Kong jurisdiction is ultra vires insofar as it relates to new causes of action if it purports to deal with any limitation other than those under the Limitation Ordinance (Cap. 347) Section 35. What we are dealing with in these two applications is not a new cause of action but a new claim. In passing it should be noticed that Order 20 rule 5(5) still finds favour in the 1988 edition of the Rules of the Supreme Court.

15. Section 35 provides that any new claim (which by subsection 2(a) includes the addition of a new party) shall be deemed to be a separate action and to have been commenced (by subsection 1(b)) on the same date as the original action. That means in the case of CL 106 of 1995, on the 30th June 1995, i.e. within the currency of the limitation period, whether it be the period under the Limitation Ordinance (Cap. 347) or under the Transfer of Businesses (Protection of Creditors) Ordinance (Cap. 49).

16. Subsection (3), however, appears to cut down on the effect of that to the extent that unless Section 30 or the rules of the court otherwise provide, the court shall not allow a new claim (within subsection 1(b)) to be made in the course of any action after the expiry of any time limit under this Ordinance which would affect a new action to enforce that claim. The time limit under this Ordinance is, however, six years. Section 30 is not relevant to these actions in any event because it is concerned with Fatal Accidents and Personal Injury claims.

17. So it is clear that the limitation provisions do not apply to CL 108 of 1994, one of the consolidated actions. The amendment sought to add Sun Asia as Plaintiff is well within that period.

18. So we must look at CL 106 of 1995. If the Limitation Ordinance (Cap. 347) applies to that action, then again the amendment sought does not offend the six-year limitation period. Even if it did, the provisions of subsection (6) and (7) of section 35 operating on subsection (5) will allow rules of the Court to provide for a new claim, which would otherwise be caught by subsection (3), to be made.

19. Mr. Kwok, of course, argues that Section 40 of the Limitation Ordinance indicates its limitation provisions do not apply to any action for which a period of limitation is prescribed by any other Ordinance, and he goes back to Section 9 of the Transfer of Businesses Ordinance (Cap. 49). Even if that is correct, it will not avail the Defendants because, as I have indicated, the action to recover the "debt from or enforce any obligation against" the Defendant, had been commenced within the 12-month period.

20. The essential objection to the application by the Plaintiffs in CL 108 of 1994 is that the Re-amended Points of Claim do not plead the basis of the claim by Sun Asia against Harvest Star and that it embarrasses the Defendant. I regret I cannot accept that as a valid argument. Sun Asia is simply to be joined because it was a party to the assignment. The basis of the claim is quite clear. Either Sun Asia or Allson Classic is entitled to make the claim. Only one can succeed but the claim is the same.

21. I have dealt with the crux of the arguments in relation to CL 106 of 1995. The considerations and dicta in the "Aiolos" are, as already set out, appropriate to this case. Order 15 rule 6 covers the circumstances in which leave may be given. The Plaintiff does not rely upon Order 20 rule 5. The limitation period set out in Section 9 of the Transfer of Businesses Ordinance does not apply to this action. Even if it did the inherent jurisdiction of the Court as referred to in Order 15 rule 6 and the "Aiolos" case enables it, as a matter of sensible and good practice, to exercise the discretion in the Plaintiff's favour.

22. Accordingly, I give leave to amend to join Sun Asia as a co-plaintiff in both actions.

23. The Defendants also oppose proposed amendments to the prayers in the pleading. (1) Falls by the wayside in any event. (2) I have further amended this simply to strike out the unnecessary "Further or in the alternative". Exception is also taken to (3). To my mind, the prayers for relief are simply a "belt and braces" pleading approach. It is clear that the addition of Sun Asia as Plaintiff will make no difference to the nature or substance of the relief sought - it is the same claim. It is a technical change only. (4) Is further amended by agreement to make it clear that what is sought is "Interest pursuant to Section 48 of the Supreme Court Ordinance (Cap. 4)".

24. Both applications will be allowed on the terms sought.