XCHRX NG KAI MING and Others v. WONG CHI CHEONG and Others

1993 No. A9549

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. On 22nd October 1993, the three Plaintiffs commenced proceedings against the four Defendants. By the Statement of Claim endorsed on the writ, the Plaintiffs alleged that by an agreement dated 29th June 1993, the Plaintiffs had agreed to sell their shares in Kenbase Ltd. ("the Company") to the Defendants for the sum of $1,323,018.00. That sum was to be paid in instalments by various post-dated cheques, and the agreement provided that if the Defendants failed to pay any of the instalments on the due dates, the whole of the balance then outstanding would become payable immediately.

2. The Statement of Claim alleged that one of the cheques was dishonoured on presentation. On the date of that dishonour, the balance then outstanding was $1,000,000, and the Plaintiffs claimed that sum plus interest. The Defendants filed a defence denying liability on the ground that the agreement was void, and counterclaimed for a declaration to that effect and for damages for breach of what they alleged to be implied terms of the agreement. It strikes me that those counterclaims should be expressed to be in the alternative to each other, but Mr. Abraham Tung for the Defendants reserves his position: he wishes to argue at the trial of the action that the counterclaims are cumulative.

3. I have seen a copy of the agreement of 29th June 1993. It shows that the sums to be paid by the various post-dated cheques were all payable to the 2nd and 3rd Plaintiffs. Under the agreement, therefore, no sum was due to the 1st Plaintiff.

4. The circumstances in which the proceedings were issued were that the 2nd and 3rd Plaintiffs instructed their solicitors to commence proceedings against the Defendants. They asked the 1st Plaintiff to agree to be joined as a plaintiff, no doubt because he had been a party to the agreement, even though no sums were payable under the agreement to him. The 1st Plaintiff was told that he would not be asked to contribute to the cost of suing the Defendants. At the time, the 1st Plaintiff did not object to being joined as a plaintiff. However, after the proceedings had been commenced, the 1st Plaintiff said that he no longer wished to be a party to the proceedings. Accordingly, the 2nd and 3rd Plaintiffs applied for leave to amend their writ and Statement of Claim so as to remove the name of the 1st Plaintiff as one of the plaintiffs and for the claims in the action to be made by the 2nd and 3rd Plaintiffs alone.

5. The 2nd and 3rd Plaintiffs sought to make other amendments to the Statement of Claim as well. First, they wished to allege, as was the fact, that under the agreement the sum of $1,323,018.00 was payable to the 2nd and 3rd Plaintiffs only. Secondly, they wished to allege, as was the fact, that under the agreement the sum of $1,323,018.00 was payable not merely for the shares in the Company, but also to discharge loans totalling $450,000.00 which had been made to the Company by the 2nd and 3rd Plaintiffs. Thirdly, they wished to allege that the Defendants had failed to comply with an undertaking in Clause 9 of the agreement to procure the discharge of a guarantee and/or indemnity given by the 2nd and 3rd Plaintiffs and/or Hung Fung Box Co. in favour of Sanwa-DSP Credit Ltd ("Sanwa"). Accordingly, the 2nd and 3rd Plaintiffs and/or Hung Fung Box Co. were exposed to the risk of repaying sums owed by the Company to Sanwa, and they sought an order for specific performance of that undertaking, and an indemnity from the Defendants in respect of their potential liability.

6. The application came before Mr. Registrar Betts on 29th April 1994. Mr. Meyrick Wong for the 2nd and 3rd Plaintiffs has told me that when he appeared before Mr. Registrar Betts he applied first for the amendments relating to the removal of the 1st Plaintiff as a party. He did not initially press for the other amendments sought because if he failed to have the 1st Plaintiff removed from the action the amendments to the Statement of Claim which he sought would have had to be redrafted. In the event, Mr. Registrar Betts refused to permit the 1st Plaintiff to be removed from the action, and that decision was confirmed by Wong J. on appeal.

7. On the face of it, the 2nd and 3rd Plaintiffs had good grounds for being given leave to have the 1st Plaintiff removed as a plaintiff. Ord. 15 r. 6(2)(a) of the Rules of the Supreme Court provides:

"....at any stage of the proceedings .... the Court may ... order any person who has been improperly or unnecessarily made a party or who has for any reason ceased to be a proper or necessary party, to cease to be a party."

It could be said with some confidence that the 1st Plaintiff had improperly been made a party since he had had no claim against the Defendants as none of the sums due under the agreement had been payable to him. Indeed, having seen the agreement, I note that the undertaking in Clause 9 was not given to him either. Alternatively, even if he had been properly joined as a party in the action, he had ceased to be a proper plaintiff in view of his wish no longer to be a party.

8. In those circumstances, I am a little surprised by the view which Mr. Registrar Betts and Wong J. took. Even if the 1st Plaintiff had been properly joined as a plaintiff on the basis that he had consented to being joined as a plaintiff, I do not understand why he had not ceased to be a proper party in view of his wish no longer to be a party to the action. I am told that the Defendants argued that if the 1st Plaintiff ceased to be a party to the action, the Defendants' counterclaim would not operate against him, and they would be prejudiced as a result. If that was the basis on which the 2nd and 3rd Plaintiffs lost before Mr. Registrar Betts and Wong J., that was wrong. Ord. 15 r. 3 permits a defendant to join a non-party as an additional defendant to a counterclaim. However, there is no course of action that I can take in relation to the proceedings before Mr. Registrar Betts and Wong J., because I cannot sit as an informal Court of Appeal from their decisions.

9. In due course, however, the 2nd and 3rd Plaintiffs issued another summons for leave to amend the Statement of Claim. In form, there were only two differences between the amendments then being sought, and the amendments which they had previously sought. First, the 1st Plaintiff remained a plaintiff in the action. Secondly, the 2nd and 3rd Plaintiffs wished to allege that Sanwa had by then issued proceedings against them, Hung Fung Box Co. and other parties under the guarantee and/or indemnity.

10. This second application for leave to amend came before Master Chan on 14th December 1994. She dismissed the application. She did so because she took the view that the amendments being sought were the same as those which had been previously refused. The 2nd and 3rd Plaintiffs now appeal against her decision to me.

11. If Mr. Registrar Betts and Wong J. had been ruling on the amendments being sought in addition to those relating to the removal of the 1st Plaintiff from the action, I would have agreed with Master Chan. The 1st Plaintiff remained a plaintiff in the action because leave to remove him in the action was refused. The new allegation that Sanwa had now commenced proceedings would have been irrelevant if the 2nd and 3rd Plaintiffs could not have alleged that there had been a breach of Clause 9 of the agreement. They could not have alleged that if leave to permit them to do that had been refused. But leave to permit them to do that had not been refused. It had not been considered. Mr. Tung accepts that the question of the other amendments was raised for the first time before Master Chan. This was not, therefore, a case of amendments being sought which were the same as those which had been previously refused. They had simply not been considered. I do not believe that that could have been sufficiently explained to Master Chan. Otherwise, she would not have taken the view that she did.

12. For these reasons, this appeal must be allowed. I set aside the order of Master Chan, and I give the 2nd and 3rd Plaintiffs leave to amend the Statement of Claim in the terms of the draft annexed to the summons filed on 14th October 1994. I will hear the parties on the question of costs, and on the time which the Defendants need to file an Amended Defence and Counterclaim.