XCHRX THE INCORPORATED OWNERS OF REPULSE BAY TOWER v. THOMAS LING & VICTOR CHAN t/a LING CHAN & PARTNERS

HCCT100/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION

PROCEEDINGS NO.100 OF 1999

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D E C I S I O N

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1. By a summons dated 22 September 1999, the defendants seek an order pursuant to Order 15 rule 6 of the Rules of the High Court that the present defendants shall cease to be a party to the proceedings and that a different defendant be substituted. They also seek an order that the present plaintiff be struck out and a different plaintiff be substituted.

2. The present Statement of Claim names "the Incorporated Owners of Repulse Bay Towers" as the plaintiff and "Thomas Ling and Victor Chan, trading as Ling Chan and Partners" as defendants. The claim is for, inter alia, damages for breach of a contract concerning services provided by the defendant as architects.

3. Miss Cruden, counsel for the defendant, submits firstly that the proper defendant is not the architects trading as a partnership but a limited company called "LCP Limited (trading as Ling Chan and Partners)". Secondly, she submits that the proper plaintiff is the "Owner's Committee of the Repulse Bay Towers". In short, the combined effect of her argument is that the defendant should be a limited company and not the individuals and the plaintiff should be the individuals and not a limited company. They are separate arguments.

The wrong defendant?

4. Miss Cruden referred the court to a number of undisputed assertions in Mr Ling's affidavit confirming the existence of the company as opposed to the partnership at the time of the contract. She relied also on assertions and documents showing that the two individuals were in fact directors of the company at the time of the contract. She also listed the documentary evidence to support her case that it was the company which was the contracting party. I do not propose to recite all those assertions and documents herein because they are all helpfully set out in her skeleton argument.

5. The relevant part of Order 15 rule 6 provides that :-

"(2)	... at any stage of 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)	order any person who has been improperly or unnecessarily made a party ... to cease to be a party;
	(b)	order any of the following persons to be added as a party, namely -
		(i)	any persons who ought to have been joined as a party ..."

6. In particular she points to a letter from the defendant dated 21 August 1995 which sets out the terms of the contract. The letterhead stated (underneath the main logo of the letterhead which only mentioned the partnership) "LCP Limited trading as Ling Chan and Partners". Further, the acceptance letter from the plaintiff said "your company is appointed as the project manager" (emphasis added). The thrust of her submission is that the contracting party was, in fact, a company and therefore only the company can be named as the proper defendant.

7. The plaintiff's pleaded case however is that the two named defendants held themselves out as a partnership. Mr Nigel Aiken, SC, for the plaintiff, submits that there is ample evidence that the defendants made representations they were a partnership and that the plaintiff relied on the representations. Thus it contracted with what was being held out as its legal entity at the time, namely, a partnership.

8. If the court is satisfied on the evidence before it that the plaintiff has a prima facie case on the issue of "holding out" then it is entitled to its day in court against the defendants which it has chosen to sue. Again it is not necessary to recite all the evidence to which Mr Aiken points in support of a prima facie case. Matters such a letter headings, business cards, a change in letter headings after the contract, contractual documents, correspondence and so on have all been highlighted in support.

9. Of course, whether or not the plaintiff succeeds on the holding out issue will be, largely, a question of fact. This court on this summons is not in a position to finally determine that issue of fact. Before it can be determined there will have to be discovery and more importantly, evidence and cross-examination. It is a matter which may turn on the credibility or assessment of witnesses. It is not an issue, on the particular facts of this case as presently known, which should properly be determined in interlocutory proceedings. I decline therefore to make the orders sought in paragraphs 1 and 2 of the summons.

The wrong plaintiff

10. It is a fact that the original contracting party on the plaintiff's side was "The Owner's Committee of the Repulse Bay Towers". In the Statement of Claim, the plaintiff pleads a novation as follows - "There was subsequently a novation of the contract whereby The Owner's Committee of the Building was replaced by the plaintiff". Miss Cruden correctly submits that the burden of proof is on the party who contends that there has been a novation. In support of the argument that the plaintiff has failed to discharge that burden she relies on Mr Ling's affidavit that the defendant was never formally notified of the change of name and there is no evidence of it ever consenting to the novation and absent consent the claim of novation fails.

11. On the other hand, Mr Aiken correctly submits that in order to rely on a novation formal notification and express consent is not required. He cites Halsbury's Laws of England, Vol.9, para.1042 in support :-

"Consent to novation may, however, be inferred from conduct without express words. Thus a company, by registering a transfer of shares, agrees to discharge the contract with the old shareholder and accept the new one in his place; and the consent of a creditor to a transfer of a liability from an old to a new firm may be inferred from the fact that he continues to deal with the new firm after notice of the change of partners."

12. He relies on documentary evidence from which he will invite the court, at trial, to infer that the defendant was at all material times aware of the change of name, dealt with the plaintiff as named and had actual knowledge of the new legal entity. As with the correct identity of the defendant, it is a question of fact. As yet there has been no discovery. He accepts it is a preliminary issue but it is a preliminary issue for the trial judge at the start of the trial after all matters have been pleaded. I agree.

13. Miss Cruden has submitted in respect of both issues that the correct identification of the parties is a matter which the court should resolve early in the proceedings. In this case, the stage reached so far, is before the filing of a Defence. She relies on Tang Man Kit v. Hip Hing Timber Co. Ltd [1999] 3 HKC 104 in which Yuen J held that :-

"(1)	Where a defendant alleged lack of authority to sue, the matter should be considered by way of a final determination of the question before the substantive trial began. If lack of authority to sue was established, the entire foundation of the proceedings would collapse. The importance of such a matter outweighed the prejudice that would be caused by a delay of the trial.
(2)	Since lack of authority to sue should not be raised as a defence as such in the action and that one could not join issue until there were pleadings, the procedure of preliminary issues was not the correct one."

14. In that case, the application was made after pleadings and amended pleadings had been served. In this case, Mr N. Aiken SC contends, in my view correctly, that the Tang Man Kit case is distinguishable because firstly the issue was the plaintiff's authority to sue at all, or lack of it, whereas here the issue is the correct names for the parties. Furthermore, the issues in this case, as already mentioned, are simply not suitable or appropriate for interlocutory determination.

15. I therefore refuse the defendant's summons under Order 15 rule 6 and make an order that the costs of the summons be the plaintiff in any event.

16. There is also a time summons seeking a general extension of time pending the outcome of the Order 15 rule 6 summons. I grant the defendant 28 days to file a Defence with costs of the time summons in the cause.