LAM PO CHIU MARK v. ION GLOBAL (BVI) LTD

HCA 4754/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4754 of 2003

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D E C I S I O N

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1.  On 31 December 2003, Mr Lam commenced proceedings against Ion alleging breach of an agreement in relation to a put option relating to certain shares.  The defence was filed on 24 February 2004, and a Reply was filed on 6 April 2004.  Following an Order for Directions, lists of documents were exchanged.  A checklist hearing was held on 17  November 2004, which was adjourned to 26 January 2005, which was in turn adjourned sine die.

2.  On 18 October 2005, Mr Lam issued a summons seeking first, to join CDC Corporation as second defendant, pursuant to Order 15 rule 6, and secondly to amend the statement of claim as shown in a draft, pursuant Order 20 rule 5.  Appropriate ancillary orders were also sought.  The matter came before the Master on 24 October 2005, and an order was made in terms of the summons.  From that order Ion now appeal.

3.  Ion is a wholly owned subsidiary of CDC Corporation.  The allegations against CDC Corporation contained in the proposed Amended Statement of Claim demonstrate that three persons, amongst the seven who held office in either Ion or CDC Corporation, hold office in both companies.  The Chief Executive Officer and a director of Ion is Chief Operating Officer and a director of CDC Corporation.  The President of Ion is Vice-President of CDC Corporation.  A Director of Ion is the Chief Financial Officer of CDC Corporation.

4.  The allegations in the Amended Statement Claim include an allegation that the consideration of the transaction was in the form of a promissory note issued by CDC Corporation.

5.  It is plain from these allegations that there is a direct overlapping of the allegations between Ion and the proposed new defendant CDC Corporation.  The allegations go a long way beyond a mere allegation that Ion is controlled by CDC Corporation.  It is plain that the matter has traversed at the trial of the present action will greatly overlap with any matters that might be traversed at a trial should Mr Lam issue separate proceedings, as he is perfectly entitled, against CDC Corporation.

6.  Order 15 rule 6(2)(b)(i) & (ii) gives the court jurisdiction, at any stage of the proceedings, to order that any person may be added as a party 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 against whom relief is sought out of the same matter.

7.  Mr Hart stands on principle and says that on the documents before the court the Mr Lam has failed to demonstrate that he has fulfilled the requirements of the order.

8.  Mr Hart accepts that the end result sought by Mr Lam would be achieved by the issue of a new writ against CDC Corporation, was a statement of claim along the lines of the proposed amended statement of claim, and an application for consolidation of that new proceeding with the present proceeding.  Mr Hart acknowledged that if a new writ were issued on that basis it was inevitable that consolidation would take place and both matters would be heard together.  His objection to the procedure proposed to be followed by Mr Lam was one of principle, based upon strict limits to the jurisdiction of the court under Order 15 and Order 20.

9.  When the matter first came before me the summons was not accompanied by an affidavit.  Somewhat reluctantly, Ms Wong accepted that an affidavit was required.  Her original contention was that as proceedings could be commenced without an affidavit, then no affidavit ought to be required.

10.  But that cannot be right in cases of joinder.  If a defendant is to have another defendant or third-party imposed upon the proceedings, with the consequent potential increase in costs, a proper basis must be shown for that joinder.  That can only be done by affidavit.  Consequently I adjourned the proceedings and an appropriate affidavit was then filed.  Notwithstanding that affidavit Mr Hart maintained his objection to the application.

11.  I now am satisfied that the papers do satisfy the requirements of Order 15, and Order 20, and that this is a case where CDC Corporation ought to be joined, and the amendments to the statement of claim permitted.  That that is so is plain from the terms of the proposed Amended Statement of Claim.  The extent of the involvement of CDC Corporation in the transaction that will plainly be the subject to the scrutiny of the court is such that that company ought to be a party to the proceedings.  If the allegations are substantiated CDC Corporation played an integral role in the whole transaction.  Issues of discovery against CDC Corporation may well arise, and in any event direct relief is sought against CDC Corporation.

12.  I am satisfied that even if the strict terms of Order 15 are not met this is an appropriate case for joinder.  Mr Hart’s acknowledgement that the situation that would be achieved by joinder would inevitably be achieved by requiring Mr Lam to issue a separate writ against CDC Corporation, and then to apply for consolidation is itself a sufficient basis to make the order.  A stand based upon principle where a party’s position cannot be seen to have been undermined in any way at all will not be encouraged by the court.  To require Mr Lam to issue a separate writ and apply for consolidation would only be to unnecessarily generate costs and expenses all of which may be avoided by the making of this order.

13.  For those reasons the appeal is dismissed.  The order of that Master will stand.  Sensibly, when the application was originally made to the Master, costs were sought in favour of Ion, notwithstanding the fact that the order was to Mr Lam’s benefit.  There is no reason to disturb that costs order.  The appeal having been dismissed however, Mr Lam is entitled to an order nisi, to be made absolute in 14 days, for his costs on the appeal, to be taxed on the party and party basis if not agreed, and paid forthwith.