A.C. AGROBIOLOGICAL CORPORATION AND ANOTHER v. BUCK SALES LIMITED AND OTHERS

1985, No. A4417

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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DECISION

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1. The summons that I have before me is one taken out by the 3rd defendant in the action and the plaintiff in the counterclaim for judgment in default of defence as against the 1st plaintiff in the action and the 3rd defendant in the countclaim. It is more convenient to call the applicant 'Centro' and the 1st plaintiff and the 3rd defendant 'A.C. '.

2. Two points arise on it. The first is whether I should be dealing with the matter at all now, or whether I should be giving A.C. time to appeal Mayo, J.'s decision. The matter first came before me, on the 5th December. Then I adjourned it till today, in order to give the liquidator of A.C. a chance to consider his position; and also a chance to see what arrangements he could make for the recovery of the papers from the company's former solicitors, who had been dealing with this particular litigation from its outset but whose bill remained unpaid. The liquidator made the application before Mayo, J. for the recovery of those papers from the former solicitors, without prejudice to their lien. That application failed on 23rd December. I am told that that decision is under appeal, and that the appeal may come on for hearing in the Court of Appeal in about mid-February. The first question which arises is whether I should do nothing for the moment pending the determination of that appeal

3. The claim against A.C. by Centro is very largely founded upon two alleged agreements. The first was an agreement of 31st July for the assignment of a claim; and the second is an agreement or an assignment of 9th August of this yearS Both those agreements were made in either Austria or Switzerland, and so one would have thought that information about them is available to the liquidator. Certainly the documentation has been available to him ever since this pleading was delivered. He only had to ask for it. He has therefore been able to have considered his position at least under those two agreements for some little time. Secondly it seems quite wrong for me to assume that the Court of Appeal is going to interfere and say Mayo, J. is wrong. That judge had a very delicate balancing act to perform. I do not want to seem to be criticising his decision in the remotest way at all. I think that I have to assume that his decision is right; or conversely that I should not assume that the Court of Appeal is going to upset him in the course of the next two or three months. In those circumstances it seems to me that I have no option but to deal with the matter upon the facts available to me today.

4. I therefore come to the second question, which is: what, if any, relief are Centro entitled to on the present summons? The first point that is taken against them on that is this. By reason of the provisions of 0.19 r. 7 they are entitled to no relief at all, because none of the relief they are claiming in the counterclaim as against A.C. is severable from the relief claimed against the remaining defendants. Therefore they do not bring thselves within 0.19 r.7(2) which says:

"Where the plaintiff makes such a claim as is mentioned in para. (1) (i.e. not a claim for damages, liquidated or otherwise or for the recovery of property) against more than one defendant, then, if one of the defendants makes default, the plaintiff may ..... if his claim against the defendant in default is severable from his claim against the other defendants, apply under that paragraph for judgment ......"

"So the first question is: is the claim or part of the claim made by Centro against A.C. severable?

5. The answer submitted here by Centro is: 'Yes, the first part of the claim', because the first part of the coterclaim which is made simply as against A.C. is based upon the two agreements or assignments I have already referred to, namely the documents of 31st July and 9th August. What the Centro seeks to say under those two documents is this: First, it claims in its own name by reason of those documents to be entitled to sue the remaining two defendants Buck Sales and Maxwell, because it claims that the second document was a valid assignment to it of the causes of action set out in that document which entitles it to maintain this counterclaim against those two parties in its own name. That claim is directly challenged by those parties who assert that the assignment is ineffective as against them to entitle Centro to behave in this way. The second way in which Centro seeks to use these documents, which in the light of those two defendants' defences is very important, is that they entitle Centro to control the original action which A.C. brought against the same two defendants. So that it is in those circumstances immaterial to Centro whether it can sue in its own name or only in the name of its assignor A.C. In one or other guise it claims to be able to get at the two principal malefactors, as alleged in the pleadings, namely the 1st and 2nd defendants.

6. This seems to me to give rise to a separate issue as between those two parties, the issue being the validity of those transactions as between the parties themselves. I draw a distinction between validity between the parties, and the effectiveness of the agreements as against third parties like the two defendants. There has been an affidavit, or alleged affidavit, put before me, I think, on the previous hearing by one of the Rabelbauers asserting that the second agreement was void for duress. There may be some entitlement in the liquidator under Swiss law to challenge the agreement by reason of some Swiss liquidation provisions. I know not. But it does seem to me that the parties in the action, in particular Centro, are entitled to know where they stand. It is very important to Centro to know whether or not it can sit back, and in the two ways that I have outlined maintain its claims against the 1st defendant, in the certainty that both belt and braces are available tot. Therefore I am sympathetic to the application which Centro is making. It seems to me that this aspect of their claim at least is severable from the other substantive claims they are seeking to make against the remaining defendants collectively, and is one which should be, as it were adjudicated upon, at the earliest possible moment.

7. Now it is said that I should not be dealing with this because it involved with making a declaration, or was tantamount to making a declaration and I had been referred to the decisions in Wallersteiner v. Moir (1974) 1WLR 991 and International General Electric Company v. Commissioners of Customs and Excise (1962) Ch784. I accept that a declaration can only be made finally and not on some interlocutory basis. I accept that any order or judgment that I make in respect of either of these agreements necessarily involves a conclusion, that the agreement is in fact valid. But the same is true of any order which is made consequentially upon any contract, and I do not see any objection to that being done in the circumstances of this case. It is quite unlike the sweeping declarations that were objected to and set aside in Wallersteiner v. Moir. This is a pleading of a specific agreement. The agreement is set out in fact in the pleading, and there has been no defence filed challenging any part of that agreement, or raising any question about its validity as between the parties. 'In those circumstances it seems to me right to deal with that aspect of this counterclaim.

8. The first prayer in the claim against A.C. alone is for declaration. That is in fact in terms specifically not pursued, although for the reasons I have given I put this case in a totally different category to Wallersteiner v. Moir. The second claim in the prayer is for a decree of specific performance in relation to the second agreement of 9th August. My attempts to persuade counsel to explain the mysteries of this decree of specific performance, in the context of an assignment, fell upon rather stony ground. I am very far from sure that I understand what it in fact would mean if granted. But I do understand the alternative way in which it is put in the draft order which is before me. This invites me to make an order that, using their names again: A.C. do take no further step in these proceedings save and except as directed by Centro. This is certainly the effect of the assignment, and would give Centro the protection it seeks. This seems to me to be the sort of order which they are entitled to on this pleading, and it is preferable. because it is clear and simpler than any decree of specific performance. The third claim raised in the prayer is for damages for fraud and/or misrepresentation. This is in fact not well founded upon the pleading itself, and is really the third alternative, the ultimate resort if (a) the claim to trace in equity fails and (b) the alternative common law claim for money had and received fails. It is in fact not being pursued before me at the moment.

9. In these circumstances I think that Centro are now entitled to have an order along the lines I have indicated. I think more formally it should be expressed in these words: "It is ordered that A.C. Agrobiological Corporation, the 1st plaintiffs in the action and the 3rd defendants by counterclaim do take no further step in these proceedings save and except as directed by Centro Internationale Handelsbank Aktiengesellschaft, the 3rd defendant in the action and plaintiff by counterclaim". It would follow from that that the 1st plaintiffs would likewise be entitled to the costs of the counterclaim to-date, As far as the remaining parts of the counterclaim is concerned I think that the rest of the matter should stand adjourned for future consideration because at a future stage, no doubt, Centro will be taking out a motion from judgment to be brought on for hearing at the same time as the trial of the action as against the remaining two defendants. That is a matter for the future.