REMEDY ASIA LTD v. YICK SHING CONTRACTORS LTD

HCCT 4/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO 4 OF 2012

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D E C I S I O N

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A. INTRODUCTION

1.  On 26 June 2014, I handed down judgment (“the Judgment”) dismissing effectively the defendant’s summons to strike out the plaintiff’s claim.

2.  This is the defendant’s application[1] for leave to appeal against the Judgment.

3.  This decision should be read together with the Judgment. I would also adopt herein the abbreviations used in the Judgment.

B. THIS LEAVE APPLICATION

4.  In its Notice of Appeal, the defendant raises four principal grounds of appeal.

5.  For leave to be granted, the defendant has to show that it has a reasonable prospect of success on any of those proposed grounds of appeal.  I would look at each of them now.

Ground 1: The court erred in finding that the arrangement under the Assignment falls under the “access of justice” exception and thus not prohibited under the law of champerty and maintenance (para 1 of the Notice of Appeal and paras 8-12 of the defendant’s skeleton)

6.  I do not find this ground having a reasonable prospect of success:

(1) The defendant is not challenging the legal principles set out at para 26 of the Judgment as derived from Unruh v Seeberger (2007) 10 HKCFAR at paras 75-104.

(2) The court applied the uncontroversial evidence set out at para 28 of the Judgment to these principles and came to the conclusion that the subject funding arrangement under the Assignment fell within the “access to justice” exception.

(3) The defendant now says the liquidators in their evidence was not saying that, other than obtaining funding from the plaintiff, they could not have obtained litigating funds elsewhere. It is thus wrong for the court to say that the exception was established since the finding (at para 28(1) of the Judgment) that “the liquidators could not pursue this action with the plaintiff’s involvement and financial support” is simply not supported by the evidence

(4) In my view, there is no reasonable prospect of success that the appellate court will interfere the conclusion that the arrangement fell within the access to justice exception on this basis. This is particularly so when Mr Parker for the defendant accepts at this hearing that he is not submitting that the “access to justice” exception could only be established by showing that the liquidators could only obtain funding from the plaintiff but not elsewhere[2].

(5) In any event, the court further went on at para 30 of the Judgment to hold that, alternatively, the arrangement did not amount to “officious intermeddling” in the litigation which was caught by the principles against champerty and maintenance.  This conclusion is not dependent on the challenge on the “access to justice” exception conclusion.

(6) In this respect, Mr Parkers submits that this alternative conclusion is erroneous too as the court had not dealt with his submissions on “reverse intermeddling” by the liquidators, relying on the In re Oasis Merchandising Ltd [1998] Ch 170, 177.

(7) I find these arguments also not having a reasonable prospect of success on appeal:

(a) First, my reasoning at para 30 of the Judgment applies in my view with equal force to reject any arguments of “reverse intermeddling”.  Whether you look at it at the position of the plaintiff or the liquidators in having certain control in the litigation under the Assignment arrangements as contended by the defendant, there is still nothing to show that the integrity of the judicial process is endangered, in particular in the context that any recovery of the Indebtedness through the action would benefit the general creditors of True Light.

(b) Second, and in any event, given my conclusion in the Judgment that True Light has to be joined in this action as a plaintiff to complete the title to sue, no question of “reverse intermeddling” arises (subject to the defendant’s 2^nd ground of appeal as discussed below).

7.  I would not grant leave to appeal on this ground.

Ground 2: The plaintiff lacks locus to bring the present action, without joining True Light as a party to the proceedings, but it cannot do so under the terms of the Assignment (Para 2 of Notice of Appeal and paras 13-16 of the defendant’s skeleton)

8.  Under this ground, Mr Parker says the plaintiff is not even an equitable assignee under the terms of the Assignment, and thus it cannot seek to have True Light joined to complete the title to sue.  This is so (as I understand the arguments) since:

(1) As it is simply unknown under the Assignment when the plaintiff could recover the Indebtedness or its share of it, no equitable interest in the Indebtedness has even arisen under its terms to be vested in the plaintiff;

(2) The defendant simply does not know who it could pay or negotiate with for the purpose of settling the Indebtedness if it wishes to do so.

9.  I do not think these arguments bear any reasonable prospect of success:

(1) In the present case, the liability to pay the Indebtedness was already incurred at the time when the defendant was in breach of the relevant contracts (if established). It is valid and permissible to assign a chose in action.  The lack of the necessary legal elements in the assignment as found by the court only renders the interest so vested an equitable one instead of a legal one.  It does not mean that the plaintiff has no equitable interest in the Indebtedness. 

(2) I also have difficulty to understand why it is suggested that, if the plaintiff and True Light are both joined as plaintiffs in this claim, the defendant would still have difficulty in ascertaining to whom to pay the indebtedness, and thus the plaintiff is not an equitable assignee.  The reason to require True Light to be joined as a co-plaintiff is to avoid any question that the defendant would be required to pay twice (see paras 23, 33-38 of the Judgment).

10.  I therefore would also refuse to grant leave to appeal on this ground.

Ground 3 – Subcontract A was time-barred to the extent as pleaded in the Re-Amended Defence and Counterclaim (para 3 of the Notice of appeal and para 17 of the defendant’s skeleton)

11.  Mr Parker’s contentions under this ground as set out at para 3 of the Notice of Appeal are effectively a re-run of the contentions on the construction of the various relevant clauses in Subcontract A.  Suffice for me to say that I am not convinced that they have a reasonable prospect of success for the same reasons I have set out in the Judgment at paras 45-50 and 52.

12.  I would refuse to grant leave on this ground.

Ground 4 – Time bar under Subcontract B (para 4 of the Notice of Appeal and paras18-26 of the defendant’s skeleton)

13.  The first contentions raised under this ground of appeal are principally premised on Mr Parker’s arguments that the court erred in relying (at para 53(1) of the Judgment) on the Court of Appeal’s decisions in Sun Focus v Tang Shing Bor [2012] 1 HKLRD 738 at paras 10-15 and Global Bridge Assets Ltd v Sun Hung Kai Financial Ltd [2012] 4 HKLRD 474 at paras 19-22, to say that, because of the relation back doctrine under s 35(1) of the Limitation Ordinance (Cap 347) (“LO”), it is no longer open to the defendant to seek to strike out the claim under Subcontract B for time-bar after it has consented to the amendments to include those claims.   

14.  This part of the Judgment is wrong, counsel submits, as the court has failed to deal with the authorities of Liff v Peasley [1980] 1 WLR 781 at 803C and Moulin Global Eyecare Holdings Ltd v Olivia Lee Sin Mei [2012] 4 HKLRD 263 at paras 66-69 per Barma J. Mr Parker says these authorities support the propositions that it is still open to the defendant to challenge a time-bar claim even after the amendments had been consented to and made notwithstanding the relation-back doctrine.

15.  With respect, I am not convinced:

(1) Moulin Global dealt with a situation where there was an amendment without leave made to include the time-barred claim under O 20 r 3 of the RHC.  Under O 20 r 4, it is specifically provided that a party could apply within 14 days to disallow amendments made without leave.  Further, it is open to the court to extend time for the party to apply to disallow those amendments under O 20 r 4 (see Moulin Global, supra, at para 67).  The relation-back at least can be seen as subject to or being qualified by the statutory right to apply to disallow it.   

(2) This is very different in principle from a situation where, (as in the present case) leave is required to amend to include the time-barred claim and that leave has then been allowed by the court after a contested hearing or expressly consented to by the very party now seeking to strike it out.  In such situations, the relation-back automatically kicks in as a matter of lawonce the amendments have already been made (as held under Sun Focus and Global Bridge). 

(3) Insofar as Brandon LJ’s reservations and observations made in 1980 in Liff at 803C-804B on the “artificiality and unreality” of the relation-back doctrine are concerned, suffice for me to say that (purely for the sake of arguments) even if they had the effect of putting a doubt (as contended by the defendant) on what I understood to be the effect of Sun Focus and Global Bridge, this court is bound by and should follow the recent decisions of our Court of Appeal as to the understanding of the “automatic” and “mandatory” nature of the relation-back doctrine provided in the LO.

(4) These authorities relied on by the defendant are therefore distinguishable and not applicable in the present case.

16.  I similarly would not grant leave on this ground.

17.  Lastly, the defendant submits that the court’s alternative observation at para 53(2) of the Judgment is also in error.  In that paragraph the court says this:

“Secondly and in any event, even if the plaintiff’s claims in respect of Subcontract B are somehow time-barred, since Yick Shing itself relies upon Subcontract B to found its Counterclaim, the plaintiff is entitled to make (and does make) a Defence and Counterclaim to Counterclaim based on Sub‑Contract B. The limitation point is, therefore, as submitted by Mr Pennicott, somewhat sterile.”

18.  Mr Parker’s submissions in support of this ground are set out at para 26 of his skeleton as follows:

“Finally, the Judge found that a party could introduce a new cause of action by way of a ‘Counterclaim to Counterclaim’, as a way for introducing an otherwise time barred cause of action. Respectfully, it is submitted that it must be arguable that under section 35(3) of the LO, no new claims may be allowed after the expiration of the limitation period other than ‘an original set-off or counterclaim’, which is defined under section 35(4) as ‘a claim made by way of a set-off or … by way of a counterclaim by a party who has not previously made any claim in the action’. Clearly, this exception does not apply to the plaintiff. The fact that the defendant first raised the matter concerning Subcontract B in its Counterclaim does not entitle the plaintiff to raise any alleged cause of action under Subcontract B after the expiration of the limitation period.”

19.  In substance, Mr Parker says s 35(4) of the LO has the effect of disbarring the plaintiff from making a counterclaim (or set-off) under Subcontract B (which is time-barred) against the defendant’s own counterclaim brought under Subcontract B because the plaintiff had already made a claim in this action.  As a result, the requirement that the plaintiff “has not previously made any claim in an action” is thus not satisfied.

20.  I would not grant leave on this ground too as, given my above view that the defendant does not fair a reasonable prospect of success in challenging on appeal the court’s primary conclusion not to strike out the plaintiff’s claims under Subcontract B on the basis of time-bar as the amendments have been consented to, this ground is academic in the proposed appeal.

C. CONCLUSION

21.  For all the above reasons, I would refuse to grant leave to appeal.

22.  I further order that costs of this application be to the plaintiff to be taxed if not agreed.