CHAN, LEUNG & CHEUNG (a firm) v. TSE MEI LIN AND ANOTHER

DCCJ5020/2003

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 5020 OF 2003

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D E C I S I O N

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Background

1. The Plaintiff is a firm of solicitors, suing in the name of the firm, "Messrs Chan, Leung & Cheung (a firm)" ("P Firm"). The Statement of Claim stated that the Defendants were the clients of P Firm. P Firm claimed against the Defendants for costs and disbursements of services rendered for (a) the application for letters of administration ("Probate Case") and (b) acting for them in HCPI No.986/2000 ("PI Case"). The Statement of Claim endorsed on the Writ of Summons was signed by Fung Shu Wah ("Fung"), a partner of P Firm.

2. The Defendants filed a Defence through their former solicitors, Messrs Kelvin Cheung & Co ("KCC"). The Defendants averred that "Messrs Chan, Leung & Cheung" with Mr Chan Wing Chuen Winchester ("Chan"), Mr Leung Shun Ying Edwin ("Leung"), Mr Cheung Ka Wai Kelvin ("Cheung"), Mr Li Ping Fai Tommy ("Li"), Fung and Mr Au Kwok Yee Benjamin ("Au") as partners was dissolved on about 22nd February 2002 before P Firm carried on business under the same style at Suite 1001-3, 10th Floor, Hang Seng Building, No.77 Des Voeux Road Central, Hong Kong.

3. The Defendants further averred that during the retainer with the former partnership of Messrs Chan, Leung & Cheung, Cheung was the handling partner of the Probate and PI Cases. They denied that P Firm was their solicitors in the Probate and PI Cases. The Defendants raised further defence arguments as to the service of the alleged bills for the Probate and PI Cases and on the quantum of the alleged bills which were the subject of the claim by P Firm.

4. Further or alternatively, it was pleaded that the claim by P Firm was an abuse of process as the alleged bills should be issued by the former partnership of Messrs Chan, Leung & Cheung and not by P Firm. It was said that Cheung, "the handling partner solicitor of the then solicitors of the Defendants", i.e. the former partnership of Messrs Chan, Leung & Cheung, objected to the commencement of the present proceedings against the Defendants. Further or alternatively, it was pleaded that the present proceedings in the District Court were an abuse of process because the proper quantum of costs and disbursements should be below HK$40,518.00.

5. By a summons filed on 24th October 2003 ("D's Summons"), the Defendants applied to stay all further proceedings in this action under Order 25 rule 4 of the Rules of the District Court until Cheung, "i.e. the other person entitled jointly with the Plaintiff for the relief herein, be joined as a party in the above action upon application by the Plaintiff".

6. By a summons for directions filed on 29th October 2003 ("P's Summons"), P Firm asked for directions for the further conduct of the present proceedings.

7. Both Mr Tang, solicitor for the Defendants, and Mr Li, counsel for P Firm, agreed that it is appropriate to first deal with D's Summons. They also agreed that if the Defendants succeed in their application, the stay of proceedings would cover P's Summons which would be stayed as well with costs reserved. Alternatively, if the Defendants fail in their application, both Mr Tang and Mr Li found the directions prayed for in P's Summons agreeable save and except that the question of costs be argued and determined by the court.

Evidence

8. The Defendants filed the affirmation of Wong Tak Hung ("Wong", a trainee solicitor of the Defendant's present solicitors) in support of D's Summons. P Firm did not file any affidavit in opposition of D's Summons. In support of P's Summons, P Firm filed the affirmation of Chan and the Defendants filed the affirmation of David WL Tang ("Mr Tang", solicitor of their present solicitors) in opposition.

9. Since P Firm did not file any affidavit evidence for D's Summons, most of the material facts are not disputed for the present application. In the circumstances and in light of the consensus between the parties in respect of P's Summons as seen from paragraph 7 above, it is more convenient to set out the relevant affirmation evidence in respect of both summonses below.

10. Wong and Mr Tang in their affirmations confirmed that the Defendants were at all material times the clients of the former partnership of Messrs Chan, Leung & Cheung under the care of Cheung as co-partner (for the period from 1st April 2000 to 22nd February 2002). Cheung was at all material times the handling solicitor for the Defendants in the PI Case in which the Defendants were the plaintiffs.

11. Mr Tang in his affirmation said that sometime after Cheung left the former partnership of Messrs Chan, Leung & Cheung, Cheung practised under the style of KCC. KCC wrote to "Messrs Chan, Leung & Cheung" on 22nd August 2003 to try to resolve the dispute over the bill in the PI Case by suggesting delivery of a revised bill.

12. Wong and Mr Tang in their affirmations said that on 25th August 2003, P Firm commenced the present proceedings against the Defendants for alleged unpaid legal costs due to the former partnership of Messrs Chan, Leung & Cheung for services rendered to the Defendants by Cheung and a trainee solicitor at alleged hourly rates of HK$3,500.00 and HK$1,300.00 respectively. Mr Tang said that by a letter dated 25th August 2003, P Firm served the writ of summons on KCC in addition to serving the same on the Defendants directly.

13. Wong and Mr Tang in their affirmations said that the aforesaid Defence was filed by KCC on behalf of the Defendants on 29th September 2003. By a letter from Cheung, in his capacity as co-partner of the former partnership of Messrs Chan, Leung & Cheung, to "Former Partners of Messrs. Chan, Leung & Cheung ([Chan], [Leung], [Li], [Fung])" dated 18th October 2003 ("Objection Letter"), Cheung specifically informed the other partners of the former partnership of his non-consent to the commencement of the present proceedings "taken out in the name of the former partnership (Chan, Leung & Cheung)" against the Defendants, "[his] former clients when [he] was an equity partner of Chan, Leung & Cheung during the period from 1st April 2000 to 22nd February 2002".

14. Mr Tang said that by 3 letters dated 10th, 14th and 15th October 2003 respectively exchanged between the Defendants' present solicitors and Cheung, the Defendants settled the disputed matters without prejudice to the Defendants' objection to P Firm's capacity and to their premature action in relying on the alleged bill of costs dated 30th May 2002. In his letter dated 14th October 2003 to the Defendants' present solicitors, Cheung confirmed he was the handling partner of the PI Case and the present proceedings were commenced without his prior consultation or consent or approval. He considered that the reasonable outstanding balance of the fees of the Probate and PI Cases (as accepted by the Defendants) was HK$17,276.00. The Defendants' present solicitors wrote to Cheung on 15th October 2003 enclosing a cheque in the sum of HK$17,276.00 being fees payable to the former partnership of Messrs Chan, Leung & Cheung with Cheung as the Defendants' handling solicitor in the PI Case but without prejudice to the Defendants' objection to P Firm's capacity and to their premature action.

15. In the Objection Letter, Cheung considered the proper outstanding balance of legal costs and disbursements under the 2 alleged bills was HK$17,276.00 and he said he had received such sum from the Defendants for and on behalf of the former partnership in full and final settlement of the claim taken out by some of the partners in the name of the former partnership. Such money had been paid into an interest bearing account pending completion of the dissolution account for distribution of the proceeds of the former partnership or alternatively at the direction of the court.

16. It was therefore said that Cheung is one of the persons jointly entitled to the relief sought by P Firm and he is plainly a necessary party to this action. Mr Tang in his affirmation stated Fung should have never taken out the present proceedings in the name of P Firm.

17. In respect of P's Summons, Chan stated that he was a partner of P Firm when the cause of action arose against the Defendants. P Firm wrote to the Defendants' solicitors on 21st October 2003 proposing draft terms for a Memorandum of Agreed Directions pursuant to Order 23A of the Rules of the District Court, and warned that failing response, they would issue a summons for directions and seek an appropriate costs order.

18. The Defendants' solicitors replied by letter dated 21st October 2003 saying that they had not received the draft Memorandum of Agreed Directions. They also stated that the proceedings had never been brought on behalf of a dissolved partnership since it was taken out against the express wishes of Cheung. P Firm by letter dated 22nd October 2003 sent the draft Memorandum of Agreed Directions to the Defendants' solicitors. There was no response and P Firm issued P's Summons.

19. Mr Tang in his affirmation said that P Firm should never have taken out P's Summons until Cheung is joined as a party to the proceedings. The Defendants asked for costs of P's Summons.

20. The Defendants' solicitors have issued a notice dated 20th November 2003 requiring P Firm to state the names and addresses of the partners pursuant to Order 81 rule 2 of the Rules of the District Court. Mr Tang, solicitor for the Defendants, informed the court that no response had been served to date. Mr Li said he had no instructions on this matter.

Stay of proceedings

(1) The issue

21. It is not disputed that for the period from 1st April 2000 to 22nd February 2002, Messrs Chan, Leung & Cheung had 5 partners, namely, Chan, Leung, Cheung, Li and Fung and that Cheung was a partner when the cause of action in the present proceedings accrued. It is also not disputed that the present proceedings were issued on 25th August 2003 in the name of "Messrs Chan, Leung & Cheung (a firm)" and that Cheung did not consent to the commencement of the present proceedings.

22. There is also no quarrel between Mr Tang and Mr Li that the cause of action is a joint one by the partners of the former partnership of Messrs Chan, Leung & Cheung, that all necessary parties should be made a party to the present proceedings and that Cheung is a necessary party. The dispute is whether Cheung is already a party to the proceedings or not. If not, the question is whether the present proceedings ought to be stayed for Cheung to be joined.

(2) Former or current partnership

23. Although a firm is not a legal entity, proceedings by or against two or more partners who carry on business within the jurisdiction may be commenced in the name under which they carried on business when the cause of action accrued (Order 81 rule 1 of the Rules of the District Court). Mr Tang submitted that the words when the cause of action accrued "enabled the co-partners in a firm dissolved before action to sue or be sued as a firm provided the co-partnership existed at the time the cause of action accrued" (emphasis in italics supplied) (Hong Kong Civil Practice 2004 Vol.1, para.81/1/11 at p.1095).

24. Mr Li had no quarrel with the above proposition and further referred to Lindley & Banks on Partnership 18th ed. (2002) para.14-03 at pp.427-428 as follows :

"Proceedings by or against two or more partners who carry on business within the jurisdiction may be commenced in the name under which they carried on business when the cause of action accrued. However, as Lord Lindley observed in relation to a forerunner of the modern rule :

"... the firm's name, when used in any action, is merely a convenient way of expressing the names of those who constituted the firm when the cause of action accrued. The rule does not incorporate the firm; so that if A is a creditor of a firm, B, C and D, and D retires and E takes his place and the name of the firm continues unchanged, A cannot maintain an action against B, C and E in the name of the firm, unless B, C and E have become and are content to be treated as his debtors. In the case supposed, an action against the firm would mean an action against B, C and D, i.e. A's real debtors."

Thus the composition of the firm at the date of the proceedings are issued will normally be irrelevant." (emphasis in bold supplied)

25. Mr Tang submitted that P Firm meant Chan, Leung, Cheung, Li and Fung, ie the co-partners of the former partnership of Messrs Chan, Leung & Cheung when the cause of action accrued (see paragraph 15 of his written submissions dated 23rd December 2003).

26. Such submission is at variance with the Defendants' pleaded position. First, it is averred in the Defence that the former partnership of Messrs Chan, Leung & Cheung until dissolution in 2002 comprised of the aforesaid 5 co-partners and Au. Neither Mr Tang nor Mr Li addressed me on the status of Au. However, as it was not contended by the Defendants that Au was a dissenting partner in respect of the claim, therefore even if Au were a partner at the material time, Au's status for the purpose of this application is immaterial. D's Summons asked for the proceedings to be stayed in order for Cheung (without reference to any other party) to be joined as a party.

27. Secondly, the Defence seemed to draw a distinction between the former partnership of Messrs Chan, Leung & Cheung and P Firm (which the Defendants in their pleadings seemed to treat as the current partnership exclusive of Cheung). This position is obviously contrary to Order 81 rule 1 of the Rules of the District Court and the learned text referred to above and is certainly not in line with Mr Tang's submissions at the hearing. I also note that although the Defence was filed by KCC, Cheung himself in the Objection Letter treated the present action as being issued in the name of the "former partnership". I consider that the suggestion that P Firm referred to the current and not the former partnership misconceived.

28. For present purposes, I shall therefore proceed on the basis of Mr Tang's contention as adopted at the hearing in his oral and written submissions, namely, that the former partnership of Messrs Chan, Leung & Cheung at the time when the cause of action accrued comprised of Chan, Leung, Li and Fung ("4 Co-Partners") and Cheung. I also find that pursuant to Order 81 rule 1 of the Rules of the District Court, P Firm clearly referred to the former partnership of Messrs Chan, Leung & Cheung and not the current partnership.

(3) Suing in the firm name

29. Order 81 of the Rules of the District Court provides inter alia that :

"1. Subject to the provisions of any written law, any 2 or more persons claiming to be entitled, or alleged to be liable, as partners in respect of a cause of action and carrying on business within the jurisdiction may sue, or be sued, in the name of the firm (if any) of which they were partners at the time when the cause of action accrued.

2.(1) Any defendant to an action brought by partners in the name of a firm may serve on the plaintiffs or their solicitors a notice requiring them or him forthwith to furnish the defendant with a written statement of the names and places of residence of all the persons who were partners in the firm at the time when the cause of action accrued; and if the notice is not complied with the Court may order the plaintiffs or their solicitor to furnish the defendant with such a statement and to verify it on oath or otherwise as may be specified in the order, or may order that further proceedings in the action be stayed on such terms as the Court may direct.

(2) When the names of the partners have been declared in compliance with a notice or order given or made under paragraph (1), the proceedings shall continue in the name of the firm but with the same consequences as would have ensued if the persons whose names have been so declared had been named as plaintiffs in the writ.

......"

30. When an action is brought in the firm name, the defendant cannot, in light of Order 81 rule 1, object to the fact that the individual partners were not specifically named. But he may under Order 81 rule 2 of the Rules of the District Court (as the Defendants had done in this case), though he is not obliged, demand disclosure of the names and particulars of the plaintiff firm's co-partners. Mr Tang accepted that this right is permissive and not mandatory although he submitted that a prudent defendant would exercise such right. This is because Order 81 rule 2(2) provides that when the names of the co-partners are declared in compliance with such demand, the proceedings would continue in the name of the firm but with the same consequences as would have ensued if the named co-partners had been named as plaintiffs in the writ. This will be an asset in facilitating enforcement of any judgment or order against the co-partners. However, the present application for stay of proceedings is not premised on Order 81 rule 2 of the Rules of the District Court.

31. What then is the position of an action maintained only in the name of a firm?

32. Mr Tang referred to the case of Kao, Lee & Yip (a firm) v Donald Koo Hoi-yan and ors [2002] 3 HKC 323 ("Kao, Lee & Yip's case") where in para.26 of the judgment at p.331, Ma J (as he then was) said that :

"In the case of partnerships, RHC Order 81, rule 1 enables, as we have seen, actions to be commenced by or against the firm instead of having to name each individual partner as plaintiffs or defendants, as the case may be. This, however, is a rule of convenience only ...... In other words, where a partnership sues as plaintiff ...... using the firm's name, this is mere shorthand for the individual partners being the plaintiff ......"

I also refer to the passage in Lindley & Banks (supra) referred to above which expressed the same view. Mr Tang submitted that the firm has no separate legal existence from the partners. This is correct and Mr Li had no quarrel with the same. Quite clearly, suing in the name of the firm does not give the firm a substantive legal existence (see Kao, Lee & Yip (a firm) v Donald Koo Hoi-yan and ors [1995] 1 HKC 248, 250). As Lord Lindley and Ma J observed, the firm's name is only a shorthand for or convenient way of expressing the names of the co-partners at the time when the cause of action accrued.

33. Therefore, Mr Li submitted that, pursuant to the above, P Firm in the present case should be a mere shorthand or convenient way for expressing the names of the 4 Co-Partners and Cheung, who were the partners of Messrs Chan, Leung & Cheung at the time when the cause of action accrued. In fact, as Mr Li submitted, it was his and P Firm's primary stance that the use of the firm name of P Firm stands for Cheung and the other 4 Co-Partners at the material time and hence Cheung is already a party to the action (see paragraph 4.2 of Mr Li's written submissions).

34. Mr Tang also acknowledged this in paragraph 15 of his written submissions dated 23rd December 2003, where he said that the firm name of P Firm in the writ of summons made all 5 co-partners (including Cheung) "parties to the action herein". Yet, in paragraph 41 of his supplemental written submissions dated 29th December 2003, Mr Tang stated that "it is illogical to suggest that once the firm name is used, the [firm name] does stand for all partners of the firm when the cause of action accrued". These appear to be startlingly opposite positions but perhaps better understanding could be obtained from Mr Tang's other contentions below.

(4) The Defendants' arguments on the unwilling partner

35. Mr Tang sought to persuade me that in the present case, Cheung is in truth not yet a party before the court. He relied on the following contentions :

(a) Cheung is an unwilling co-partner who refused to endorse the commencement and continuance of the present proceedings against the Defendants. This is not disputed.

(b) If there is an unwilling partner, the firm cannot sue by the firm name. The unwilling partner does not automatically become a co-plaintiff unless he has been joined as a co-plaintiff.

(c) This is because no one can be compelled against his will to be a co-plaintiff. Fung's conduct in issuing the present proceedings in the name of P Firm when he well knew of Cheung's dissent is unlawful.

(d) The proper approach is for the willing partners to issue the claim in their own names and join the unwilling partner as a co-defendant.

(e) If it were otherwise, a former partnership will be given unfair preferential treatment over a currently existing partnership where all partners should be before the court (paragraph 38 of Mr Tang's supplemental written submissions dated 29th December 2003).

(f) The alternative approach was for the unwilling partner to allow the willing partners to use his name to the proceedings subject to the provision of an adequate indemnity on costs. The provision of such indemnity is a condition precedent or prerequisite for adopting this approach.

(g) Here, as the 4 Co-Partners have as yet failed to provide Cheung with an indemnity for costs, Fung's conduct in issuing the present proceedings in the name of P Firm is unlawful. It is artificial to say that Mr Li and his instructing solicitors acted for Cheung as well.

36. The two approaches set out in (b) to (e) and (f) to (g) above are, in a way, inconsistent. The former approach is premised on Cheung not being a co-plaintiff and therefore not a party to the present proceedings. The latter approach is premised on Cheung (though unwilling) lending his name to the proceedings and thereby being a co-plaintiff, albeit subject to the prerequisite to be satisfied. Although Mr Tang's submissions did not draw the distinction clearly (and perhaps that led to the confusion referred to in paragraph 34 above), in fairness, I shall treat the former approach as Mr Tang's primary contention and the latter one as his alternative argument.

(5) Misjoinder and non-joinder of party

37. I will first consider Mr Tang's wider argument that since Cheung is a dissenting partner and cannot be made a co-plaintiff, he is not yet before the court and the present proceedings are defective for want of all necessary parties. In my view, such proposition blurred the two distinct concepts of non-joinder and misjoinder of parties. Where a party is neither joined as plaintiff nor defendant, there is non-joinder of party. However, if a party is inappropriately or improperly joined as a party, then there is misjoinder of party. Even assuming that Cheung should not be made a co-plaintiff, it does not necessarily follow that he is an absent party. There is a possibility that he might have been mis-joined as a party to proceedings.

38. The present proceedings were issued in the firm name of P Firm, which I have found to refer to the former partnership of Messrs Chan, Leung & Cheung. In my view and in light of the authorities, this is a shorthand or convenient way to express the names of the relevant partners at the time when the cause of action accrued and that necessarily included Cheung (which proposition was accepted by Mr Tang in his written submissions as well). Therefore, rightly or wrongly, Cheung is presently a co-plaintiff and a party to the present proceedings.

39. There is no application before me to strike out Cheung as a co-plaintiff or to strike out the action for the allegedly "unlawful" use of the name of P Firm as plaintiff. It is therefore questionable, without such applications being made concurrently, whether the remedy of adding Cheung as a defendant is available at all where the present action is taken in the firm name. A party cannot be both plaintiff and defendant at the same time.

40. Under the three possibilities discussed by Ma J in Kao, Lee & Yip's case, the unwilling partner can only be joined as a defendant where he is not a co-plaintiff (see possibility (b) referred to below). An example is where the willing partners choose to sue in their individual names and joining the unwilling partner as a co-defendant to ensure that the unwilling partner be bound by the result of the litigation. Another example can be found in the case of Deacons (a firm) (formerly known as Deacon Graham & James) other than Mark Gerard Fairbairn v White & Case Limited Liability Partnership, White & Case (a firm), Mark Gerard Fairbairn and Edward Anthony Cairns HCA2433/2002 (Gill J, 24th October 2003). In that case the plaintiff partnership chose to sue in the firm name but expressly excluded one partner, Mr Fairbairn, so that Mr Fairbairn could be joined as a co-defendant. This clearly was to avoid the situation of Mr Fairbairn being both plaintiff and defendant. The plaintiff partnership in this case had substantive cause(s) of action against Mr Fairbairn, so therefore the plaintiff partnership was bound to make him a co-defendant and could not be content to let him remain as an unwilling co-plaintiff.

41. Mr Li submitted that, even if the inclusion of Cheung as a co-plaintiff was a mis-joinder of party, no cause or matter shall be defeated by reason of the misjoinder or non-joinder of any party (Order 15 rule 6(1) of the Rules of the District Court). The current edition of Lindley & Banks (supra) dealt with the English Civil Procedure Rules. But in Lindley & Banks on Partnership 17th ed (1995), para.14-22 at p.444, it is said that :

"Since a claim can no longer be defeated by the misjoinder or non-joinder of parties, it is not as important as it once was to identify the proper parties to an action brought by a form; a fortiori where the proceedings are commenced in the firm name ......"

A similar version of this passage in the 16th edition was cited with approval in Hong Kong Civil Procedure 2004 para.81/1/10 at p.1095 (and Mr Tang referred to part of the following passage as well) :

"As a general rule a suit by or against an ordinary partnership would have been defective for want of parties, unless all the partners were before the court (Lindley on Partnership, 16th ed., 1990) but now the firm may be sued without first ascertaining who all the partners are."

42. Given the aforesaid analysis based on uncontroverted legal principles and Mr Tang's acceptance that the use of the name of P Firm as the plaintiff made all 4 Co-Partners and Cheung parties to the action herein, I do not accept Mr Tang's submissions that Cheung is an absent party.

43. I note that the present application is made by the Defendants and not Cheung. I do not wish to say anything on Cheung's right as an unwilling partner to non-join himself as a co-plaintiff; it is not in issue before me. But the Defendants' position is clearly stated in paragraph 39 of Mr Tang's supplemental written submissions dated 29th December 2003 : "whether [Cheung] be join as a co-plaintiff or a defendant is not the concern of the Defendant as long as all necessary party are brought before the Court for determining the dispute between the parties" and indeed, Mr Tang cited the case of Burnside v Harrison Marks Productions, Ltd [1968] 2 All ER 286, 287F-G in support of such contention.

44. Given that Cheung is already a co-plaintiff (irrespective of whether he is so rightly or wrongly) and there is no application to strike him out as co-plaintiff, there is no basis for granting a stay of the present proceedings on the ground contended for, namely, for Cheung to be joined as a party to the action.

45. This is sufficient to dispose of D's Summons. However, in deference to the arguments made by Mr Tang and Mr Li in respect of implications arising from an unwilling partner to legal proceedings, I will consider those issues below.

(6) The Whitehead line of cases

46. On the matter of Cheung's dissent, Mr Tang referred me to paragraph 28 of the judgment in Kao Lee & Yip (a firm)'s case at p.332. There Ma J said that where proceedings are commenced by a partnership but one or more partners is unwilling to participate further, there are 3 possibilities :

(a) the unwilling party is joined as a co-plaintiff or where the proceedings are already in existence, he remains a co-plaintiff ("possibility (a)");

(b) the unwilling party is for any reason not a co-plaintiff, he may be joined as a defendant to the proceedings ("possibility (b)");

(c) the unwilling party is not joined in the proceedings at all whether as plaintiff or defendant ("possibility "c").

47. In respect of possibility (b), Ma J said that the unwilling partner becomes a defendant simply to be bound by the result of the litigation and to ensure that the plaintiff's claim is not thwarted by a lack of proper parties before the court (Kao, Lee & Yip (a firm)'s case at pp.332-333).

48. Mr Tang referred to Ma J's summary on possibility (a) above as follows :

"Normally, this obviously requires the consent of [the unwilling partner] because no one can be joined or made to be a plaintiff against his will ......"

However, Ma J went on to say as follows :

"In the case, however, of partners, the position seems to be different. Some of the authorities are of the effect that even where a partner is unwilling to be a co-plaintiff, he may be compelled by the other partners to be one, providing that an indemnity for his costs liability is given. In Whitehead v Hughes (1834) 2 C&M 318, at 319, Bayley B said :

"One of several partners has a clear right to use the names of the other partners. If they object to their names being used, they may apply for an indemnity against the costs to which they might be subjected by the use of their names."

This statement was approved by the English Court of Appeal in Tomlinson v. Broadsmith [1896] 1 QB 386, at 392 and again in Seal & Edgelow v. Kingston [1908] 2 KB 579, at 582. The reason for this rule in the case of partnerships is probably that unlike joint contractors, partners are agents of each other and in general responsible jointly to third partners : c.f. sections 7 and 11 of the Partnership Ordinance, Cap.38; Sutherland v. Gustar [1994] Ch. 304, at 310E-F. As I have mentioned what would be required in a situation where a partner is compelled to be a co-plaintiff is the provision of an indemnity for costs by the other partners. This would be a condition to his being made a co-plaintiff ......" (emphasis in italics supplied)

49. At the hearing, I referred Mr Tang and Mr Li to Tomlinson's case (supra), Seal & Edgelow's case (supra) and Sutherland's case (supra) mentioned above and to the case of Johnson v Stephens and Carter, Limited and Golding [1923] 2 KB 857 which was also referred to in Kao, Lee & Yip (a firm)'s case.

50. The correctness of the rule summarised by Ma J on possibility (a) was left open by the English Court of Appeal in cases like Johnson's case (per Atkin LJ) and Sutherland's case (supra at p.311) (see paragraph 32 of the judgment of Ma J in Kao, Lee & Yip (a firm)'s case). Ma J found it unnecessary in Kao, Lee & Yip (a firm)'s case to enter into a discussion on whether such rule established by cases like Whitehead's case (supra) still represents good law.

51. However, although the rule summarised by Ma J for possibility (a) is in contention in this case, I find, on hearing arguments from Mr Tang and Mr Li, that there is in fact fairly little dispute between the parties on the legal principles represented by the Whitehead line of cases. Mr Li clearly supported those authorities. For Mr Tang, given his stance on the alternative argument in paragraphs 35(f) and (g) above, the crux of his objection was not so much as the legal principles involved in those cases but their application to the circumstances of the present case.

52. It will be useful to have a brief review of the authorities.

53. In Tomlinson's case (supra), it was held that a solicitor employed by the managing partner of a business firm to defend an action against the firm in the firm name had authority to enter an appearance in the names of the individual partners and was not guilty of negligence in not keeping the other partners informed of the progress of the action. Rigby LJ at p.392 said that "suppose ...... that the claim had been against a customer of the firm, and a partner had said he would not allow the name of the firm to be used, still the managing partner might have said that he intended to use the name because he had a right, of which he could not be deprived, to take the proper steps to get in what was due to the firm, subject possibly to the right of the other partner, by taking proper steps, to obtain an indemnity."

54. Seal & Edgelow's case (supra) is interesting because of its facts as well as the principles enunciated. Seal and Edgelow were partners in a solicitors' business. The partnership was dissolved, and subsequently an action was commenced in the name of the firm against the defendant, who was said to have been a client of the firm, to recover the amount alleged to be due to the firm on a bill of costs. The defence to that action was that under some arrangement made with one of the partners the defendant was not liable for any costs. Edgelow did not desire that the action should be brought or proceeded with, but Seal, contending that the firm had a good claim, thought they ought to sue. Sir Gorell Barnes in his judgment at p.582 said that as Edgelow objected to the action, "Seal adopted the usual course of asserting his right to use the name of the firm for the purpose of bringing the action, and he gave Edgelow an indemnity against the costs to be incurred" (emphasis in italics supplied). Sir Gorell Barnes cited the passage from Whitehead's case (supra) referred to by Ma J in Kao Lee & Yip (a firm)'s case (supra), saying that it was clear authority for one partner of a firm to use the name of the other partner for the purpose of bringing an action to recover a debt due to the firm, on giving his partner an indemnity against costs.

55. In Johnson's case (supra), Johnson sued the other contracting party for wrongful repudiation of contract and joined his co-partner as defendant when allegedly the latter refused to join the action as plaintiff. Therefore when the action commenced, Johnson sued in his own name and joined his co-partner as co-defendant. The co-partner applied to non-join because Johnson failed to offer him an indemnity against costs if he would consent to be joined as plaintiff.

56. It was held that where one of two joint contractors refused to join as co-plaintiff in an action for breach of the contract it was, as a general rule and in the absence of special circumstances, the practice of many years to first offer him an indemnity against costs if he would consent to join as plaintiff, failing which the other co-contractor could make him a defendant. There was an exception to this rule where the dissenting contractor had in breach of his duty to the plaintiff colluded with the defendant and brought about the breach of contract complained of.

57. Atkin LJ at p.861 in Johnson's case (supra) also referred to the rule that one partner might use the names of his co-partners on his giving an indemnity if it were asked for and referred to Whitehead's case (supra) as authority for the same. It was said that in Whitehead's case (supra) the action was brought by the plaintiff partner in the names of himself and the assignees of his bankrupt partner. The action was brought against the assignees' will but they had not applied for an indemnity against costs, and in those circumstances, it was held that the plaintiff was entitled to use the assignees' names against their will. Atkin LJ said : "It was for the dissenting partner to ask for the indemnity, not for the plaintiff to offer it. I do not think it necessary to consider whether that case is law now, whether, that is to say, one partner can use his co-partner's name as plaintiff against his will."

58. In Sutherland's case (supra), several assessments to income tax were raised on a medical partnership. Disagreement arose between 1 partner and the 5 other partners resulting in the dissolution of the partnership. The other 5 partners reached an agreement with the tax inspector but the remaining partner challenged his five co-partners' claim for personal expenses. The remaining partner requested a case to be stated for the opinion of the High Court. The question was whether he was an 'appellant' within the meaning of the relevant legislation. Sir Donald Nicholls V-C in his judgment at pp.310-311 gave a good summary of the Whitehead principles, but he found they could not provide an answer to that case :

"......What is important to one partner may not matter to another. Similar divergences of interest, and differences of view about what is the best course for the partnership, can and do arise regarding other aspects of partnership business. Here, as elsewhere in the law, the courts evolved practical solutions. In the context of litigation, the courts devised procedures which protect a would-be plaintiff partner by permitting him to go ahead with court proceedings but also protect the partners who do not wish to become embroiled in the proceedings. The traditional means used to achieve this end was for the minority partner to be permitted to bring the proceedings in the name of the partnership. Every partner is an agent of the firm, a principle now enshrined in section 5 of the Partnership Act 1890 (53 & 54 Vict. C. 39). But the other partners had to be protected by an adequate indemnity.

There are many instances of this procedure being followed. For example, in Whitehead v. Hughes (1834) 2 Cr. & M. 318 Bayley B. observed that "one of several partners has a clear right to use the names of the other partners." If the others object they may apply for an indemnity against the costs to which they might be subjected by the use of their names. This was approved by Sir Gorrell Barnes P. in Seal & Edgelow v. Kingston [1908] 2 K.B. 579, 582, and by Lord Finlay L.C. in Rogriguez v. Speyer Brothers [1919] A.C. 59, 69. Those were cases of claims brought by a partnership. The same approach was applied to claims brought against a partnership firm: see Tomlinson v. Broadsmith [1896] 1 Q.B. 386, especially per Rigby L.J., at p. 392.

An alternative approach is to treat partners, so far as litigation is concerned, in the same way as other joint contractors. If one joint contractor is unwilling to join the other in pursuing a claim on the contract, the one may bring proceedings himself so long as he joins the other as an additional defendant in the proceedings. That procedure is now enshrined in R.S.C., Ord. 15, r.4(2). Rule 4(2) was introduced in 1962, but the notes to the rule in The Supreme Court Practice 1993, vol. 1, p. 240, para. 15/4/1, record that this rule embodied the previous law and practice. In Johnson v. Stephens and Carter Ltd. and Golding [1923] 2 K.B. 857, 861, Atkin L.J. referred to Whitehead v. Hughes, 2 Cr. & M. 318 and left open the question whether it was still the law that one partner can use his co-partner's name as plaintiff against his will. "

59. The principles in the Whitehead line of cases was referred to in Hong Kong Civil Procedure 2004 (supra) at para.81/1/12 at p.1095 where it is said that "where one partner commenced an action in the name of the firm against the express wishes of his co-partners, the action was stayed until the partner bringing the action had given his co-partner a full indemnity, coupled with security, against all costs, charges, or liability by reason thereof (Davey & Co. v. Alby United Carbide Factories Ltd, unreported, Coleridge J in chambers, March 19, 1914). In this case the decision in Seal and Edgelow v. Kingston [1908] 2 K.B. 579, was referred to ......"

60. The aforesaid authorities, which I have referred to as the Whitehead line of cases, suggest that in any partnership (or former partnership as in Seal and Edgelow's case (supra)), partners can diverge in their views and, in relation to legal proceedings, this means that a partner may consent to and another partner dissent from a decision to take legal action against other parties. Whitehead's case (supra) and the other cases referred to above suggested that historically, despite the unwilling partner's objection and dissent, the willing partner has the right and authority to use the partnership name (which is a convenient way of expressing the names of all partners, including the dissenting partner, at the time when the cause of action accrued) to bring the legal action. Hence, by commencing the legal action in the firm name, the willing partner compels the unwilling partner to be a co-plaintiff. This is what actually happened in Seal & Edgelow's case which involved a former partnership (as in the present case).

(7) The right to issue proceedings in the name of P Firm

61. Can proceedings be issued in the name of P Firm when Cheung dissents? On plain reading, Order 81 rule 1 of the Rules of the District Court does not expressly qualify or restrict itself to where only all partners are willing. Mr Tang was unable to cite any authority to support his contention that the willing partners must sue in their individual names where there is an unwilling partner (and thereby exclude him from being a co-plaintiff). However, Mr Tang referred me to Order 15 rule 4(2) of the Rules of the District Court which he said supports the contention that (a) no one can be compelled against his will to be a co-plaintiff and (b) Cheung should be joined instead as a co-defendant, and he therefore concluded that where there is an unwilling partner, the willing partners must sue in their individual names.

62. Order 15 rule 4(2) provides as follows :

"Where the plaintiff in any action claims any relief to which any other person is entitled jointly with him, all persons so entitled must, subject to the provisions of any written law and unless the Court gives leave to the contrary, be parties to the action and any of them who does not consent to being joined as a plaintiff must, subject to any order made by the Court on an application for leave under this paragraph, be made by a defendant." (emphasis in italics supplied)

63. Mr Tang further referred me to certain extracts from Hong Kong Civil Procedure 2004 (supra) para.15/4/12 at pp.202-203 as the legal basis for compelling P Firm to join Cheung as a co-defendant (see paragraph 40 of Mr Tang's supplemental written submissions dated 29th December 2003). Below are the fuller extracts from the learned text :

"Where two or more persons are entitled to any relief jointly, as where a contract is made with several persons jointly, all such persons must join in the action as plaintiffs, or if any of them will not join as plaintiff, he must be made a defendant. The defendant may apply to compel the plaintiff to join his co-contractor either as a co-plaintiff, if he consents, or as co-defendant, if he does not; and such application will usually be allowed, if the proposed new party is alive and within the jurisdiction ......"

"Where two persons are prima facie jointly entitled with the plaintiff to any relief to which he might be entitled in respect of loans alleged to have been made to the defendant, they have to be made to parties to the action in the absence of sufficient evidence justifying the giving of leave to the contrary, and accordingly the action will be stayed until they are so joined or until further order ......"

64. Neither Mr Tang nor Mr Li addressed me on the history of Order 81 rule 1 and Order 15 rule 4 or on the interplay of the 2 rules. However, I note that Hong Kong Civil Procedure 2004 (supra) para.81/1/1 at p.1094 stated that Order 81 "was taken from the former English RSC (Rev.) 1962, O.81, which had been taken, without any material change, from the former O.48A, which itself was introduced by RSC 1891 ......". Therefore the Whitehead line of cases referred to above all came after the introduction of the English equivalent of Order 81 of the Rules of the District Court which expressly permitted partners to sue in the firm name. The English equivalent of Order 15 rule 4(2), which was introduced in 1962, was said to embody the previous law and practice (Sutherland's case (supra) at p.311 and The Supreme Court Practice 1993, Vol.1, para.15/4/1 at p.240).

65. Having considered the above matters, I do not see that, as a matter of law, where there is an unwilling partner, the willing partners must sue in their individual names and must make the unwilling partner as a co-defendant. I do not for any moment deny that in appropriate circumstances (eg where the willing partners had a substantive cause of action against the unwilling partner), such approach can be adopted and the court ultimately retains an inherent jurisdiction to regulate its own procedures in respect of parties. Yet, as a matter of broad application vis-à-vis claims for or against third parties, I also see no cogent reason to disturb the long-standing practice of allowing partners to sue in the firm name even when some partners are unwilling or have become unwilling (subject to the issue of indemnity).

66. It will be noted that Order 15 rule 4(2) is subject to the provisions of any written law and is said to embody the previous law and practice.

67. Further, although Ma J left open the Whitehead principles in Kao, Lee & Yip's case, this case illustrates that it is not a necessary matter of law that the unwilling partner must be made a co-defendant. In that case, the action was issued in the firm name of "Kao, Lee & Yip (a firm)". Mrs Lam was a willing partner when the action commenced. She has since retired from the firm and was unwilling to pursue the litigation. In short, she became an unwilling former partner. It had been suggested that she should be made a co-defendant but this argument was abandoned. Ma J also did not consider it appropriate at that stage to strike out Mrs Lam as a plaintiff. The remaining willing partners submitted that she should remain as plaintiff (as a result of suing in the firm name) subject to the protection of an indemnity for costs. The true controversy in that case was whether the indemnity should be fortified. Ma J did grant orders to fortify the indemnity. The action eventually proceeded to trial on that basis, with the plaintiff still suing in the name of "Kao, Lee & Yip (a firm)" (and without turning Mrs Lam into a co-defendant) and final judgment was given on 2nd April 2003 by Ma J (HAC8847/1993, unreported). This suggested that legally speaking, even where there is an unwilling partner, the willing partners can continue proceedings in the firm name and it is not a must that the unwilling partner be struck out as plaintiff and made a co-defendant.

68. In the newly published Hong Kong Civil Procedure 2004 (see paragraph 59 above), the learned authors still referred to the principle (without disapproval) that one partner can commence an action in the firm name against the wishes of the unwilling partner subject to the provision of an indemnity. If the unwilling partner cannot be compelled to become a co-plaintiff by the willing partner by issuing proceedings in the firm name, then the whole issue of an indemnity for costs as a countervailing protection will be redundant and meaningless.

69. Further, partnerships have historically been treated differently from other joint contractors because, in contra-distinction with other joint contractors, partners are agents for each other and the firm, and they are therefore able to bring proceedings even in the name of the unwilling partner. To suggest that the use of the firm name in legal proceedings in the pursuit of a debt due to the partnership would require the total consensus of all partners fly in the face of the nature of a partnership (particularly, as it is at the insistence of a third party) and would have much wider ramifications than the confines of the circumstances of this case. I have not been addressed on these matters and it seemed to me inappropriate to over-turn the long-standing practice without full consideration of these matters.

70. I note further that the facts of Sutherland's case do not turn on the Whitehead principles. In both Burnside's case (supra) and Johnson's case (supra), the unwilling co-contractor was made a defendant where the willing co-contractor sued in his own name (not in the firm's name). On these facts, the ratio of these cases do not detract from the principles discussed above.

71. In the circumstances, had it been necessary, I have come to the conclusion that the present proceedings are properly commenced in the name of P Firm despite Cheung's dissent and by virtue thereof, Cheung is already a party to the action. I will deal with the matter of indemnity below.

(8) Indemnity

72. There is also Mr Tang's alternative argument that if Cheung's name is used (despite his unwilling stance), the 4 Co-Partners must provide adequate indemnity for costs to Cheung as a prerequisite. In the present case, neither party adduced (more importantly, the Defendants did not adduce) any evidence as to whether there was failure or refusal by the 4 Co-Partners to offer Cheung any indemnity for costs or whether Cheung had ever asked for such indemnity. Johnson's case (supra) made it clear that it is for the dissenting partner to ask and not for the willing partner to offer the indemnity.

73. In any event, the issue of an indemnity is not a matter of concern for the other party to the proceedings; it is a matter between the willing and dissenting partners. Although Mr Tang in his oral submissions complained of the lack of an indemnity for costs by the 4 Co-Partners in favour of Cheung, he submitted in paragraph 42 of his supplemental written submissions dated 29th December 2003 that it was not the Defendants' request that P Firm should first make an offer of indemnity to Cheung before adding him as a co-plaintiff or a co-defendant. He further accepted that Lord Denning MR said in Burnside's case (supra) that the other party (the defendant in that case) "cannot insist on the indemnity or the offer of it : for it is no concern of his. All that he can require is that both the persons, with whom he made his contract, are before the court. So long as they are both there, even if one is a defendant, he cannot complain; and they are both present in this case, Mr. Burnside as plaintiff and Mr. Templeton as a defendant" (see also Hong Kong Civil Procedure 2004 (supra) para.15/4/12 at p.203). In that case, Mr Burnside chose to sue in his own name and joined Mr Templeton as a co-defendant. But, as explained above, Cheung is already a party to the present action by virtue of it having been commenced in the name of P Firm.

(9) Miscellaneous matters

74. Mr Tang in paragraph 33 of his supplemental written submissions dated 29th December 2003 said that if Fung/P Firm could sue the Defendants on behalf of the former partnership without Cheung's consent, then Cheung (without the consent of the 4 Co-Partners) could also settle the matter with the Defendants on behalf of the former partnership. However, Mr Tang in his oral submissions at the hearing confirmed that the Defendants are not relying on the settlement of the claim by Cheung on behalf of the former partnership for the purpose of the application for stay of proceedings under D's Summons.

75. Mr Li in his written submissions suggested that D's Summons was a deliberate attempt engineered by Cheung in the back to stifle or delay P's claim against the Defendants. P Firm filed no affidavit evidence and Mr Tang vigorously complained against the bare assertions in Mr Li's written submissions which he said were not grounded on evidence. Mr Li informed the court at the hearing that he abandoned these arguments for the purpose of the hearing.

(10) Conclusion

76. D's Summons is therefore dismissed. In the circumstances, I also make a costs order nisi that the Defendants do pay P Firm's costs of D's Summons (including all costs reserved in respect of D's Summons) to be taxed if not agreed with certificate for counsel. Mr Tang had indicated at the hearing that he had no objection to certificate for counsel being granted if the Defendants were awarded costs of the application.

Summons for directions

77. As regards P's Summons, I grant an order in terms of the 1st to 5th paragraphs of the summons. As the Defendants' application for stay of the present proceedings failed, there is no reason to say that P's Summons was premature. Further, even if it were premature, a simple and timely response to P Firm indicating consent to the directions sought without prejudice to the Defendants' application for stay of proceedings would have obviated the need for P's Summons. Since the matter of costs has been fully argued before me, I therefore order that the 1st and 2nd Defendants do pay P Firm's costs of P's Summons (including all costs reserved in respect of P's Summons) to be taxed if not agreed.