XCHRX THE OWNERS OF CARGO LATELY LADEN ON BOARD THE "C.R. POINTE NOIRE" v. THE OWNERS OF THE SHIP "C.R. POINTE NOIRE" AND ANOTHER

1988, Folio AJ165

H E A D N O T E

PRACTICE AND PROCEDURE - COSTS - PARTY - INSURANCELAW - INSURER EXERCISED RIGHT OF SUBROGATION - ACTION INSTITUTED IN THE NAME OF INSURED - ACTION DISMISSED - DEFENDANTS SEEKING COSTS OF THE ACTION AGAINST THE INSURER - IS THE INSURER A PARTY TO THE PROCEEDING - CAN THE INSURER BE JOINED AS A PARTY OR THIRD PARTY FOR THE PURPOSE OF RECOVERING COSTS AGAINST IT.

1988, Folio AJ165

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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(Admiralty action in rem against:
the ship "C.R. POINTE NOIRE")

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J U D G M E N T

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Nature of the Application

1. By a summons dated 14th January 1994 the 1st and 2nd Defendants applied to have the action dismissed on the ground that the Plaintiff had been guilty of prolonged or inordinate and inexcusable delay in proceeding with this action, and that the Plaintiff had failed to comply with the order of Barnett J. dated 26th February 1992 requiring the Plaintiff to furnish security for costs. The summons further sought to join National Insurance Company Limited ("National Insurance") as a 3rd Defendant and for an order directing National Insurance to pay the cost of this action to the 1st and 2nd Defendants.

2. On 26th January 1994, Barnett J. ordered that the action be dismissed and the Plaintiff to pay the Defendants costs of this action. The other reliefs sought in the summons were adjourned and they are now restored before me.

Background

3. By way of background, the claim in this action was brought by the Plaintiff as owners of cargoes shipped on a vessel "C.R. Pointe Noire" ("the vessel") against the 1st and the 2nd Defendants. The 1st Defendant was the owner of the vessel and the 2nd Defendant was asserted to be the demise charterer of the vessel. The Plaintiff was claiming short delivery of the cargoes. According to Andrew Wilding, solicitor for National Insurance, one Creative Style Enterprise ("Creative") of Hong Kong sold the goods to Societe Sapna in Lome, Togo. The sale was on a CIF basis and Creative was obliged to insure the goods. Creative took out a contract of insurance with National Insurance. After the goods arrived in Lome, Togo, some goods were found to be missing. The receiver of the goods namely Societe Sapna presented an insurance claim to National Insurance. National Insurance appointed Ashby Recoveries Limited to investigate the circumstances of the loss and advise them on the liability of the owners of the vessel.

4. National Insurance subsequently paid the insurance claim that was presented to them by Societe Sapna. Societe Sapna authorised the seller of the goods, namely, Creative to collect the cheque in payment of the insurance claim and authorised them to sign the letter of subrogation in favour of National Insurance. By a letter dated 20th May 1991 Sinclair Roche, the solicitors for National Insurance and the Plaintiff informed the Defendants' solicitors that,

"In exercise of their rights of subrogation National Insurance instructed Ashby Recoveries (at that time a subsidiary of Toplis and Harding) to recover the monies paid under the terms of the insurance policy. Ashby Recoveries in turn instructed us to conduct legal proceedings for recovery of the money. We trust that authority is no longer an issue."

5. The writ of summons in this case was issued on 11th November 1988. The trial was listed for hearing on 16th March 1992. It was adjourned by agreement between the parties on 7th March 1992.

6. By a court order of the First Instance and First Class Court of Lome dated 16th November 1992 the Plaintiff in this proceedings namely Societe Sapna was declared to be in judicial liquidation. According to Mr Wilding, on 24th March 1992 he received a telephone call from Mr Davidson of the Defendants' solicitors in which he informed him that the Plaintiff was in liquidation. Mr Wilding discussed the matter with Maitre J.K. John Kokou, a practitioner of Togo law working in Lome, Togo and Mr John Kokou advised him that according to the law of Togo a judicial liquidation has no effect whatsoever on a claim brought by an insurer pursuant to a right of subrogation where the letter of subrogation was executed prior to the liquidation.

Is National Insurance a party to the proceedings?

7. While the summons initially seeks to join National Insurance as a party for the purpose of recovering cost, Mr Kerr, Counsel for the Defendants, argued that it was in fact not necessary to join National Insurance as a party for the purpose of recovering the costs of the action against it because National Insurance is already a party to the proceedings.

8. The jurisdiction for awarding cost in Hong Kong is set out in s.52A of the Supreme Court Ordinance ("the Ordinance") which is as follows:

"(1) Subject to the provisions of rules of court, the costs of and incidental to all proceedings in the Court of Appeal in its civil jurisdiction and in the High Court, including the administration of estate and trust, shall be in the discretion of the Court, and the Court shall have full power to determine by whom and to what extent the costs are to be paid.

(2) Subject to specific provision made in this or any other Ordinance (other than subsidiary legislation) nothing in subsection (1) shall authorise an award of costs against a person who is not a party to the relevant proceedings."

9. By reason of s.52A (2) of the Ordinance the position in Hong Kong is different from that in England, in that the courts here cannot order costs against a party who is not a party to the proceedings. In England, Section 51(1) of the Supreme Court Act 1981 ("the Act") provided that:

"Subject to the provisions of this or any other Act and to rules of court, the costs of and incidental to all proceedings in the civil division of the Court of Appeal and in the High Court, including the administration of estates and trusts, shall be in the discretion of the court, and the court shall have full power to determine by whom and to what extent the costs are to be paid."

10. The House of Lords in Aiden Shipping Co. Ltd v. Interbulk Ltd [1986] 1 A.C. 965 overruling previous decisions to the contrary, held that because of the broad words of the section there is no implied limitation that costs may only be ordered to be paid by persons who are parties to the relevant proceedings. In Symphony Group Plc v. Hodgson [1993] 3 W.L.R. 830, the Court of Appeal set out the considerations to be applied in awarding costs against a non-party.

11. Mr Kerr argued that National Insurance is already a party to the present action by virtue of the meaning of "party" in s.2 of the Ordinance. The term "party" under the section includes every person served with notice of or attending any proceeding, although not named on the record.

12. The Defendants submitted that there was no effective answer to the submissions that National Insurance is a party to the proceedings by virtue of the definition section. It is submitted that term "party" should not be construed to mean a party on the record, to do so would give a narrow, restrictive and unnatural meaning to the Ordinance. This would result in injustice and potential difficulties for the court. For example, National Insurance's counsel has argued the matter before the court and if their arguments are correct, the court has no jurisdiction to order costs against National Insurance. It is only just and proper that a party who resists or opposes an application before the court should be on risk for costs.

13. It was submitted on behalf of the Defendants that the Plaintiff in this action was only a nominal Plaintiff and took no real part in the proceedings. At all relevant times National Insurance had the conduct of the proceedings. It would have taken the benefit of the proceedings in the event that the proceedings were successful. It was always envisaged and represented by the solicitors for National Insurance that they would put up security for costs and indeed they made representations to this effect to the court when the order for security was made against the Plaintiff. The order of Barnett J. was that the security for the 1st and 2nd Defendants' costs of this action in the sum of HK$100,000 was to be provided by means of a letter of guarantee or written undertaking by National Insurance. The first time the Defendants became aware that National Insurance did not intend to put up security was when they failed to comply with the order. The action had been dismissed firstly as a result of the inordinate delay of National Insurance in conducting the proceedings and secondly as a result of the failure to comply with the order for security for costs.

14. Mr Kerr argued that the merits of the case require an order for cost of the action to be made against National Insurance because in effect the proceedings were conducted by National Insurance. It was National Insurance who had agreed to furnish a guarantee for the security for costs and it is only right that it should be liable for costs. He referred to me a number of cases such as Singh and another v. Observer Limited [1989] 2 All E.R. 751 in which the court held that it had power to order a party who was financially supporting a plaintiff's action without himself having any interest in the litigation to pay the defendant's cost if the action fails since it would be contrary to public policy and justice to restrict the operation of s.51 of the Act which conferred on the court full power to provide by whom and to what extent the costs are to be paid by imposing a limitation on the court's power to make a cost order against the maintainer of an action, particularly in view of the fact that it would be unjust if an action was kept going purely by outside financing of persons who had no interest in the litigation and who would otherwise not be liable for any of the costs if the action fail.

15. MacPherson J. referred to the decision of Lord Denning in Orme v. Associated Newspaper Group Limited [1980] C.A. Transcript 809 in which it was stated that,

"...... The result of it all is that: 'it is perfectly legitimate today for one person to support another in bringing or resisting an action (as by paying the cost of it) provided that he has a legitimate and genuine interest in the result of it and the circumstances are such as reasonably to warrant his giving his support', and this is an important addition, 'provided always that the one who supports the litigation, if it fails, pays the costs of the other side.'"

MacPherson, J. further stated that,

"Insurance companies are subrogated to their insured's rights and both they and unions invariably paid the cost of unsuccessful litigation. Otherwise injustice would certainly result and I do not believe that if, for example, unions decided simply to refuse to pay cost in these cases, the court would not step in."

16. Mr Kerr further referred me to the recent case of Regina v. Darlington Borough Council, ex parte Association of Darlington Taxi Owners and Another (No. 2) (Judgment April 12, 1994) in which the court held that it had a discretion in exceptional cases to award costs against individual members of an association although they were not parties to the proceedings as the members at the time of the making of the application for leave for judicial review in that case were the instigators of it and financed it. It clearly fell within the exceptional category of cases which it was appropriate to make an order for costs against persons who were not parties to the action.

17. Mr Chua, Counsel for National Insurance, argued that the term "party to the proceedings" under s.52A(2) should not include someone who is served with the notice of proceedings or attended the proceedings. The term party should confine to a party on the record. As National Insurance is not a party on the record, it is not a party to which a costs order can be made against. He further argued that if someone who is served with the notice of proceedings or attend the proceedings is a party, then it would render otiose provisions like joinder of parties under Order 15 Rule 6.

18. Mr Chua further submit that the Defendants had throughout the proceedings looked towards the Plaintiff for the payment of costs, it had applied for security of costs against the Plaintiff and it is not right that they should now turn around and seek costs against National Insurance. In any event he argued that costs should not be made against National Insurance. National Insurance or Ashby Recoveries Limited had never been informed by the Defendants that they

19. Mr Chua referred me to the case of Moon v. Atherton [1972] 2 QB 435 in which a distinction was drawn between a "party" and "a party to the proceedings" to which an order for costs could be made. In that case a representative action was begun in the name of "M on behalf of herself and the tenants of the block of flats ........ except CER." The defence was filed but later on M and nine of the other tenants decided to discontinue the action. The remaining tenant A wished to go on but as any new action begun by her in her own name would have been statute barred, she applied for leave to amend the statement of claim by substituting herself as the named Plaintiff in place of M and deleting all reference to the other tenants. Lord Denning M.R. held that,

"In a representative action, the one person who is named as Plaintiff is, of course, a full party to the action. The others who are not named but whom she represents are also parties to the action. They are all bound by the eventual decision in the case. They are not full parties because they are not liable individually for the cost. That was held by Eve J. in Price v. Rhondda Urban District Council [1923] W.N.228. but they are parties because they are bound by the result.

What then is to happen when the named Plaintiff decides to withdraw? It seems to me that when it is open to anyone of those whom she represents to come forward and take the place of the named Plaintiff. The case comes within O.15, r.6 which enables a party to be added whose presence is necessary. It also comes within O.20, r.5(1) which says:

'The court may at any stage of the proceedings allow the Plaintiff to amend his writ, or any party to amend his pleading, on such terms as to costs or otherwise as may be just and in such manner (if any) as it may direct.'

In those rules the word "party" is used in the same sense as it is used in the definition in s.225 of the Supreme Court of Judicature (Consolidation) Act 1925, which says that:

'Party includes every person serve notice of or attending any proceeding, although not named on the record.'

So it includes one of the persons represented even though not named in the writ."

20. I have a chance of looking at Price v. Rhondda Urban District Council after the hearing. In that case an action was brought by E.P. suing on behalf of herself and 57 other married woman teachers against the Defendant Council. The action was dismissed with costs to be taxed and paid by E.P. and liberty was given to the Defendant to apply as to whether the order for payment of costs should bind not only the Plaintiff but all those persons on whose behalf she was expressed to sue. Eve, J.held that the teachers whom the Plaintiff represented had actively supported the litigation brought by the Plaintiff on their behalf, and had contributed towards the cost of carrying on the action. They were thus before the court, and were bound by any decision which the court pronounced, but they were not in fact made parties to the action. In the circumstances, the court had no jurisdiction to make the order for the payment of cost by them. The case came within the decision in Scott v. Pascall (1847) 15 Sim. 559 and the motion would be dismissed with costs.

21. In the light of Aiden Shipping Ltd (supra) the observation in these 2 cases about the court having no jurisdiction to order costs against the tenants or teachers who were not named as parties probably could no longer stand.

22. In Aiden Shipping Ltd (supra) Lord Goff had the opportunity of commenting on the meaning of the term "party". At page 979 of the judgment he held that,

"Furthermore, the chosen limitation is that courts should only be free to award costs against a person who is a party to proceedings. That word has been defined both in the Act of 1925 and in the Act of 1981. In the former Act, a party is defined as including 'every person served with notice of or attending any proceeding, although not named on the record' (see section 225); in the latter Act, a party, in relation to any proceedings, is defined as including:

'any person who pursuant to or by virtue of Rules of Court or any other statutory provision has been served with notice of, or has intervened in, those proceedings' (see section 151(1)).'

Both definitions are expressed not to be applicable if the context otherwise requires. It is plain, therefore, that, in the relevant statutes, the word 'party' has been given a technical meaning. It has moreover been changed in the Act of 1981; and, since it includes a person upon whom notice of the relevant proceedings has been served pursuant to or by virtue of rules of court or any other statutory provision, it is so wide that it scarcely seems to provide an apt criterion upon which to found a limitation upon the jurisdiction to award costs. In any event, had the legislature thought it right to limit the jurisdiction under section 51(1) of the Act of 1981 in this way, it would have been very easy to achieve such a result by drafting the concluding words of the subsection as follows:

'.... and the court shall have full power to determine by which party to the proceedings and to what extent the costs are to be paid.'

I refer to the passage to show that Lord Goff recognized that the definition of party is wide and the definition is expressly stated not to be applicable if the context otherwise requires. However, as the issue in that case is different, the passage does not assist me in the construction of s.52A(2).

Does National Insurance come within s.2 of the Ordinance

23. The next question is whether National Insurance is someone served with notice of the proceeding or attending the proceeding. The proceedings were of course instituted and conducted by National Insurance in exercise of its right of subrogation. But as stated in MacGillivray & Parkington on Insurance Law 8th Edition, Para 1193, the cause of action for damages remains in the assured, and the insurer subrogated to the assured's rights, brings the action in the name of his assured, whose action it is.

24. Section 2 refers to someone served with notice of and attending proceedings other than the party on record. The party on record will of course serve and be served with the documents in the proceedings or attending the proceedings in its capacity as a party on record. Section 2 covers those persons who are not parties on record but nonetheless are served with notice of and attending proceedings. In my view, such persons must be served with notice of or attending proceedings in their own capacities. Other than the application before me, National Insurance was not served with notice of proceedings in its capacity as an insurer of the Plaintiff nor had it attended any of the proceedings in its capacity as an insurer of the Plaintiff. The service of the court documents was on the Plaintiff and the attendance in the proceedings was that of the Plaintiff whose action it was. In Wilson v. Raffalovich (1881) Vol. XII QBD 557, an action was brought in the name of the assured by an insurer exercising its right of subrogation. Jessel, M.R. held that,

"They (i.e.the assured) are the plaintiffs on the record, and they must be taken to have instructed the solicitors and counsel who appear on the present occasion ...... As long as these plaintiffs are the plaintiffs on the record, they must be taken to be the parties conducting the litigation......"

25. I find it difficult, as a matter of principle, to hold that in respect of the action, National Insurance falls within the category of persons covered by s.2. As National Insurance does not come within the ambit covered by s.2, I am unable to find that it is a party to the proceedings to which an order for costs of the action can be made under s.52A of the Ordinance.

26. I will now deal with the alternative basis in which the Defendants seek to recover the costs against National Insurance.

Joinder of National Insurance as a party for the purpose of recovering costs

27. If National Insurance is not a party to the proceedings, a jurisdictional basis must first be established against National Insurance before an order for costs can be made against it. Mr Kerr submitted that National Insurance can be joined as a party to the proceedings and an order for cost can then be made. In support of his submission he relied on the case of The W.H. Randall [1928] P.41. In that case, the Plaintiff's barges, lying in barge rows, were damaged by being run into by the sailing barge W.H. Randall shortly after she had been in collision with the steam ship Anjou. The owners of the W.H. Randall commenced proceedings against the owners of the Anjou in respect of the damage to the W.H. Randall but both the W.H. Randall and the Anjou threw the blame on each other when written to by the Plaintiffs in respect of the damage to the barges. Accordingly, the Plaintiffs issued a writ against the owner of the W.H. Randall and obtained an undertaking for bail. A few weeks later, the owners of the Anjou admitted liability both for the collision with the W.H. Randall and for the collision with the barges, but they declined to pay the costs of the Plaintiffs' action against the owners of the W.H Randall on the ground that, as there was no doubt that either the Anjou or the W.H. Randall was liable, the Plaintiffs ought to have waited to abide the result of the litigation between the respective owners of the W.H. Randall and the Anjou. To get their cost, therefore, the Plaintiffs obtained an order from the Assistant Registrar adding the owners of the Anjou as Defendant to the action already instituted against the owners of the W.H. Randall. On appeal, the single judge reversed the order. From that decision the Plaintiffs appealed to the Court of Appeal. Atkin L.J. at page 45 of the judgment held that,

"The owners of the Anjou certainly cannot complain of the plaintiffs issuing their writ against the owners of the W.H. Randall in view of the letter written on behalf of the owners of the Anjou in which it was said that there appeared to be no question of the liability of the W.H. Randall for the collision. If the plaintiffs had done that which seems to me to be the ordinary practice on the common law side, they would have joined the W.H. Randall and the Anjou as defendants, and the Anjou would have incurred costs at once by reason of the issue of the writ and having to give bail and so forth. It is clear from this that Anjou would have incurred cost had the writ been issued against Anjou at the beginning of the proceedings."

"I have no doubt that the proper order, if the action had been properly constituted should have been an order which would have protected the Plaintiffs in respect of the cost of the action they had quite reasonably brought against the W.H. Randall. It appears to me quite impossible to suggest that the Plaintiffs are bound to stand by while third parties discuss the question as to who is responsible for the damage to the Plaintiffs. The Plaintiffs are entitled from the beginning to control that part of the litigation and to take steps, by the proper legal procedure, to see that they will be compensated as soon as they can. In my opinion, therefore, the Plaintiffs had a right to have the owners of the Anjou added for the purpose of getting an order for cost, and it would appear that the only way to get that order is by making the owners of Anjou party to the action already commenced against the owners of the W.H. Randall."

At page 46 of the judgment, Atkin L.J. had this to say,

"The proper course is to join both parties in the alternative in rem in one action. If that is right, ought not the owners of the Anjou to be joined for the purpose of enabling the Plaintiffs to assert the right to an order for cost against them. I think the owner of the Anjou ought to be joined. I think the principle comes within that laid down in Order XVI., r.11 : 'No cause or matter shall be defeated by reason of the misjoinder or non-joinder of parties,' and while it is quite true that this is not a question of original liability but of liability for costs incurred by reason of the conduct of the defendants, I think it comes within the same principle."

Eve J. at page 47 of the judgment held that,

"It appears to me that we must read r.11 as a whole. So read it is obvious that its object was to prevent a multitude of actions or any injustice by reason of non-joinder of parties. When one comes to investigate the facts of the case it appears that there is a matter on which the plaintiffs are entitled to have the decision of the court; and it is quite obvious that the decision cannot be arrived at in this proceedings in the absence of the owners of the Anjou. In the circumstances a state of things has arisen which I think entitle the plaintiffs to have these defendants added."

28. I do not think that the case of W.H. Randall can be used as a general proposition that one may join a party simply for the purpose of recovering costs against it. One only needs to look at the case itself to see that it does not provide such a wide proposition. It is accepted that in that case the question is not one of original liability but of liability for costs incurred by reason of the conduct of the owners of the Anjou, but the Plaintiffs actually had a cause of action against the Anjou.

29. In the present case there is simply no cause of action between the Defendants and National Insurance. As stated in MacGillivray and Parkington on Insurance Law, 8th Edition, Para 1193, the cause of action for damages remains in the assured, and the insurer subrogated to the assured's rights, brings the action in the name of his assured, whose action it is. In the present case the action is that of the action of the cargo owners, i.e. the Plaintiff and not National Insurance, the subrogated insurer. In Para. 1194 it was further stated that an insurer, who is the defendant in proceedings brought by a person against whom the assured had a cause of action, cannot counterclaim in those proceedings even though he is subrogated to the rights of the assured. Judgment must be entered in the name of the nominal plaintiff, the assured, and the defendant will obtain a good discharge only if he pays the assured, not if he pays the insurer.

30. Wilson v. Raffalovich [1881] Q.B.D. Vol.Vll 553 is an illustration of the principles. Goods were shipped by an insured having been lost at sea. The underwriters who had insured the cargo paid the insured for the total loss and then commenced an action against the ship owners in the name of the insured to recover the value of the goods. An order for discovery was made against the plaintiff. The solicitors for the underwriter deposed that the members of the firm of the insured were abroad and would not give any further discovery and that the real plaintiff had done all they could do to comply with the order. Brett, L.J. held that,

"The underwriters are, in the sense in which the phase is always used, the real plaintiffs, that is, they are the persons instructing the solicitors, the persons paying for the action, the persons to benefit by the action, and persons to lose by the action if it is lost; but in point of law they are not the plaintiffs, the plaintiffs on the record being the only persons who can be recognised as plaintiffs. ........ It is the misfortune of the real plaintiffs that, being obliged to bring the action in the name of the parties to the contract who are aboard, they cannot get those persons, in whose name they are bound to sue to obey the procedure of the court. It is their misfortune but it may be a misfortune without a legal remedy. The order that the plaintiffs on the record should make the further answer is a proper order, they have not made the answer, ...."

31. It was argued on behalf of the Defendants that the proper plaintiff in this case should be National Insurance because the subrogation receipt dated 6th May 1988 and signed by Creative in favour of National Insurance was in the nature of an assignment. The subrogation receipt stated that,

"In consideration of you settling by a payment of US$20,568.67 a claim on the undermentioned goods insured with you under your Policy Number 4301/C87/37287 I/We hereby assign transfer and abandon to you all my/our right title and interest in and to the said goods and the proceeds thereof (to the extent provided by the law) and all rights or remedies against any person or persons whatsoever in respect thereof."

32. It is stated in Paragraph 1193 of MacGillivray that if the assured has made an express assignment of his rights to the insurer, the cause of action has vested in the insurer who shall exercise in its own name the rights originally belonging to the assured.

33. The Defendants further relied on s.9 of the Law Amendment and Reform Consolidation Ordinance which deals with the assignment of debts or chose in action.

34. National Insurance, however, argued that the Defendants had not alleged that the notice of the assignment had been given to the Defendants as required under s.9. In any event it maintained that any assignment would be void through champerty and maintenance as it is not possible to assign a mere right of action.

35. I do not see how this point could assist the Defendants at this stage even assuming that the suborgation receipt was in truth an assignment and that the proper party to institute the proceedings should be National Insurance instead of the Plaintiff. The Plaintiff's right or capacity to sue in this action had not been previously challenged and as the action has by now been dismissed, I just could not see how this point could assist the Defendants.

Basis for joinder of party

36. The Defendants could only join National Insurance as a party if the situation is within the ambit of Order 15, r.4 and Order 15, r.6.

37. Under Order 15, r.4 (1) a party may be joined as a defendant when -

(a) if separate actions were brought by or against each of them as the case may be where some common question of law or fact would arise in all the questions, and

(b) all rights to relief claimed in the action (whether they are joined, several or alternative) are in respect of or arise out of the same transaction or series of transactions.

38. Under Order 15, r.6 any of the following persons may be ordered to be added as a party namely -

(i) Any person 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 matters may be effectually and completely determined and adjudicated upon, or

(ii) Any person between whom and any party to the cause or matter there may exist a question or issue arising out of or relating to or connected with any relief or remedy claimed in the cause or matter which in the opinion of court, it would be just and convenient to determine as between him and that party as well as between the parties to the cause or matter.

39. In the present case I am not satisfied that the fact situation falls within any of the provisions of these two rules. Reference can be made to the case of The Result [1958] P.174. In that case Nello Simoni Ltd ("Nello") agreed to buy from the plaintiffs oranges. The plaintiffs under a bill of lading shipped only part of the oranges on board the vessel "The Result". On arrival of The Result in the United Kingdom, the defendants who were owners of The Result without the production of the bill of lading or the authority of the plaintiffs and in return for and in consideration of an indemnity whereby Nello agreed to indemnify the defendants against all consequences of delivery, delivered the oranges to Nello who claimed that the property therein had passed to them. The plaintiffs commenced an action in rem against the owner of The Result, claiming damages for breach of the contract of carriage under the bill of lading in that the defendants delivered the goods, the property of which had remained in the plaintiffs, without the production of the bill of lading or the authority of the plaintiffs, and alternatively damages for conversion. The defendants served a third party notice on Nello claiming an indemnity in the event of their being held liable to the plaintiffs. Nello applied under RSC Order 16, r.11 for an order that they be joined as co-defendant in the action so that they would be in a position to counterclaim against the plaintiffs claiming damages for breach of the contract of sale. The Registrar ordered that Nello be joined as a co-defendant. The plaintiffs appealed against the order of the Registrar joining Nello as a co-defendant.

Order 16, r.11 was as follows:

"No cause or matter shall be defeated by reason of the mis-joinder or non-joinder of parties, and the court may in every cause or matter deal with the matter in controversy so far as regards the rights and interest of the parties actually before it. The court or a judge may, at any stage of the proceedings either upon or without the application of either party, and on such terms as may appear to the court or a judge to be just, order ..... that the names of any parties, whether plaintiffs or defendants, who ought to have been joined, or whose presence before the court may be necessary in order to enable the court effectually and completely to adjudicate upon and settle all the questions involved in the cause or matter be added ..... every party whose name is so added as defendant shall be served with a writ of summons ..... and the proceedings as against such party shall be deemed to have begun only on the service of such writ ...."

Willmer J. held that the only reason which makes it necessary to make a person a party to an action is so that he should be bound by the result of the action, and the question to be settled therefore must be a question in the action which cannot be effectually and completely settled unless he is a party. At page 184, he, held that,

"In these circumstances, in my judgment, the third party's (i.e. Nello's) application to be added as defendants must fail, because it is not shown that the cause or matter - i.e., the dispute arising in relation to the plaintiffs' claim - is liable to be defeated by the non-joinder of the third party as defendants, nor is it shown to my satisfaction that the third party are persons who ought to have been joined as defendants in the first instance, or that their presence before the court, as defendants, is necessary to enable the court effectually and completely to adjudicate upon and settle all questions involved in the cause or matter, within the meaning of the rule. I do not think that upon any view it can be said that the third party are persons who ought to have been joined as defendants in the first instance."

At page 185, he held that,

"I am dealing with this matter as a question of jurisdiction. Jurisdiction depends on the terms of the rule, and not upon what I may or may not think would be a convenient course in all the circumstances."

40. What Willmer J. stated in The Result applies equally to this case. First of all it is not shown that the cause or matter, i.e. the dispute arising in relation to the Plaintiff's claim is liable to be defeated by the non-joinder of National Insurance as a defendant. Secondly it is not shown that National Insurance is a person who ought to have been joined as a defendant in the first place. Thirdly, it is not shown that National Insurance's presence before the court as a defendant is necessary to enable the court effectually and completely to adjudicate upon and settle all questions involved in the cause or matter.

41. National Insurance also argued that the claim by the Plaintiff is by now time barred and that a party should not be joined after the limitation period. I do not wish to express my view on this matter because I have decided that on a matter of jurisdiction, National Insurance can not be joined as a Defendant.

Third Party proceedings

42. The Defendants as an alternative seeks to join National Insurance as a third party under Order 16. The intention of Order 16 is to prevent multiplicity of action and to enable the court to determine the dispute between the parties in one action, and secondly, to prevent the same question from being tried twice with possibly different results. The basis upon which a person can be joined as a third party is set out in Order 16, r.1. Again, I do not see how the fact situation would fall within the ambit of Order 16, r.1(1). Further as I understand the position, the Defendants are not seriously pursuing an order under Order 16, r.1. in the event that National Insurance could not be made a party under Order 15.

Conclusion

43. The 1st and 2nd Defendants' application is refused. National Insurance is to have the cost nisi of this application against the 1st and 2nd Defendants.

Comment

44. If there is any jurisdictional basis upon which an order for costs can be made against National Insurance, I am satisfied that an order for costs should be made against it. It is accepted that the cause of action remains in the Plaintiff and not in National Insurance. However, National Insurance funded the proceedings and it would have taken the benefit of the proceedings in the event that the proceedings were successful. While the liquidation of the Plaintiff was not something within its control, by bringing the proceedings in the name of the Plaintiff, it exposed the Defendants to the risks of costs which they now have no prospect of recovering. While the Defendants had looked towards the Plaintiff to put up the security for costs, National Insurance had in fact agreed to put up the security by way of a letter of guarantee which it had since defaulted in furnishing.

45. However, until such time as the law in Hong Kong is changed, so that an order for costs can be made against a non-party, I am regret to say that the Defendants would be without remedy against National Insurance.