BRAND FARRAR BUXBAUM LLP v. SAMUEL-ROZENBAUM DIAMOND LTD AND ANOTHER

CACV 272/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 272 OF 2004

(ON APPEAL FROM HCA 5191 OF 1998)

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Reasons for Judgment

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Hon Cheung JA (giving judgment of the court) :

1.  These are the reasons of our judgment given on 15 March 2003.

Facts

2.  This is an appeal against the judgment of Chung J.

3.  On 1 April 1998, the plaintiff commenced action against the defendants.  Judgment was entered against the defendant on 18 March 2000.

4.  In order to enforce the judgment, a writ of fieri facias was executed by the bailiff.  The bailiff seized, among other things, property (in the form of diamonds) belonging to the claimant.  The bailiff issued an interpleader application.  Sakhrani J. ordered an issue to be tried on the ownership of the property.  Shortly before the trial of the issue, the plaintiff agreed that it would not claim the property.  Sakhrani J. awarded costs of the interpleader proceedings to the claimant.  Ma J. (as he then was) also made various costs orders against the plaintiff in favour of the claimant.

5.  The claimant applied by two summonses to enforce these costs orders against Mr. David Buxbaum on the basis that he was a partner of the plaintiff.  The application was made pursuant to Order 81, Rule 5(2) alternatively Rule 5(4) of the Rules of the High Court.

6.  Chung J. found for the claimant.  Mr. Buxbaum appealed against the decision.  The claimant also filed a respondent’s notice seeking to affirm the decision on other grounds.

Order 81, Rules 5(2) and (4)

7.  Order 81, Rules 5(2) and (4) provide that,

‘5(2)	Where a judgment is given or order made against a firm, execution to enforce the judgment or order may, subject to rule 6 and to the next following paragraph, issue against any person who -
	(a)	acknowledged service of the writ in the action as a partner, or
	(b)	having been served as a partner with the writ of summons, failed to acknowledge service of it in the action, or
	(c)	admitted in his pleading that he is a partner, or
	(d)	was adjudged to be a partner.’
‘5(4)	Where a party who has obtained a judgment or order against a firm claims that a person is liable to satisfy the judgment or order as being a member of the firm, and the foregoing provisions of this rule do not apply in relation to that person, that party may apply to the Court for leave to issue execution against that person, the application to be made by summons which must be served personally on that person.’

Was Mr. Buxbaum a partner of the firm? 

8.  The difference between Rules 5(2) and 5(4) is that leave from the court to enforce the judgment is required in the latter situation but not the former.

9.  In this case, the name of the plaintiff as described in the writ is ‘Brand Farrar Buxbaum LLP (formerly known as Arnberger, Kim, Buxbaum & Choy) (A firm)’.  When a partnership sues in the name of a firm, it is a shorthand way of describing the party.  Instead of naming the individual partners of the firm, Order 81 Rule 1 allows a firm’s name to be used if the partners carried the business of the firm within the jurisdiction of Hong Kong.  In reality, the action is brought by the individuals who are the partners of the firm.  As pointed out in Para. 81/1/7 of Hong Kong Civil Procedure 2004 :

‘The firm name is a mere expression, for a firm is not a legal entity, nor for some purposes is it a ‘person’, although for convenience under this order, the firm name may be used for the purpose of suing and being sued.’

Because the party is actually the individual partners who constituted the firm, Rule 5(2) and (4) enable the judgments made against the firm to be enforced against the partners.

10.  The issue in an Order 81, Rule 5(2) and (4) application is a narrow one and that is whether the person against whom the costs orders is to be enforced is indeed a partner of the firm. 

11.  Chung J. found that Mr. Buxbaum was a partner of the firm.  This finding is supported by ample evidence in this case.  It begins when the plaintiff applied for leave to issue the writ outside jurisdiction.  Mr. Buxbaum stated in the supporting affirmation that he was a partner of the plaintiff.  This assertion continued in the numerous affirmations filed by Mr. Buxbaum in this case on various interlocutory applications.  Mr. Buxbaum himself never denied that he was a partner of the firm.  He only retired from the firm on 1 January 2003.  The hearing below was based entirely on affidavit evidence.  In our view this is an open and shut case, once it is shown that Mr. Buxbaum was a partner of the firm, the costs orders can be enforced against him.  

Foreign or Hong Kong partnership

12.  The application below took a somewhat unusual approach.  Chung J. in paragraph 6 of his judgment stated the parties agreed that the dispute on whether the costs orders could be enforced against Mr. Buxbaum ‘depends on whether the firm was a Hong Kong partnership or an overseas partnership’. 

13.  We have to confess we really do not understand how this issue will affect the determination.  Whether the firm was a foreign or Hong Kong partnership has no impact on whether Mr. Buxbaum was a partner of that firm.  Mr. Woo, counsel for Mr. Buxbaum, accepted that the issue was really whether his client was a partner of the plaintiff.

The affirmation

14.  This issue apparently arises because Mr. Buxbaum stated in his affirmation of 8 August 2003 :

‘	2.	The Plaintiff is an American law firm, established in Los Angeles, USA, in November 1997, as a limited liability partnership, pursuant to California law and the California Corporation Code, Section 16951 et seq.  In order for a foreign law firm to practice law in Hong Kong, within the scope of practice permitted by the Law Society, the foreign firm must present its credentials and register with the Law Society of Hong Kong.  The Plaintiff was registered with the Law Society in Hong Kong in this manner some years ago.
	3.	It was the Plaintiff limited liability partnership is the Plaintiff firm which provided services to the Defendants (Judgment Debtors) and it was the Plaintiff which charged the Defendants for their legal services, for which services the Defendants failed to pay, and on which Judgment was subsequently obtained by the Plaintiff against the Defendants in March 2000.  It is the same Plaintiff, which issued enforcement proceedings including the Writ of Fieri Facias on 22nd November 2001, upon which the Claimant subsequently became involved.  It is in the same proceedings in which the Claimant is now trying to seek enforcement of a costs order against me personally.’

15.  Mr. Buxbaum claimed that as a partner of a limited partnership, he could not be held personally liable to the claimant.

Red herring

16.  This assertion is clearly a red herring.  Even assuming the firm was an American law firm in the form of a limited liability partnership under California law, in order to defeat the claimant’s claim, Mr. Buxbaum has to show that when the firm carried on its practice in Hong Kong, Hong Kong law recognizes the limited nature of the partners’ liability in the firm.  Mr. Buxbaum did not point to any law or evidence which may support this view.  There was no evidence on California law relating to the nature of such a partnership.  On the contrary, section 4 of the Limited Partnerships Ordinance (Cap. 37) requires registration of a limited partnership and in default of registration it shall be deemed to be a general partnership and every limited partners shall be deemed to be a general partner.  There was no registration of the firm in Hong Kong as a limited partnership.

Business registration

17.  Given the way the case proceeded in the court below, we will also consider whether the firm was a foreign or a Hong Kong partnership.  In our view, in order to decide this question it is relevant to consider what Mr. Buxbaum represented to the outside world about the partners of this firm.  One begins with the business registration records in Hong Kong :

(1.)	On 12 April 1985, Mr. Buxbaum filed a business registration stating he was a proprietor and partner of the ‘Law firm of David C. Buxbaum’.  The description and nature of business was ‘Legal Consultancy’.  The business was to commence on 1 July 1985.
(2.)	On 25 September 1985 the name of the business was changed to ‘Buxbaum & Choy’.
(3.)	On 15 February 1993, the name was changed to ‘Lewis D’Amato Brisbois Bisgaard Buxbaum & Choy’.
(4.)	On 22 December 1994, the name was changed to Arnberger, Kim, Buxbaum & Choy.
(5.)	On 10 July 1997, the name was changed to the present name of the plaintiff.
(6.)	The record showed that there were three partners namely, Mr. Buxbaum, Mr. Standard and Mr. Choy.  It is not clear from the record if Mr. Standard was a partner since the date of the filing of business registration or added later.  In any event he ceased to be a partner in 1990.  Mr. Choy appeared to be a partner at least since 1990.

18.  From this, one can see Mr. Buxbaum represented that he and Mr. Choy were partners in respect of at least two firms, namely, Arnberger, Kim, Buxbaum & Choy and also Brand Farrar Buxbaum LLP.  This could either mean Mr. Buxbaum and Mr. Choy were trading in Hong Kong as partners under the style or name of these two firms or that these two firms were trading in Hong Kong but only asked two of their partners to be registered as partners in the business registration record. 

The statement of claim

19.  The Statement of Claim in this action supported this contention.

20.  It pleaded that :

‘	1.	The plaintiff is a firm established under Business Registration Ordinance in Hong Kong and is carrying on business in legal consultancy.
	2.	By contracts made between the plaintiff and the defendants between about September 1995 and about December 1997 in Hong Kong, the plaintiff rendered certain legal services at the request of the defendants.’

21.  The plaintiff then pleaded about the failure by the defendants to pay the fee notes rendered to the defendants.

Hong Kong partnership

22.  Hence, irrespective of the legal status of the plaintiff in U.S.A., the judge must be correct when he said it was a Hong Kong partnership which rendered the legal service to the defendants. Mr. Buxbaum was at all material times a partner of these firms.  The new evidence in the form of the fee note did not advance his case.

23.  Accordingly he was liable for the costs orders under Order 81, Rules 5(2) and (4).

24.  The judge referred to representation by estoppel as an alternative basis of his judgment.  In view of our decision there is no need for us to deal with this issue.

25.  Accordingly we dismissed the appeal and awarded costs of the appeal for the claimant against Mr. Buxbaum.

Security for costs

26.  The claimant applied for security for costs of the appeal against Mr. Buxbaum.  The summons was issued a few days before the hearing of the appeal and returnable on the same day.  We dismissed the application and ordered costs of the application to be borne by the claimant in favour of Mr. Buxbaum.  As we were already seized of the appeal, it should be dealt with so that finality of the litigation could be achieved.  It would be a waste of the court’s resources not to hear the appeal itself but to deal with an interlocutory application which may cause an adjournment of the appeal.  Further in view of the late application (and we do not wish to express any view whether it was caused by Mr. Buxbaum’s late disclosure of his financial condition), the mischief that an order for security seeks to avoid no longer existed because costs of the appeal must by then have been incurred by the claimant who had to instruct his lawyers to attend the appeal.

Application to adduce fresh evidence

27.  The application was not opposed.  We ordered Mr. Buxbaum to be responsible for such costs.