LIN MAN YUAN v. KIN MING HOLDINGS INTERNATIONAL LTD

HCA 216/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 216 OF 2008

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D E C I S I O N

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1. The hearing before me relates to an application made by the defendant in the main action (“Kin Ming”) for leave to join Jose Kho (“Kho”) as the proposed 2^nd plaintiff by counterclaim and to amend the counterclaim which was filed in these proceedings on 26 October 2010. Koh is a director of Kin Ming. The application is opposed by the plaintiff in the main action (“Lin”), who seeks to have the main action and the counterclaim to be separately tried.

2. Put briefly, the main action concerns a dispute between Lin and Kin Ming over an agreement made between them on 16 April 2004 for co-operation in the development of a part of the land in Xiamen (“Property”), over which Kin Ming (or its subsidiary) had been granted the development rights by the Xiamen government. A sum of RMB 130 million was paid by Lin to Kin Ming under the Agreement to develop the part of the Property identified in the proceedings as “Lot A4”. As a result of changes in the land planning of the Xiamen government, Kin Ming did not ultimately obtain the development rights to Lot A4 as envisaged under the Agreement, but Kin Ming was instead granted the development rights over other lots within the boundary of the original Property (“Replacement Lot”). The main issue between the parties in the main action is whether or not the Agreement extended to the Replacement Lot.

3. The counterclaim which was filed by Kin Ming in October 2010 relates to the alleged harassment and intimidation made by one Tsoi Chun Yu and Hung Kwok Wai, who were claimed to be agents authorized by Lin under powers of attorney signed by her. The harassment and threats of intimidation were claimed to have been made against Kho from July 2010 to October 2010, to exert pressure on Kin Ming to settle the dispute in the main action with Lin. By way of counterclaim, Kin Ming seeks an injunction to restrain Lin and her husband, Huang Ruifu (“Huang”), named as 2^nd defendant by counterclaim, from intimidating, threatening and annoying Kin Ming’s directors, officers and employees or their family members, and unquantified damages.

4. The application to amend the counterclaim and to join Kho as 2^nd plaintiff by counterclaim was made in January and May 2012. The initial summons to amend was issued shortly before the case management conference scheduled for 26 January 2012.

5. It should be highlighted at the outstart that all the claims of alleged harassment and intimidation were included in the counterclaim filed in October 2010. The defence to counterclaim was filed on 28 December 2010. The alleged acts of harassment and intimidation were dealt with in the Corrective Affirmation of Kho dated 25 October 2010, the witness statement of Kho dated 12 October 2011, the 4^th affirmation of Lin dated 26 October 2010 and the witness statements of Lin and Huang dated 28 September 2011. The proposed amended counterclaim repeats factual matters already set out in Kho’s statement and affirmation, and pleads the basis of a claim for exemplary or aggravated damages.

6. The proposed amendment of the counterclaim and the joinder of Kho is made under Order 15 rule 6 and Order 20 rules 5 and 8, RHC. Order 15 rule 6 (2) (b), which is relied upon by Kho, permits the joinder as a party to an action:

“(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 matter 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 the 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.”

7. The application for joinder is opposed by Lin, on the basis that Order 15 rule 2 only permits “a defendant in any action” to make a counterclaim against a plaintiff, and that notwithstanding Order 15 rule 6, the court has no jurisdiction under Order 15 rule 3 to permit a person, not already a party to the main action, to be joined as co-plaintiff with a defendant in the latter’s counterclaim (Pender v Taddei [1898] 1 QB 798).

8. Order 15 rule 3 provides as follows:

“(1) Where a defendant to an action who makes a counterclaim against the plaintiff alleges that any other person (whether or not a party to the action) is liable to him along with the plaintiff in respect of the subject matter of the counterclaim, or claims against such other person any relief relating to or connected with the original subject matter of the action, then, subject to rule 5 (2), he may join that other person as a party against whom the counterclaim is made.”

9. In Pender, the defendant sought to join a new party, Mr Bellani, as a defendant by counterclaim, although he had in fact a joint cause of action with Mr Bellani against the plaintiff. The English Court of Appeal held that the rules did not admit such a counterclaim. In his judgment, Smith LJ referred to the then Order 21 rule 11 of the English rules, which is equivalent to our Order 15 rule 3, and observed thus:

“It is clear that the defendant is not really raising any question between himself and the plaintiffs along with any other persons; he is raising a question between himself along with another person and the plaintiffs. He seeks to put Bellani in the position of defendant when he ought to be in the position of co-plaintiff with himself in the counterclaim. I do not think the defendant can do indirectly what the rules do not appear to enable him to do directly.”

10. Chitty LJ agreed with the views expressed by Smith LJ on Order 21 rule 11 :

“The words of the rule can only be construed as referring to cases where the defendant raises by counterclaim questions between himself and the plaintiff along with other persons, and not as including a case where the defendant raises questions between himself along with other persons and the plaintiff. …If the rules do not give the defendant power to counterclaim jointly with another person against the plaintiff directly, then, counterclaim being entirely the creature of the Judicature Act, I do not think he can be allowed to do the same thing indirectly in the manner proposed.”

11. Leading counsel for Kin Ming relies on the decision of Deputy High Court Judge Carlson in Mimi Kar Kee Wong Hung v Severn Villa Ltd & Ors HCMP 522/2011 24 October 2011, when leave was granted by the court for the joinder of a new party to make cross-claims against existing parties to the action, to avoid the necessity for separate proceedings to be instituted. Paragraph 15/6/1 of the Hong Kong Civil Procedure was referred to, and relied upon by counsel for Kin Ming in this case:

“ …these are all provisions designed to save rather than to destroy, to cure that which is capable of cure… This rule prevents an action being defeated by the misjoinder or nonjoinder of parties, and it provides for any necessary amendment in respect of the parties to an action being made at any stage of the proceedings… This rule should be construed so as to bring the parties to the disputes relating to one subject matter before the court at the same time so that the disputes may be determined without the delay, inconvenience and expense of separate actions and trials. Under it the court has power to secure the determination of all disputes relating to the same subject matter, without delay and the expense of separate actions.”

12. Counsel for Kin Ming also relies on Montgomery v Foy, Morgan & Co [1895] 2 QB 321, to support the proposition that where there is one subject matter out of which several disputes arise, the object of the Judicature Acts is that all parties may be brought before the court, so that the disputes may be determined at the same time without the expense and delay of several actions and trials. It was further argued that since Pender v Taddei, the courts have adopted a more liberal approach to the joinder of parties, as illustrated in the decisions in Guntner v Circuit (1968) 2 QB 587, Balkanbank v Taher & Others 14 April 1975, Times Transcript, Umm Qarn Management Co Ltd v Bunting & Another, All England Official Transcripts, Lexis Nexis High Court of Justice 10 October 2000 and Hodgson v Amcor 9420 of 2004, 2010 VSC 204.

13. Leading counsel for Lin points out that all the cases relied upon by Kin Ming are distinguishable on their special facts. It was also emphasized that Montgomery v Foy, Morgan & Co, and Guntner v Circuit  all deal with joinder of defendants in an action, and not with the joinder of a party as a plaintiff by counterclaim. The party allowed to be joined in the counterclaim in Balkanbank v Taher & Others was also joined as a defendant in the main action.

14. In this case, Kin Ming claims by its original counterclaim that Lin is liable to Kin Ming in respect of the alleged harassment, and it is not alleged by the proposed amended counterclaim that Kho, the party to be joined, is liable to Kin Ming along with Lin. Nor does Kin Ming claim against Kho any relief relating to the alleged harassment. The proposed joinder does not fall within the language of Order 15 rule 3.

15. However, I agree that the joinder of parties envisaged and permitted by Order 15 rule 6 should be given a liberal application, particularly in the aftermath of the Civil Justice Reform. This is also consistent with the objective set out in s 16 of the High Court Ordinance, which provides that in administering law and equity in any civil cause or matter before it, the Court shall exercise its jurisdiction so as to ensure that, as far as possible, all matters in dispute between the parties are completely and finally determined, and all multiplicity of legal proceedings with respect to any of those matters is avoided.

16. In Balkanbank v Taher & Others 14 April 1975, Times Transcript, All England Official Transcripts, Lexis Nexis High Court of Justice 10 October 2000, Clark J did not follow the decision of Pender v Taddei, but granted leave to the defendants under Order 15 rule 6 (2) (b) (ii) to add their subsidiaries as defendants in the action, to enable the subsidiaries to advance a counterclaim. The learned judge did not consider the decision of the Court of Appeal in Pender v Taddei to be binding on him as a decision on the construction of Order 15 rule 6, despite the fact that there was a reference to the order in argument. Clark J considered that sub-paragraph (ii) of Order 15 rule 6 should be given its ordinary and natural meaning, and that a joinder of a party should be permitted so long as it can be shown that: (a) there exists a question or issue between the party to be joined and a party to the cause or matter; that question or issue arises out of or relates to or is connected with other relief or remedy claimed in the course or matter ; and (b) it would be just and convenient to determine that question or issue as between the parties to be joined and that party as well as between the parties to the cause or matter.

17. Although it is true that the claims of harassment which are made by Kin Ming & Kho in the counterclaim are not, strictly, related directly to the issues of the dispute in the main action, on the construction of the Agreement and whether the Agreement was subject to the terms orally agreed, the facts and allegations made in the counterclaim would affect the credibility of Lin, Huang and Kho - the key witnesses in the trial of the main action.

18. As the English court in Umm Qarn Management Co Ltd v Bunting & Another (All England Official Transcripts, Lexis Nexis High Court of Justice 10 October 2000) had observed, the resolution of all the issues capable of arising in the proceedings will involve consideration of the credibility of the protagonists, and that cannot be satisfactorily assessed without an investigation of all the disputes. The trial judge’s assessment of a witness’s credibility will have an impact on his resolution of the issues to be tried. The court accordingly granted leave to the defendant in the main action to add new parties both as claimant and defendant to the counterclaim.

19. Counsel for Kin Ming has emphasized that Lin’s credibility is essential to the court’s determination of her claim on the terms orally agreed on 16 April 2004 as part of the Agreement. It was argued that the evidence on the counterclaim shows that Lin and Huang lied in many material respects, that the credibility of Lin and Huang are issues which exist between Kho and Lin, and that the facts in the counterclaim relate to the matters in the main action, to justify a joinder under Order 15 rule 6.

20. I would say that the counterclaim is not only relevant to the question of whether Lin and Huang should be believed in the evidence on the issues and subject matter of the main action, but is related to the essential question of whether Lin is entitled to the relief which she seeks as plaintiff in the main action. According to paragraph (5) of the prayer in her Re-Amended Statement of Claim, Lin seeks an order for specific performance of the oral agreement, and/or specific performance of clause 7.1 of the written agreement, for development of the Replacement Lot. Specific performance is an equitable remedy granted at the discretion of the court. If the counterclaim is proved, that Lin had authorized and instructed agents to intimidate and harass Kho and members of his family in order to exert pressure on Kin Ming and its directors to develop the Property with Lin, the court may not be ready to grant specific performance to Lin, even if her claims under the Agreement are established.

21. I consider that it is necessary to allow the joinder of Kho as a party in this action, to enable him to raise the amended counterclaim against Lin and Huang and to enable the court to completely and effectively determine all matters in dispute between all the parties.

22. Counsel for Lin sought to distinguish the decision made in Umm Qarn Management Co Ltd by virtue of the different language used in CPR Part 19, rule 19.2 (2), which permits the court to order a person to be added as a new party if it is “desirable” to do so. Under Order 15 rule 6 of our rules, an order may be made on such terms as the court thinks just,for the joinder of a person “who ought to have been joined”, or whose presence before the court is “necessary” to ensure the effectual determination of the matters in dispute (rule 6(2)(b)(i)), or if in the opinion of the court it would be just and convenient to determine the question or issue within the criteria of rule 6(2)(b)(ii). To the extent that Order 15 rule 6 imposes a stricter test, I am satisfied that it is just and convenient to join Kho as a necessary party.

23. Provided that the court considers that the presence of a third party is necessary to ensure that all matters in dispute are effectively dealt with, the court may add the third party, of its own motion under Order 15 rule 6 (2) (b), even though there is no cause of action against that party (para 15/6/6, p 299 Hong Kong Civil Procedure 2012), or no claim is made against him (per Kempster, JA in Hong Leong Investment Co Ltd v The Tai Ping Insurance Co Ltd CACV 27/1991, 20 June 1991). Ultimately, the question is whether the court should exercise its discretion to grant the order, having regard to the prejudice to the parties, the stage the action has reached when the order was sought, the delay in making the application, and any delay that may be caused should an order be made.

24. The underlying objectives of the Rules of the High Court (“RHC”) are to increase the cost-effectiveness of any practice and procedure to be followed in relation to proceedings before the Court, to promote a sense of reasonable proportion and procedural economy in the conduct of proceedings, to facilitate the settlement of disputes and to ensure that the resources of the Court are distributed fairly. Order 1A rule 2 expressly states that the Court shall seek to give effect to these underlying objectives when it exercises any of its powers (whether under its inherent jurisdiction or given to it by the rules or otherwise), or when it interprets any of the rules of RHC.

25. If the joinder of Kho is not permitted, Kho will have to institute separate proceedings against Lin, and may seek consolidation of those proceedings with this action. The existence, conduct and subject matter of these proceedings will form the essential background of the claims in the separate proceedings of the harassment and intimidation alleged to have taken place.

26. Even if Kho’s joinder and the amendment of the counterclaim is not allowed, Lin and Huang will be extensively cross-examined at the trial of this action on the alleged harassment of Kho, and on the agreement which is claimed to have been made between a company owned by Lin and Huang (“XFHIL”) and an agent involved in the alleged harassment (“Agency Agreement”). Under the Agency Agreement which was signed by Huang, XFHIL agreed to engage the agent to cause Kin Ming to continue to perform or honour its Agreement with Lin, and to transfer a part of the Property to XFHIL, in consideration of XFHIL’s payment to the agent of a substantial fee of RMB 60 million.

27. If separate proceedings had to be commenced by Kho against Lin and Huang, there will inevitably be references made in the pleadings and evidence to the Agreement for the development of Lot A4, the history and conduct of these proceedings, and similarly, cross-examination of the witnesses on the Agreement, on the facts and circumstances of the alleged harassment and intimidation by Lin’s agents, and on the existence of the Agency Agreement.

28. The joinder proposed will avoid a multiplicity of proceedings, and duplication in time, costs and resources of the court and the parties.

29. It is true that there has been delay in bringing the parties’ dispute to trial, bearing in mind that the Agreement was made in April 2004. Having reviewed the history of the matter, it would appear that both sides had a role to play in protracting the resolution of the dispute, from the time when proceedings were first instituted by Kin Ming in Hong Kong in 2005, to Lin’s institution of legal proceedings in China in October 2006, to her institution of these proceedings in February 2008 to seek the court’s determination of the dispute concerning the effect of the Agreement, and whether it should extend to the Replacement Lot.

30. After some interlocutory skirmishes which led to these proceedings being delayed until May 2010, the counterclaim was filed in October 2010 and the first case management conference was held on 4 April 2011, when directions were given and the next case management conference was fixed for hearing on 26 January 2012. Witness statements were ordered to be filed in the interim. The Master also directed on 4 April 2011 that all interlocutory proceedings be issued within 74 days of the exchange of witness statements. Those acting for Kin Ming stressed that the application for amendment of the counterclaim was made within the time-table set by the Master on 4 April 2011.

31. It was always Kin Ming’s case that the threats and harassment by Lin’s agents were directed against Kho. The matters contained in the proposed amended counterclaim have been dealt with in the witness statements. I fail to see how Lin can be surprised by the proposed amendments to the counterclaim. Counsel for Kin Ming and Kho has confirmed that no further witness statements will have to be filed on their side. In her 4th affirmation of 26 October 2010 and her witness statement of 28 September 2011, Lin already dealt with the allegations made by Kho in his affirmations of 25 October 2010 and 12 November 2010, in relation to the Agency Agreement.

32. Hence, despite the fact that the proposed joinder and amendment of the counterclaim will cause some inevitable delay for the amendment of the defence to counterclaim and/or the filing of supplemental statements by Lin, at this stage of the proceedings when the parties are still at case management hearings, I cannot see any prejudice being caused to Lin by the amendment, which cannot be compensated by costs. Overall, bearing in mind the evidence so far filed, I consider that more time and costs would be saved in the long run, by allowing the proposed joinder and the amendments, so that all the necessary parties can be brought before the court for the full and effective determination of all their disputes at the same time, by the same court and the same legal team considering all the related issues in one go, instead of separating but duplicating the agony.

33. For all the above reasons and to achieve the purposes set out in paragraphs 28 and 32 above, I will order Kho to be joined as 2^nd defendant in the main action, to enable him to make the counterclaim as 2^nd plaintiff by counterclaim.

34. I will grant leave for the filing of the amended counterclaim. However, despite the claims of harassment having been made as early as October 2010 when the original counterclaim was filed, no particulars have ever been furnished of the damage allegedly sustained by Kin Ming as a result. The amended counterclaim is similarly lacking in such particulars of Kin Ming’s and Kho’s damage. Accordingly, I will order that unless Kin Ming and Kho file and serve by 30 June 2012 full particulars of their damage sustained as a result of the pleaded harassment, the amended counterclaim will be struck out.

Orders

35. I allow Kin Ming’s summons of 14 May 2012, with the further order that Kho be joined as 2nd defendant in the main action, with costs to Lin. I dismiss Lin’s summons of 20 January 2012, with costs to Kin Ming. The 2 earlier summonses of Kin Ming of 11 January and 16 January 2012 are dismissed, with costs to Lin. All orders for costs will include certificate for counsel.

36. As indicated at the hearing on 6 June 2012, the parties will make submissions on paper as to the further directions to be made as a result of my orders on the summonses before me. If the parties cannot agree on such directions, Lin should file such submissions within 14 days of the handing down of this Decision, and Kin Ming and Kho should file their submissions within 7 days thereafter.