REMEDY ASIA LTD v. YICK SHING CONTRACTORS LTD

HCMP 2543/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 2543 OF 2014

(ON AN INTENDED APPEAL FROM HCCT 4/2012)

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HCMP 3114/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 3114 OF 2014

(ON AN INTENDED APPEAL FROM HCCT 4/2012)

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(HEARD TOGETHER)

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JUDGMENT

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Hon Cheung CJHC (giving the judgment of the court):

1.  HCMP 2543/2014 is the defendant’s application for leave to appeal from the judgment and order of Au J dated 26 June 2014 refusing the defendant’s application to strike out the plaintiff’s claim, or alternatively to have some questions summarily determined in such a way as would result in the dismissal of the plaintiff’s action.

2.  On the first ground, that is, whether the assignment of the causes of action of the subcontractor, True Light Civil Contractors Limited (“True Light”), under subcontracts A and B to the plaintiff is void for champerty and maintenance, the question whether the assignment falls, strictly speaking, within the “access to justice” exception for leaving too much control to True Light after the assignment is not of itself determinative of the issue.  What matters is the overall picture.  We take the view that the judge has come to the right conclusion, after looking at the entire circumstances, that the assignment “does not amount to such ‘officious intermeddling’ in the litigation in the sense that it results in oppression of [the defendant] so as to be caught by the principles against champerty and maintenance” (paragraph 30).  We do not find this ground reasonably arguable.

3.  As for the plaintiff’s locus to sue, we think the judge was plainly right in concluding that the plaintiff has an equitable interest in the choses in action.  The fact that the plaintiff’s interest in the alleged indebtedness is subject to conditions and contingencies is quite a different matter from whether it is one recognised in equity, or, in other words, an equitable interest.  With respect, counsel’s argument has confused the two.  All doubts regarding the plaintiff’s right to sue in its own name has been removed by the joinder of True Light as a co‑plaintiff to the action, pursuant to the judge’s direction (see below).

4.  Thirdly, as for the limitation defences regarding the two contracts, we think the judge was again right in concluding, on the terms of the contracts, that time did not begin to run until the issue of the final certificate.  In a situation of the present type, where interim payments were applied for and received both as between the employer and the main contractor and as between the main contractor and the subcontractor on a rolling basis, with the final accounts to be prepared after completion and certification of all works, the judge’s conclusion on when the causes of action for the works done under the two contracts arose for the purposes of the limitation periods simply makes sense.

5.  As for the relation‑back argument, as the judge pointed out in his subsequent decision dated 30 September 2014, the matter was covered, bindingly, by this court’s decisions in Sun Focus Investment Ltd v Tang Shing Bor [2012] 1 HKLRD 738, paras 10‑15; and Global Bridge Assets Ltd v Sun Hung Kai Financial Ltd [2012] 4 HKLRD 474, paras 19-22.  This being the case, as regards the plaintiff’s claims under subcontract B, which came to an end on 18 April 2006, the defendant’s limitation argument is simply defeated by the relation‑back principle, the amendments to add the relevant claims under subcontract B having been consented to by the defendant.

6.  For these reasons, the intended appeal under HCMP 2543/2014 has no reasonable prospect of success.  It is dismissed.

7.  Turning to HCMP 3114/2014, this is the defendant’s application for leave to appeal from the decision of Mimmie Chan J dated 16 October 2014 allowing the plaintiff’s application to join True Light, acting through its liquidators, as a co‑plaintiff in the action.

8.  As regards issue estoppel, given what we have said about the limitation defences, this issue is now academic.  For the sake of completeness, we would indicate that we agree with the judge that there is an issue estoppel against the defendant in relation to the time‑bar point arising from Au J’s judgment dated 26 June 2014, in which the judge, for reasons he gave, clearly decided that the plaintiff’s claims under subcontracts A and B are not time‑barred.  The suggestion that there is no identity of parties because True Light, the party sought to be joined, has now come into the picture in the joinder application is not reasonably arguable.  The parties before Mimmie Chan J in the joinder application were still the plaintiff and the defendant only.  True Light was not a party to the application, although by an affirmation, the liquidators had informed the court that they consented to the joinder if granted.

9.  As for the issues involved, we take the view that there is a complete identity of issues.  As for the argument that the limitation issues were not finally decided by Au J, with respect, we take the opposite view.

10.  So much for the issue estoppel argument.

11.  As regards the objection to the joinder based on section 35(5), (6) and (7) of the Limitation Ordinance (Cap 347) and Order 15, rule 6(5) and (6), as we said, we find it plain that the plaintiff has an equitable interest in the alleged contractual indebtedness arising from subcontracts A and B, whereas the legal title to the same remains with True Light even after the assignment.  We therefore consider the contrary suggestion that True Light is not a “necessary” party to complete the plaintiff’s title to sue not reasonably arguable.

12.  As for the argument that True Light’s claim is “a new claim” not contained in the “original action”, it is completely answered by the relation‑back point as well as the point made by Mimmie Chan J in paragraph 43 of her judgment, that is, so far as the defendant’s counterclaim based on subcontract B is concerned, which is a “claim already made in the original action” – which includes the counterclaim, True Light is certainly a necessary party, and the court undoubtedly has the jurisdiction to add, even on its own motion, True Light as a party to the action.

13.  Finally, as regards clause 3.1(C) of the Deed of Assignment, the Deed must be read as a whole.  Clause 3.3(E) states expressly that True Light “shall not be obliged … to participate in … any Proceedings for the purpose of recovering the Indebtedness, nor shall it be obliged to incur any costs or expenses in relation to any such … Proceedings”. Clause 6.3(A) provides that upon termination of the Deed and the reassignment of the indebtedness to True Light, the plaintiff shall satisfy “all cost orders which have been made or may be made with respect to such Proceedings, whether against the [plaintiff], [True Light], the beneficial owner of the Indebtedness or otherwise”.  Clause 8.1 says that the plaintiff agrees to indemnify and keep True Light indemnified from and against “all direct or indirect costs … directly arising out of (i) any proceedings commenced by [the plaintiff] relating to the Indebtedness”.

14.  Reading the entire Deed, including these clauses as a whole, it is plain that True Light is not obliged to, but may at its discretion and at the expense of the plaintiff, take part in proceedings commenced by the plaintiff against the defendant for the recovery of the alleged indebtedness.

15.  This being the case, we do not see how Harris J’s approval of the liquidators’ entering into the Deed of Assignment with the plaintiff could have the effect of prohibiting True Light from participating in the recovery action below.

16.  For these reasons, we also take the view that the intended appeal under HCMP 3114/2014 has no reasonable prospect of success.  It is dismissed.

17.  As for costs, we order that the costs of the two applications for leave to appeal be paid by the defendant to the plaintiff forthwith.  We summarily assess those costs in the total sum of $200,000.