KIUWIDE CO LTD v. THE SECRETARY FOR JUSTICE for and on behalf of the DIRECTOR OF LANDS

HCMP 253/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 253 OF 2015

________________________

________________________

(By Counterclaim)

________________________

JUDGMENT

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A. Subject matter

1.  This is an appeal against the Order of Master M Wong on 3 May 2016 whereby it was ordered, interalia, that the defendant’s (“the Government”) Counterclaim against D2 to D16 be struck out.

B.    Background

2.  Lot 951 in DD 381 (“the Lot”) is held from the Government under the New Grant (“the New Grant”) which was granted to Madam Tseung Ding Man (“Madam Tseung”) in 1957.

3.  Between 1959 and 1962, Madam Tseung subdivided the Lot into Sections A to P and the Remaining portion, and had assigned Sections A to P to various assignees, whilst keeping the Remaining Portion in her own name.

4.  By an Assignment dated 30 June 1986 and registered in the Tuen Mun Land Registry, the plaintiff became the registered owner of Section J of the Lot.

5.  According to the plan attached to the New Grant (“the New Grant Plan”), there was a purple area which was within the boundary of the Lot and was situated in the Remaining Portion of the Lot (“the Purple Area”).

6.  It is the plaintiff’s case that its director and his family have been occupying Section J and the Purple Area (as well as some other areas) for many years.

7.  Indeed, by an order of DHCJ Marlene Ng dated 19 December 2013 in HCMP 1003/2013, the plaintiff had obtained title to the Purple Area by adverse possession against Madam Tseung. 

8.  Whilst the Government accepts that the Purple Area was included in the New Grant Plan, it says that there was a realignment of the boundary of the Lot by a series of letters between the Government and Madam Tseung in October and November 1958.

9.  It is the Government’s position that by the letters, Madam Tseung either had never taken possession of the Purple Area or possession of the Purple Area had been surrendered to the Government prior to Madam Tseung’s assignments to the various purchasers. 

10.  Thus, if the Government is right, the Purple Area is Government land.  If the plaintiff is right, the Purple Area is land over which it had acquired title through adverse possession.

11.  When the plaintiff was claiming adverse possession against Madam Tseung over the Purple Area, it wrote through its solicitors to the Government on 20 May 2013 inviting the Government to participate in the proceedings.

12.  The Government replied by letter dated 19 June 2013 saying it was not going to participate in the private proceedings but “nothing herein… prejudices the Government’s position that the Purple Area … is Government land and its rights to issue proceedings for appropriate declarations from the Court.”

13.  On 18 December 2014, the Government issued a notice under the Land (Miscellaneous Provisions) Ordinance (Cap 28) requiring the plaintiff to cease unlawful occupation of the Purple Area before 9 January 2015.

14.  Against this background, the plaintiff filed and served the Originating Summons (“OS”) dated 2 February 2015 seeking, inter alia, a declaration that the Purple Area is an area over which a Government lease was granted under the New Grant in favour of Madam Tseung; that the plaintiff is the registered owner of the Purple Area by the order of DHCJ Marlene Ng; and the Government is estopped from denying the aforesaid.

15.  Since 23 March 2015, the Government had indicated their intention to file a counterclaim against the plaintiff.  But nothing was done until 11 May 2015, two days before the first hearing of the OS, when a counterclaim joining 15 additional defendants was filed and served on the plaintiff (“the Counterclaim”).

16.  The 15 additional defendants, D2 to D16 are successors in title of Madam Tseung of other sections of the Lot (ie, Sections A – P, except Section J).

17.  In the Counterclaim, the Government sought, inter alia, a declaration that the boundaries of each of Sections A to P had prior to the date of the first assignments been realigned or modified by agreement between the Government and Madam Tseung; and that the areas occupied by the plaintiff including the Purple Area remained unleased Government land.

18.  By summons dated 18 June 2015, the plaintiff seeks to strike out:

(a)   the Counterclaim or parts thereof (in particular para 12 and para 1 of the Prayer of Relief) under Order 15, rule 5 and/or Order 18, rule 19 on the ground that it may prejudice, embarrass or delay the fair trial of the action; and

(b)  the joinder of the causes of action and the 15 additional defendants under Order 15, rule 5 on the ground that it may embarrass or delay the trial or is otherwise inconvenient.

19.  The matter came before Master M Wong on 29 January 2016 and by his Decision handed down on 3 May 2016, the Master ordered the joinder of D2 to D16 be struck out and effectively the Counterclaim be also struck out.

20.  Since then, the Government has attempted to amend its Counterclaim by supplying further particulars of its case against D2 to D16 by summons dated 21 February 2017.  The Government has also issued what it called 15 protective writs against D2 to D16 (but not yet served) to secure against time-bar.

21.  It is the Government’s position that it will not proceed with the writs if this appeal is allowed.  But if there is a dismissal of the appeal, the Government will ask for an order (also by summons dated 21 February 2017) that the OS and the actions under the 15 writs be consolidated or they be tried at the same time or one after the other.   

C.    Submissions and Discussion

22.  I will deal with Counsel’s submissions together with the discussion of the main issues involved in this appeal.

23.  In my view, the main issues are:

(a)   The construction of Order 15, rules 3(1), 5(1) and 5(2); and

(b)  The exercise of the court’s discretion on whether the joinder and the counterclaim should be struck out.

C1.   Order 15, rules 3(1), 5(1) and 5(2)

24.  It is Mr Ho SC’s (together with Mr Yin) submission that the relevant terms for considering joinder and counterclaim are contained in Order 15 of the Rules of the High Court, the relevant parts of which are:

“ 3. Counterclaim against additional parties (O. 15, r. 3)

(1) Where a defendant to an action who makes a counter-claim 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 counter-‌claim is made.

…

5. Court may order separate trials, etc. (O. 15, r. 5)

(1) If claims in respect of two or more causes of action are included by a plaintiff in the same action or by a defendant in a counterclaim, or if two or more plaintiffs or defendants are parties to the same action, and it appears to the Court that the joinder of causes of action or of parties ‌… may embarrass or delay the trial or is otherwise inconvenient, the Court may order separate trials or make such other order as may be expedient.

  (2)   If it appears on the application of any party against whom a counterclaim is made that the subject-matter of the counterclaim ought for any reason to be disposed of by a separate action, the Court may order the counterclaim to be struck out or may order it to be tried separately or make such other order as may be expedient.”

25.  It is Mr Ho’s submission that there is a common issue that arises between the Government and the plaintiff and each of D2 – D16, who are current owners of Sections A to P. 

26.  He submits the following common issue arises, ie, whether the boundaries of the Lot have been modified / realigned by agreement between Madam Tseung and the Government prior to the first assignments affects not only Section J and the Purple Area which are registered in theplaintiff’s name or occupied by the plaintiff but all the other sections carved out of the Lot, ie, Sections A to P now occupied by D2 – D16.

27.  Hence, the Government argues that it has established a proper case to join D2 to D16 to the Counterclaim under Order 15, rule 3(1), subject only to Order 15, rule 5(2). 

28.  The powers under rule 5(2) include not just strike-out, but the power to order the counterclaim to be tried separately or such other order as may be expedient.  It is the Government’s position that since the plaintiff has only sought to strike-out the Counterclaim, this is the only question which concerns the court and nothing else.

29.  In his oral submission, Mr Ho further made the point that the plaintiff was only seeking to strike out the Counterclaim on the basis that it would embarrass, delay the trial or otherwise inconvenient: see Order 15, rule 5(1).  Mr Ho submits, however, that the power to strike-out does not arise under rule 5(1).  He says the words “or make such other order” should not include the power to strike out, as this power is not expressly spelled out under the rule 5(1).  The power to strike out, if meant to exist, would take the form of express wording as in the case under rule 5(2). 

30.  I disagree with Mr Ho.

31.  First, paragraph 1 of the plaintiff’s summons for strike out dated 18 June 2015 says:

“ … the Counterclaim ... be struck out under the Rules of the High Court (Cap. 4A) O. 28, r. 7(3) and/or O. 15, r. 5 and/or O. 18, r. 19 on the ground that it may prejudice, embarrass or delay the fair trial of the action;”

32.  It is obvious that the court’s power under, inter alia, Order 15, rule 5 is invoked and is not a limitation to Order 15, rule 5(1).  The word “prejudice” is not within rule 5(1).  It does not appear the plaintiff has limited itself to rule 5(1) by tracking the exact wordings of rule 5(1).  Even if it was so limited, as the summons has cited Order 15, rule 5, the court may consider whatever order is just or appropriate in the circumstances.  For the avoidance of doubt, I disagree that the court is precluded from considering other forms of relief / order and should consider only striking out as the Government suggested.

33.  Secondly, such narrow interpretation of the rules is unnecessarily fettering the discretionary power of the court under Order 15, rule 5.  Looked closely, it does not seem that rule 5(1) and rule 5(2) are mutually exclusive of each other and to be read as if these were two limbs conferring different powers on the court, one with the power to strike-out, the other without.  This is made clear by the wordings common to both sub-rules that the court may make “such other order as may be expedient”.  The overriding guiding principle is what is just and expedient in the circumstances of the case.  If the subject matter of the counterclaim may prejudice, embarrass or delay the trial, it may follow that it ought to be disposed of by a separate action.  In other words, there may be many reasons why the counterclaim needs to be disposed of separately.  One of such reasons is that it may prejudice, embarrass or delay the trial.  In such case, the plaintiff may ask the court to exercise the discretion to strike out the counterclaim.  Thus, even though the words “prejudice, embarrass or delay” are not found in rule 5(2), it does not mean the court’s discretion is curtailed or the court is excluded from considering striking out where it finds that the counterclaim ought to be disposed of by a separate action as it would cause embarrassment or delay to the trial.  Alternatively, if it appears to the court that the joinder of causes of action or party prejudices, embarrasses or delays the trial, the court may strike out the same under the “such other order” provision if it is just and expedient to do so. 

34.  Thirdly and most importantly, it is the Government’s case that the joinder should be made under Order 15, rule 3(1), which states that the joinder is subject to rule 5(2).  Rule 5(2) expressly provides for the power to strike-out.  To ask the court to only look at rule 5(1) and submit there is no power to strike out is inconsistent with the Government’s own stance to invoke joinder jurisdiction under rule 3(1).

35.  For this reason alone, it is pivotal to construe the power to strike-out under rule 5(2).

36.  On the interpretation of the relationship between joinder under rule 3(1) and what is expedient to do under rules 5(1) and (2), much assistance can be derived from Ernst & Young (a firm) v Butte Mining Plc (No 2) [1997] 1 WLR 1485, 1493D – 1494B:

“ … The subject matter of the counterclaim need not be of the same nature as the original action or even analogous to it. A counterclaim is in substance a separate action: the only limitation is the identical limitation on the inclusion of various different causes of action in the same counterclaim to that imposed on the inclusion of different causes of action in an original action: see Ord.15,rr.1(2) and 2(3). And rule 3(1) specifically provides for the joinder as additional defendants to counterclaim of persons who are not plaintiffs in the action.

The safeguard against any misuse of this procedure is afforded by the overriding discretionary jurisdiction conferred by rule 5(2), to which rules 2(1) and 3(1) are expressly made subject. This rule affords the court the ultimate say in what should or should not proceed by way of counterclaim. If the court thinks for any reason that the subject matter of the counterclaim ought to be disposed of by a separate action, the court may make such order as may be expedient. Any excess may be curbed in this way.

This construction is entirely in accord with the history of the counterclaim and the authorities. Section 24(3) of the Supreme Court of Judicature Act 1873 (36 & 37 Vict. c. 66) created the counterclaim for the statutory purpose of enabling all matters in dispute between the parties to be completely and finally determined and all multiplicity of disputes with respect to any of those matters to be avoided. The counterclaim was devised and designed for use for the purposes of procedural convenience, enabling the subject matter of claim and counterclaim to be tried in one action: see e.g. Beddall v. Maitland (1881) 17 Ch.D. 174 and cases cited. If this procedureisinvokedwherethereisnosuchproceduralconvenience, the court is afforded the means to take the appropriate counter-‌measures. I should add that the availability of a counterclaim is not intended to affect the substantive rights of the parties, but afford a means for determining those rights: see Stumore v. Campbell & Co. [1892] 1 Q.B. 314, 316.

  The leading authority is Manchester,Sheffield,and LincolnshireRailway Co.v.Brooks (1877)2Ex.D.243.  The two plaintiff railway companies sued for tolls due to them jointly.  The defendant set up separate counterclaims against each of the plaintiffs for damages for the delay in the delivery of goods.  Notwithstanding the absence of mutuality, the court refused to strike out the counterclaims, because they could conveniently be tried together with the action.  The decision in this case and in a number of other scantily reported 19th century decisions all support the view that there is absent any such limitation on the possible subject matter of a counterclaim as is contended for by E.&Y., but that the court has a discretionary power to limit use of the counterclaim to cases where it is procedurally convenient and that, in the exercise of such discretion, the absence of mutuality may be a weighty factor in favour of striking out the counterclaim in order to protect the plaintiff from the over-complication of the litigation and the resulting delay: see Wood on English and International Set-off (1989), pp.253–255 and consider The Normar [1968] P.362, 372–373.”

[Emphases supplied]

37.  Then at pp 1495 – 1496, Lightman J went on to say that:

“ There are two stages to be considered on this as on any application under rule 5(2). The first is whether the subject matter ought to be disposed of in a separate action. The second (which only arises if the first is answered in the affirmation), is what order ought to be made.

Stage 1. Stage 1 involves essentially a balancing of the considerations of procedural convenience in favour of and against disposal in a separation action. …

Stage 2. I must then turn to the second question, namely whether I should strike out the counterclaim or order it to be tried separately or make some other order which is expedient.

...

  The starting point in considering this issue is to determine what, if any, are the appropriate guidelines in the exercise by the court of its discretion under rule 5(2). I agree with Mr. Boyle QC that the starting point is to be found in the dictum of Neill L.J. in Boocock v.Hilton International Co.[1993]1W.L.R. 1065,1076c:‘…the surest guideline for the exercise of any general discretion is to consider what the justice of the case demands.’  But, in deciding what the justice of the case demands, it is in my view, necessary to have in the forefront of the mind the statutory object of the creation of the counterclaim, namely procedural convenience.” 

[Emphases supplied]

38.  I shall adopt the above principles when considering whether the Master’s decision to strike out the joinder and the counterclaim of the Government was correct.

C2.   The exercise of discretion: procedural convenience or inconvenience

39.  It is Mr Ho’s submission that since the boundary dispute, ie, whether there was a realignment of the boundaries between the Government and Madam Tseung, would affect not just the plaintiff’s land, but the land of D2 – D16 as well, it is in the interest of efficient case management that the Government’s claim against the plaintiff be tried together with its claim against D2 – D16 to avoid multiplicity of proceedings and the risk of inconsistent findings over this common issue.

40.  This seems to ignore the plaintiff’s submission that although all the sections of the Lot share a common grant, under section 4 of the Government Leases Ordinance (Cap 40) (“the Ordinance”), each section of the Lot is deemed to be subject to a separate government lease.  It is well settled that the Government is acting in its private capacity as landlord in relation to Government leases.  The Government, as private landlord, is free to negotiate and reach different agreements with different tenants which are not binding upon any other owners of the other sections of the Lot. 

41.  Indeed, as is recognised in paragraph 12 of the proposed Amended Counterclaim, there were separate negotiations with D2 to D16 going on with a view to regularizing their respective occupations of areas purportedly outside the boundaries. 

42.  The Government claimed and pleaded that none of D2 – D16 have responded: paragraph 12 of the proposed Amended Counterclaim.  But this does not prevent that eventually some or part or all of D2 – D16 may reach private / separate agreement with the Government.  Thus, even on the Government’s own case, there may or may not be the need to resolve the common issue with all the other defendants.

43.  That much is made clear by the Government’s own pleading that “in the event” the plaintiff succeeds, then the realigned boundary applies to all the additional defendants: see paragraph 14 of the proposed Amended Counterclaim. Plainly, the Government is suing on a contingency basis. 

44.  In this regard, Mr Ho counters by submitting that the Government is suing on an “as is” basis.  Effectively, he is saying that this is the Government’s case as pleaded and there is a common issue to be determined on how the boundaries should be drawn between the plaintiff and all the other defendants. 

45.  I disagree.  I agree with Ms Eu SC (together with Ms Cheung) that the Government can and is free to draw the boundaries through private agreement with each of the tenants not just now but in the future.  For as long as the negotiations are going on, some or part or all of the additional defendants may reach agreement with the Government and may not have any common issue to resolve in the Amended Counterclaim. 

46.  Moreover, each section owner (ie, each defendant) may be occupying each section on a different set of facts which may or may not be common to each other; and may have nothing to do with the common issue identified by the Government.

47.  It is difficult to see how it would be procedurally convenient or promotes procedural convenience to try (a) the common issue, which does not necessarily arise, and (b) all the other non-common issues which do not concern the plaintiff, or amongst the defendants.

48.  The Government argues that it is premature to consider what other facts or issues may be raised by D2 – D16 as they have not filed their defences yet.  The court can always consider separate trials or trial of separate issues when all the defences are available.

49.  In my view, this is precisely the reason why the presence of the Counterclaim promotes procedural inconvenience.  Procedural convenience or inconvenience involves consideration of efficient case management which in turn should ensure not just speedy resolution but also that the case be resolved in the least time and costs-consumptive fashion.  It would be costly, time-consuming, and prolonging the procedures to wait and see all the defences, then determine what the next step to be. 

50.  It would be far more convenient to see all the defences, to identify whether common issues exist / arise and if so, vis-à-vis which defendants, before joining and counterclaiming.  To join and counterclaim first then disjoin or order separate trials or trial of separate issues or seek other form of order is to put the cart before the horse.  The reason is very simple.  Uncertainty of the defences may cause wastage of time and effort.  For example, amongst the 15 additional defendants, perhaps only 5 are interested in defending; and this mutual issue of boundary dispute may only arise vis-à-vis 2 of them.  Joining them all now and wait to see what defences they may (or may not raise) causes at the very least the delay in time, if not cost-consumptive as well. 

51.  As a matter of fact, in respect of this current appeal, quite a number of the defendants have written to suggest they adopt a neutral stance or are not interested in participating.  Although not directly on the boundary dispute, the current appeal will no doubt have an impact on all the defendants’ occupation of each section.  The lack of interest is a good indication that the Government’s dispute with the plaintiff does not necessarily concern / affect the other defendants.

52.  At this juncture, it is worth mentioning Mr Ho’s oral submission that he disagreed that the burden is on the Government to justify the Counterclaim; and the burden is on the plaintiff to show procedural inconvenience (a term coming from Ernst & Young) to justify striking out the Counterclaim.   

53.  I reject this submission.  At 15/5/1, Vol 1, HongKongWhiteBook 2017, it is said:

“ The power of the court under this rule is discretionary (Thomas v. Moore [1918]1K.B. 555,CA,perPickford L.J.: ‘joinder of parties and joinder of causes of action are discretionary in the sense that if they are joined there is no absolute right to have them struck out, but it is discretionary in the Court to do so if it thinks right’). The plaintiff,if challenged,must justify the joinder and no extra burdenshould be imposed on the defendant through the plaintiff needlessly enlarging the area of the dispute (per Collins M.R. in Saccharin Corp. v. Wild [1903] 1 Ch. 410 at 422, where the plaintiff was limited in the first instance to three out of 23 causes of action for infringement of patents).”

54.  Mr Ho seeks to distinguish Saccharin saying it was a case where the plaintiffs literally threw 23 different actions against the defendant, thereby casting the onerous burden on the defendant to examine the grounds in each action to refute infringement of patent in each case.  I understand Mr Ho to be submitting that in the present case, the Government has pleaded a complete cause of action by raising the boundaries dispute which is an issue common to and which the Government has counterclaimed against the plaintiff and D2 – D16.

55.  But as submitted by Ms Eu and stated above, the Government’s case on the common issue against the additional defendants is made on a contingent basis and separate negotiations with each of the defendants are on-going.  The best the Government can say is it may or may not have a case on the common issue vis-à-vis each of D2 – D16.

56.  Moreover, the Government has chosen to insist on joining the defendants by way of counterclaim at this stage (even though they have now issued writs against the defendants, which they have now done but not when the case was before Master M Wong), seeing what defences may be raised, which would enable the Government to know the case of each defendant, before taking the next step.  I take the view that, although not exactly the same, this is similar to the situation in Saccharin, where an unnecessary burden was imposed upon the defendant to disprove each of the 23 causes of action.  Here, the analogy is that the burden is cast on the plaintiff to justify the Counterclaim against each of the parties, ie, D2 – D16, without even knowing what case each of them are going to raise.  This cannot be right.

57.  I hasten to add that apart from disputing the applicability of the principles stated in the White Book citing Saccharin, Mr Ho has provided no authority to support his proposition that the burden is on the plaintiff to justify the Counterclaim or establish procedural inconvenience within the meaning of Ernst & Young.

58.  I also wish to add that even if I am wrong about the burden, for reasons stated herein, the exercise of the court’s discretion in this case is not going to be in favour of the Government.

59.  In an attempt to refute the plaintiff’s contention that the Government’s case against the additional defendants were unparticularised, the Government responded by proposing to amend the counterclaim to insert more particulars against the defendants.

60.  However, it seems clear that even on the Amended Counterclaim,the Government has only pleaded the boundary disputes as the only common issue amongst the plaintiff and the other defendants.

61.  For reasons which I have already explained above, I do not think there is any procedural convenience to gain by joining and counterclaiming against all the defendants.  On the contrary, it is procedurally inconvenient in the sense that this is inefficient case management, and will enhance costs and time.  I further note and agree with Ms Eu that the plaintiff’s case vis-à-vis the Government is in fact ready for determination.  It would delay the proceedings between the plaintiff and the Government if the plaintiff is put to wait upon the filing of the defences, see what issues are common or indeed whether there are common issues at all, and as the Government suggested, only then decide whether there should separate trials or trials of separate issues, etc.  This is unfair and prejudicial to the plaintiff. Nor is it just or expedient in this case do so.

62.  I agree with the plaintiff that the overloading of the proceedings with factual circumstances pertaining to the separate Government lease of each defendant of the Lot will add to the cost and delay of the plaintiff’s OS.  The evidence suggests that the Purple Area forms part of the home of the plaintiff’s director and his family.  The Government has not suggested otherwise.  It is unfair and unjust for the plaintiff’s claim over the Purple Area to be further delayed to enable the Government to counterclaim unrelated and unascertained issues relating to D2 – D16, who may or may not resist the Counterclaim with defences which may or may not be common to the dispute over the Purple Area.

63.  In contrast, no or little prejudice will be suffered by the Government.  Now that the Government has issued separate writs against each of the defendants, it is even clearer that the Government is in a no-lose position.  The Government can proceed separately against each of the defendants focusing on the genuine disputes which are individual or specific to each defendant. The Government can still proceed with its consolidation application at a later stage, after the main issues of each suit are identified when pleadings of each suit are closed.

64.  For these reasons, I uphold the Master’s decision to strike out the joinder and the counterclaim and the Government’s appeal is dismissed.

65.  For the sake of completeness and in deference to the parties’ submission, I shall mention Ms Eu’s submission about the Government’s refusal to participate in the Adverse Possession proceedings and now turns around to claim that the Purple Area is Government land.  She submits the Government is estopped from denying the plaintiff’s title to the Purple Area.  Ms Eu further relies on this to support the unfair and unjust conduct of the Government which is prejudicial to the plaintiff and aims at procrastinating the proceedings.

66.  Mr Ho submits that the criticism is unfair.  The plaintiff’s claim against Madam Tseung premised upon adverse possession and raised no boundary disputes of the Lot with which the Government was concerned.  Furthermore, any declaration obtained by the plaintiff against Madam Tseung would only be binding on Madam Tseung and those claiming through her: Wong Yiu v Leung Sum and Leung Sui Ying, HCMP 2421/1987. Importantly, the plaintiff would have absolutely no case to claim adversary possessory title against the Government which requires a possession of 60 years.

67.  In Fairweather v St Marylebone Property Co Ltd [1963] AC 510 at 536, it was held that:

“ No one supposes that adverse possession against a lessee during his term is itself adverse possession against his landlord.”

68.  Thus, any successful claim by the plaintiff against Madam Tseung would only bar the latter’s title between themselves and cannot be binding upon the Government.  

69.  I agree with Mr Ho that the Government’s refusal to participate in those proceedings between the plaintiff and Madam Tseung was reasonable as there was no or little commonality of issues which justify the Government intervening in those proceedings.

D.    Other matters

D1.   Government’s Summons to amend Counterclaim

70.  As I have dismissed the Government’s appeal, it is unnecessary to consider its summons to amend the Counterclaim.

D2.   Government’s consolidation application

71.  Both the plaintiff and the Government do not dispute that consolidation is an exercise of the court’s power of discretion.

72.  The Government has filed but not yet served the 15 protective writs against D2 – D16. 

73.  It is unknown whether defences would be filed or if so, what defences there would be.  In the circumstances and in the exercise of the court’s discretion, it is premature to order consolidation at this stage.

74.  I shall adjourn the Government’s summons for consolidation sine dine with liberty to restore.

E.    Disposal

75.  The Government’s appeal against Master M Wong’s decision dated 3 May 2016 is dismissed with costs to the plaintiff, certificate for two counsel.

76.  I make no order on the Government’s Summons dated 21 February 2017 seeking amendment of the Counterclaim.

77.  The Government’s Summons dated 21 February 2017 for consolidation is adjourned sine die with liberty to restore.  Costs be reserved.

F.    Note of thanks

78.  I am indebted to Counsel’s most able assistance.

HCMP 253/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 253 OF 2015

_________________________

_________________________

(by original action)

_________________________

(by counterclaim)

_________________________

_______________

D E C I S I O N

_______________

Background

1.  By an Inter-Partes Summons dated 18 June 2015, the plaintiff (by original action) (“the plaintiff”) seeks to strike out the following:-

(a)  Paragraph 12 and Paragraph 1 of the Prayer of Relief in the Points of Counterclaim (“the Counterclaim”) dated 11 May 2015 and filed by the defendant (by original action) (“the defendant”), under the Rules of the High Court (Cap 4A) Order 28, rule 7(3) and/or Order 15, rule 5 and/or Order 18, rule 19 on the ground that it may prejudice, embarrass or delay the fair trial of the action; and

(b)  The defendant’s joinder of the causes of action and the 15 other parties to the Counterclaim (“the Joinder”), under the Rules of the High Court (Cap 4A) Order 15, rule 5 on the grounds that it may embarrass or delay the trial or is otherwise inconvenient.

2.  At the hearing on 29 January 2016, the 2^nd to 12^th and 14^th to 16^th defendants (by counterclaim) were absent, but the attendance of the 6^th, 9^th and 16^th defendants (by counterclaim) had been excused before the hearing.  Although the 13^th defendant (by counterclaim) was present at the hearing, he expressed clearly that he did not wish to take part in the proceedings.  Thus, only the plaintiff and the defendant are involved in the present striking out application.

3.  In fact, the plaintiff commenced the present proceedings by way of Originating Summons dated 2 February 2015 (“the OS”) against the defendant only.   The defendant then filed the Counterclaim against the plaintiff and 15 other defendants (by counterclaim).  On 13 May 2015, Deputy High Court Judge Saunders ordered that the Counterclaim be treated as a pleading delivered pursuant to an order made under Order 28, rule 4(5) of the Rules of the High Court and for the purposes of the Counterclaim, these proceedings do continue as if the cause or matter had been begun by Writ of Summons pursuant to Order 28, rule 8 of the Rules of the High Court.

4.  The plaintiff submits that the relief sought by the Joinder of the 15 additional defendants (by counterclaim) does not relate to or connect with the original subject-matter of the OS, ie the plaintiff’s entitlement to the Purple Area in question.  Thus, it does not meet the requirement stipulated under Order 15, rule 3 of the Rules of the High Court.

5.  The plaintiff also submits that even if the Joinder is within Order 15, rule 3, the Court should exercise its discretion to strike out the Joinder or alternatively to stay or order separate trial of the same; and that the Counterclaim, particularly where it relates to “divers other parties” or Sections A to I, K to P of the Lot, is embarrassing, prejudicial and will cause undue delay to the plaintiff.  Thus, the plaintiff asks the Court to strike out parts of the Counterclaim; alternatively to stay or order separate trial of the same.

The plaintiff’s case

6.  In the OS, the plaintiff claims against the defendant for 3 declarations, namely: (1) that the property described in the Schedule of the OS (“the Purple Area”) is an area over which a Government lease was granted under New Grant No. 492 dated 28 March 1957 (“the New Grant”) in favour of Tseung Ding Man (“Tseung”); (2) that the plaintiff is the registered owner of the Purple Area by virtue of having extinguished by adverse possession pursuant to section 17 of the Limitation Ordinance (Cap 347) the title, interest and/or right of Tseung in and/or over the Purple Area and as determined in an Order dated 19 December 2013 by Deputy High Court Judge Marlene Ng in HCMP 1003/2013 (“the Adverse Possession Order”); and (3) that the Government is estopped from denying the above.

7.  It is not disputed that the plaintiff is the registered owner of Section J (“Section J”) of Lot 951 in DD 381 (“the Lot”).  Section J was assigned to the plaintiff by its predecessor-in-title Cosmos Passengers Service Co Ltd by an Assignment dated 30 June 1986 and registered in the Tuen Mun Land Registry under Memorial No TM280161.

8.  The Lot is held from the Government under the terms and conditions of the New Grant which was granted to Tseung in exchange for the surrender of various pieces of parcels of land as specified in the New Grant.  The demarcation and boundary of the Lot was shown on the plan (“the New Grant Plan”) attached to the New Grant coloured red, which includes the Purple Area.

9.  During the period between 1959 and 1962, Tseung subdivided the Lot into Sections A to P and the Remaining Portion of the Lot.  Tseung assigned each of Sections A to P to various purchasers while keeping the Remaining Portion of the Lot registered under her name.  The Purple Area is situated in the Remaining Portion of the Lot.

10.  Apart from Section J, the plaintiff, through its director Poon Jing and his family, had been occupying the Purple Area (as well as some areas coloured Orange and Blue in the plan annexed to the OS) for many years.  In 2006, by virtue of its continuous and uninterrupted possession of the Purple Area, the plaintiff extinguished Tseung’s title over the Purple Area under section 17 of the Limitation Ordinance (Cap 347).  This was confirmed by the Adverse Possession Order.

11.  In fact, before the plaintiff obtained the Adverse Possession Order, the solicitors acting for the plaintiff, Messrs Chan, Lau & Wai wrote a letter dated 20 May 2013 to the Department of Justice (“DOJ”) informing them of the proceedings in HCMP 1003/2013 and asking them to participate in the proceedings if interested.  However, DOJ replied by letter dated 19 June 2013 that it was not minded to participate in such “private proceedings”, and that “nevertheless, nothing herein … prejudices the Government’s position that the Purple Area … is Government land and its rights to issue proceedings for appropriate declarations from the Court.”

12.  Despite refusing to take part in HCMP 1003/2013 and standing by whilst the Adverse Possession Order was made, the defendant now claims that the Purple Area is Government land.  Although the defendant accepts that the Purple Area is included in the New Grant Plan, it says that Tseung and the Government must be taken to have realigned the boundary of the Lot by virtue of various correspondence in October and November 1958, and it must be inferred that either Tseung had never taken possession of the Purple Area or possession of the Purple Area had been surrendered to the Government prior to the assignment of the various sections of the Lot by Tseung to the various section owners.  However, none of these 1958 letters have been registered in the Land Registry and they were unknown to the plaintiff prior to these proceedings.

13.  DOJ did not then seek any declaration from the Court to the effect that the Purple Area is Government Land.  Instead, the District Lands Office Tuen Mun threatened to carry out land enforcement actions on the Purple Area unless the plaintiff issued legal proceedings seeking relief from the Court regarding its title thereto.

14.  Against this background, the plaintiff had no choice but to file and serve the OS, and the subject matter of the dispute between the plaintiff and the defendant is the title to the Purple Area.  There is no dispute between the plaintiff and any of the other section owners of the Lot.  None of the other owners of the adjourning sections claim title of or interest in the Purple Area.

15.  Although since 23 March 2015, DOJ had indicated by their letter to Messrs Chan, Lau & Wai their intention to file a counterclaim against the plaintiff, DOJ continuously delayed in doing so until 11 May 2015, two days before the first hearing of the OS, when the defendant filed and served the Counterclaim on the plaintiff.  The Counterclaim also joined 15 additional defendants without any description of the same.  Their connection to the subject matter of the OS is not pleaded.

16.  In the Counterclaim, the defendant seeks the following reliefs:-

(a)  A declaration in respect of each of Sections A to P of the Lot that that segment of the boundaries of the Lot which also serves as a segment of the boundaries of the Section in question had prior to the date of the first assignment been adjusted, modified or realigned by agreement between the Government and Tseung to that shown on the Lot Index Plan annexed to the Counterclaim; and

(b)  A declaration that the areas now under the occupation of the plaintiff and divers other parties which lie outside the boundaries of the Lot as shown on the Lot Index Plan have at all material times been and remain unleased Government land, and the plaintiff’s occupation of the areas respectively shown coloured Blue and Purple on the plan annexed to the OS is in contravention of section 4 of the Land (Miscellaneous Provisions) Ordinance, Cap 28.

17.  However, it should be noted that:-

(a)  The Counterclaim makes generic references to “divers other parties” and/or seeks reliefs for Sections A to I, K to P of the Lot without linking them to the 2^nd to 16^th defendants (by counterclaim);

(b)  The reliefs sought against the “divers other parties” and/or reliefs for Sections A to I, K to P of the Lot expand the subject matter considerably and cover areas outside the Purple Area.

(c)  The Counterclaim only seeks declaratory reliefs.  No existing dispute as between the Government and the “divers other parties” has been pleaded.

(d)  Prayer (2) of the Counterclaim relates not only to occupation by the plaintiff but also occupation by “divers other parties” of areas outside the Lot Index Plan but none of these areas are identified and the circumstances or length or history of such occupation are not particularized.

18.  Up to the present, out of the 15 additional defendants to the Counterclaim, only the 5^th, 9^th and 11^th defendants have indicated that they are minded to contest the Counterclaim, whereas the 10^thand 12^th defendants have not indicated their position.  It is not yet known what issues, if any, they will add or bring.

19.  Thus, the plaintiff submits that the relief sought by the defendant’s joinder of 15 additional defendants (by counterclaim) does not relate to or connect with the original subject-matter of the OS, ie the plaintiff’s entitlement to the Purple Area, and even if it is related, the Court should exercise its discretion to strike out the Joinder or alternatively to stay or order separate trial of the same when the balance of convenience lies clearly in favour of striking out the Joinder (applying the first stage of the two-stage test in Ernst & Young (a firm) v Butte Mining Plc (No 2) [1977] 1 WLR 148).  Moreover, the Counterclaim, particularly where it relates to “divers other parties” or Sections A to I, K to P of the Lot, discloses no reasonable cause of action and is irrelevant and it may embarrass, prejudice and delay to the fair trial of the proceedings, and the Court should strike out parts of the Counterclaim or alternatively stay or order separate trial of the same.

The defendant’s case

20.  The defendant’s case is that as a result of the New Grant, there was an adjustment, modification or realignment of the boundaries of the Lot, and the Purple Area (as well as the area coloured Blue) became unleased Government land.  Thus, the defendant seeks a declaration in respect of the boundaries of the Lot.  This is also a defence to the plaintiff’s claim because the plaintiff’s occupation of the Purple Area (being unleased Government land) is in contravention of section 4 of the Land (Miscellaneous Provisions) Ordinance, Cap 28. 

21.  The defendant submits that it is important not to confuse the question of whether it was proper for the defendant to join the 2^nd to 16^th Defendants to the Counterclaim as parties to the proceedings with the altogether different question of whether it would be expedientfor the Court to order the defences of the 2^nd to 16^th defendants to the Counterclaim to be tried separately.

22.  There is no alternative claim by the plaintiff that even if paragraph 12 of the Counterclaim and paragraph (1) of the Prayer of Relief in the Counterclaim properly raise an issue which is relevant to the dispute between the plaintiff and the defendant and the Joinder of the 2^nd to 16^th defendants to the Counterclaim is necessary to enable the Court effectually to adjudicate on all disputes relating to the same subject-matter, the 2^nd to 16^th defendants’ defences to the Counterclaim may nevertheless raise issues which do not concern the plaintiff and for that reason it would be expedient for the Court to make an order for those issues to be tried separately.

23.  Hence, defendant submits that the only questions before the Court are:-

(a)  the relevance of paragraph 12 of the Counterclaim and paragraph (1) of the Prayer of Relief in the Counterclaim to the dispute between the plaintiff and the defendant; and

(b)  the necessity of joining the 2^nd to 16^th defendants to the Counterclaim as parties to the proceedings.

24.  The position of the defendant can be shortly stated as follows:-

(a)  paragraph 12 of the Counterclaim and paragraph (1) of the Prayer of Relief in the Counterclaim are clearly referable to the question as to whether the boundaries of the Lot as shown on the Lot Index Plan have been agreed to by Tseung prior to the date of the first assignment or fixed by the Government pursuant to the power conferred by General Condition 3 of the New Grant, which is undoubtedly relevant to the dispute between the plaintiff and the defendant;

(b)  given that on the defendant’s case, the boundary agreement between Tseung and the Government and the exercise of the power to fix the boundaries conferred by General Condition 3 of the New Grant affected the whole of the Lot and not just Section J, it is clearly necessary for the 2^nd to 16^th defendants to the Counterclaim to be present before the Court to enable the Court effectually to adjudicate on all disputes relating to the same subject-matter once-and-for-all; and

(c)  in any event, either any question over the propriety of joinder of causes of action and/or parties to the Counterclaim has already been raised by the plaintiff and decided by Deputy High Court Judge Saunders before making the Order on 13 May 2015 (in which case it is not open to the plaintiff now to re-litigate the issue) or it not only could but should have been raised with Deputy High Court Judge Saunders (in which case it is an abuse of process for the plaintiff now to raise an issue which ought properly to have been decided on an earlier occasion).

25.  For the purposes of deciding whether it was proper for the defendant to join the 2^nd to 16^th defendants to the Counterclaim as parties to the proceedings, it is wrong to treat “the original subject-matter of the action” as narrowly confined to the Purple Area.  Even though the defendant’s counterclaim against the plaintiff is concerned only with the area illegally occupied by the plaintiff, it is clear that the real dispute between the defendant and the plaintiff is about whether the boundaries of the Lot has been realigned prior to the first assignment by agreement with Tseung or fixed by the Government pursuant to the power conferred by General Condition 3.  This is a dispute which is clearly common to all those whose titles are derived from Tseung and the Joinder of the 2^nd to 16^th defendants to the Counterclaim is plainly justified on the ground of preventing multiplicity of proceedings.

26.  The facts of the present case are a far cry from those cases where the Court should make an order under Order 15, rule 5 of the Rules of the High Court to strike out a counterclaim on the ground that allowing it to proceed may embarrass or delay the trial or is otherwise inconvenient.  This is not a case where a defendant is seeking to include in a counterclaim causes of action which are not directly related to the subject-matter of the claim.  The defendant’s counterclaim is only the flip side of his defence to the plaintiff’s claim.

27.  There is no substance in the plaintiff’s complaint in respect of the lack of particulars regarding the “divers other parties”.  In the context of the Counterclaim, the “divers other parties” is a clear reference to the 2^nd to 16^th defendants and those claiming through or under them and the disputed areas can be readily ascertained by comparing the New Grant Plan with the Lot Index Plan.  Moreover, the issue over whether the boundaries of the Lot has been realigned by agreement with Tseung or fixed by the Government pursuant to the power conferred by General Condition 3 is sufficiently raised without the particulars of wrongful occupation of unleased Government land by the “divers other parties”.  In any event, it is not for the plaintiff to complain of any want of particulars regarding the allegations against the “divers other parties” as by its own admission the material facts against the plaintiff are clearly set out in paragraphs 1 to 11 of the Counterclaim.

28.  Further, in considering whether to strike out paragraph 12 of the Counterclaim and paragraph (1) of the Prayer of Relief in the Counterclaim and to strike out the Counterclaim as against the 2^nd to 16^th defendants to the Counterclaim, the important point to note is that inasmuch as Order 28, rule 7 of the Rules of the High Court lays down no procedure for counterclaim by a defendant to an originating summons, the defendant has proceeded along the lines suggested in paragraph 28/7/1 of Hong Kong Civil Procedure 2016 by serving his proposed points of counterclaim on the plaintiff to give it an opportunity to raise objections, and before making the order on 13 May 2015, Deputy High Court Judge Saunders had to adjudicate on the preliminary question of the competency or bona fides of the defendant’s counterclaim.  In deciding to let it proceed and give directions on how it should proceed, the learned Judge must have already been satisfied that the Counterclaim cannot be struck out for reasons under Order 28, rule 7(3) or Order 18, rule 19 (see paragraph 28/7/2 of Hong Kong Civil Procedure 2016).  It would be wrong for the Court now to revisit that question.

29.  It may be that the Court can still exercise the power under Order 15, rule 5 to order the defences of the 2^nd to 16^th defendants to the Counterclaim to be tried separately, but the time for considering such a course has not yet arrived since the 2^nd to 16^th defendants have yet to file their defences to the Counterclaim and until they are in, one would not know what additional issues (if any) will be raised.  In any event, given that is not a relief sought in the Inter-Partes Summons, the Court is not in a position to make such a direction when not all the interested parties are before the Court.  Therefore the defendant submits that the proper course is to dismiss the plaintiff’s Inter-Partes Summons with costs.

The Joinder

30.  For the sake of convenience, I will discuss about the Joinder first.  Joinder of additional parties to a counterclaim is governed specifically by Order 15, rule 3(1) of the Rules of the High Court which provides that “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.”

31.  It is clear that there are two situations mentioned in Order 15, rule 3(1) when a defendant can join additional parties in the counterclaim.  The first one is when the additional parties are liable to the defendant along with the plaintiff in respect of the subject-matter of the counterclaim.  The second one is when the defendant claims against the additional parties any relief relating to or connected with the original subject-matter of the action.

32.  The plaintiff seems to assume that the defendant could only join the additional parties if the Counterclaim is related to or connected with the original subject-matter of the action, namely the Purple Area, and argues that the Counterclaim is not related to or connected with the Purple Area.  I think the plaintiff has overlooked the first situation as mentioned above where the defendant can also bring in additional parties if they are liable to the defendant along with the plaintiff in respect of the subject-matter of the Counterclaim.

33.  As the defendant is seeking a declaration in respect of the boundaries of the Lot (paragraph 1 of the Prayer of Relief in the Counterclaim), the subject-matters of the Counterclaim are the boundaries of the Lot, not just the Purple Area.  All the additional defendants (by counterclaim) are liable along with the plaintiff in respect of the Counterclaim.  Thus, it is clear to me that the defendant is entitled to rely on the first limb of Order 15, rule 3 to join the additional parties in the Counterclaim.  

34.  It is trite that the Counterclaim need not be an action of the same nature as the original action (see point 5 in paragraph 15/3/1 of Hong Kong Civil Procedure 2016).  So even if the Counterclaim has expanded the scope of the subject-matter from the Purple Area to the boundaries of the Lot, it does not mean that the defendant cannot raise such matters in the Counterclaim.

35.  Of course, the Counterclaim must still ask for relief relating to or connected with the subject-matter of the plaintiff’s claim (see point 4 in paragraph 15/3/1 of Hong Kong Civil Procedure 2016), but it is not the same as saying that the subject-matter of the Counterclaim must still be the Purple Area.  As the determination of the boundaries of the Lot will in turn determine whether the Purple Area is unleased Government land or otherwise, which constitutes a defence to the plaintiff’s claim, I am of the view that the relief sought under the Counterclaim is related to or connected with the subject-matter of the plaintiff’s claim.  Thus, the Joinder of additional parties by the defendant is permissible.

Whether the Joinder may embarrass or delay the trial or is otherwise inconvenient

36.  However, the plaintiff submits that even if the additional defendants are properly joined under Order 15, rule 3, the Court should exercise its discretion to strike out parts of the Counterclaim insofar as they relate to “divers other parties” and/or reliefs for Sections A to I, K to P of the Lot, alternatively such parts be stayed or separately tried.

37.  It is clear that Order 15, rule 3 is subject to the Court’s overriding discretion under Order 15, rule 5 to do what is just and expedient.  Under Order 15, rule 5, the Court may order the Counterclaim to be struck out or tried separately or make such other order as may be expedient if it appears to the Court that the joinder of the parties may embarrass or delay the trial or is otherwise inconvenient.  This is what the plaintiff refers to as “the expedient question”.

38.  First of all, I think it is wrong for the defendant to say that the plaintiff has not made an alternative claim based on the expedient question. The plaintiff has clearly referred to Order 15, rule 5 in the Inter-Partes Summons and presented arguments in respect of the expedient question in its skeleton submission.  The expedient question is obviously an issue in this striking out application.

39.  In fact, the plaintiff applies the first stage of the two-stage test identified in Ernst & Young, supra, and submits that the balance of convenience lies clearly in favour of striking out the Joinder for the following reasons:-

(a)  The objectives of Order 15, rules 3 to 5 on the prevention of multiplicity of actions will not be achieved by the joinder of the parties to the Counterclaim.  The subject matter of the original action and the Counterclaim is quite separate and distinct and there is no mutuality.  Notably, the additional defendants will not be bound by the declarations to the OS.

(b)  Moreover, the same questions or issues will not be tried twice, as the title to each section of the Lot depends not only on the boundary of the Lot but also on fact-specific issues, which will differ from each party.  In the OS, the plaintiff has produced evidence relating to its occupation of the Purple Area.  The other defendants may have their own correspondence or evidence which is not relevant to the plaintiff’s occupation of the Purple Area.  Occupation of unparticularized areas by “divers other parties” may involve long history and factual circumstances not related to the plaintiff.

(c)  Any monetary “prejudice” the Government may suffer should it decide to bring separate actions against the additional parties joined to the Counterclaim is not comparable to that suffered by the plaintiff should the joinder to the counterclaim be allowed.  The Counterclaim does not plead any existing dispute as between the Government and the additional defendants.  It is unfair and unjust for the plaintiff’s claim as regards the Purple Area (which forms part of the home of the plaintiff’s director and his family) to be further delayed so that the Government can ventilate unrelated issues related to “divers other parties” who will contest the Counterclaim with fact-specific defences (such as lease modification, surrender or regrant, waiver or estoppels etc) that have no relation to the Purple Area.

(d)  In particular, the plaintiff has already been subject to undue delay due to the Government’s procrastination throughout (see paragraphs 20 to 29 of the 2^nd Affirmation of Poon Jing).  It is unjust and prejudicial for the Government to now subject the plaintiff to further delay by attempting to use the plaintiff’s original proceedings, which is self-contained and not binding on other parties.

40.  Moreover, due to the lack of particulars in the Counterclaim, the plaintiff submits that the Counterclaim discloses no reasonable cause of action against the 15 additional defendants and is embarrassing to the plaintiff. Accordingly, the Court is invited to strike out those parts of the Counterclaim in relation to “divers other parties” and other sections of the Lot, alternatively to order that it be stayed or separately tried.

41.  I totally agree with the plaintiff in respect of its aforesaid submissions.  Although the defendant is entitled to join the additional parties as aforesaid, it is still within the Court’s discretion to strike out the Joinder, order separate trial or make such other order as may be expedient under Order 15, rule 5.  In Ernst & Young, supra, Lightman J explained the relationship between Order 15, rules 2 to 3 (on counterclaim) and rule 5 as follows:-

“These are indeed potentially disturbing implications, but … In short, rule 2(1) opens the door to a counterclaim against any one or more of the plaintiffs in any action for any relief. The subject matter of the counterclaim need not be of the same nature as the original action or even analogous to it. A counterclaim is in substance a separate action: the only limitation is the identical limitation on the inclusion of various different causes of action in the same counterclaim to that imposed on the inclusion of different causes of action in an original action: see Ord. 15, rr. 1(2) and 2(3). And rule 3(1) specifically provides for the joinder as additional defendants to counterclaim of persons who are not plaintiffs in the action.

The safeguard against any misuse of this procedure is afforded by the overriding discretionary jurisdiction conferred by rule 5(2), to which rules 2(1) and 3(1) are expressly made subject. This rule affords the court the ultimate say in what should or should not proceed by way of counterclaim. If the court thinks for any reason that the subject matter of the counterclaim ought to be disposed of by a separate action, the court may make such order as may be expedient. Any excess may be curbed in this way.

…

The leading authority is Manchester, Sheffield, and Linsolnshire Railway Co v Brooks (1877) 2 Ex.D. 243. The two plaintiff railway companies sued for tolls due to them jointly. The defendant set up separate counterclaims against each of the plaintiffs for damages for the delay in the delivery of goods. Notwithstanding the absence of mutuality the court refused to strike out the counterclaims, because they could conveniently be tried together with the action. The decision in this case and in a number of other scantily reported 19^th century decisions all support the view that there is absent any such limitation on the possible subject matter of a counterclaim as is contended for By E. & Y., but that the court has a discretionary power to limit use of the counterclaim to cases where it is procedurally convenient and that in the exercise of such discretion the absence of mutuality may be a weighty factor in favour of striking out the counterclaim in order to protect the plaintiff from the over-complication of the litigation and the resulting delay: see Wood on English and International Set-Off (1989), pp. 253-255 and consider The Normar [1968] P. 362, 372-373.” (Emphasis added)

42.  Lightman J then proceeded to the “real issue” between the parties and described in detail the two stages to be considered on any application under Order 15, rule 5(2).  The first is whether the subject matter ought to be disposed of in a separate action.  This essentially involves a balancing of the considerations of procedural convenience in favour of and against disposal in a separate action.  The second (which only arises if the first is answered in the affirmative), is what order ought to be made, ie whether the Court should strike out the counterclaim or order it to be tried separately or make some other order which is expedient.

43.  The power of the Court under this rule is of course discretionary and decided cases are of limited value as each case falls to be dealt with on its own facts (see Leung Ching Fai v Tang Ka Fai [2006] 1 HKLRD 462 at para 13).  The burden is on the defendant to justify the Joinder and no extra burden should be imposed on the plaintiff through the defendant needlessly enlarging the area of dispute (see paragraph 15/5/1 of Hong Kong Civil Procedure).

44.  It is clear to me that the defendant does not have any real or concrete disputes with the additional parties at this stage and hence the cases against them cannot be formulated properly in the Counterclaim.  The only matter that the defendant relies on in the Joinder is that these additional parties would be affected by the intended declaration on the boundaries of the Lot.  However, it is not even clear whether these additional parties would dispute with the defendant on the boundaries of the Lot.  They may or may not be interested in the dispute at all.  I think it is totally unnecessary to drag these additional parties into the proceedings just for the sake of avoiding any multiple proceedings which may or may not exist.

45.  In fact, the defendant has produced an authority (Wong Yiu alias Wong Yiu Kwan v Leung Sum and Leung Sui Ying, MP No 2421 of 1987) to support its contention that a declaration will not bind the whole world but only the parties to the proceedings.  That being the case, the additional parties (if they have any real and genuine dispute with the defendant on the boundaries of the Lot later on) can always argue the matter again in separate proceedings. As submitted by the plaintiff, there could be other fact-specific issues relating to these additional parties and they should be dealt with separately. To drag all these individual fact-specific cases into the present proceedings is totally unfair to the plaintiff, as it will inevitably prolong and delay the trial of the plaintiff’s case.

46.  Thus, I am satisfied that the defendant’s cases against the additional parties ought to be dealt with in separate actions.

Striking out, separate trials or other order

47.  The next question I have to consider is whether I should strike out the Counterclaims against the additional parties, order separate trials or make any other order as may be expedient.

48.  First of all, the Counterclaim against the plaintiff alone is a valid counterclaim as it operates as a defence to the plaintiff’s claim as well.  So this part of the Counterclaim should not be struck out at all, nor should it be tried separately.

49.  The problem lies with the Counterclaim against the additional parties. As aforesaid, it is not clear whether there is any real or genuine dispute between the defendant and the additional parties, and the defendant cannot even formulate the cases properly against the additional parties in the Counterclaim.  It is difficult to see how the defendant could proceed with such cases against the additional parties based on what is pleaded in the Counterclaim.  I am therefore of the view that such cases against the additional parties should be struck out rather than tried separately.

50.  The defendant argues that Deputy High Court Judge Saunders in making the order on 13 May 2015 must have ruled that the Joinder is a proper one and hence the plaintiff cannot re-litigate this issue again.  I do not accept the defendant’s contention in this regard.  First of all, there is no proof that Deputy High Court Judge Saunders did make such an express ruling as alleged by the defendant, which is disputed by the plaintiff.

51.  Secondly, both under Order 15, rule 5(2) and Order 28, rule 7(3), the striking out order is to be made after “a counterclaim is made”.  The Counterclaim was made only after Deputy High Court Judge Saunders made the order on 13 May 2015.  It has been held in Ernst & Young, supra the appropriate stage to apply for striking out is after service of pleadings, and in Ng Wing-see and others v Chang Chi-ching [1973] HKLR 170 that the power to strike out under Order 28, rule 7(3) cannot be exercised until a counterclaim has been made in the manner directed by the Court.  Thus, it is proper for the plaintiff to make the application for striking out after the Counterclaim has been allowed to go in.  In fact, striking out application may even be made at the trial (see paragraph 15/5/1 of Hong Kong Civil Procedure 2016).

52.  Thus, there is no issue of re-litigation or abuse of process for the plaintiff to make the striking out application after the Counterclaim was made.

Paragraph 12 and Paragraph 1 of the Prayer of Relief in the Counterclaim

53.  In addition to the above, the plaintiff submits that the Counterclaim discloses no reasonable cause of action and is irrelevant.  It may embarrass, prejudice and delay the fair trial of the proceedings and ought to be struck out whether under Order 15, rule 5, Order 28, rule 7(3) or Order 18, rule 19 for the following reasons:-

(a)  Although paragraphs 1 to 11 of the Counterclaim set out the material facts with regard to the Government’s Counterclaim against the plaintiff, there is nothing in the body of the Counterclaim which expressly refers to any of the other 15 defendants.  The only oblique reference is in paragraph 12 to occupation by “divers other parties” which, does not identify the material facts, the causes of action the Government has against them or why.

(b)  The Counterclaim lacks material particulars.  In this connection, the Court is invited to refer to the English Court of Appeal case of Philipps v Philipps (1878) 4 Q B D 127, 138-139 per Cotton LJ:-

“In my opinion, this statement of claim in no way enables the defendants to know what case they have to meet at the trial of this action …

I think this is perfectly obvious, that to enable the defendants fairly to meet a case of this sort, where the plaintiff has never been in possession, the plaintiff at least ought to say this: “Such and such a person was in possession of this land – had seisin of it; on his death the title which he had, and under which I claim, devolved under certain facts which I state, either to me or to any ancestor under whom I claim.” Then the defendants will fairly and reasonably know what they have to meet. I do not mean to give that as the form in the present case because we do not know any of the facts. We cannot possibly tell what facts are material to be stated, unless we really know what the case of the plaintiff is – which, as he has carefully kept all the facts and particulars out of the pleading, we cannot even guess at. So, as a conclusion, I decline to pledge myself to any opinion as to whether or not it is necessary to state in detail all the line of descent, how he makes out his heirship, and various other matters … What particulars are to be stated must depend on the facts of each case. But in my opinion it is absolutely essential that the pleading, not to be embarrassing to the defendants, should state those facts which will put the defendants on their guard and tell them what they have to meet when the case comes on for trial.” (Emphasis added)

(c) The lack of particulars regarding the “divers other parties” is also prejudicial in that the Government is essentially shifting the burden to the plaintiff and the “divers other parties” to show the relevance of a party to or a part of the Counterclaim. The observations of Collins MR in Saccharin Corp Ltd v Wild [1903] 1 Ch 410, 421, later applied in the well-known case of Wharf Properties Ltd and Another v Eric Cumin Associates Architects Engineers and Surveyors and Others [1989] 1 HKLR 556, 563-564 are apt:-

“The defendant here says,

‘That is a very great burden to impose upon me; you, the plaintiffs are bringing, in point of fact, 23 different actions against me, and you compel me at my own risk and expense to examine into all the grounds of those actions, and take up a position, which will be practically irrevocable, of admitting or denying the validity of those patents, and confining myself to disputing the infringement if so advised. That is not a burden which it is fair for you, the plaintiffs, to put upon me.’

The plaintiffs reply:

‘We are in very great difficulty in finding out which of our patents you are infringing by your product; and because we are in that difficulty our easiest course is to put them altogether, and say we cannot point out under which of them your product has been made, but it must have been made under one of them.’

The plaintiffs thus endeavour to shift the onus onto the defendant of disproving their case; in point of fact, the plaintiffs, on whom the burden lies in this case, are inviting the defendant to come forward and show that there is not a cause of action against him. Now that, to my mind, is a complete reversal of the true position. The burden of showing that he has a cause of action lies upon the plaintiff in a patent case just as much as upon the plaintiff in any other case. It is upon him to show that he has a cause of action by reason of the defendant having infringed his patent.” (Emphasis added)

(d) The said parts of the Counterclaim are also vexatious and embarrassing in that, even on the face of it, the occupation of divers other parties of lots to which the plaintiff has no title is clearly irrelevant to the plaintiff’s claims over the Purple Area. First, the areas occupied by “divers other parties” are not even identified. Further, the factual occupation of such areas is necessarily a fact-sensitive one, regarding which the Government has separate causes of action. Notably, the declarations sought by the plaintiff have no binding effect on the “divers other parties” to the Counterclaim.

(e) Irrelevance aside, the part of the Counterclaim relating to “divers other parties” will cause substantially delay to the current proceedings to the plaintiff’s prejudice: see paragraphs 20 to 29 of Poon Jing’s 2^nd Affirmation. As stated above, the issues relating to each lot of land are necessarily fact-sensitive and thus wholly unconnected with the declarations sought by the plaintiff. See also the observations of Cairns J in MV Normar (Owners) v British Transport Docks Board and Others [1968] P 362, 371C-373F.

(f) The Government will not be prejudiced if the joinder is stayed or tried separately after the plaintiff’s claim is dealt with.

54.  By reason of the foregoing, the plaintiff asks the Court to strike out parts of the Counterclaim, particularly where it relates to “divers other parties” and/or reliefs for Sections A to I and K to P of the Lot.

55.  However, I do not think that there is anything unclear about the boundary dispute between the plaintiff and the defendant.  That part of the Counterclaim against the plaintiff has been clearly pleaded and I agree with the defendant that it is the “flip side” of the defendant’s defence to the plaintiff’s claim.  What is unclear is just the dispute between the defendant and the additional parties in respect of the boundaries of the other sections of the Lot apart from Section J.  It cannot be doubted that no sufficient particulars have been pleaded against the additional parties.

56.  As I have ruled that the Counterclaim against the 15 additional parties should be struck out, it goes without saying that any part of the Counterclaim relating to the 15 additional parties should be struck out as well.

57.  It is admitted by the defendant that the phase “divers other parties” in the Counterclaim refers to the 15 additional parties and the reliefs concerning Sections A to I and K to P of the Lot are also made in respect of the additional parties.  Thus, these references in the Counterclaim should be struck out accordingly.

58.  In the circumstances, I will strike out the words “and divers other parties” in paragraph 12 of the Counterclaim.

59.  As to paragraph 1 of the Prayer of Relief of the Counterclaim, the words “each of Sections A to P” be replaced with “Section J”.

60.  Although the plaintiff has not made any specific striking out application in respect of paragraph 2 of the Prayer of Relief of the Counterclaim, it is clear that the words “and divers other parties” in that paragraph should also go in view of my ruling that the joinder of the additional parties be struck out.  Thus, the words “and divers other parties” in paragraph 2 of the Prayer of Relief of the Counterclaim will be stuck out accordingly.

Conclusion

61.  I therefore order as follows:-

(1)The joinder of the 2^nd to 16^th defendants (by counterclaim) be struck out.

(2)The words “and divers other parties” in paragraph 12 of the Counterclaim be struck out.

(3)Paragraph 1 of the Prayer of Relief of the Counterclaim be amended by replacing the words “each of Sections A to P” with “Section J”

(4)The words “and divers other parties” in paragraph 2 of the Prayer of Relief of the Counterclaim be struck out.

(5)The defendant do within 14 days from the date of this order file and serve an amended Points of Counterclaim to effect the above changes.

(6)Costs order nisi: the defendant do pay the plaintiff costs of the Inter-Partes Summons dated 18 June 2015 with certificate for one counsel to be summarily assessed on paper; the plaintiff do submit and serve its Statement of Costs within 14 days hereof; and the defendant do submit and serve their Statement of Objection on Costs within 14 days thereafter.