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Ddk Trading & Development Co. Ltd. v Multi Best Manufacturers Ltd. And Another

Judgment Cited authorities 14 Cited in Precedent Map Related
Vincent
Judgment Date25 September 1985
Year1985
Judgement NumberHCA4277/1982
Subject MatterCivil Action
CourtHigh Court (Hong Kong)
HCA004277/1982 DDK TRADING & DEVELOPMENT CO. LTD. v. MULTI BEST MANUFACTURERS LTD. AND ANOTHER

HCA004277/1982

Procedure - application of limitation periods - amendment of writ to add new defendant - whether general principle that amendments date back to the date of the original pleading apply where an additional party is added - consideration of relation back and no useful purpose theories - conflict of English authority - effect of changes in Rules of Supreme Court - fundamental principle and practical considerations do not support relation back principle - Held: 1. That when an original writ is amended by adding a defendant the action is deemed to have begun as against the person added at the date of the amendment and not at the date of issue of the original writ; 2. Appeal from Master dismissed. Section 9 Transfer of Businesses (Protection of Creditors) Ordinance, Cap. 49; Section 35 Limitation Ordinance, Cap. 347; Rules of Supreme Court Orders 15, 18, 20.

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

H.C Action No. 4277 of 1982

BETWEEN

DDK TRADING & DEVELOPMENT CO. LTD.

Plaintiff

AND

MULTI BEST MANUFACTURERS LTD.

 1st Defendant

KOKYU LTD.

 2nd Defendant

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Coram: Deputy High Court Judge Cruden

Date of Hearing: 12th September 1985

Date of Delivery of Judgment: 25th September 1985

___________

JUDGMENT

___________

1. The present appeal against an order of a Master, granting leave to the plaintiff to amend the statement of claim, was heard in Chambers but because of the legal issues raised, judgment is being delivered in open Court. The appeal raises the narrow but important procedural question whether an amendment of a statement of claim introducing a new cause of action against a subsequently joined defendant dates back to the issue of the writ or merely from the date the latter defendant was joined to the action. The law and certainly the practice was, until recently, well established that all amendments date back to the issue of the writ. This simple and often acted on principle can have important and far reaching consequences in practice as is highlighted by the present appeal.

2. The factual background to the present procedural question, commences with the issue of a writ on 22nd May 1982 by the plaintiff solely against the 1st defendant claiming damages raising out of the sale of alleged defective video tapes. According to the affidavit evidence, the 1st defendant agreed on 1st May 1983 to sell its business to the 2nd defendant with settlement then intended to be effected on 30th June 1983. The plaintiff became aware of the transfer of business during May 1984 and has pleaded that the actual transfer took place in or about October 1983. It is common ground that the transfer of the business was effected well after the date of the issue of the writ. On 7th June 1984 the plaintiff was granted leave to amend the writ by joining the 2nd defendant.

3. The amended writ also included an amended endorsement of claim under which damages were claimed against the 2nd defendant pursuant to the Transfer of Businesses (Protection of Creditors) Ordinance, Cap. 49. Later, on 31st May 1985, the plaintiff sought leave to amend the statement of claim, consequential to the joinder of the 2nd defendant particularising, inter alia, the nature of its claim against the 2nd defendant as transferee of the 1st defendant's business within the meaning of the Transfer of Businesses (Protection of Creditors) Ordinance.

4. The 2nd defendant's solicitor did not object to the amendment which was granted by the Master in terms. The solicitor for the 2nd defendant now deposes by affidavit that in deciding not to object to the amendment, it was overlooked at the time that the statutory cause of action against the 2nd defendant had not arisen until after the date of the issue of the writ. On the plaintiff's amended pleadings that cause of action arose in October 1983. The cause of action hence did not exist at the date of the issue of the writ. It was therefore submitted, in accordance with the principle of relation back, that the 2nd defendant must cease to be a party to the action on two grounds. First, that the plaintiff sought to add a cause of action which had not accrued at the date of issue of the writ. Secondly, the statement of claim disclosed no cause of action against the 2nd defendant.

5. I record that neither ground was raised before the learned Master and are now argued for the first time. If the grounds advanced are sound, they are fatal to the plaintiff's claim against the 2nd defendant. This follows from the fact that under Section 9 of the Transfer of Businesses (Protection of Creditors) Ordinance, the statutory liability of the transferee ceases on the expiration of 1 year from the date on which the transfer took effect. If the 2nd defendant ceases to be a party to the present action it is now too late, because of the expiration of the 1 year limitation period imposed by Section 9, for the plaintiff to initiate a new separate action against the 2nd defendant based on he Transfer of Businesses (Protection of Creditors) Ordinance.

6. Counsel for the 2nd defendant strongly relied on the general principle that an amendment takes effect from the date of the issue of the writ and not from the date when the amendment is made. I was referred to 1 'The Supreme Court Practice' (1985) page 338 para. 20/5 - 8/2 where that principle is set out and the relevant authorities collected. In particular I was referred to the judgment of Swift J. in Eshelby v. Federated European Bank Ltd. (1932) 1 KB 254, affirmed by the Court of Appeal at page 423, as the explanation and the authority for why a plaintiff may not amend his writ to add a cause of action which has only accrued to him since the date of the issue of the writ. On the instant facts I am satisfied that the sole statutory cause of action against the 2nd defendant only arose after the issue of the writ.

7. Eshelby v. Federated European Bank Ltd. was concerned with the plaintiff's attempt to amend the writ by adding a cause of action which arose after issue. In upholding that judgment on appeal, Scrutton L.J., at page 429, observed that to allow an amendment to introduce a cause of action which did not exist at the date of issue was "contrary to the universal practice." Certainly the principle enunciated in relation to the facts of that case has continued to be widely applied. However, it should be noted that those facts were limited to the amendment of the cause of action between the original parties. Neither Court considered if the position remained the same, if the amendment sought to join an additional defendant in relation to a subsequent cause of action.

8. Counsel for the 2nd defendant also pointed out that the Court of Appeal had held in Read v. Brown (1889) 22 QBD 128 that where a debt is assigned, the assignment itself forms part of the cause of action in favour of the assignee. Accordingly, it was not open to the plaintiff to argue that the statutory liability of a transferee under the Ordinance, is deemed to have arisen when the cause of action against the transferor arose. To the contrary, the later date of transfer is the relevant date, in respect of the cause of action arising against the transferee.

9. Counsel for the 2nd defendant while maintaining that the long established principle of relation back still applied, recognised that in recent years there have been some English decisions which in certain circumstances have qualified that principle by holding that an amendment to add a new defendant as a party to an existing action, does not have retrospective effect. In those particular circumstances, there is authority that it would be sufficient if the cause of action against the added defendant existed at the date of joinder.

10. Counsel for the plaintiff relied on these latter decisions to oppose the appeal. If those decisions represent the law in Hong Kong, the appeal would fail for it is common ground that when the 2nd defendant was joined to the action on 28th May 1984, the cause of action against the 2nd defendant had already arisen. Both Counsel referred to the Court of Appeal decision of Liff v. Peasley (1980 1 WLR 781 where this issue is examined. The Court of Appeal was able to dispose of the appeal by ordering that the 2nd defendant should cease to be a party to the action on the ground that at the date of joinder the plaintiff would have been time barred from bringing a fresh action against him.

11. However, in view of the fact that the question had been fully argued, Brandon L.J. went on to consider whether the principle of relation back applies to an amendment, joining an additional defendant. If the case law were disregarded Brandon L.J. was of the view that both principle and the current English High Court and County Court rules, favoured the view that the action should be deemed to have begun against the new defendant only at the date of joinder. Seabridge v. H. Cox & Sons (Plant Hire) Ltd. (1968) 2 QB 46 had earlier held that, under R.S.C. Order 15 r.8(4)(a), where a defendant is added the action is deemed to have begun against him on the date of amendment and not, as had been the position under the prior rule, at the date of service.

12. Against this background, Brandon L.J. was of the view that the practice of not allowing a defendant to be added, where limitation periods would have prevented a separate new action being brought, was based not on any relation back principle but because to do so would be to serve no useful purpose. However, Brandon L.J. went on to recognise that the majority of the case law supported the relation back principle as being the juridical basis of the practice and not "his...

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