China Railway Investments Group (Hong Kong) Ltd v. Eternity Profit Investments Ltd and Another

HCA 701/2013

ACTION NO 701 OF 2013

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REASONS FOR DECISION
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Introduction

1.On 26 April 2013, the plaintiff issued the writ in this action.  The Statement of Claim (“SC”) endorsed on the writ runs to 31 pages and was drafted by “黃約翰律師事務所” in Chinese.

2.On 30 July 2013, the 2^nd defendant issued a summons to strike out the SC.

3.On 13 May 2014 the plaintiff amended the SC under Order 20, rule 3 of The Rules of the High Court, Cap 4A.  What the plaintiff did was to cross out the SC in its entirety.  The Amended Statement of Claim (“ASC”) was drafted by Mr Damian Wong and Mr Alexsander(?) Wong. Their instructing solicitors were Simon Chan & Co.  It ran to 17 pages plus a one‑page “Annexed [sic] l”.

4.On 20 May 2014, the 30 July 2013 summons came up for hearing and on 16 July 2014 the plaintiff was ordered to pay full costs.

5.On 15 August 2014, the 2^nd defendant issued two summonses to:

(1) strike out the ASC read together with the Further and Better Particulars dated 4 August 2014 (“the Particulars”) and to “dismiss” the plaintiff’s writ; and

(2) disallow the amendments made to the SC read with the Particulars.

6.On 3 June 2015, the master ordered that:

(1) “The amendments by addition in the Amended Statement of Claim in so far as it relates to the causes of action against the 2^nd Defendant be struck out under Order 20 Rule 4 of the Rules of the High Court (Cap. 4A)”;

(2) “Unless the Plaintiff do make application to re-amend the Amended Statement of Claim by 4:00 p.m. on 17^th June 2015, the claim against the 2^nd Defendant be struck out and dismissed with costs together with all costs reserved”; and

(3) “Costs of the 2 Summons together with 2 certificates to Counsel be paid by the Plaintiff to the 2^nd Defendant summarily assessed at HK$550,000.00 payable forthwith”.

7.On 17 June 2015, the plaintiff:

(1) gave notice of appeal against the 3 June 2015 decision of the master; and

(2) also issued a summons for leave to “amend the Amended Statement of Claim filed on 13^th May 2014 as per copy attached”

8.The draft Re‑Amended Statement of Claim crosses out the ASC in its entirety.  Only the one‑page “Annexed [sic] l” remains.  The Re‑Amended Statement of Claim (“RSC”) was also drafted by Mr Damian Wong and Mr Alexsander Wong in English.  Their instructing solicitors were Simon Chan & Co.  It ran to 17 pages plus a one‑page “Annexed [sic] 1”.

9.On 2 July 2015, the master ordered by consent of the plaintiff and the 2^nd defendant that the hearing of this summons “be adjourned sine die with liberty to restore pending the determination of the Plaintiff’s Appeal”.

10.On 9 December 2015, I heard the appeal and dismissed it with costs on indemnity basis.

11.I said I would give my reasons in due course which I now do.

Section 35, Limitation Ordinance, Cap 347

12.Section 35, Limitation Ordinance, Cap 347 (“the Ordinance”) provides that:

“(1) For the purposes of this Ordinance, any new claim made in the course of any action shall be deemed to be a separate action and to have been commenced-

…

(b) in the case of any other new claim, on the same date as the original action.”

(2) In this section a new claim means any claim by way of set-off or counterclaim, and any claim involving either-

(a) the addition or substitution of a new cause of action; or

…

(3) Except as provided by section 30 or by rules of court, the court shall not allow a new claim within subsection (1)(b), other than an original set-off or counterclaim, to be made in the course of any action after the expiry of any time limit under this Ordinance which would affect a new action to enforce that claim.

…

(5) Rules of court may provide for allowing a new claim to which subsection (3) applies to be made as there mentioned, but only if the conditions specified in subsection (6) are satisfied, and subject to any further restrictions the rules may impose.

(6) The conditions referred to in subsection (5) are-

(a) in the case of a claim involving a new cause of action, if the new cause of action arises out of the same facts or substantially the same facts as a cause of action in respect of which relief has already been claimed in the action by the party applying for leave to make the amendment;

…”

Order 20, rule 5(2) and (5)

13.Order 20, rule 5(2) and (5) of The Rules of the High Court, provide:

“(2) Where an application to the Court for leave to make the amendment mentioned in paragraph (3), (4) or (5) is made after any relevant period of limitation current at the date of issue of the writ has expired, the Court may nevertheless grant such leave in the circumstances mentioned in that paragraph if it thinks it just to do so.

…

(5) An amendment may be allowed under paragraph (2) notwithstanding that the effect of the amendment will be to add or substitute a new cause of action if the new cause of action arises out of the same facts or substantially the same facts as a cause of action in respect of which relief has already been claimed in the action by the party applying for leave to make the amendment.”

Plaintiff’s skeleton submission

14.Paragraphs 5 and 13 of the “Skeleton Submission of the Plaintiff” dated 4 December 2015 by Mr Damian Wong and Mr Alexsander Wong read as follows:

“5. For the purposes of this appeal hearing, P will proceed on the basis that the claims in the ASOC represent a new claim for the purposes of LO. However, P submits the amendments in the ASOC should be allow (sic) on the grounds that:

(1) The ASOC was filed within the limitation period and hence s. 35 LO and O. 20, r. 5 have no application; and

(2) Even if the ASOC was filed outside the limitation period, it arises substantially on the same facts as the claims in the SOC.

…

13. In the present case, P submits that for reasons below that the breach of the Oral Agreement occurred on 13 October 2008.  As the ASOC was filed on 13 May 2014, the limitation period had not expired at the time when it was filed.”

13 October 2008 as the date of accrual of the cause of action

15.The argument that 13 October 2008 was the date of accrual of the cause of action should never have been put forward.

16.A party is bound by its own pleadings.

17.By para 24 of the ASC, Mr Damain Wong and Mr Alexsander Wong pleaded “breach of the Oral Agreement”.  The Particulars drafted by Simon Chan & Co stated categorically that the breach occurred on 31 July 2007.  On the plaintiff’s own pleaded case, more than six years had elapsed since the accrual of the cause of it when it amended its SC on 13 May 2014.  The plaintiff is bound by its own pleadings.  It is not open to the plaintiff to argue that the cause of action accrued on 13 October 2008.

18.At the hearing, Mr Damain Wong said that after reading the 2^nd defendant’s skeleton submission, they had decided not to pursue the first point — they would not pursue the point relating to the limitation period.

The prescribed condition

19.The plaintiff conceded that the claims in the ASC are new claims for the purposes of the Ordinance.

20.At the hearing, the plaintiff abandoned the attempt to argue that the limitation period for the claim in the ASC had not expired.

21.I have already found in para 15 above that on the plaintiff’s own pleaded case, more than six years had elapsed since the accrual of the cause of it when it amended its SC on 13 May 2014.

22.Thus, by virtue of section 35(3) of the Ordinance, the court shall not allow a new claim except as provided by rules of court.  Sub‑section (5) goes on to provide that rules of court may provide for allowing a new claim to be made only if the conditions specified in sub-section (6) are satisfied.  The relevant condition in sub-section (6) is that:

“if the new cause of action arises out of the same facts or substantially the same facts as a cause of action in respect of which relief has already been claimed in the action by the party applying for leave to make the amendment;” (emphasis added??)

23.Order 20, rule 5 is to the same effect and makes it clear that:

“An amendment may be allowed under paragraph (2) notwithstanding that the effect of the amendment will be to add or substitute a new cause of action if the new cause of action arises out of the same facts or substantially the same facts as a cause of action in respect of which relief has already been claimed in the action by the party applying for leave to make the amendment.”

24.The relevant issue, as prescribed by both the Limitation Ordinance, Cap 347, and The Rules of the High Court, Cap 4A, is whether:

“… the new cause of action arises out of the same facts or substantially the same facts as a cause of action in respect of which relief has already been claimed.”

25.Unless a plaintiff succeeds on this issue, the court may not allow the amendment.

26.The relevant issue is not, as contended by the plaintiff:

(1) whether the new agreement and the old agreement “essentially arose from the same set of negotiations between Wang, Liu and Hon, together with the involvement of senior management of D2” (§28 of Skeleton Submissions of the plaintiff); or

(2) whether “the circumstances in which the Old Agreement would have been the subject of inquiry at trial in any event” (§30(1)); or

(3) whether “we are dealing with agreements that arose from the same set of negotiations” (§33).

Statute refers to “facts as a cause of action”, not “negotiations”, not the “subject of inquiry”.  Moreover, evidence on negotiations may not be admissible on the terms of an oral contract or on construction of the terms of the contract.

27.What the plaintiff is seeking to do is to re-write the statutory condition and this is not permissible.

28.If the new cause of action in the amended claim arose out of the same facts or substantially the same facts as the cause of action in respect of which relief has already been claimed in the original claim, I wonder why the pleaders of the ASC chose to take the drastic step of crossing out the whole of the SC.  Mr Damain Wong repeatedly said that the SC was in Chinese while the ASC was in English.  Importantly, he put forward no reason for the change in language.

29.The cause of action in respect of which relief has already been claimed in the original claim is breach of the oral agreement pleaded in para 11 of the SC.

30.Paragraph 11 of the SC pleads the oral agreement made between the representative of the plaintiff with “the de facto controllers of the 1^st and 2^nd defendants”.  Significantly, it was not alleged that the oral agreement was made on behalf of the 2^nd defendant.  The pleading read as follows:

「2006年11月中旬, 原告人代表王精與第一被告及第二被告的實際控制人韓明光、劉益東，雙方就中鐵自備列物流專案的合作原則達成了以下部分口頭協定及部分書面協定的合約。口頭協定的內容是以下6條...」

31.The facts alleged in respect of the oral part of the agreement in the SC are:

(1) The time of agreement is mid‑November 2006.

(2) The counter-party to the agreement with the plaintiff was Hon and Liu who were described as the de facto controllers of the 1^st and 2^nd defendants.  Neither the 2^nd defendant nor the 1^st and 2^nd defendants is or are alleged to be a party to the agreement.

(3) No officer of the 2^nd defendant is alleged to be involved in the making of the oral agreement.

32.Does the new cause of action in the ASC arise out of the same facts or substantially the same facts as those referred to in para __ above?

33.In the ASC:

(1) The oral agreement is pleaded under the section “The Oral Agreement with the 2^nd Defendant” in the ASC.

(2) Paragraph 2 alleges the incorporation of the plaintiff in or about May 2002.

(3) Paragraph 3 alleges that “from June 2006 onwards, … the managing director of the Plaintiff, met the following persons at various meetings”, followed by a list of eight persons, including Liu and Hon.

(4) Paragraph 4 alleges that during those meetings:

(a) Wang introduced the persons to various commercial projects in China;

(b) Wang explained that investors were welcome to participate in those projects;

(c) Liu and Hon represented to Wang that they were the controlling shareholders of the 2^nd defendant; and

(d) they further represented that they had vast experience in such financial transactions and were interested in investing in the railway logistics project through the 2^nd defendant.

(5) Paragraph 5 alleges that:

“After discussion, an oral agreement was reached between the Plaintiff and the 2^nd Defendant (‘the Oral Agreement’) with the following terms …”

(6) This section in the ASC contains numerous allegations which should have no place in a pleading.  On the other hand, material particulars on the Oral Agreement are conspicuous in their absence.  They include:

(a) The natural person or persons who made the Oral Agreement on behalf of the plaintiff;

(b) The natural person or persons who made the Oral Agreement on behalf of the 2^nd defendant;

(c) The date when the Oral Agreement was made.

34.Plainly, the new cause of action in the ASC does not, and is not shown to, arise out of the same facts or substantially the same facts as those referred to in para 27 above.  Paragraph 5 of the ASC bears no resemblance to para 11 of the SC.  The burden is on the plaintiff to persuade the court that the statutory condition is satisfied.  The plaintiff has not begun to do that.  The plaintiff’s appeal fails and must be dismissed.

Costs

35.The following is my decision on costs:

(1) This is a hopeless appeal which should never have been brought.

(2) The attempt to argue that 13 October 2008 was the date of accrual of the cause of action was bad.

(3) By its appeal, the plaintiff seeks dismissal of the 2^nd defendant’s two summonses, both issued on 15 August 2015.  If the plaintiff had succeeded in this appeal, the ASC would be restored upon dismissal of the 2^nd defendant’s summonses.

(4) The plaintiff also seeks leave to re‑amend the SC.  The draft re‑amendment shows deletion of the ASC in its entirety (except the one‑page “Annexed [sic] l”).  The plaintiff would be seeking deletion of the ASC restored upon success in its appeal.  To argue for its restoration and at the same time to argue for its deletion is a complete waste of costs and time.

(5) To express court’s disapproval of the abuse of process, I dismissed the appeal with costs on indemnity basis.

Mr Damian Wong and Mr Alexsander Wong, instructed by Simon Chan & Co, for the plaintiff

Ms Winnie Tam SC, leading Mr Jonathan Kwan and Mr Ernest CY Ng, instructed by DS Cheung & Co, for the 2nd defendant