Chinabase Holdings Ltd v. Robert Chun Chung Ip t/a Robert C.C. Ip & Co and Others

HCA 1892/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1892 of 2015

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DECISION

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1.This is an application by the 1^st defendant, Robert Chun Chung Ip, trading as Robert C.C. Ip & Co., for an order that paragraphs 18 and 22 to 24 and 25 of the statement of claim be struck out on the grounds that they disclose no reasonable cause of action and/or are frivolous, vexatious, and/or an abuse of the process of the court.

2.The application is supported by two affirmations of the 1^st defendant, and resisted by an affirmation of Hung Kin Ming.

Background and the plaintiff’s claim

3.In 2015 the 1^st defendant, through his firm, was instructed as solicitors to act on behalf of all of the other defendants in relation to a commercial dispute that those defendants collectively had with the plaintiff.  That engagement has given rise to the claim being made by the plaintiff against the 1^st defendant.

4.It is necessary to understand the background to the complaints made by the plaintiff.  That background includes the nature of the relationship between the various other defendants and the plaintiff and the nature of the dispute that ensued between them arising out of that relationship.

5.The plaintiff contends in the statement of claim that, on or about 5 August 2008, the plaintiff entered into a framework agreement with the 2^nd defendant by which it was agreed that the plaintiff would participate in the acquisition of a development project in the Mainland.  On 6 August 2009 the plaintiff entered into a joint venture agreement (“the JV Agreement”) with the 2^nd defendant for the acquisition of a joint venture company, known as Manifests Management Limited (“MML”or “the JV Company”).  The plaintiff contributed RMB240,000,000 towards the capital of the JV Company representing 75% of the total interest in the project.  That investment was subsequently amended to US$29 million by virtue of a written supplemental agreement.

6.As part of the agreement, the JV Company is alleged to have guaranteed a minimum return on the plaintiff’s capital investment such that, after 24 months from the contribution, the plaintiff would be paid a guaranteed return of 25% per annum calculated on a simple interest basis.  Further, the 2^nd defendant is said to have provided a further guarantee, as principal obligor, for the due and punctual performance by the JV Company of its obligations under the JV Agreement.

7.The performance of the obligations owed by JV Company and the 2^nd defendant were also secured by two share mortgages, both dated 6 August 2009 and both executed in favour of the plaintiff.  The first mortgage was executed by the 2^nd defendant as the legal and beneficial owner of all the shares it owned in the 3^rd defendant. The second mortgage was executed by the 4^th and 5^th defendants as legal and beneficial owners of shares in the 2^nd defendant.

8.In support of the due performance of the obligations under the two mortgages the mortgagors are said to have executed various instruments of transfer and contract notes, together with various undated board resolutions, resignation letters by directors, and a letter to a company called Portcullis TrustNet (Hong Kong) Limited (“Portcullis”), who was the registered agent of the 2^nd defendant in the British Virgin Islands (“BVI”).   The plaintiff contends that under BVI law any changes to corporate details need to be effected by the registered agent, and hence the need for the unsigned letter to Portcullis.

9.The plaintiff contends that the JV Company failed to comply with its obligations, and in particular failed to provide the plaintiff with the minimum guaranteed return.

10.On 28 February 2014 the plaintiff and the 2^nd defendant entered into an agreement (“the Sale and Purchase Agreement”) by which the plaintiff’s entire 75% interest in the project was sold to the 2^nd defendant for the sum of RMB430 million.  Completion was set on 30 May 2014 in Hong Kong, but the plaintiff alleges that the 2^nd defendant paid only RMB137 million, and a further HK$20 million, leaving the balance of the consideration unpaid.  Although not pleaded as such, it would appear to be the plaintiff’s case that the Sale and Purchase Agreement did not complete in those circumstances.

11.The Sale and Purchase Agreement provided that until completion the JV Agreement would remain valid, and consequently, in what appears to be an exercise of its rights under the share mortgages, on 15 July 2015 the plaintiff’s agent, ABM Nominees Ltd (for reasons which will become clear I shall refer to ABM Nominees as “ABM Group”), gave notice to Portcullis that ABM Group would replace Portcullis as the registered agent of the 2^nd defendant.  Further the plaintiff instructed George & Partners (“G&P”), a firm of BVI lawyers, to assist in the process of transferring the shares of the 2^nd defendant and the 3^rd defendant to the plaintiff.

12.It is clear that the 2^nd to 5^th defendants collectively instructed the 1^st defendant to act as their lawyer in relation to these matters, although details of that engagement are, perhaps naturally, not before the court.

13.For the purposes of the strike out application, in accordance with normal practice, I will assume that the facts alleged by the plaintiff (and as set out above) are correct.

14.The plaintiff relies upon three matters as against the 1^st defendant which it contends give rise to a conspiracy to injure, and actionable misrepresentations:

(1)   In a letter dated 17 July 2015 issued by the 1^st defendant to ABM Group [1] the 1^st defendant stated as follows:

“ We act for Ming Yuan Investments Group Ltd, Ming Yuan Holdings Limited, and Messrs Yao Yuan and Iu Chung.

Our clients received enquiry from Portcullis TrustNet (Hong Kong) Limited, the British Virgin Islands agent of the Company [Ming Yuan Investment Group Limited] concerning your email to them dated 15 July 2015 on the purported appointment of your company as the new administrator of the Company and the purported transfer of shares of the Company from Ming Yuan Holdings Ltd. in favour of a Chinabase Holdings Limited, resignation of directors, appointment of new directors and notice of change of address and contact person (‘the purported documents’).

We are instructed that our respective clients have not signed any of the above purported documents on 10 July 2015 and have not given any instructions for registration of any transfer of shares of the Company.

Our clients hereby demand you to provide the background information of the signing of the purported documents and confirm on whose instructions, the purported documents were presented to the BVI agent for registration.

We believe that you are aware of the fact that legal proceedings have been instituted against, inter‑alia, Provident Pacific Holdings Ltd, Time Arising Limited and Sharp Colour Ltd by the Company on 3 July 2015.”

(2)   In an announcement by the Mingyuan Listco dated 22 July 2015 signed by the 4^th defendant as Chairman and Chief Executive Officer, it was announced that the 2^nd defendant had not signed any of the security documents which were relied upon by plaintiff.

(3)   In a letter dated 29 July 2015 addressed to G&P the 1^st defendant stated as follows:

“ We are instructed that the Joint Venture Agreement has effectively been terminated by [the 2^nd defendant] and Chinabase on 28 February 2014 by the execution of an Agreement for Sale and Purchase of 75% of the shares of MML by Chinabase as Vendors and [the 2^nd defendant] as Purchaser at a consideration of RMB 430 million which agreement was completed on or about 30 May 2014.

As a result of the sale and purchase of the 75% of the shares of MML, the relevant share charges being executed as security for the performance by [the 2^nd defendant] of its obligation under the Joint Venture Agreement should be discharged and/or released and the Security Document should be returned to our clients.”

15.The allegation of a conspiracy to injure is set out in paragraphs 18, 22 and 23 of the statement of claim as follows:

“ 18. In order to frustrate the rights of the plaintiff under the MYHL Mortgage and Yao’s Share Mortgage, Robert Ip, MYHL, MYIGL, Yao Yuan and Tao Yong (collectively ‘defendants’) have conspired to deceive, and each of the defendants did deceive, AMB Group, Portcullis and/or George & Partners with an intention to injure the plaintiff …

[there is then pleaded the three matters relied upon]

22. The plaintiff avers that similar false and deceitful representations aforesaid would have been given directly to Portcullis. Further particular(s) will be provided after discovery.

23. The plaintiff avers that the acts in paragraphs 19 to 22 above were misrepresentations carried out pursuant to the agreement between the defendants with the predominant motive to injure the plaintiff by inducing actions/inactions by ABM Group, George & Partners and/or Portcullis on the basis of false information which was subsequently detrimental to the plaintiff and caused it loss and damages.

Particulars of Deceit

(1) The Robert Ip’s letter of 17 July 2015 was intended to mislead ABM Group and/or Portcullis in not proceeding with the transfer and registration of the MYHL and MYIGL shares in its favour which was a summary right that the plaintiff was entitled to in the event of default of the JV Company’s obligations under the Joint Venture Agreement.

(2) In reliance on the Robert Ip’s representations contained in the 17 July 2015 letter, ABM Group could not replace Portcullis as administrator of MYHL and MYIGL.

(3) Subject to discovery, in reliance on Robert Ip’s representations to Portcullis, Portcullis did refuse to allow ABM Group to replace it as the administrator of MYHIL and MYIGL.

(4) in Robert Ip’s subsequent letter of 29 July 2015, the falsehood of the Robert Ip’s representations to ABM Group and/or Portcullis was admitted by virtue of Robert Ip’s change in position that, it was by way of discharge of the Joint Venture Agreement rather than the non‑signing of the MYHL Security Documents, that rendered the MYHL Security Documents ineffective.”

16.The misrepresentation claim is pleaded in paragraph 25 of the statement of claim as follows:

“ Further and/or in the alternative, the plaintiff repeats the matters contained in paragraphs 18 to 23 herein and avers that by virtue of the same, Robert Ip made the aforesaid representations to ABM Group, Portcullis and/or George & Partners knowing that the said representations were false, or not caring whether they were true or false, with the intention that they be acted on or not acted on by ABM Group, Portcullis and/or George & Partners and with the intent to deceive ABM Group, Portcullis, George & Partners and the plaintiff and causing loss and damage to the plaintiff.”

17.The plaintiff seeks an order that the defendants do undertake to withdraw, and not make further, false representations to ABM Group, Portcullis and George & Partners together with an order for damages and further or other relief.

Legal professional privilege

18.The first point which the 1^st defendant makes is that he continues to be bound by legal professional privilege, which has not been waived by any of his clients, and consequently he is unable to disclose any details of the instructions which he received or the advice which he gave at the relevant time.  The 1^st defendant contends that in such circumstances, where there is any room for doubt, he ought to be entitled to the benefit of that doubt.  In support of that contention he relies upon Ma So So v Chin Yuk Lun & Anor (2004) HKCFAR 300 at [11] – [12].

19.That case was a case in which the defendant lawyers were facing a wasted costs order, as a result of a claim having been based on false allegations.  The solicitor was made personally liable for the whole costs of the action on a solicitor and own client basis and the solicitor was ordered to pay other costs on an indemnity basis.  On appeal to the Court of Final Appeal, the court dismissed the appeal, but varied part of the order so that the costs were not payable on an indemnity basis.  As part of the reasoning in that judgement Li CJ recognised the difficulties that a solicitor faced in subsequent litigation when it was unable to disclose the full nature of the instructions upon which it acted and the advice which had been given.  He held that the court must make full allowance for the inability of the respondent solicitor to tell the whole story and that where there is room for doubt, the respondent solicitor is entitled to the benefit of that doubt.

20.There is great force in that proposition, and I have no doubt that it represents Hong Kong law.  However I do not believe that it can be applied to a strike out application on the ground of no reasonable cause of action.  It is settled that in such a strike out application the court must assume that the facts alleged by the plaintiff are true, and the court will assess whether a cause of action has been established by reference to those alleged facts.  If that is the approach which the court must take to a strike out application there is no room for giving the defendant the benefit of any doubt.  Indeed there cannot be any doubt because the court is obliged to assume that the facts alleged by the plaintiff are correct.  In those circumstances in my view the reliance by the 1^st defendant upon this principle is misplaced, in the context of the application which he makes.

Conspiracy

21.It is common ground that the plaintiff relies upon a conspiracy to injure rather than a conspiracy to use unlawful means.  A conspiracy to injure involves a combination to perform acts which, although not themselves unlawful, are done with the sole or predominant purpose of injuring the plaintiff.

22.It is also common ground that there are four necessary elements to an action for conspiracy to injure, each of which must be specifically pleaded:

(1) a combination or agreement between two or more individuals;

(2) an intent to injure;

(3) pursuant to which combination or agreement, and with that intention, certain overt acts were carried out; and

(4) resulting in loss and damage to the plaintiff.

23.The 1^st defendant contends that:

(1) There is no suggestion that the 1^st defendant had any involvement in the issuance of the public announcement by the listed company, and consequently the only overt acts capable of being relied upon are the issuance of the two letters.

(2) No combination or agreement can be identified or inferred from the pleaded facts.  The plaintiff cannot rely upon the letters for this purpose because they are simply, and expressly, expressions of the instructions given to the 1^st defendant by his clients.  They cannot represent a relevant agreement for the purposes of the tort of conspiracy to injure.

(3) No intent to injure has been identified.  The letters cannot have been issued with an intention held by the 1^st defendant to injure the plaintiff because:

(a) They do not represent overt acts of the 1^st defendant himself, but rather they are simply, and expressly, a reflection of the instructions that the 1^st defendant had received from his client.

(b) They were addressed to the agents of the plaintiff and, as a result, effectively to the plaintiff itself.  In the context of a commercial dispute between the plaintiff and the 2^nd to 5^th defendants, that cannot amount to an intent to injure.

(4) The plaintiff has not pleaded, or suffered, any loss caused by the alleged conspiracy:

(a) There is no plea as to how either of the letters caused ABM or G&P to do anything which they would not have done in any event, or indeed anything to the plaintiff’s detriment.  To the contrary, ABM Group and G&P were the agents of the plaintiff and were obliged to, and would, act on the instructions of the plaintiff and not upon representations made by the opposite side in a commercial dispute.

(b)   To the extent that any loss alleged is the result of actions of Portcullis, or the failure by Portcullis to take any action, there is no pleading of any representation to Portcullis, other than a mere assertion that similar representations “would have been given”.  That plea is wholly speculative and unparticularised and should be struck out.

(c) In any event, the plea that Portcullis refused to transfer shares cannot amount to a loss.  The plaintiff could always take legal action to have the shares transferred and, as it transpires from submissions made by the plaintiff, the shares have in fact now been transferred.  Hence no loss has been suffered.

24.It is, with respect, somewhat difficult to distil what the plaintiff says in answer to these points.  Its skeleton argument does not really address the criticisms made.  Instead the plaintiff repeats the background to the dispute between the plaintiff and the 2^nd to 5^th defendants, and contends that a conspiracy is often concealed.  As a result, it suggests that the issuance of the letters amounts to overt acts from which the trial Judge will be able to draw an inference that there was an underlying conspiracy.  Hence it suggests that the matter should go to trial.

25.During the course of oral argument Mr Kim, acting on behalf of the plaintiff, spent considerable time seeking to demonstrate that there was a significant difference between the representations contained in the two letters, and he said that, as a result, there was clearly a misrepresentation.  He said that in the first letter, there was a representation that the various documents had not been signed by the 2^nd to 5^th defendants at all, whereas in the second letter the position had changed, and it was accepted that the documents had been signed, and the defence had shifted to the proposition that the JV Agreement had been brought to an end by the Sale and Purchase Agreement.

26.He went on to say that it was the duty of the 1^st defendant, as the solicitor acting for the other defendants, to recognise that the two representations were inconsistent with each other, to investigate which was the correct position, and to advise the recipients of the letters of the result of those investigations.  On the basis that the 1^st defendant had not done so, he contended that it was at the least arguable that the 1^st defendant was party to a conspiracy to injury the plaintiff.

27.However, ultimately Mr Kim did not maintain his suggestion that such a duty existed.  He accepted that in the context of a commercial dispute it could not be suggested that the solicitor for one side owed a common law duty of care to the other side.  In my view Mr Kim was correct in making this concession.  The argument then changed to a suggestion that the mere existence of two inconsistent representations was in itself sufficient to identify a conspiracy of the nature alleged.

28.The first difficulty for the plaintiff however is that, on analysis, even assuming that the 1^st defendant has adopted the representations as his own, they are not in fact inconsistent.

29.In the first letter to ABM Group it is made plain that what was contended was that the 2^nd to 5^th defendants did not sign any documents on 10 July 2015, and had not given any instructions for registration of any transfer of shares of the Company.  That representation is not a representation that no such documents had ever been signed.  It is simply a representation that they were not signed on 10 July 2015.

30.The representation was made after a reference to an email from ABM Group to Portcullis dated 15 July 2015, seeking the transfer of the shares.  Although I have not seen the email dated 15 July 2015, and I make no findings as to this, it is a reasonable presumption that the plaintiff, or somebody acting on its behalf, had taken the undated documents executed in support of the share mortgages, and inserted the date of 10 July 2015 on them.  Thereafter, it appears that when writing to Portcullis, ABM Group may have made some reference to documents dated 10 July 2015.  The point made by the 1^st defendant was simply that his clients had not signed any documents on 10 July 2015.  Even if what I presume to have happened is not correct, based on the facts alleged by the plaintiff, namely that the documents in support of the share mortgages were undated when signed (as pleaded at paragraph 9 of the statement of claim), the representation made by the 1^st defendant was a true and accurate representation.

31.The second letter, to G&P, recognised that certain documents were signed, although it did not identify the date upon which they were signed.  It went on to identify that the real defence to the claim by the plaintiff for transfer of the shares was that the plaintiff was no longer entitled to have the shares transferred due to the completion of the Sale and Purchase Agreement.

32.There is, therefore, no inconsistency of the type which is alleged by the plaintiff as the basis upon which a conspiracy might be inferred.  The letters simply make two propositions: first that the documents were not signed on 10 July 2015, and secondly that the plaintiff is not entitled to seek a transfer of the shares because of the completion of the Sale and Purchase Agreement.  Those propositions are not inconsistent and do not necessarily represent a change in stance.

33.Mr Kim urged upon the court the proposition that, when read as a whole, the first letter to ABM Group was in fact a representation that the documents had not been signed.  I do not consider that to be a legitimate reading of the letter, and consequently I do not accept that submission.

34.The second difficulty for the plaintiff is that both letters make it clear that what the 1st defendant was doing in the letters was identifying the instructions that he had been given by his clients, the 2^nd to 5^th defendants.  The letters each expressly identified that the representations contained within the letters were instructions provided.

35.I fully accept that it would be possible for a solicitor to be part of a conspiracy to injure, and if he (or she) was part of such a conspiracy he would not be able to hide behind the solicitor–client relationship as a defence.  However a solicitor is entitled to rely upon what his client tells him, and is entitled to pass on those instructions to the counterparty in a dispute, without necessarily giving rise to the implication that he is involved in a conspiracy to injure.  This has been made clear in numerous authorities, in various contexts, as has been identified by Sakhrani J in De Krassel v Chu Vincent [2010] 2 HKLRD 937:

(1)   Orchard v South Eastern Electricity Board [1987] 1 QB 565, 579 per Dillon LJ:

“ It is not the duty of the solicitor to endeavour to assess the result where there is a likelihood of a conflict of evidence between his client’s witnesses and those of the other side: per Sachs L.J. in Carl Zeiss Stiftung v. Herbert Smith & Co. (No. 2) [1969] 2 Ch. 276, 297D.”

(2)   Carl Zeiss Stiftung v Herbert Smith & Co (No 2) [1969] 2 Ch 276, 293 per Danckwerts LJ:

“ But claims are not the same things as facts. … What we have to deal with is the state of the defendant solicitors’ knowledge (actual or imputed) at the date they received payments of their costs and disbursement. At that date they cannot have had more than knowledge of the claims above mentioned. It was not possible for them to know whether they were well‑founded or not. The claims depended upon most complicated facts still to be proved or disproved, and very difficult questions of German and English law. It is not a case where the West German foundation were holding property upon any express trust. They were denying the existence of any trust or any right to property in the assets claimed by the plaintiffs. Why should the solicitors of the West German foundation assume anything against their clients?”

(3)   Competitive Insurance Co Ltd v Davies Investments Ltd [1975] 1 WLR 1240, 1250 per Goff J:

“ True it is that he disposed of the trust property but he did so on the basis that there was no trust and that he was acting on nobody’s behalf except his principals. I do not see how this can be regarded as intermeddling in this context. The most that can be said, even if that be right, is that he was negligent which, in my judgment, is not sufficient.”

(4)   Dean v Allin & Watts [2001] EWCA Civ 758, [2001] 2 Lloyd’s Rep 249 at 257 per Lightman J:

“ The greatest caution is required in treating statements made by a solicitor in the course of a conveyancing transactions and the like on or in accordance with the instructions of his client as representations made by the solicitor rather than as ‘conveyed’ by him as (in effect) a medium of communication or messenger for his client, for this may readily be assumed to be understood to be part of his role in the transactions. The solicitor’s position in such a situation is to be contrasted with his position in a situation where the solicitor makes an express unequivocal statement to a third party which is not attributable simply to performing his role as the client’s adviser: for in the latter case the adviser may readily be held to have assumed responsibility to the third party, since the explanation of his acting merely as a messenger would be inapplicable: consider Gran Gelato Ltd v. Richcliff (Group) Ltd [1992] Ch. 560 and McCullagh v. Lane Fox [1996] 18 E.G. 35 at pp.42–44.”

36.In my view if a party wishes to allege a conspiracy to injure involving a solicitor who is engaged in a solicitor–client relationship with the other party to the alleged conspiracy it is incumbent upon the plaintiff to identify something more than simply a representation of instructions received, when that representation expressly identifies itself as being of instructions received.  At the very least the plaintiff must be able to make a sustainable allegation that the solicitor has in some way adopted the representation as his own.

37.In this case there is no pleading of any fact or matter other than the mere existence of the representation as to instructions received.  In my view that is wholly inadequate to found a cause of action against the solicitor that he was involved in a conspiracy with his clients to injure the plaintiff.

38.In this context I am very conscious that a court should not strike out a plea if there is material available to a party, or evident to the court, upon which a proper pleading of a cause of action could be based.  At the commencement of the hearing I was careful to request of the plaintiff whether it wished in any way to amend its statement of claim.  The plaintiff confirmed that it had no intention of doing so.  Further I have been through the evidence very carefully in an attempt to establish whether there are any facts or matters which, in my view, could be relied upon to establish that the 1^st defendant was indeed party to a conspiracy to injure.  I have been unable to find any matters other than those pleaded by the plaintiff, and in my view the matters which have been pleaded by the plaintiff do not give rise to a good cause of action for conspiracy involving the 1^st defendant.

39.In so far as the public announcement made by the listed company is concerned, I accept the submission of the 1^st defendant that there is no pleading, no suggestion, and no evidence, that the 1^st defendant was in any sense connected to that public announcement.  I do not see any manner in which the announcement can be relied upon in support of a conspiracy involving the 1^st defendant.

40.In relation to the suggestion that there was no loss, Mr Kim contended that there had been a delay in the transfer of the shares and that in itself represented sufficient loss.

41.I am prepared to accept for the purposes of a strike out application that a delay in the transfer of the shares is sufficient to create a loss for the purposes of the tort of conspiracy to injure. Therefore I accept that there is an adequate pleading of loss when the claim is simply for damages.  The damages may not be capable of precise quantification but I do not think it is entirely unarguable that some damage has occurred as a result of delay.

42.However I do not think that the order which is sought by the plaintiff, that the 1st defendant should undertake to withdraw the alleged false representations, is necessarily one which it is entitled to.  Notwithstanding my very considerable doubts in this respect I do not address this point further in relation to conspiracy because I have already taken the view, as expressed above, that the claim made is inadequate.

Misrepresentation

43.The pleading in misrepresentation is set out above.  It is, in reality, a claim made in the tort of deceit.  There is no dispute between the parties that to sustain a valid cause of action for fraudulent misrepresentation or deceit the plaintiff must plead, and prove, that:

(1) there has been a representation of fact;

(2) the representation was made with knowledge that it is false (or at least made in the absence of a genuine belief that it is true, or recklessly ie not caring whether it is true or false);

(3) the representation was made with the intention that it should be relied upon by the plaintiff in the manner which resulted in damage to him;

(4) the plaintiff in fact acted upon the false statements; and

(5) the plaintiff has sustained damage by doing so.

44.It is also not in dispute that a claim for fraudulent misrepresentation or deceit can only be brought by the representee himself.  It is only the representee that has the locus to sue upon the representation: see Spencer Bower & Handley: Actionable Misrepresentation 5^th Edition at §11.03.  The 1^st defendant relies upon this, and the fact that the alleged representations were made to ABM Group and G&P who are not the plaintiff, to contend that the action is unsustainable.  The plaintiff did not identify any argument against this point as a reason to strike out the claim in misrepresentation.

45.However, I do not accept the 1^st defendant’s submissions in this respect, and therefore I decline to strike out the claim on this basis.  A representation to a known agent, with the intention of inducing the agent to act on it, on behalf of the principal, and to the principal’s detriment is an actionable misrepresentation at the suit of the principal.  In this case it is clear, and indeed it is the 1^st defendant’s own case, that both ABM Group and G&P were agents of the plaintiff. Consequently any representation to those agents designed to persuade them to act to the detriment of the plaintiff would be actionable at the suit of the plaintiff.

46.However in relation to the allegation that there “would have been” similar representations to Portcullis, I accept that a representation to Portcullis, who was the agent of the 2^nd defendant and not the agent of the plaintiff, would not found a claim for fraudulent misrepresentation or deceit in the hands of the plaintiff.  Therefore, albeit that I do not consider the claim of representations made to Portcullis to be in any sense sustainable because they are totally under particularised and nothing other than a bare assertion, I would strike out a claim for misrepresentation on this ground insofar as it relied upon representations to Portcullis.

47.Next the 1^st defendant relies upon his position as the solicitors for the 2^nd to 5^th defendants, and on the arguments which I have identified above in relation to the letters, for the proposition that the representations are not his own representations, but are merely repeats, as agent, of the instructions he has received.

48.As identified above, an essential element of the cause of action for fraudulent misrepresentation or deceit is that the representation must be made with knowledge that it is false, or at least recklessness as to whether it is true or false.  Put simply this means that there must be some element of a “guilty mind” in the 1^st defendant in order for the cause of action to be sustained.  That is so whether the representor is sued as agent or as principal.

49.In the same way as for the tort of conspiracy to injure, I see no reason in principle why a solicitor acting on behalf of his clients cannot be guilty of a fraudulent misrepresentation or deceit.  However the plaintiff must plead, and thereafter prove, something which gives rise to the “guilty mind” which is necessary.

50.The plaintiff has alleged that the 1^st defendant knew that the representations were false, but has not made any attempt to plead any particulars of the knowledge which it alleges.

51.The only basis upon which the plaintiff argued, during submissions, for a fraudulent misrepresentation was the alleged inconsistency between the two letters.  I have addressed this above and I do not believe that there is any such inconsistency.

52.Again the plaintiff has confirmed that it does not wish to amend its statement of claim, and I have scoured the evidence and material before the court to identify anything which might, in my view, create a basis upon which the knowledge necessary for a fraudulent misrepresentation or deceit claim might be founded.  I have not been able to find anything.

53.In those circumstances I do not believe that a cause of action in fraudulent misrepresentation or deceit has been properly pleaded.  This part of the statement of claim should be struck out.

54.For the sake of completeness I note that the 1^st defendant also relies upon three further arguments to support its strike out application of the misrepresentation claim:

(1)   First he relies upon the proposition that there is no plea to the effect that the 1^st defendant intended the representation to be relied upon.  In my view this is not a ground to strike out this claim.  The purpose of a party identifying its position in a dispute must be at least twofold.  First it is so as to identify, and crystallise, the dispute.  Secondly it must be at least arguable that one of the reasons for identifying a position is to seek to persuade the counterparty of the accuracy of that position and thereafter to accept it.  In my view that purpose is sufficient for a claim in fraudulent misrepresentation or deceit.

(2)   Secondly he suggested that there is no plea or evidence that the plaintiff acted in reliance on the representation.  It is correct that there is no such plea.  To the contrary, according to Mr Kim, the plaintiff sought to have the shares transferred.  That action cannot have been made in reliance on the representations, which were to the effect that the plaintiff had no entitlement to any transfer.  The real complaint of the plaintiff is that Portcullis acted on the representations by delaying the transfer of the shares.  But reliance by Portcullis (if it occurred) does not give rise to a cause of action in favour of the plaintiff against the 1^st defendant.

(3)   Thirdly the 1^st defendant suggests that no loss and damage has been identified.  I have addressed this above in relation to the tort of conspiracy to injure, and the same comments apply to this tort.  I do not consider this to be a valid ground upon which to strike out the statement of claim.

The prayer for relief

55.In the light of the conclusions I have reached above, I do not need to address the specific application to strike out the prayer for relief.  Whilst I have considerable doubts whether the claim for an undertaking not to make further representations, and for the withdrawal of the existing representations, is relief to which the plaintiff is entitled, I would not be prepared to strike it out at this stage as wholly unsustainable.

56.Equally I have already identified that I am not persuaded that the claim for damages would be unsustainable.  Therefore I decline to strike out the prayer for relief specifically, although given that I have struck out the causes of action it is inevitable that the prayer for relief against the 1^st defendant should also be struck out.

The position of the other defendants

57.Throughout this decision I have been concerned only with the position of the 1^st defendant.  I have not been asked to, and have not, considered whether the 2^nd to 5^th defendants may have committed the tort of conspiracy to injure the plaintiff, or may be guilty of fraudulent misrepresentation or deceit by virtue of either of the two letters or the announcement by the listed company.

58.The paragraphs of the statement of claim which the 1^st defendant seeks to have struck out contain averments which may be relevant to any allegation against those other defendants.  The 1^st defendant has suggested that the court can, on its own motion, strike out those paragraphs, notwithstanding that the 2^nd to 5^th defendants have not asked the court to do so, simply on the grounds that they are obviously unsustainable and do not disclose a reasonable cause of action.

59.As will be apparent from my reasoning above, I consider that the 1^st defendant is in a different position to that of the 2^nd to 5^th defendants because of the nature of the role that he played throughout.  I make no findings, and reach no conclusions, as to whether the various paragraphs are sufficient to amount to a cause of action against the 2^nd to 5^th defendants. Therefore I decline the 1^st defendant’s invitation to strike out those paragraphs, save insofar as they relate to him.

60.Consequently I do not strike out the paragraphs, but I do strike out the claim against the 1^st defendant.  I recognise that it may be appropriate for there to be an amendment to the statement of claim to reflect this decision, but I must leave that matter to the parties to consider, and if necessary return to the court in the event that the correct approach cannot be agreed.

Disposition

61.In all the circumstances I order that the claims against the 1^st defendant shall stand as struck out on the basis that they disclose no reasonable cause of action against the 1^st defendant.

Costs

62.On the basis of my decision, it is inevitable that the plaintiff must bear the costs of the 1^st defendant of the action.

63.However the 1^st defendant has gone a stage further and argues that costs should be on an indemnity basis because he says that the claim is frivolous, vexatious, an abuse of the process of the court and designed simply to harass the 1^st defendant.

64.In support of this proposition the 1^st defendant has taken me through a series of correspondence between the plaintiff and the 1^st defendant, and the 1^st defendant and G&P, to demonstrate the oppression alleged.  In that correspondence it is clear that the plaintiff is reserving its right to bring to the attention of the Law Society what it says is the inappropriate conduct of the 1^st defendant, and indeed in one letter confirms that it would indeed in due course lodge a complaint.

65.The 1^st defendant also relies upon the fact that there is no claim in this action against the 2^nd to 5^th defendants in relation to the underlying dispute over the shares as evidence that this action is designed only to harass the 1^st defendant.

66.I am not persuaded that in the circumstances of this case it is appropriate to award indemnity costs.  The dispute between the plaintiff and the 2^nd to 5^th defendants is clearly one which created some heat and disquiet between them.  The 1^st defendant was the solicitor acting for the 2^nd to 5^th defendants and it is inevitable in such circumstances that he places himself somewhat in the firing line of the dissatisfaction that the plaintiff is experiencing.  I do not think that there is anything in the correspondence that I have seen which supports the proposition that the action was brought for the purpose of harassing the 1^st defendant. Consequently I decline the invitation to award indemnity costs.

67.I order that the plaintiff shall pay to the 1^st defendant the costs of the action to be taxed if not agreed on a standard basis.

Mr Minju Kim, instructed by Lam & Co, for the plaintiff

Ms Sara Tong, instructed by P C Woo & Co, for the 1^st defendant

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