Zhang Xiuhong v. Liu Wenchen and Others

HCMP 411/2017

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO. 411 OF 2017

(On an intended Appeal from HCA No. 2118 of 2012)

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Before: Hon Lam VP and Poon JA in Court

Dates of Written Submissions: 22 February & 6 March 2017

Date of Judgment: 29 March 2017

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J U D G M E N T

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Hon Poon JA (giving the Judgment of the Court) :

Introduction

1.By a decision handed down on 14 November 2016 (“Main Decision”), Deputy High Court Judge Wilson Chan (as his Lordship then was) allowed the plaintiff’s application to amend his statement of claim to include new claims against the 5^th to 7^th defendants (collectively “the defendants” below unless otherwise indicated).  By another decision dated 8 February 2017, the learned Judge dismissed the defendants’ application for leave to appeal (“Leave Decision”).  They now renew their leave application before this Court.

2.The defendants requested an oral hearing so that their counsel could take the Court through the emails relied on by the plaintiff in support of the amendment application to make good their argument that the emails were not capable of supporting the plaintiff’s new pleas and hence the Judge erred in allowing the amendments.  Having considered the matter, we take the view that, despite the defendants’ request, we can dispose of the leave application without an oral hearing as it is plain to us that the intended appeal is wholly without merit.  We now hand down our judgment.

Background

3.The background facts have been summarized by the Judge at [2] – [13] of the Main Decision.  We will respectfully adopt it without repetition.

Existing pleas against the defendants

4.As pointed out by the Judge, the plaintiff’s existing claims against the defendant are set out at [75] – [87] of the Statement of Claim.  The plaintiff’s causes of action against them are breach of their duty of care under tort and contract to the plaintiff in implementing the transfer of the 40,000 shares in question.

Proposed new pleas

5.The Judge summarized the new pleas at [23] to [29] of the Main Decision.  In gist, the plaintiff pleads that the defendants owed fiduciary duties to the plaintiff in relation to the 40,000 shares and the 4^th defendant’s affairs.  They however acted in breach of such fiduciary duties by reason of the matters pleaded in section I3 concerning the email correspondence between the 7^th defendant and the 1^st defendant or his associates, most of which were disclosed by the defendants in February 2016.

6.The plaintiff also pleads that the 1^st defendant had committed the tort of unlawful interference and breach of trust in respect of the transfer of the 40,000 shares from the plaintiff to the 1^st defendant (for which judgment had been obtained already).  By virtue of the matters pleaded in section I3, the defendants had also committed the tort and dishonestly assisted the 1^st defendant in his breach of trust.

7.Next, the plaintiff pleads that by virtue of the matters pleaded in section I3, the defendants had conspired and combined with the 1^st defendant to defraud the plaintiff or injure the economic interests of the plaintiff.

8.In respect of loss and damage arising from the new causes of action, the plaintiff pleads that his loss comprises not only the loss of the value of the 40,000 shares but also the financing cost, and the legal and other costs and expenses incurred by him in the Mainland to preserve his rights in respect of his shares in the 4^th defendant, all to be assessed.

The Judge’s decision

9.The defendants opposed the proposed amendments, arguing that firstly, the proposed amendments were entirely based on an inference drawn from circumstantial evidence, viz the emails referred to in section I3, which could not support the new cause of action of fraud; secondly, the new claims for various costs and expenses were lacking in particulars.

10.The Judge rejected the defendants’ arguments, holding that :

(1) Most of the emails were disclosed by the defendants in February 2016, that is, after the Statement of Claim was filed and served;

(2) The amendments would not cause prejudice to the defendants;

(3) It was a matter for trial whether the emails gave rise to an inference that the 7^th defendant had committed fraud as pleaded;

(4) The plaintiff was entitled to plead his interpretation of the implications of the emails.  It sufficed for the court to come to the view that the implications of the emails and the proper inferences to be drawn therefrom were definitely not as clear-cut as suggested by the 7^th defendant. This was not a case where the proposed amendments had no prospect of success; and

(5) The new claim for costs and expenses were sufficiently pleaded.

Discussion

11.The proposed amendments on the new causes of action all hinge upon the meaning of the emails referred to in section I3.  On the one hand, the plaintiff advanced his own interpretations by way of the proposed amendments.  On the other, the 7^th defendant offered his explanation by way of his affirmation.  Mr Leung, for the defendants, essentially took the point that the emails, properly understood, do not support the plaintiff’s new causes of action.  The Judge therefore misapprehended the facts and was plainly wrong.

12.In our view, those emails must be understood in context against the relevant factual matrix at the time. As rightly held by the Judge, the disputes between the parties on the emails must and can only be resolved at trial.  There is no merit in Mr Leung’s complaint that the Judge did not sufficiently analyzed the emails.  The Judge did analyze the emails but he was not required to go into great detail as Mr Leung suggested for the purpose of disposing of the amendment application.  If he were to do so, he would be embarking on an impermissible course of conducting a mini-trial on affidavit.  That is what Mr Leung asked us to do when he requested an oral hearing to take the Court through the emails to make good the 7^th defendant’s case.  With respect, this is wrong and must be firmly rejected.

13.Mr Leung next submitted that the new pleas on loss and damage are lacking in particulars.  Such amendments should not be allowed.  However, as rightly observed by the Judge at [6] of the Leave Decision, the level of precision required in pleading a particular head of damage is determined by the need to provide a fair and sufficient indication of the case that is being brought and that the opposing party has to meet.  In our view, the proposed amendments meet the pleading requirements.  Even if further and better particulars for the loss and damage are required, in the overall context, we do not consider the Judge had erred in his discretion to allow the amendments as they now stand.  For the deficiency can be easily cured by a request for further and better particulars.  The defendants do not and would not suffer any real prejudice.

Conclusion

14.As the defendants’ intended appeal does not have any reasonable prospect of success, we dismiss their leave application with costs to the plaintiff, to be taxed if not agreed.

15.Pursuant to Order 59, rule 2A(8) of the Rules of the High Court, Cap 4A, as the defendant’s leave application is wholly without merit, we order that no party may request our determination to be reconsidered at an oral hearing inter partes.

Written Submissions by Mr Douglas Lam, SC and Mr Patrick Siu, instructed by Henry Wai & Co., for the Plaintiff

Written Submissions by Mr Wilson Leung, instructed by Smyth & Co., for the 5^th to 7^th Defendants

No written submissions by Kok & Ha, for the 4^th Defendant