Super Cruise Ltd v. Cosimo Borrelli and Others

HCA 1460/2013

[2018] HKCFI 1854

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1460 OF 2013

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Before: Deputy High Court Judge Keith Yeung SC in Chambers

Date of Hearing: 28 June 2018

Date of Decision: 10 August 2018

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DECISION

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The appeal

1.This is the third parties’ appeal against the decision of Registrar Lung given on 27 February 2018 refusing the third parties’ application by summons of 1 September 2017 (“Summons”) for an order that “The 1^st and 2^nd Third Parties claim by the 3^rd Defendant against the 1^stand 2^nd Third Parties be struck out on the ground that the same discloses no reasonable cause of action and is an abuse of the process of the Court.”

2.The Summons was taken out pursuant to Order 18, rule 19 of the Rules of the High Court.  In response to the submissions made by Mr Martin Kok, counsel for the 3^rd defendant (“D3”), that (amongst other points he made) Order 18, rule 19 is concerned with the striking out of pleadings (as opposed to the striking out of claims), Mr Kwok Kam Kwan, counsel for the third parties, towards the very end of the hearing sought leave to amend the Summons as follows:

“The 1^st and 2^nd Third Parties claim by Statement of Claim of the 3^rd Defendant against the 1^st and 2^nd Third Parties be struck out on the ground that the same discloses no reasonable cause of action and is an abuse of the process of the Court by D3.”

3.Having considered the matter carefully, I have decided to refuse Mr Kwok’s application for leave to amend.  I have further decided to dismiss the third parties’ appeal.  Below are my reasons.

The pleaded facts, and the procedural history

4.The full facts of the case are complicated.  However, for the purpose of this appeal, it is sufficient that they be briefly summarized as follows.

5.The plaintiff is a company incorporated in Hong Kong.  It had a wholly-owned subsidiary which was incorporated in the Mainland (the “Subsidiary”). The Subsidiary owned and operated a recreational country club called Pine Valley Sports and Country Club (“Pine Valley”).  The third parties were between them the only directors and shareholders of the plaintiff.

6.D3 is a private limited company incorporated in Hong Kong and carries on inter alia the business of restructuring and insolvency practice.  The 1^st and 2^nd defendants (“D1” and “D2” respectively) have been its managing director and director respectively.

7.Jiuzhou Development Company is a company registered in Bermuda (“JZD”).

8.In or about August 2008, negotiations took place between the 1^st third party and JZD for the sale and purchase of 80% of the shares in the plaintiff.  JZD paid the 1^st third party HK$30 million as some sort of deposit or earnest money.  To secure the repayment of that sum should the sale fall through, the 1^st third party and JZD executed a share charge dated 10 September 2008 (the “Share Charge”) over those shares (the “Charged Shares”). 

9.Subsequently, dispute arose between the 1^st third party and JZD.  JZD on 20 July 2009 appointed D1 and D2 as receivers of the Charged Shares.  That was done pursuant to the terms of the Share Charge.

10.In the course of the receivership, D1 and D2 dealt with the assets of the Subsidiary.  According to the plaintiff, on or about 20 August 2011, the defendants procured the plaintiff to enter into a tripartite agreement with the Subsidiary and another company (“Hoada”) to sell the plaintiff’s entire interest in the Subsidiary and Pine Valley at RMB 100 million.  That agreement has been referred to as “the Hoada Agreement”.  The plaintiff avers further that pursuant to the Hoada Agreement as subsequently varied, Hoada had paid over, so long as relevant here, the total sum of RMB 9 million, which total sum was subsequently “released … and transferred to a bank account held and/or operated by the 1^st, 2^nd and/or 3^rd Defendants.”

11.In so far as the plaintiff’s claim against D3 is concerned, the plaintiff pleads at paragraphs 21 to 23 of its Re-Amended Statement of Claim that:

“21. At all material times the Plaintiff did not owe any sums to the 3^rd Defendant.

22. The 1^st and 2^nd Defendant alleged that they, in their capacity as receivers over the charged shares, had incurred fees and out-of-pocket expenses in the sum of HK$14,833,087 as of 31 August 2012, which was spent by them in managing the Plaintiff and Pine Valley in the course of performing their duties as receivers but has not been settled. These were wrongly spent expenses without approval, power and authority because the 1^st and 2^nd Defendant were only receivers of charged shares, not receivers of the Plaintiff and the Subsidiary.

23. Apart from the RMB 9 million transferred to and embezzled by the 3^rd Defendant, the 1^st and 2^nd Defendants procured, caused and/or allowed the Plaintiff to make payments,between November 2011 to September 2012 in the total sum of HK$2,832,260.34 to the 3^rd Defendant for no cause, no consideration or no services rendered by the 3^rd Defendant by issuing various cheques in favor of the 3^rd Defendant ….”

Under heading (B) of the prayer for relief, the plaintiff claims:

“3. A declaration that the 3^rd Defendant holds the sums of RMB 9 million and HK$2,832,260.34 as constructive trustees for and to the use of the Plaintiff;

4. Return of the sums of RMB 9 million and HK$2,832,260.34 from the 3^rd Defendant to the Plaintiff.”

12.The Defence was first filed on 5 December 2013.  It was subsequently amended on 16 October 2015, and re-amended on 18 April 2018.  Liabilities were denied.

13.On 5 December 2013, the defendants issued a Third Party Notice under Order 16 against the third parties.  They claim thereby against the third parties indemnity or contribution to the extent the defendants are held liable to the plaintiff on its claim.  On 30 December 2013, they took out a summons for third party directions.  Directions were given by Master Au Yeung on 30 June 2014.  In the meantime, on 12 February 2014, pursuant toa Consent Order dated 14 January 2014 made by Master Hui, the defendants filed their Statement of Claim against the third parties (“TPSOC”).  The relevant parts of the TPSOC are as follows:

“8. By their Defence dated 5 December 2013, the Defendants deny liability in respect of each and every claim brought against them by the Plaintiff. However, in the event of the Defendants,or each or any of them, being held liable to the Plaintiff in respect of their claims (or any part of such claims) in this action (which liability, for the avoidance of doubt, is denied) then, by reason of the matters pleaded herein, the Defendants are entitled to an indemnity and/or contribution from the Third Parties or either of them for the full amount of any liability to the Plaintiff. In particular, the Defendants aver that:

(a) at all material times, the 1^st and 2^nd Defendants acted as agents only for the 1^st and 2^nd Third Parties; and

(b) steps taken subsequent upon the appointment of the Receivers pursuant to the Share Charge were the intention of the Third Parties and [JZD] on the creation of the Share Charge.

…

13. The Share Charge expressly provides as follows:

(a) Under Clause 9.2 of the Share Charge, the Receivers shall be the agents of the Third Parties and the Third Parties shall be solely responsible for the acts of the Receivers andtheir remuneration as well as for any defaults committed by the Receivers. In the premises, the Third Parties are the principals of the 1^st and 2^nd Defendants and the facts and matters forming the basis of the Plaintiff’s claim in this action arise out of steps taken by the 1^st and 2^nd Defendants and their managers, officers, servants and agents (including, without limitation, the 3^rd Defendant) as agents of the Third Parties.

…

(c) Under clause 9.2(8) of the Share Charge, the Receivers have powers to appoint managers, officers, servants and agents. In respect of the subject matter of the Plaintiff’s claim, the 3^rd Defendant is the manager or agent of the 1^st and 2^nd Defendants.

…

(e) Clause 9.6 of the Share Charge further provides that all costs, charges and expenses incurred by the Receivers (including the costs of any proceedings in relation to the Share Charge) shall be paid by the Third Parties on a full and unqualified indemnity basis. In the premises, the Third Parties are liable to pay the costs and expenses incurred by the 1^st, 2^nd and 3^rd Defendants in carrying out their duties and exercising their powers under the Share Charge, including works carried out, whether as de jure directors, de facto directors, representatives or majority shareholders of the Plaintiff, or otherwise, in respect of the Plaintiff and the Subsidiary as a consequence of such appointment.

…

30. The Defendants repeat paragraphs 20 and 26 of their Defence and aver that, as a result of the matters pleaded therein,the sums alleged to have improperly paid to the 3^rd Defendant instead of to the Plaintiff were, if not properly paid (which is denied), sums which the Third Parties are obliged to reimburse to the Defendants and/or in respect of which the Third Parties are obliged to indemnify the Defendants, in each case pursuant to the terms of the Share Charge.

…

And the Defendants claim against the Third Parties:

(1) A declaration that the Third Parties are jointly and severally liable to indemnity the Defendants in respect of:

(a) such sum as the Defendant or any of them may be ordered to pay or may reasonably pay to the Plaintiff in satisfaction of this action; and

(b) the costs of the action on a full indemnity basis;

(2) Alternatively, a declaration that the Third Parties contribute to the Plaintiff’s claim or the Defendants’ liability to the Plaintiff in such sum as the Court considers just;

(3) An order for payment by the Third Parties of the sums referred to in (1) above; and

(4) All costs, charges and expenses incurred by the Defendants in respect of acts undertaken as Receivers and all acts consequential thereto on a full and unqualified indemnity basis.”

14.On 1 September 2017, nearly four years after the defendants had taken out the Third Party Notice, the third parties took out the Summons. Several matters about that Summons/application should be noted:

(a) It was taken out pursuant to Order 18, rule 19;

(b) The third parties are not seeking thereby to strike out any pleadings. Instead, it is the “claim by the 3^rd Defendant against the 1^st and 2^nd Third Parties” (emphasis added) which the third parties are seeking to strike out;

(c) The application is confined to the third party claim made by D3.  No order is sought in respect of the claims brought by D1 and D2;

(d) Although the limb of “an abuse of the process of the Court” has also been pleaded, the application has in fact been proceeded with on the “no reasonable cause of action” limb.No evidence has been filed in support of the application.  Not even a copy of the Share Charge has been produced.       

The hearing before Registrar Lung

15.The Summons came before Registrar Lung for hearing on 27 February 2018.  The learned Registrar set out the relevant factual background.  When doing so, he mentioned that D1 and D2 had been appointed “as the receivers of [the plaintiff]”.  He observed that “The partiesrely heavily on the trite legal principles on striking out under O.18 r.19 RHC”.  The learned Registrar then expressed the view that the parties “have misdirected the Court on the appropriate legal principles application to this application.  The third parties’ proceedings are provided and governed under O.16, r.1 RHC”.  He recited the third parties’ argument that “D3 have no cause of action against them simply because there is no privity of contract between the third parties and D3, who is the agent of D1 and D2 only.”  The learned Registrar observed that “this is not the appropriate question to ask under Order 16, rule 1.”  He disagreed with Mr Kwok’s submission that “only O.18, r.19 should be considered for this application”. The learned Registrar proceeded to identify a number of “issues between P and D3, and therefore between D3 and the third parties”.  He observed that “It is clearly preferable for the court to hear all the evidence from the relevant parties in this action, including the third parties’ proceedings before coming to a determination.”  The learned Registrar then dismissed the Summons with costs.

The submissions on behalf of the third parties

16.Mr Kwok submitted that the learned Registrar erred on the facts when he observed that D1 and D2 were receivers of the plaintiff when they were only receivers of the Charged Shares.  He further submitted that the learned Registrar erroneously relied on Order 16, rule 1 which, in Mr Kwok’s submissions, only governs how a third party claim is issued and entertained.  He submitted that a third party statement of claim issued under Order 16, rule 1 is also a statement of claim and is liable to be struck out if it offends Order 18, rule 19(1)(a).

17.On the merits of the Summons, Mr Kwok has made three main points:

(a) D3 is not entitled to claim any indemnity by reference to the Share Charge because it is not a party to any contract with the Third Party;

(b) While D1 and D2 as receivers had authority to appoint managers, officers and agents, and that D3 had been appointed as such, that only made D3 “a sub-agent by delegation with the authority of the Third Parties as the principals”.  As such, Mr Kwok submitted, D3 still cannot claim against the third parties directly because there is no privity of contract between them; and

(c) Further, as the “work done by the Defendants (including [D3]) as pleaded in the TPSOC relate only to the company of the Plaintiff, not its shares as received by the Receivers”, D3 “is not entitled to claim by reference to the Share Charge (e.g. for an indemnity) whether or not there is privity of contract between it and the Third Parties.”

The submissions on behalf of D3

18.Mr Kok’s submissions in gist are:

(a) The learned Registrar was plainly correct in finding that the third parties’ strike-out application was made and pursued on the wrong basis.  D3’s third party claim against the third parties is entirely permissible under Order 16, and it ought not to be struck out; and

(b) Even if Order 18, rule 19 is applicable, there is still no basis for D3’s third party claim to be struck out.  The third parties incorrectly assumed and pigeon-holed D3’s claim as one arisingout of contract.  But the right to indemnity or contribution neednot be contractual.  On the facts pleaded by D3 in the TPSOC, and applying the correct legal principles, D3 has, at the very least, some chance of success in its claim against the third parties.

Appeal by way of rehearing

19.I remind myself that in general, an appeal from the master to the judge in chambers is dealt with by way of an actual rehearing of the application which led to the order under appeal, and the judge treats the matter as though it came before him for the first time.  The judge will give the weight it deserves to the previous decision of the master, but he is in no waybound by it.  The judge in chambers is in no way fettered by the previous exercise of the master’s decision, and on appeal from the judge in chambers, the Court of Appeal will treat the substantial discretion as that of the judge,and not of the master—Hong Kong Civil Procedure 2018, paragraph 58/1/2.  

Order 16, rule 1 or Order 18, rule 19?

20.The first issue to consider is which of the two rules is applicable.

21.Order 18, rule 19(1) provides that:

“The Court may, either of its own motion or on application, at any stage of the proceedings order to be struck out or amended any pleading or the indorsement of any writ in the action, or anything in any pleading or in the indorsement, on the ground that—

(a) it discloses no reasonable cause of action or defence, as the case may be; or

(b) it is scandalous, frivolous or vexatious; or

(c) it may prejudice, embarrass or delay the fair trial of the action; or

(d) it is otherwise an abuse of the process of the court;

and may order the action to be stayed or dismissed or judgment to be entered accordingly, as the case may be.”

22.It is therefore clear that Order 18, rule 19(1) only gives the Court the power to stuck out or amend “any pleading or the indorsement of any writ … or anything in any pleading or in the indorsement”.  Only when the pleading or indorsement has been struck out that the Court may “accordingly” order the action to be stayed or dismissed or judgment to be entered.

23.The applicability of the Rules of the High Court however cannot be considered in isolation and in a vacuum, but has to be considered against the application that is before the Court. 

24.In the present case, as I have noted above, the Summons was taken out pursuant to Order 18, rule 19.  However, the Third Parties were not seeking to strike out any pleading or indorsement of any writ.  By the Summons, they were seeking an order that the “claim by the 3^rd Defendant against the 1^st and 2^nd Third Parties be struck out on the ground that the same discloses no reasonable cause or action and is an abuse of process of the Court”.  As such, it was clearly misconceived.

25.The next issue is whether a third party claim raised by way of a third party notice issued under Order 16, rule 1 can be “struck out on the ground that the same discloses no reasonable cause of action.” [1]

26.Order 16, rule 1(1) provides that:

“Where in any action a defendant who has given notice of intention to defend—

(a) claims against a person not already a party to the action any contribution or indemnity; or

(b) claims against such a person any relief or remedy relating to or connected with the original subject-matter of the action and substantially the same as some relief or remedy claimed by the plaintiff; or

(c) requires that any question or issue relating to or connected with the original subject-matter of the action should be determined not only as between the plaintiff and the defendant but also as between either or both of them and a person not already a party to the action;

then, subject to paragraph (2), the defendant may issue a notice in Form No. 20 or 21 in Appendix A, whichever is appropriate (in this Order referred to as a third party notice), containing a statement of the nature of the claim made against him and, as the case may be, either of the nature and grounds of the claim made by him or of the question or issue required to be determined.”

27.It is immediately clear that under Order 16, rule 1(1)(a), (b) and (c), a defendant who has given notice of intention to defend may issue a third party notice under three different situations.  Order 16, rule 1(a) and (b) each involves the making of a “claim” of the nature as set out.  They are “claim-based”.  However, the situation permitted by Order 16, rule 1(c) is not. It is “issue-based”.  No claim is involved, and the making of one is not required.  As Anderson Chow J has explained at paragraph 16 of his Judgment in KP Financial Services Ltd v Li Ka Man [2018] 2 HKLRD 256:

“It is clear that under Order 16, rule 1(1), a defendant may issue a third party notice even though it is not making any claim against the third party (whether for contribution or indemnity under sub- paragraph (a) or for any relief or remedy under -paragraph (b)), but merely for the purpose of having some question or issue relating to or connected with the original subject-matter of the action to be determined not only as between the plaintiff and the defendant but also as between either or both of them and the third party under sub-paragraph (c). The purpose of permitting a defendant to issue a third party notice under this sub‑paragraphis to ensure that the relevant question or issue will be determined once and for all amongst the plaintiff, the defendant and the third party, thereby avoiding multiplicity of proceedings on the same point with possibly different results.”

28.Order 16, rule 4(5) and Order 16, rule 6 are also relevant, which respectively provide that:

“Any order made or direction given under this rule may be varied or rescinded by the Court at any time.”

“Proceedings on a third party notice may, at any stage of the proceedings, be set aside by the Court.”

In Wong Wai Lan v Tam Fung Lan [2003] 1 HKLRD 674, Chung J, having referred to the above rules, observed at paragraph 13 of his Judgment that:

“These provisions are obviously intended to confer a discretionarypower on the court to regulate third party proceedings at all stagesof those proceedings. At least to this extent, there is a difference between ordinary legal actions and third party proceedings.”

29.Having considered Order 16 as a whole, and in particular the wording of Order 16, rule 1(1)(c), I am of the view that it is wrong as a matter of law to suggest that the absence of any reasonable cause of action is per se a sufficient reason for a third party claim to be struck out.  If that is what Mr Kwok is submitting, which appears to be, I have no hesitation in rejecting it.

30.However, it does not mean that Order 18, rule 19(1) is totally irrelevant when it comes to a third party claim in the context of striking out.  Pleadings may be filed in the course of a third party claim.  For example, as in the present case, a third party can file a third party statement of claim.  Such a document is a pleading and is governed by Order 18, rule 19(1).  If the third party notice was issued pursuant to Order 16 rule 1(1)(a) or (b), and that the third party statement of claim subsequently issued discloses no reasonable cause of action, that third party statement of claim is liable to be struck out under Order 18, rule 19(1).  There are indeed many examples in our law reports in which similar applications were made.  One of such is Far East Consortium Ltd v Airedale Ltd (Henry Boot Far East Ltd & Anor, Third Parties) [1991] 1 HKC 325.

31.Mr Kok submitted that Order 16 contains an essentially self-contained mechanism for dealing with third party proceedings.  There is no need for me to rule on this wide proposition.  But to the extent of his submissions involving the proposition that Order 18, rule 19 can under no circumstances have any application to third party proceedings, I reject the same.

The Summons as it is

32.The application before the learned Registrar was for an order that the “claim by the 3^rd Defendant against the 1^st and 2^nd Third Parties be struck out”.  There was no application before him for any amendment of that Summons.  Given the way the Summons was couched, and on the basis of the analysis above, the learned Registrar was in my view correct inrejecting the submission that only Order 18, rule 19 should be considered.  He was in my view also correct in relying on Order 16, rule 1 instead. 

33.I have, in addition to analyzing the learned Registrar’s reasoning, independently considered the matter. Whilst the defendants’ third party claim against the Third Parties is principally claim-based, it also falls within Order 16, rule 1(1)(c) as being issue-based.  Issues like the proper interpretation of the relevant clauses of the Share Charge, the duties and powers of the defendants under the same, the exact status of D3, whether D3 had “embezzled” the sum of RMB 9 million, the extent of the Third Parties’ duties of indemnity, etc. are some of the obvious issues “relating to or connected with the original subject-matter of the action” which D3 can legitimately require to be determined not only as between the plaintiff and the defendants but also as between them and the Third Parties. 

34.Having considered all matters before me, I see no basis to set aside the Third Party Notice.  I further see no basis to make the order sought, ie that the “claim by the 3^rd Defendant against the 1^st and 2^nd Third Parties be struck out”.  But for Mr Kwok’s application to amend the Summons, I would simply have dismissed the same for the reasons explained above.

35.I now turn to Mr Kwok’s application to amend the Summons.

The application to amend the Summons

36.By applying to amend the Summons, Mr Kwok is seeking to re-focus the application, not on any claim, but upon the TPSOC.  The TPSOC is clearly a pleading.  It is governed by Order 18, rule 19.  It is liable to be struck out if it discloses no reasonable cause of action.  Even though the application was made late, I might have entertained it favourably if the Summons in the amended form as proposed had any merit.  However, for the reasons set out below, I am of the view that it does not.

37.Mr Kwok firstly submitted that D3 was not a party to the ShareCharge.  D3 therefore has no direct contractual claim against the third parties.

38.Mr Kwok acknowledged that D1 and D2 as the receivers had authority to appoint managers, officers, servants and agents, and that D3 was so appointed.  He submitted that even so, D3 was only a sub-agent by delegation with the authority of the third parties as the principals.  Relying on authorities like Bowstead & Reynolds on Agency 20^th ed, 5-008 and Article 35(3) and O’Keefe v London and Edinburgh Insurance Co Ltd [1928] NI 85, Mr Kwok submitted that even if D3 were a sub-agent, D3 could still not have any direct recourse against the third parties.

39.There is no need for me to rule on those submissions.  The reason is that Mr Kok has made clear that D3’s case for indemnity and contribution is not one arising out of contract (ie the Share Charge).  He submitted that D3 did not need to.  He relied on the following authorities:

(a) Eastern Shipping Co v Quah Beng Kee [1924] AC 177 (HL), that:

“ A right to indemnity generally arises from contract express or implied, but it is not confined to cases of contract. A right to indemnity exists where the relation between the parties is such that either in law or in equity there is an obligation upon the one party to indemnify the other. There are, for instance, cases in which the state of circumstances is such that the law attaches a legal or equitable duty to indemnify arising from an assumed promise by a person to do that which, under the circumstances,he ought to do. The right to indemnity need not arise by contract; it may (to give other instances) arise by statute; it may arise uponthe notion of a request made under circumstances from which thelaw implies that the common intention is that the party requested shall be indemnified by the party requesting him; it may arise (to use Lord Eldon's words in Waring v. Ward 7 Ves. 332, 336; a case of vendor and purchaser) in cases in which the Court will ‘independent of contract raise upon his (the purchaser’s) conscience an obligation to indemnify the vendor against the personal obligation’ of the vendor.”

(b) Hong Kong Civil Procedure 2018, paragraph 16/1/2, that:

“In effect a claim to contribution is a claim to a partial indemnity. ‘Contribution is bottomed and fixed on general principles of justice and does not spring from contract, though contract may qualify it’ (Dering v. Winchelsea (1787) 1 Cox 318). A right to contribution usually arises as between joint debtors, or joint contractors, or joint trustees, or joint sureties, or joint wrongdoers, and it may be created by statute. The entitlement to contribution has been greatly extended by s.3(1) of the Civil Liability (Contribution) Ordinance (Cap. 377), which provides that subject to the provisions of that section, ‘any person liable in respect of any damage suffered by another person may recover contribution from any other person liable in respect of the same damage, whether jointly with him or otherwise’.”

40.The propositions put forward by Mr Kok are in my view clearly arguable as a matter of law.

41.Mr Kwok has also submitted that as the “work done by the Defendants (including [D3]) as pleaded in the TPSOC relate only to the company of the Plaintiff, not its shares as received by the Receivers”, D3 “is not entitled to claim by reference to the Share Charge (e.g. for an indemnity) whether or not there is privity of contract between it and the Third Parties.”  I note in this regard Mr Kwok’s complaint that the learned Registrar has mistakenly observed that D1 and D2 were receivers of the plaintiff when they were only receivers of the Charged Shares.  I remind myself of this fact.  However, the nature of the work done by the defendants are facts sensitive.  It would be wrong for me to make any finding at this stage on that issue.

42.I remind myself of the legal principles relevant to the exercise of the Court’s power upon an application for striking out:

(a) “It is only in plain and obvious cases that the court should exercise its summary powers to strike out the indorsement on any writ… There should be no trial upon affidavit.  Disputed facts were to be taken in favour of the party sought to be struck out.  Nor should the court decide difficult points of law in striking out proceedings.  The claim must be obviously unsustainable, the pleadings unarguably bad and it must be impossible, not just improbable, for the claim to succeed before the court will strike it out.  If the court does not think the matter to be clear beyond doubt or if it fails to be satisfied that there is no reasonable causeof action or that the proceedings are frivolous or vexatious, then, there should be no striking out. …”   (paragraph 18/19/4)

(b) “A reasonable cause of action means a cause of action with some chance of success when only the allegations in the pleading are considered …”   (paragraph 18/19/5)

(c) “No evidence is admissible on [an application to strike out as disclosing no reasonable cause of action]: the court simply looks at the statement of claim and determines whether, on the assumption that the facts pleaded in it are true, the plaintiff has a cause of action in law (see O.18, r.19(2)).”

(Polytechnic University v Next Magazine Publishing Ltd

[1996] 2 HKLR 260, at 263H)

43.I refer to the part of the TPSOC reproduced above.  I refer in particular to paragraphs 8(b) and 13(a) thereof.  On those pleaded facts, and applying the principles summarized above, I reject the submission that the TPSOC discloses no reasonable case of action by D3 against the third parties. I am of the view that it cannot be said that D3’s claim against the third parties has no chance of success.  I am not satisfied that this would be one of those plain and obvious cases in which the court would exercise its summary powers to strike out the parts of the TPSOC which relate to D3’s claim against the third parties, even if I were to allow the application to amend the Summons.

44.For the reasons set out above, I refuse the application made on behalf of the third parties to amend the Summons.

Disposal

45.For the reasons set out above, I refuse the application and dismiss the appeal.

46.I make a cost order nisi that the third parties shall bear the costs of and occasioned by this appeal, to be taxed if not agreed.

Mr Kwok Kam Kwan, instructed by Wong Poon Chan Law & Co, for the 1^st and 2^nd third parties

Mr Martin Kok, instructed by Tanner De Watt, for the 3^rd defendant