Vigers Hong Kong Ltd (in Creditors’ Voluntary Liquidation) v. Michael Andrew Barclay Binney and Others

HCA 744/2013

[2019] HKCFI 461

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 744 OF 2013

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DECISION

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The appeal

1.This is the plaintiff’s appeal against the Order made by Master Gary C C Lam dated 24 January 2018 granting the defendants leave to amend their Defence (the “Order”).  The main issues are (1) whether the averments and particulars proposed to be added to the Defence (respectively the “Proposed Averments” and the “Proposed Particulars”, and together the “Proposed Amendments”) are certain enough to constitute “trade custom”, and (2) in any event, whether the Proposed Amendments have been sufficiently particularized.  

The factual background

2.The plaintiff is a company incorporated in Hong Kong.  It is in liquidation. 

3.The 1^st to 5^th (“D1”, “D2”, “D3”, “D4”, “D5”) and 7^th (“D7”) defendants were former directors of the plaintiff. D1, D2 and D5 are natural persons.  D3, D4 and D7 are limited companies which were formerly within the same corporate group as the plaintiff (the “Group”).

4.It is the plaintiff’s pleaded case that the 6^th defendant (“D6”) is and was at the material times a shadow or de facto director of the plaintiff and D7.

5.The 8^thdefendant (“D8”) is according to the plaintiff’s pleaded case 99.9% owned by D7.

6.The plaintiff avers that D1 to D7, by virtue of their offices as directors or de facto directors, owed the plaintiff the following fiduciary duties:

“ (1) to act honestly and in good faith in the interest of the Plaintiff as a whole,

(2) to act for a proper purpose,

(3) to be answerable to the Plaintiff for the application or misapplication of its assets;

(4) to apply such degree of skill, care and diligence as may reasonably be expected of a person of his knowledge and experience.”

7.The plaintiff advances five principal claims against the defendants.  Four of them are relevant to the present appeal.  Those claims,and the defendants’ defences as originally pleaded (not sought to be changed by the Proposed Amendments), may be summarized as follows.

8.The “Transfers”:

(a) The plaintiff pleads that its shareholding in three companies within the group had been caused by D1, D2, D5 and/or D6 to be wrongfully transferred away to D4 and D7 without proper consideration.  D1, D2, D5 and/or D6 as the directors who caused such transfers are therefore each liable to “compensate the Plaintiff in equity for their breaches of fiduciary duty” and “to account to the Plaintiff for the proper consideration the Plaintiff ought to have received for the Transfers”.  D4 and D7 as the recipients had acted dishonestly in assisting them in relation to their breaches of fiduciary duties, and as such are also liable to the plaintiff;

(b) In their defence, the defendants aver that the Transfers were part of a wider restructuring process of the entire Group, which was suffering from poor financial performance. The restructuring (the “Group Restructuring”) took place in 2003 to 2004, and was designed to streamline the operations of the various companies in the Group.  Following the Group Restructuring, the financial situation of the Group (including the plaintiff) indeed improved significantly. 

9.The “VH Payments”:

(a) The plaintiff pleads that certain payments made by the plaintiff to D7 (in the total sum of HK$12,225,790.85) in the two years immediately prior to the commencement of the plaintiff’s winding up constituted an unfair preference;

(b) In defence, the defendants plead that the VH Payments were made by the plaintiff to D7 in order that D7 would support the plaintiff’s business (by causing D7’s other subsidiary companiesto provide staff and other services to the plaintiff), without which support the plaintiff could not have earned any income in 2008.

10.The “VAP Payments”:

(a) The plaintiff pleads that certain payments made by the plaintiff to D8 (in the total sum of HK$8,248,875) prior to the commencement of the plaintiff’s winding up constituted a fraudulent disposition under section 60 of the Conveyancing and Property Ordinance.  The payments were therefore void and D8 has become liable to repay the plaintiff the same.  Those payments were also paid in breach of fiduciary duties on the part of D1 to D7, who have become liable to compensate the plaintiff in equity and to account;

(b) The defendants plead that as part of the Group Restructuring, D8 took on the role of the Group’s centralized cash agent.  The VAP payments were legitimate payments made to D8 in that role.

11.The “Problematic Transactions”:

(a) The plaintiff pleads that a debt of HK$9,564,984.66 due to it from D7 was disposed of via a series of transactions in December 2008.  Those transactions are said to be void as being a disposition of the plaintiff’s property with intent to defraud creditors.  D7 is therefore liable to pay to the plaintiff that sum.  Further, as the Problematic Transactions were caused and approved by D3 to D6, they are liable to compensate the plaintiff in equity, and are liable to account to the plaintiff for that debt;

(b) In defence, the defendants plead that the Problematic Transactions were not done to defraud creditors.  Their purpose was to remove the status of a company (called Grande Capital Group Limited) as a creditor of the plaintiff, and to obviate the risk of that company making a demand for repayment.  It is further averred that in the light of the plaintiff’s poor financial condition at the time, such a demand for repayment would have had disastrous consequences (including a risk that the plaintiff would be put into liquidation and/or removed from the Housing Authority’s list of approved consultants).

The Proposed Amendments

12.In respect of each of the above four claims, the defendants seek leave to amend their Defence by adding, variably:

(a) the following averments (namely the Proposed Averments):

(i) at paragraph 25A, that:

“ Further, the Transfers (as implemented for the purpose pleaded in paragraphs 20 to 25 above) were in line with the custom and/or usual trade practice of restructuring and operating a corporate group to address its poor financial performance and to salvage its financial situation.”

(ii) at paragraphs 30(3), 36A and 42(3A), that:

“ … the [VH Payments / VAP Payments / Problematic Transactions] ‌… were in line with the custom and/or usual trade practice of operating a corporate group.”

(b) the following particulars (namely the Proposed Particulars) under each of those paragraphs (namely 25A, 30(3), 36A and 42(3A)):

“ Particulars

(a) The said custom and trade practice are in the field of insolvency management, and relate to the corporate rescue of financially impaired groups of companies;

(b) Under the said custom and trade practice, there are variousmeasures that may be undertaken by the practitioners (on acase-by-case basis) to improve the viability and profitability of the group of companies. However, it is not uncommon that a group is restructured in the following manner:

(i) Non-profitable companies and non-core assets are disposed of (provided that such disposal is to take place at a fair price).

(ii) Operating and financial costs of the group are reduced and centralized.

(c)  the [Transfers / VH Payments / VAP Payments / Problematic Transactions] … are in line with such custom and trade practice as pleaded in sub-paragraph (b) above.”

Parties’ submissions

13.Mr Wong, counsel for the plaintiff, takes issue with the Proposed Particulars.  He submits that:

(a) as a matter of law, a trade custom or usage must possess the characters of being, amongst other qualities, “notorious”and“certain”, and the alleged “custom and trade practice” as particularized do not qualify as such;

(b) the Proposed Particulars, being formulaic, lack particulars and should be disallowed in any event in the exercise of the Court’s discretion.

14.Mr Leung, counsel for the defendants, submits that:

(a) the Proposed Averments and Proposed Particulars are essentially directed towards one point, namely to plead that the various actions taken by the plaintiff were in line with custom and/or usual trade practice.  As such they are relevant;

(b) in respect of the requirements of notoriety and certainty,they only apply to “trade custom”.  The plaintiff’s objection in this regard “can be easily addressed (if necessary) by a minor tweak to the amendments, i.e. deleting the word ‘custom’ while leaving the words ‘trade practice’”[1]; and

(c) the Proposed Particulars are sufficient for the plaintiff to know basically what the defendants’ case is regarding custom and trade practice. Anything further is a matter for evidence.

Principles on amending pleadings

15.The applicable general principles on amending pleadings have been usefully summarized by Ng J in Hsu Ming Chi v Lam Shu Chit HCCL 8/2013, unreported 22 October 2014, at paragraphs 13 to 18, that:

“ 13. It is a guiding principle of cardinal importance on the question of amendment that generally speaking, all such amendments ought to be made ‘for the purpose of determining the real question in controversy between the parties to any proceedings or of correcting any defect or error in any proceedings’: Re Playmates Investments Ltd [1996] 4 HKC 577 at 582E–H (per Le Pichon J as she then was); Natamon Protpakorn v Citibank NA [2009] 1 HKLRD 455 at para. 25 (per Cheung JA); Hong Kong Civil Procedure 2014 Vol. 1 para. 20/8/6.

14. Leave is readily granted to amend before trial unless it can be shown that the new claim based on the proposed amendment is bound to fail.  While the court is entitled to have regard to the merits of the case, it should only do so when the merits are readily apparent, and are so apparent as not to require prolonged investigation: Natamon Protpakorn v Citibank NA supra at para. 25 (per Cheung JA).

15. If the proposed amendments are bound to fail, no leave to amend should be granted.  In this regard, the court will take the applicant’s proposed pleaded case to the highest: Bank of China v Leigh Hardwick unrep., HCA 1110 of 2006, 28 August 2013, per Anthony Chan J at para. 2.

16. Absent any real prejudice, an application for amendment,albeit late, must be decided upon the general principle that a court of law seeks to adjudicate on the real issues and disputes between the parties and, if possible, technical and procedural rules should not stand in the way of allowing the parties to raise their real claims or defences before the court for adjudication: VSC Building Products Co Ltd v Kono Insurance Ltd., unrep. HCA 947/2005, 9 September 2009, per A Cheung J (as he then was) at [22].

17. Where prejudice is claimed, the burden is on the party opposing the amendment to show prejudice.  There is no injustice to the opposing party if he can be compensated by appropriate orders as to costs: RePlaymates Investments Ltd supra at 582H,584C (Le Pichon J as she then was).

18. Lastly, in giving effect to the underlying objectives of theRules of the High Court, including those concerning amendments,the court shall always recognize that the primary aim in exercisingthe powers of the court is to ‘secure the just resolution of disputes in accordance with the substantive rights of the parties’: RHC O 1A r 2(2).”

16.The principles above are not in dispute.  What is in dispute is the extent of definiteness and particularity that is required to be provided before any proposed amendments may be allowed.

17.Mr Wong submits[2] that “It is tolerably trite that an amending party has the obligation to put forward properly particularized amendments and it is no answer that further particulars may later be given.”  That submissions of his however begs the question as to what the phrase “properly particularized amendments” means.

18.In putting forward that proposition, Mr Wong relies heavily on Highfit Development Co Limited (in liquidation) v Koo Siu Ying, unreported, HCA 494/2015, 9 August 2017, where Anthony Chan J at §30 observed that:

“ On the other hand, I agree with Ms Seto that: (i) it is no answer to an objection that a proposed amendment lacks particulars tosay that they can later be given (see Perak Pioneer Ltd v CarrianHoldings Ltd, CACV 59 of 1985, 13 June 1985, p.5); and (ii) the requirement for properly particularised amendments is a matter of obligation for the amending party if they are proposed at a late stage (see Swain-Mason v Mills & Reeve LLP [2011] 1 WLR 2735, §73).” (emphasis added)

19.In Highfit, the proposed amendments concerned averments which suggested that certain fraud was premediated, “but there is no particulars at all about the alleged intention”[3].  It is therefore not surprising at all that those proposed amendments were disallowed.  In my view, the words “lacks particulars” at §30 of the Judgment (as highlighted above)have to be understood in that context.  Anthony Chan J in my view did not seek to lay down any hard and fast rule in that regard. 

20.Perak Pioneer Ltd v Carrian Holdings Ltd was one of the two cases referred to in Highfit.  In that case, Fuad JA (as he then was) observed at §16 of the Judgment that:

“ As regards particulars, in my view, it is no answer to an objection that a proposed amendment lacks particulars, to say that particulars can later be given. Of course, if a pleading lacks particulars, particulars can be asked for in the usual way and ordered by the Court if necessary, but where an amendment is applied for it would be an unusual case where the Court would consider it appropriate to allow an amendment to be made which lacks particularity, and might cause embarrassment.”

21.As can be seen from the excerpt above, the meaning of the terms“lacks particulars” and “lacks particularity” were not specifically considered by Fuad JA in Perak Pioneer.  What is clear is that in his Lordship’s view, even when a proposed amendment lacks particulars, it is still relevant to consider whether the lack in particularity “might cause embarrassment.”

22.Swain-Mason v Mills & Reeve LLP was the other case referred to in Highfit.  In that case, Lloyd LJ observed at paragraph 73 of the judgment that:

“ A point which also seems to me to be highly pertinent is that, if a very late amendment is to be made, it is a matter of obligation on the party amending to put forward an amended text which itself satisfies to the full the requirements of proper pleading. Itshould not be acceptable for the party to say that deficiencies in the pleading can be made good from the evidence to be adduced in due course, or by way of further information if requested, or as volunteered without any request. The opponent must know from the moment that the amendment is made what is the amendedcase that he has to meet, with as much clarity and detail as he is entitled to under the rules.”

23.Swain-Mason was concerned primarily with late amendments.  As has recently been explained by Moore-Bick LJ in Ahmed v Ahmed [2016] EWCA Civ 686 (at §18):

“ Applications to amend the pleadings are made at different stagesin the proceedings for different purposes in different cases. Thecourt’s observations in Swain Mason were clearly directed to thecase in which an application for permission to amend is made at a late stage with a view to raising a new point of substance. In such cases it is clearly important that the amendment be clearly drawn and with full particulars to enable the court and the other parties to understand the nature of the case that the applicant wishes to make.”

24.That it is of particular importance to ensure adequate particularity when amendments are sought late was emphasized by the Courtof Appeal in Wellfit Investments Ltd v Poly Commerce Ltd [1995] 3 HKC 56,where Nazareth VP (as he then was) observed at 61G–H that:

“ Where amendments, particularly material amendments of the present sort, are made so shortly before the hearing, it must be incumbent upon the party seeking them to ensure adequate particularity. The constraints of time, and the high risk of disruption of the orderly conduct of trials by the courts and of prejudice to the other party must demand strongly that leave be refused.”

Having cited Perak Pioneer, His Lordship then continued at 62B that:

“ Likewise, in Re Unisoft Group Ltd (No2) [1994] BCC 766 at 770-1, Hatman J explained in some detail why, in the context of late amendments, requests for further and better particulars are not an answer to the lack of particularity, and cause injustice.” (emphasis added)

25.The fact that the level of particularity of the proposed amendments is such that there is room for post-amendment requests for further and better particulars is therefore not in itself determinative of the application, as Mr Wong appears to be arguing.  As has been explained by Poon JA (giving the Judgment of the Court of Appeal) in Zhang Xiuhong v Liu Wenchen, unreported, HCMP 411/2017, 29 March 2017 (§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.”

26.Indeed, there are previous cases in which applications for amendments were granted despite the possibility of requests for post-amendment further and better particulars—see Silverlink (Hong Kong) Finance v Zhang Sabine Foi Fan HCA 2783/1998, unreported, 23 October 2003, per Deputy Judge Muttrie at paragraph 21, and Siberian Mining Group Co Ltd v Cheung Keng Ching [2017] 2 HKC 512, per Deputy Judge Lee (as he then was) at paragraphs 43 – 44.

27.This is of course not to say that amendments need only be adequately particularized when sought late.  As has been explained by Deputy Judge Marlene Ng (as she then was) in Chan Kon Fung v Gallop Pioneer Ltd HCA 1357/2011, unreported, 4 August 2016, at §45:

“ Mr Li SC accepted P should properly plead his proposed amendments, but argued Swain-Mason & ors v Mills & Reeve LLP and Wellfit Investments Ltd concerned late amendments made at trial or shortly before trial that called for more stringent scrutiny. However, the application in Perak Pioneer Limited that invited Fuad JA’s observations did not appear to have been made at or near the court doors. More importantly, given the rationale for pleadings in the post-CJR era, courts nowadays are unlikely to smile kindly on amendments that lack particularity or may cause embarrassment as they will prejudice the underlying objectives. Anyway, even though the present action had not been set down for trial, Mr Li SC’s written submissions suggested ‘[the] evidence has been fully unfolded’ (by several rounds of witness statements) and ‘[the] case should be ready to be set-down for trial’, so the proposed amendments deserved scrutiny to ensure they were properly formulated and would not cause prejudice/‌embarrassment (especially if they had the effect of altering the applicant party’s case).”

28.From the above authorities, the following considerations can be distilled:

(a) When an application for amendment is opposed on the basis of lack of particularity, the Court, when deciding whether the application may be granted in the exercise of its discretion,should take into account all relevant facts and circumstances which include in particular the underlying objectives, the degreeof particularity that has been provided, whether the point soughtto be raised is a new one, whether embarrassment may be caused,and the stage at which the application is made;

(b) The required degree of particularity 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;

(c) If that degree of particularity is not met, the application may be refused, irrespective of the stage of proceedings at which the application is made.  It is not an answer in this context to say that further and better particulars may later be sought;

(d) But if that degree of particularity has been met, the fact that there may be room for a post-amendment request for further and better particulars is not in itself a ground for exercising the discretion against the application;

(e) Any lack of particularity which is likely to cause embarrassment may also lead to refusal of the application;

(f) When the application is made late, it is of particular importance that the proposed amendment be clearly drawn and with full particulars to enable the court and the other parties to understand the nature of the case that the applicant wishes to make.  The underlying objectives, the constraints of time, and the high risk of disruption of the orderly conduct of trials by the courts and of prejudice to the other party must demand strongly that that be done.

29.With the above in mind, I return to the present application.

Whether “for the purpose of determining the real question in controversy between the parties”

30.I consider first of all whether the Proposed Amendments as put forward are relevant for the purpose of determining the real questions in controversy between the parties.

31.As I have summarized above, the defendants have in their original Defence pleaded that the impugned transactions were undertaken for legitimate purposes.  The proposed amendments are essentially directed to one additional point, that the undertaking of the Transfers, VH Payments,VAP Payments and Problematic Transactions were in line with custom and/or usual trade practice (the “New Plea”). 

32.Mr Leung submits that the relevance of this New Plea is obvious in that if it is in line with custom and usual trade practice to effect those transactions for the purposes explained by the defendants, then the defendants’ said explanations are more likely to be accepted by the trial judge to be true.  Save and except paragraph 42(3A) relating to the Problematic Transactions (which I will come back to), I agree.

33.In my view, but again save and except paragraph 42(3A), this New Plea is also relevant to two important issues:

(a) whether the defendants or any of them had acted in breach of the fiduciary duties pleaded by the plaintiff (eg whether they had acted honestly and in good faith, whether they had acted for a proper purpose, and whether they had applied such degree of skill, care and diligence as may reasonably be expected of a person of their knowledge and experience); and

(b) if necessary, what relief should be granted (noting in this regard that the forms of relief sought by the plaintiff are mostlyequitable in nature, and the existence or otherwise of the custom and/or usual trade practice pleaded will be relevant to the trial judge’s exercise of her or his discretion in that regard).

34.However, the New Plea, as currently particularized, and in so far as paragraph 42(3A) relating to the Problematic Transactions is concerned,has to be separately considered.  I have summarized above the defendants’case as to why they say those Problematic Transactions were undertaken. Those reasons, in so far as the Problematic Transactions were concerned, donot appear to fall within either the category of (1) the disposal of non-profitablecompanies or non-core assets (Proposed Particulars (b)(i)), or (2) the reductionor centralization of operating and financial costs (Proposed Particulars (b)(ii)).  In other words, the Proposed Particulars as currently pleaded are immaterial or not relevant to the Problematic Transactions.  I have indeed raised this concern with Mr Leung in the course of the hearing.  Mr Leung submits that the problem may need to be addressed by further voluntary particulars in the future.  This is a matter for the defendants to decide.

35.For the reasons set out above, and in so far as the Transfers, VH Payments and VAP Payments are concerned, I am therefore of the view that the New Plea, if made out, is relevant for the purpose of determining a number of core issues in controversy between the parties.

Whether too uncertain to be a trade custom or usage

36.Relying on a number of authorities, Mr Wong submits that as a matter of law, for something to qualify as a trade custom or usage, it must be “notorious, certain and reasonable and does not offend against the intention of any legislative enactment” (Chitty on Contracts, 32^nded, at §13-132), “invariable” (Chitty on Contracts, §14-021), and meet the requirement of universality (Re Far East Structural Steelwork Engineering Ltd [2010] 1 HKLRD 156 at §§48 – 49).

37.Those propositions are not controversial, which I accept.

38.On the strength of those authorities, Mr Wong then submits that the so-called “custom and/or usual trade practice” pleaded in the Proposed Particulars do not qualify as any trade custom.

39.However, whilst making those submissions, Mr Wong at the same time also accepts[4] that:

“ … there are authorities suggesting that there is an ambit for the Court to consider evidence of ‘general industry practice’ which falls short of ‘trade custom’ in the sense of an invariable, certain and notorious usage. See for example, Crema v Cenko Securities plc [2011] 1 WLR 2066 §§6 and 43 ….”

40.That acceptance by Mr Wong is clearly correct.  In Crema, Aikens LJ observed at paragraph 43 that:

“ In my experience, it has been common practice for the CommercialCourt to hear evidence of ‘market practice’, which does not amountto evidence of an alleged ‘trade usage or custom’, in order to assist the court with a full understanding of the factual background to the proper construction of a written contract.”

Similarly, Sir Andrew Morritt C observed at paragraph 70 that:

“ I agree with Aikens LJ that, for the reasons he gives, the court inascertaining and interpreting the terms of an agreement is entitled to have regard to market practices falling short of trade usage or custom. They are part of the factual context known to both parties. But the experts were agreed that they knew of no case in which the issue with which we are concerned had arisen.”

41.In the Proposed Averments, the defendants use the phrase “the custom and/or usual trade practice”.  In the Proposed particulars, the defendants use the phrase “the said custom and trade practice”.  Viewed in context, this part of Mr Wong’s objection in effect goes only to the “custom” parts of those Proposed Amendments.

42.In his written submissions[5], Mr Leung submits that:

“ … even the Plaintiff accepts that the so-called ‘requirement of certainty’ only applies to custom stricto sensu, and that a lesser threshold is applicable to industry practices …. Thus, the Plaintiff’s objection can be easily addressed (if necessary) by a minor tweak to the amendments, i.e. deleting the word ‘custom’ while leaving the words ‘trade practice’.”

He further submits that:

“ In any event, the label used in the amendments is less important than the substance of what is said. The Defendants’ case as pleaded in the amendments is not that a corporate restructuring always happens in a certain way; instead, the averment is that a corporate restructuring often happens in a certain way.”

43.Whilst I agree with Mr Leung that substance is usually more important that label, the use of the phases “custom and/or usual trade practice” or “custom and trade practice” in the New Plea are more than mere labelling.  They frame the issues, affect the scope of discovery, and define the types of evidence that may need to be compiled and adduced. 

44.I have considered the submissions, the authorities and the Proposed Amendments.  I agree with Mr Wong that the matters pleaded in the Proposed Particulars are not of such “invariable,certain and notorious” nature as would qualify as any custom.  The employment of the words “may be undertaken”, “on a case-by-case basis” and “not uncommon” in the Proposed Particulars highlights the uncertainty.  In fact, having read and heard Mr Leung’s submissions, I doubt whether the particularized matters were in fact meant by the defendants to be put forward as any invariable custom.

45.Following from the above, I find also that the plea of “custom” in the Proposed Amendments lacks particulars.  The Proposed Particulars fail to provide a fair and sufficient indication of what that alleged “custom” is.  The inclusion of the words “custom” is in my view embarrassing, in the sense that they blur the true nature of the issues and confuse the plaintiff as to the case it needs to meet. 

46.In my view, given the different legal criteria that should be applied when deciding the existence (or otherwise) of a custom on the one hand and of a trade practice on the other, the defendants’ application in relation to custom and trade practice should be (and should have been) considered separately.  Any failure to do so is in my view an error of law.

Whether the “trade practice” also lacks particulars

47.Having made the acceptance in paragraph 19 of his written submissions, Mr Wong proceeds to submit that “… the Proposed Amendments qua general industry practice are still demurrable” for “other discretionary factors”. He submits that the Proposed Particulars lack in particulars. He interprets the New Plea as seeking to advance a case that there is an alleged custom/practice to advance the interest of the Company.  He submits that the phrase “company’s interests” has a contextual meaning and is fact-sensitive, but that the defendants have made no attempt to state how the interests of the plaintiff’s creditors and the plaintiff’s own interests are taken into account by the alleged custom/practice.  He submits that the defendants are entitled to such particulars.  He further submits that the defendants have unjustifiably sought to conflate established duties and trade custom.

48.In reply, Mr Leung submits that the Proposed Particulars are sufficient for the plaintiff to know basically what the defendants’ case is regarding trade practice. 

49.I deal first of all with paragraphs 25A, 30(3) and 36A relating respectively to the Transfer, the VH Payments and the VAP Payments.  I have considered carefully the Proposed Particulars.  I apply the principles distilled from the authorities which I have set out above.  I take into accountthe fact that no trial date has been fixed, and any trial will be quite some timeahead.  I repeat my findings above, that the New Plea, if made out, is relevant for the purpose of determining a number of core issues in controversy between the parties.  The particularization of the practice as (1) the disposal of non- profitable companies or non-core assets (Proposed Particulars (b)(i)), and (2) the reduction or centralization of operating and financial costs (Proposed Particulars (b)(ii)) is in my view sufficient to provide a fair and sufficient indication of the nature of the New Plea and the case which the plaintiff has to meet in so far as the trade practice is concerned.  The evidence that may be compiled and adduced in support (or rebuttal thereof) are sufficiently clear.  I see no potential embarrassment which they may give rise.  If the plaintiff believes that it is entitled to seek some further and better particulars of the same, it is a matter of it to pursue.

50.In so far as paragraph 42(3A) relating to the Problematic Transactions is concerned, I repeat my observations set out in paragraph 34 above.  That part of the Proposed Particulars is irrelevant and immaterial to the purposes for which, according to the defendant’s pleaded defence, the Problematic Transactions were undertaken.  Immaterial and useless amendments will be disallowed: see Hong Kong Civil Procedure 2019 §20/8/24.  For that reason, I refuse leave in relation to paragraph 42(3A) (and the Proposed Particulars thereunder).

Disposal

51.For the reasons set out above, I allow the appeal in so far as, but in so far only as, the following two aspects of the Proposed Amendments are concerned:

(a) all references to “custom”; and

(b) the proposed addition of paragraph 42(3A) (and the Proposed Particulars thereunder).

Leave to amend in those regards is, and in my view ought to have been, refused.

52.I have been informed that as there was no stay of the Order under appeal, the Amended Defence and the Amended Reply have been filed. I therefore make the following directions: that the defendants should re-file its Amended Defence in accordance with my rulings above within 14 days from the date of handing down, and the plaintiff to re-file its Amended Reply within 14 days thereafter.  I give parties liberty to seek further directions.

53.I add also this.  In his written submissions[6], Mr Leung seeks to argue that a master’s order granting leave to amend a pleading is a case management decision, and as such should not be interfered with on appeal unless the master has committed an error of law.  I have indicated to Mr Leung that this is an important proposition which I am not prepared to rule on unless it has been fully argued.  In the end Mr Leung submits that this is not the type of marginal cases which need to engage that issue.  I agree.  I therefore express no view on that proposition. 

Costs

54.The plaintiff is partially successful in this appeal.  I make a costs order nisi that 75% of the costs of and occasioned by the Summons dated 14 September 2017 for the Proposed Amendments, including 75% of the costs for the hearing before Master Lam and for this appeal, be to the defendants (both with certificate for Counsel for the avoidance of doubt), to be taxed if not agreed.  I do not disturb the costs order made by Master Lam that the costs of and occasioned by the amendment be to the plaintiff, with certificate for Counsel, to be taxed if not agreed.  Any parties who seek to vary the above shall file and serve its submissions within 14 days from the date of handing down, response within 14 days thereafter, and reply within 14 days.

Mr Jonathan Wong, instructed by Lam & Co, for the plaintiff

Mr Wilson Leung, instructed by K&L Gates, for the 1^st to 8^th defendants