Graceful Win International Ltd v. Goldstar Success Ltd and Others
Read the full judgment text of HCA 42/2018 on BabelCite. This High Court CFI judgment was delivered on 19 November 2019.
1. This is the Defendants’ (“ Ds ”) application to strike out §§24-38 of the Statement of Claim dated 5 January 2018 (“ SoC ”) and prayers (1)-(9) therein on the grounds of disclosing no reasonable cause of action, are frivolous and/or abuse of process (“ Striking-out Application ”).
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HCA 42/2018 [2019] HKCFI 2831 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 42 OF 2018 ________________________ BETWEEN
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_________________________________ DECISION _________________________________ A. Introduction 1.This is the Defendants’ (“Ds”) application to strike out §§24-38 of the Statement of Claim dated 5 January 2018 (“SoC”) and prayers (1)-(9) therein on the grounds of disclosing no reasonable cause of action, are frivolous and/or abuse of process (“Striking-out Application”). 2.The Plaintiff (“P”) pursues four causes of action against Ds, namely breach of contract, Quistclose trust, unjust enrichment and unlawful means conspiracy. These causes of action are pleaded in §§24-38 of the SoC and, on these bases, P claims relief in prayers (1)-(9). Ds have not sought the striking out of this action. If the Striking-out Application succeeds, this action and §§1-23 of the SoC would still remain. Accordingly, it may still be open to P to seek leave to amend the SoC in future, but that is a matter for another day. 3.As noted by Mr Horace Wong SC (appearing with Mr Alexsander Wong) for P, Ds are in fact only relying on the limb of “frivolous/abuse of process” in O18 rr19(1)(b) and (d) of the Rules of High Court (“RHC”) but not the “no reasonable cause of action” limb in O18 r19(1)(a) of RHC. This is because Ds are not saying that, assuming all pleaded facts in favour of P, the SoC discloses no reasonable cause of action. Rather, Ds have adduced evidence to seek striking out on the bases that P’s claims are frivolous and/or abuse of process as they are (i) time-barred and/or (ii) bound to fail because the evidence demonstrates that valid written notice as required under contract had been given to P. B. Background 4.The background has been canvassed in the parties’ written and oral submissions, chronology and/or summary. For present purposes, it suffices to outline the key salient facts. 5.The dispute arose out of the restructuring of Ocean Grand Holdings Limited (“Ocean Grand”), a company listed on the Hong Kong Stock Exchange (“HKEx”) (Stock code: 1220). Trading in the shares of Ocean Grand on the HKEx was suspended since 17 July 2006. Provisional liquidators of Ocean Grand (“PLs”) were appointed on 24 July 2006. Pursuant to the Restructuring Agreement dated 20 December 2007 (“Restructuring Agreement”), the 1st Defendant, Goldstar Success Limited (“Goldstar”), was nominated as investor and granted the exclusive right to implement the restructuring proposal of Ocean Grant to secure resumption of its listing status. The 2nd Defendant, Chau Shing Yim David (“Chau”), was the driving force behind Goldstar. 6.Following the execution of the Restructuring Agreement, Mr Jet Lam Yin Lok (“Lam”) of the Jimei group (“Jimei Group”) was introduced to Chau as a person interested in the restructuring project. On 3 January 2008, an agreement in Chinese was entered into between Cen-1 Partners Limited (“Cen-1”), a company of which Chau was Chief Executive Officer (“CEO”) and coordinating the restructuring project on behalf of Goldstar, and Ms Or as nominee of Lam (“2008 Agreement”). Under Clause 2, Ms Or agreed to pay the capital required for the restructuring project in the sum of HK$197.5 million. Further, Ms Or agreed to pay HK$25 million upon execution of the 2008 Agreement, of which HK$5 million was non-refundable (Clause 3), and to pay the remainder of HK$172.5 million if the HKEx granted approval or conditional approval for resumption of trading and within 5 days upon Cen-1 giving Ms Or written notice to pay (Clause 5), failing which the (remaining) sum of HK$20 million paid under Clause 3 would be forfeited and not refunded (Clause 6). The said HK$25 million was paid by 2 cheques issued by Jimei Vessel Company Limited (“Jimei Vessel”), a subsidiary of the Jimei Group. 7.The resumption proposals were not viewed favourably by HKEx. In 2010, the 4th Defendant, Mr Ng Ting Wai (“Ng”), was introduced by the PLs to Chau and Lam with a view to injecting his aluminium business into Ocean Grand to facilitate the application for resumption of listing. At or around the same time, in July 2010, P was incorporated for the purpose of continuing with the restructuring project. Mr Tai Ming (“Tai”), son of Tai Chok Lam deceased (“Tai Senior”), was the sole director of P. It is P’s case that Lam agreed with Tai Senior for the latter to acquire his 1/3 stake in the restructuring project. On the other hand, it is Ds’ case that they regarded P and Tai as Lam’s corporate vehicle and nominee and it was not until P filed evidence herein that they heard about the acquisition of 1/3 stake by Tai Senior for the first time. 8.On 6 September 2010, Ms Or, Chau, Cen-1 and P entered into a novation deed in which Ms Or agreed to transfer, assign and novate all rights and obligations etc under the 2008 Agreement to P. On the same day, an agreement in Chinese was entered into among Goldstar, P and the 3rd Defendant, Kwok Tao Capital Investment Limited (“Kwok Tao”), being a shareholder of Goldstar and a company controlled by Ng, for the restructuring of Ocean Grand (“2010 Agreement”). Under Clause 2, P and Kwok Tao agreed to pay the capital required for the restructuring project in the sum of HK$197.5 million in the proportion of 1/3 and 2/3 respectively. They further agreed under Clause 3 to shoulder the sum of HK$25 million paid by P in the proportion of 1/3 and 2/3 respectively, and further that such sum would not be refunded to either of them regardless of whether Ocean Grand obtained HKEx’s approval for resumption of trading. Further, each of P and Kwok Tao shall pay the sum of HK$197.5 million in the proportion of 1/3 and 2/3 respectively if HKEx granted approval or conditional approval for resumption of trading and within 5 days upon Goldstar giving written notice to pay (Clause 4), failing which the non-defaulting party may acquire shares which could have been acquired by the defaulting party (Clause 5). In line with Clause 3, Kwok Tao arranged for payment of HK$5 million and HK$11.67 million in favour of Jimei Vessel as per P’s instructions on 6 September 2010 and 8 October 2010. 9.On 28 September 2010, the HKEx granted conditional approval to resume the listing of Ocean Grand, subject to Ocean Grand’s compliance with various conditions by 30 June 2011. This was made known to the public by Ocean Grand’s announcement of 11 October 2010. As it transpires, the date of compliance with the resumption conditions was subsequently extended, as evidenced by further announcements. 10.On 4 November 2010, Messrs KY Woo & Co issued a letter to P and Kwok Tao on behalf of Goldstar enclosing the letter dated 28 September 2010 from HKEx and giving notice in accordance with Clause 4 of the 2010 Agreement to request P and Kwok Tao to contribute their respective capital contribution within five days, before 5pm on or before 11 November 2010 (“KY Woo’s Letter”). The KY Woo’s Letter was sent by post and registered post to P at Mr Lam’s office at Unit 3908-13, 39th Floor, Cosco Tower, 183 Queen’s Road Central, Sheung Wan (“Cosco Office”). It is not disputed that P has received and was aware of the contents of the KY Woo’s Letter. There is however conflicting evidence as to whether a meeting among the parties took place before or after the issuance of the KY Woo’s Letter. 11.It is Ds’ case that another payment notice was issued by Goldstar to P for the attention of Tai and hand-delivered to P/Tai’s representative Ah Bo in Macau on 6 December 2011 (“Payment Notice”), and Goldstar also instructed Messers Dechert to issue a demand letter dated 15 December 2011 enclosing the Payment Notice (“Dechert’s Letter”), which was delivered by fax, registered post to P’s registered address and by hand to the Cosco Office, and was also hand-delivered to Tai in Macau on 16 December 2011 by Chau, Ng and Lee Cheuk Man. P, however, denies ever receiving either document. 12.On Ds’ case, P refused to pay up its capital contribution under the 2010 Agreement despite repeated demands. In the end, Kwok Tao had to make up the 1/3 share of capital contribution defaulted by P to complete the restructuring project. Ocean Grand resumed its listing on 11 January 2012. 13.On P’s case, however, it is an implied term of the 2010 Agreement that upon the HKEx’s acceptance or agreement to the resumption or conditional resumption of trading of Ocean Grand, Goldstar shall, within a reasonable time, given written notice to P to call for the further injection of the capital (“Implied Term”) (SoC §12). Further, it is P’s case that Goldstar did not give any written notice to P in accordance with Clause 4 of the 2010 Agreement and/or the Implied Term (SoC §20). On such basis, P sues (i) Goldstar for breach of the Implied Term of the 2010 Agreement (SoC §§24-25), breach of Quistclose trust (SoC §§26-27) and unjust enrichment (SoC §§28-29), and (ii) Ds for unlawful means conspiracy (SoC §§30-38). 14.As mentioned, by the Striking-out Application, Ds seek to strike out SoC §§24-38 (and consequentially prayers (1) to (9) therein) on the bases that P’s claims are (i) time-barred and/or (ii) bound to fail because the evidence demonstrates that valid written notice as required under the 2010 Agreement had been given to P. C. Applicable principles for striking out 15.It is only in plain and obvious cases that the Court should exercise its summary powers to strike out the indorsement on any writ or any other pleading under O18 r19 of the RHC. There should be no trial upon affidavit: Hong Kong Civil Procedure 2020 (Vol.1), §18/19/4. 16.For striking out under O18 r1(b) of the RHC, a proceeding is “frivolous” if it is not capable of reasoned argument, without foundation or where it cannot possibly succeed: Hong Kong Civil Procedure 2020 (Vol.1), §18/19/7. As regards O18 r1(d) of the RHC, the process of the Court must be used bona fide and properly, and must not be abused. 17.Where a litigant brings a claim knowing that there is no substance in it or that it is bound to fail, or if the claim is on its face so manifestly misconceived that it can have no prospect of success, it may be deemed frivolous and an abuse of process. The Court should see what the party in question knew or ought to have known if he had gone about the matter seriously: Yifung Properties Ltd v Manchester Securities Corp, HCA 1341 and 1359/2014 (19 October 2015), per Au-Yeung J at §12. 18.However, as pointed out by Godfrey J (as he then was) in Hutchvision Asia Ltd v Asia Television Ltd [1993] 2 HKC 510:
19.Mr Ambrose Ho SC (appearing with Ms Joyce Leung) for Ds emphasised, however, that the Court does not assume all the facts in favour of P as they are not relying on the “no reasonable cause of action” limb in O18 r19(1)(a) of RHC. He drew the Court’s attention to Au-Yeung J’s observation in Yifung Properties Ltd at §15 that each limb under O18 r19(1) of RHC forms a separate ground for striking out and accordingly, although a cause of action might appear to be reasonable on the face of a set of pleading, the Court is at liberty to consider evidence and decide if the pleading should be struck out under another limb. I have no difficulty accepting such proposition of Mr Ho SC. However, the question remains as to what the proper test or threshold should be when the Court considers such evidence for the purpose of striking out, including in particular whether the Court can apply a test similar to the one applicable to an application for summary judgment. 20.Mr Ho SC contended that the Court could adopt such an approach. He relied on two English decisions in Three Rivers District Council & Ors v Governor and Company of the Bank of England [2003] 2 AC 1 and ED&F Man Liquid Products Ltd v Patel & Anor [2003] All ER (D) 75. As he submitted, the question is whether the claim has no real prospect of succeeding, and the principle is similar to the applicable test for obtaining summary judgment (Three Rivers District Council, §§94-95). 21.In response, Mr Wong SC critiqued the reliance on English cases as misleading since the statutory framework is different. Under the Civil Procedure Rules (“CPR”) in the United Kingdom, there was a substantive change in the rules, and in relation to a striking out application, CPR 24.2 introduces something entirely different and absent in Hong Kong, namely a procedure for summary judgment against a claimant in favour of a defendant. By the time the appeal came to the House of Lords in Three Rivers District Council, the CPR came into existence. By consent, the House of Lords dealt with the matter on the basis of CPR 24.2, which imports a very different test on striking out, namely the test of reasonable prospects of success. As regards the ED&F case, Mr Wong SC pointed out that it was concerned with an application to set aside a regular default judgment, where it has to be established that the applicant has a real prospect of success. 22.In these circumstances, I accept the argument of Mr Wong SC that CPR cases should be treated with caution and, in particular, the test under CPR 24.2 is different from the one applicable to striking out applications in Hong Kong. That said, I am conscious that the matter could be more nuanced or sophisticated than what it might appear. For instances, in some cases, it may be open to a defendant to bring a counterclaim which raises factual and legal issues common to a plaintiff’s claim. It may be that in those cases, a defendant may apply for summary judgment for its counterclaim. If the defendant obtains a summary judgment, that could well be a basis for seeking to strike out the plaintiff’s claim to the extent it is coterminous with the defendant’s counterclaim (perhaps on the basis of res judicata). In this way, one may say that the defendant can in effect seek to strike out a plaintiff’s claim by resorting to a test applicable to summary judgment. However, this is not the situation here since Ds have applied for striking out without pursuing any counterclaim (at least not at this stage). D. Analysis 23.For the reasons explained below, I come to the conclusion that §§24-38 of the SoC and prayers (1)-(9) therein should be struck out on the ground of (i) defective plea of SoC §20 (by reason of the KY Woo’s Letter) and/or (ii) P’s claims being time-barred. For these reasons, it is not strictly necessary for me to reach a conclusive view whether they should also be struck out on the basis that P’s claims are bound to fail (save to the extent canvassed in ground (i)) by reason of the Payment Notice and the Dechert’s Letter. If I have to decide on this issue, I will probably decline to accede to striking out on such ground, even though I am inclined to the view that P’s case on the same is highly improbable (if not incredible). D1. Defective plea of SoC §20 (by reason of KY Woo’s Letter) 24.This is in fact one of the key points submitted by Ds in contending why P’s claims are bound to fail. For reasons which I would explain, I have come to the conclusion that I should accede to the Striking-out Application on such ground. 25.To begin with, I accept the contention of Mr Ho SC that each of P’s causes of action depended on whether written notice was given to P under Clause 4 of the 2010 Agreement or the Implied Term. This was pleaded in §20 of the SoC, ie despite the acceptance or agreement by HKEx for the resumption of trading and despite the resumption of trading upon the fulfillment of resumption conditions, Goldstar did not give any written notice to P in accordance with Clause 4 of the 2010 Agreement and/or the Implied Term. This is the basis of P’s claim on breach of contract in SoC §24. As pointed out by Mr Ho SC, P did not raise additional facts in support of its claims under Quistclose trust, unjust enrichment and conspiracy. Therefore, P’s claims rise and fall together based on the plea in SoC §20. 26.In my view, the plea in SoC §20 is plainly defective. Simply put, such written notice under Clause 4 of the 2010 Agreement and/or the Implied Term has actually been given in KY Woo’s Letter in November 2010. Indeed, after the Striking-out Application was taken out, P accepts that it has received KY Woo’s Letter in November 2010. This directly contradicts SoC §20 which pleaded that Goldstar “did not give any written notice to the Plaintiff”. 27.At first blush, the view may be taken that this is merely a technical defect. It may be said that, on the evidence, KY Woo’s Letter may not be the operative notice since Ds adduced evidence that it was overtaken by an alleged subsequent meeting in the Cosco Office (“Alleged Cosco Meeting”), whilst Ds’ case is that Goldstar for whatever reason saw fit to issue a subsequent Payment Notice. This is further compounded by the lapse of over 1 year between the issuance of the KY Woo’s Letter in November 2010 and the Payment Notice in December 2011. There is therefore some attraction in Mr Wong SC’s argument that a lot of what Ds say would have gone to the defence and, if a defence has been filed, P will address that in P’s reply. 28.However, on reflection, I do not think this is a satisfactory way of approaching the matter. The case as pleaded by P in SoC §20 is that Goldstar did not give any written notice to P in accordance with Clause 4 of the 2010 Agreement and/or the Implied Term. In a similar vein, it is pleaded in SoC §24(1) that Goldstar failed to give written notice to P as stipulated under Clause 4 of the 2010 Agreement, whether within reasonable time or at all. Although Mr Wong SC said rather loosely that his case is that the KY Woo’s Letter was not a valid notice given under Clause 4 of the 2010 Agreement, P has put forth no basis or evidence to suggest that, at the time the KY Woo’s Letter was issued, it was not a valid notice given under Clause 4 of the 2010 Agreement. It may well be the case that P could argue, based on P’s allegations of the event taking place in the Alleged Cosco Meeting, that KY Woo’s Letter and/or the parties obligations were varied or waived subsequently, or that notwithstanding the KY Woo’s Letter there could be a different implied term to give a further or fresh written notice subsequently, or that P could rely on alleged representations made on behalf of Goldstar during the Alleged Cosco Meeting, or even estoppel. However, that is not P’s pleaded case. 29.Indisputably, on P’s own case, it had received and was aware of the KY Woo’s Letter. There is no good reason why P did not and should not deal with the status of the KY Woo’s Letter expressly in its SoC. The point is that, unless P pleads clearly what has become of the status of the KY Woo’s Letter, it should remain a valid notice issued in accordance with Clause 4 of the 2010 Agreement, in which case there would have been no breach of the 2010 Agreement. Further, if there was no breach of the 2010 Agreement, then there is no reason why Ds could not rely on Clause 3 of the 2010 Agreement which provides expressly that the sum of HK$25 million contributed by P and Kwok Tao in the proportion of 1/3 and 2/3 respectively would not be refunded to P or Kwok Tao, in which case there can be hardly any basis for breach of Quistclose trust (as the retention of the HK$25 million was a purpose specifically agreed), unjust enrichment (as the retention pursuant to contractually agreed term cannot be unjust) or conspiracy to injure by unlawful means (as the premise “to effect a breach of the [2010] Agreement” in SoC §34 simply falls away). 30.As Mr Ho SC put it, the proper way in these circumstances is perhaps for P to seek leave to amend the SoC. However, Mr Wong SC maintains that it is not necessary for P to amend the SoC. In these circumstances, it is perhaps unfortunate that P chose not to put forth any proposed amendment, with the result that the Court is left with an alleged cause of action which could not be sustained on the evidence. Indeed, as Mr Ho SC forcefully put it, even at the point of oral submissions, P has not formulated precisely at which point an obligation was breached and until P has reformulated its case, there is little room to give P the indulgence. In this regard, Mr Ho SC argues that if the case is so different from that being pleaded, it should be struck out: Cheung Chui Sou Ying v The Personal Representatives of Cheung Yuk-luen [1981] HKLR 585 at 589. 31.In the circumstances, I am prepared to strike out §§24-38 of the SoC and prayers (1)-(9) therein on the basis that P’s pleaded case premised on SoC §20 is bound to fail by reason of the undisputed receipt of the KY Woo’s Letter. Whilst it may be open to P to put forth proposed amendment by way of fallback, P chose not to do so. In these circumstances, the Court is left with little alternative but to strike out those paragraphs as presently formulated. I note that, since Ds have not sought the striking out of the action herein, it may be open to P to come up with a properly formulated amendment of the SoC. There will no doubt be argument then as to whether leave to amend should be given but there is no need for the Court to prejudge the outcome at this stage. D2. Limitation defence 32.Ds argue that P’s claims in respect of breach of the 2010 Agreement and unjust enrichment are time-barred under section 4(1) of the Limitation Ordinance (Cap. 347) (“LO”) which provides that the 6-year limitation period for actions founded on simple contract or tort runs from the date of accrual of the cause of action. Breach of contract 33.Insofar as breach of contract is concerned, Ds contend that, assuming that P’s Implied Term could be established, Goldstar should have given written notice to P within a reasonable time from which conditional approval was granted by HKEx on 28 September 2010. Ds contend that, on P’s case, a breach would have occurred by late 2010, or July/August 2017, or end of 2011. As Mr Ho SC put it, by no stretch of imagination could the reasonable time stretch to more than a year as that would not have made any commercial sense. At the latest, P’s claims would have been time-barred by end of 2017, prior to the issuance of P’s Writ of Summons on 5 January 2018. 34.Further, Ds recognise that section 26(1)(a) of LO operates to postpone the running of time in actions based on fraud of the defendant for so long as the plaintiff has not discovered the fraud and could not with reasonable diligence have discovered it. Ds contend that even on the assumption that Goldstar’s alleged breach(es) of contract would amount to “unconscionable behaviour” and qualify as “fraud” under section 26(1)(a) of LO, there should not be any postponement of the running of time against P because it could, with reasonable diligence, discovered each of the alleged breach by Goldstar as timely public announcement was made by Ocean Grand in respect of each triggering event. 35.In response, P runs a few alternative arguments:
36.Before considering the issues arising on the limitation defence for the claim on breach of contract, it is pertinent to note that the foundation of P’s case is the Implied Term pleaded in SoC §12. For the purpose of striking out, Ds have not argued that the Implied Term is unarguable as a matter of law. That said, I wish to say a few words about the Implied Term, as this may affect the way one looks at the issue of continuing breach. 37.According to the Implied Term, it is an implied term upon the HKEx’s acceptance or agreement to the resumption or conditional resumption of trading of Ocean Grand that Goldstar shall within a reasonable time give written notice to P to call for the further injection of capital provided for in Clause 4 of the 2010 Agreement. 38.However, if one looks at Clause 4 of the 2010 Agreement, it does not impose any obligation on Goldstar to give a written notice. Rather, it only imposes a contractual obligation on each of P and Kwok Tao to make further injection of capital within 5 days upon written notice by Goldstar. On a plain reading of Clause 4, Goldstar was conferred a contractual discretion to decide when to issue a written notice. There is no express provision compelling Goldstar to issue a written notice. 39.Having said that, it is trite that contractual discretion is not unfettered. Generally and as an implied term, not only must a contractual discretion be exercised honestly and in good faith, but it must not be exercised unreasonably (in a sense analogous to the Wednesbury sense), arbitrarily, capriciously or irrationally: Horkulak v Cantor Fitzgerald International [2005] ICR 402, §§27-30; Brogden v Investec Bank Plc [2014] EWJC 2785 (Comm), §§91, 95-100; Tadjudin Sunny v Bank of America, National Association, CACV 12/2015 (28 September 2016), §§46-55; Braganza v BP Shipping Ltd [2015] UKSC 17, §§18-30; Lewison, The Interpretation of Contracts (6th ed, 2015), §14.11. 40.Therefore, it may be argued that in exercising its contractual discretion to issue a written notice, there is an implied term that Goldstar could not act in bad faith, or arbitrarily, capriciously or irrationally. That may well mean that Goldstar cannot issue a written notice too early, too late, or not at all, or otherwise in bad faith or in a manner which would sidestep or undercut P in favour of Kwok Tao. Arguably if Goldstar chose to give 5 days’ notice to Kwok Tao but not P, then Goldstar could also be in breach of such implied term. If this is the way P has pleaded its case and insofar as Goldstar failed to give written notice to P, it would appear that Goldstar would not be in breach until it reached the time when Goldstar could no longer give the requisite written notice to P to enable the latter to participate in the restructuring. However, this is not how P pleads its case. 41.Instead, P’s case is that of the Implied Term, ie an implied obligation on Goldstar to issue a written notice to P within a reasonable time. Based on such pleaded case, there is force in Mr Ho SC’s contention that if P is relying on some extraneous circumstances or some facts which would sway the Court that the reasonable time is more than 1 year, it would have come out in the evidence, and yet little (if any) of that has been particularized despite having had the chance of putting in five affirmations. 42.Further, there is also force in Mr Ho SC’s contention that the Implied Term as framed envisages a one-off breach. If notice is given within a reasonable time then there is no breach; and the concept of breach only occurs when the reasonable time expires. As he put it, assuming there is an obligation to give notice by 1 January 2011 and Goldstar failed to give notice by 1 January 2011, the breach occurred there and then, and the cause of action arose once and for all. There is no lingering, continuing breach every day when Goldstar failed to give that notice. If so, a breach of an obligation to give notice does not become a continuing one simply because a specified date is replaced by a concept, ie a reasonable time which the Court has to ascertain anyway. In any event, there is no express plea of continuing breach in the SoC. 43.That said, the Court is dealing with a striking out application. The draconian power of striking out should not be lightly exercised. In fairness, Mr Wong SC rightly emphasized the following points. 44.First, the law on continuing breach is far from being settled in Hong Kong and in England. The jurisprudence is still developing and it would not be prudent for the Court to accede to a striking out by forming a conclusive view on the state of the law. Without doing injustice to the detailed submissions of Counsel, I wish to highlight the following:
45.Second, Mr Wong SC submitted that the Court is concerned with a relationship which lasted throughout between formation of contract and the time when the restructuring project was completed; and further that P, Kwok Tao and Goldstar were in a continuing relationship akin to joint venturers under the 2010 Agreement. Whilst it would appear from the authorities cited above that the existence of a continuous relationship does not mandate a continuing duty, it is fair to say that this is likely to be a relevant factor. Further, as explained by Mr Wong SC, P did not just contract for a right to timely notice; rather it was merely a right for a bigger purpose, as it would trigger a corresponding obligation on P’s part to make a further obligation which in turn would trigger obligation of Goldstar to give P one-third shareholding (25% out of 75%). Whilst this raises the issue whether the Implied Term is indeed the properly formulated implied term, it is perhaps not unarguable that even if one proceeds under the rubric of the Implied Term, these factors may have a bearing on whether Goldstar has a continuing duty to give notice despite the lapse of reasonable time. 46.For these reasons, whilst I remain skeptical of P’s case of continuing breach, this is perhaps not a sufficient basis on its own for concluding that P’s claim is time-barred. 47.However, even assuming that P can rely on the concept of a continuing breach, I am of the view that P’s claim of breach of contract will still be time-barred. P relies on §29 of Chau’s Affirmation which suggested that Kwok Tao had to make up the 1/3 share of capital contribution defaulted by P and paid the subscription money to the PLs on 9 January 2012. P thus argued that payment was in fact made by Kwok Tao on 9 January 2012 only. However, Chau did refer to the correspondence produced in Exhibit “CSYD-17” to his Affirmation. Among them is a letter dated 6 December 2011 from the PLs to Goldstar requesting Goldstar to come up with the sum of HK$13 million for the Underwritten Shares by 28 December 2011 and to pay HK$167 million as Investor Subscription by the Closing Date on 4 January 2012. These were deadlines imposed by the PLs on Goldstar and logistically Goldstar must demand injection of further capital from each of P and Kwok Tao at least 5 days before 28 December 2011 and 4 January 2012 (as the case may be) to ensure that Goldstar would in turn be in a position to make payments by the stipulated deadlines. The 5 days’ advanced notice is required because, under Clause 4 of the 2010 Agreement, each of P and Kwok Tao is contractually entitled to a period of 5 days to honour payment. 48.Hence, P’s reliance on §29 of Chau’s Affirmation without regard to the correspondence exhibited by him is misplaced. Indeed, it seems to me clear from the correspondence that the date of 9 January 2012 is a reference to the letter of the same date issued by the PLs to Ocean Grand instead. 49.Alternatively, even putting aside the letter dated 6 December 2011 from the PLs, there is an announcement of Ocean Grand on 9 January 2012 which informed the pubic that, by 5 January 2012, the restructuring had been completed, and that all the conditions of the subscription were fulfilled on 9 January 2012. These shares had been allotted and issued to the Investor as of 9 January 2012 and must have been paid for before that. Hence, if one works backward from 9 January 2012 (Monday) when allotment took place, the closing notice could only be given on 6 January 2012 (Friday) at the latest. Again, if one factors in the 5-day written notice, that would have taken the time to 1 January 2012 (if not even earlier). 50.In the further alternative, even if one assumes that Kwok Tao only made payment on 9 January 2012, it is plain that this would be the latest date on which payment could be made, as it is clear from Ocean Grand’s announcement that the restructuring was achieved via a scheme of arrangement effective on 9 January 2012. If one factors in the 5-day written notice, that would have taken the time to 4 January 2012. 51.In order to circumvent these, Mr Wong SC submitted that it was up to P to waive the 5-day notice requirement. However, as pointed out by Mr Ho SC, we are concerned with inter partes rights and obligations prescribed by contract. Goldstar must afford P and Kwok Tao 5 days’ written notice to come up with payment. If Goldstar failed to do so and acted in breach, the mere fact that hypothetically P may waive such breach and accept a shorter notice period should not have the effect of postponing the running of time as a result to a later date. 52.For all these reasons, I am of the view that time would start to run by late December 2011 or at the latest 1 January 2012, and thus P’s claims of breach of contract will become time-barred before 5 January 2018, subject to section 26 of LO. On this, Ds rely on concealment rather than fraud under section 26(1)(b) of LO. However, in my view, such argument is bound to fail. 53.First, I agree with Mr Ho SC’s submission that P has not put forth any allegation and facts of material and deliberate concealment in the five affirmations filed in opposition to the Striking-out Application. 54.Second, as a matter of fact, Ocean Grand had made regular announcements to inform the public the status of the restructuring. That is hardly consistent with concealment. 55.Third, whilst it is P’s case that it did not receive the Payment Notice or the Dechert’s Letter, there is no suggestion that Ds or Goldstar concealed relevant facts by deliberately withholding the Payment Notice or the Dechert’s Letter. In other words, it is one thing to say that P did not in fact receive either letter, which could be due to inadvertent errors or misdelivery. It is however quite another to accuse Ds of deliberately withholding the said letters (not to mention the absence of accusation that Ds fabricated the letters as evidence – which means they must have attempted to send the letters, regardless of whether P received them). 56.In any event, I accept Ds’ argument that P could, with reasonable diligence, discovered the alleged breach of contract by Goldstar from the public announcements made by Ocean Grand. In particular, P accepted that it had received the KY Woo’s Letter which enclosed the conditional approval from HKEx by letter of 28 September 2010, which stipulated 30 June 2011 as the deadline for complying with the resumption conditions. In these circumstances, there is no reason why P could not and should not make reasonable enquiries before 30 June 2011. Unjust enrichment 57.As regards unjust enrichment, Ds contend that since P paid the initial investment in January 2008, the claim on unjust enrichment would have been time-barred by January 2014. Further, even if P is running the case of concealment, given the plea in SoC §35(6) that since late 2011 Ds refused to acknowledge P’s initial investment, it must have discovered such concealment/fraud by then. 58.In response, P argues that the cause of action of unjust enrichment is not complete until the failure of basis accrues. Further, P contends that on its pleaded case, consideration for the initial investment failed because such payment was premised on P’s participation in the restructuring of Ocean Grand, and the failure of basis occurred on 11 January 2012 when the restructuring was completed. 59.In my view, there is a common thread in the limitation defence to P’s claims of breach of contract and unjust enrichment, namely the question as to the latest point in time when Goldstar would be acting in breach of contract or refusing to acknowledge P’s initial investment. In principle, they should not result in a different point in time given the common facts relied upon in both causes of action. Indeed, the underlying rationale of the Implied Term must be that Goldstar should give written notice to P to call for the further injection of capital so that P’s initial investment would not be denied. Accordingly, if time started to run for breach of the Implied Term, time should also start to run for unjust enrichment. Accordingly, for reasons similar to those set out in relation to P’s claim for breach of contract, I am of the view that P’s claim for unjust enrichment is also time-barred. D3. P’s claims bound to fail 60.Insofar as Ds argue that P’s claims are bound to fail because each of P’s causes of action depended upon the alleged failure by Goldstar to give written notice under Clause 4 of the 2010 Agreement and the Implied Term but such written notice had actually been given in KY Woo’s Letter, I have held in Section D1 above that this is a valid basis for striking out. 61.In addition, Ds also rely on the Payment Notice and the Dechert’s Letter. However, unlike the KY Woo’s Letter, P claims that it did not receive either of them. Indeed, the evidence adduced by P and Ds on the receipt of the Payment Notice and the Dechert’s Letter are conflicting, if not diametrically opposed. Of course, if P had in fact received either of them, its claims under each of its four causes of actions would have collapsed. Nevertheless, for the reasons explained in Section C above, I am not prepared to adopt the test applicable for summary judgment for the purpose of striking out. Hence, even if the version put forth by P on the non-receipt of the Payment Notice or the Dechert’s Letter is highly improbable (if not incredible), I doubt if that is a sufficient basis for striking out P’s claims. 62.In the light of my view, it is not strictly necessary to go into the merits of P’s and Ds’ respective cases on the receipt (or non-receipt) of the Payment Notice and the Dechert’s Letter in details. Suffice it to say that I am inclined to say that P’s version is highly improbable, if not incredible, for inter alia the following reasons. 63.First, the Dechert’s Letter was issued by lawyers on behalf of Goldstar. In my view, it cannot realistically be suggested that the Dechert’s Letter was a subsequent fabrication. If so, since the Payment Notice was itself enclosed with the Dechert’s Letter, it is equally unrealistic to suggest that the Payment Notice was a subsequent fabrication. On the premise that both letters were prepared contemporaneously, there is no reason why Goldstar would not have exhausted every possible means to deliver them to P. 64.Second, Goldstar received a letter from the PLs on 6 December 2011 imposing deadlines for making payments. This lends support to Ds’ case that a written demand (ie Payment Notice) was issued to P on the same day (and followed up by the Dechert’s Letter). 65.Third, the Payment Notice was on the face of it signed by Ah Bo, the personal driver of Lam. If Goldstar were to forge anyone’s signature, it would in all probabilities forge the signature of Lam or Tai instead, as opposed to Ah Bo. 66.Fourth, the evidence of delivery of the Payment Notice to Ah Bo and the Dechert’s Letter to Tai were substantiated by affirmations for Ds and substantiated with immigration records evidencing visits to Macau on 6 and 16 December 2011 respectively. In contrast, there are only bare assertions from Ah Bo and Tai of the alleged non-receipt of the Payment Notice or the Dechert’s Letter. 67.Having said that, there are some uncertainties in the evidence, as pointed out by Mr Wong SC. For instance:
68.Further, P also relies on the transcript of a secret audio recording in around 2017. However, the audio recording is not a complete record of the conversation. Moreover, the contents of the conversation are rather vague and I find it difficult to attach any significant weight to the same. Given my overall view, I do not intend to comment further on this for present purposes. 69.I should perhaps mention that, notwithstanding P’s case of non-receipt of the two letters, it may be open to Ds to argue that it is sufficient if Goldstar did give written notice (eg by post) even if P did not receive them. However, since this argument has not been raised and addressed by the parties, I do not venture to go into it. 70.Overall, whilst I remain skeptical of P’s version of events on the Payment Notice and the Dechert’s Letter, I would not have been inclined to accede to the Striking-out Application solely on the basis that P’s version of events on the same is highly improbable (but without a finding that P’s case amounts to an abuse of process). E. Conclusion 71.For all these reasons, I rule that §§24-38 of the SoC and prayers (1)-(9) therein be struck out. 72.Whilst Ds succeed in the Striking-out Application, I am not prepared to accede to striking out solely on the basis that P’s version of events on the Payment Notice and the Dechert’s Letter might well be highly improbable (if not incredible). Taking a broad-brush approach, I make a costs order nisi that three-quarters of the costs of the Striking-out Application be to Ds, with certificate for two counsel. 73.It remains for me to thank counsel teams from both sides for their most able assistance to the Court.
Mr Horace Wong SC and Mr Alexsander Wong, instructed by Chong & Partners LLP, for the plaintiff Mr Ambrose Ho SC and Ms Joyce Leung, instructed by Haldanes, for the defendants |