C.S. Low Investment Ltd. v. East Asia Warburg Ltd. and Others

CACV000037/1990

BETWEEN

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Coram: Hon Kempster, Clough and Penlington, JJA

Date of hearing: 6 July 1990

Date of Handing down Judgment: 12 July 1990

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JUDGMENT

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Kempster, JA :

1. By Notice amended by leave, albeit the application was made by motion instead of by summons contrary to RSC O59 rule 14(1), the 3rd defendants in these proceedings appeal from a decision of Mortimer J made on 27 February last setting aside an Order of Master Woolley striking out those parts of the Re-Amended Statement of Claim whereby damages were claimed against them. The appellants are a well-Known firm of chartered accountants, Touche Ross & Co. The respondent plaintiffs, CS Low Investment Ltd, may fairly be described as a family named Low in corporate guise.

2. According to one of the averments in the pleading impugned, for present purposes deemed correct, in 1984 the respondents owned 40.53 per cent of the issued $1 ordinary shares in Ka Wah Bank Ltd. Subsequently that bank fell on evil days. During 1986, following recommendations by East Asia Warburg Ltd, the Bank's financial advisers, and with the blessing of the Secretary for Monetary Affairs a capital reconstruction took place in order to permit the provision of $350 m by China International Trust & Investment Corporation (Citic) in consideration of the issue to them both of 150 m redeemable preference shares and of 250 m ordinary snares; all with a nominal value of $1. The nominal value of existing shares was reduced to 5 cents which, in turn, were consolidated into new ordinary $1 shares. As a result Citic now own over 90 per cent of the Bank's issued ordinary share capital and the respondents only some three per cent.

3. The respondents allege that the appellants, the Bank's auditors and accountants, acted in breach of duties of care owed to them accurately to ascertain both the necessary provision to be made against the Bank's bad debts and, taking into account all the terms of the agreement concluded with Citic, the true value of the existing ordinary shares. These allegations, which could fall to be considered in the light of the decision of the House of Lords in Caparo Industries Plc v Dickman & Ors [1990] 2 WLR 358, the appellants deny.

4. Necessarily, as their claim is pleaded in tort, the respondents also claim that they have suffered damage by reason of the appellants' negligence; that damage being the difference between the fair and proper value of the shares they held before the reconstruction and the 5 cent value thereby ascribed to them. Proceeding no further it is apparent that a cause of action has been pleaded. If,therefore, complaint were made only of inadequate particulars of damage furnished prior to the summons to strike out and following request, alternatively of the propriety of a claim to defer service of such particulars until after discovery in circumstances where it might be argued that the appellants are better aware of the relevant facts than the respondents, that would, as Mortimer J held, be a matter for an application of a different nature. But that is not the position. The appellants, in effect, complain that although the respondents have pleaded a cause of action which satisfies RSC O18 rule 19(1)(a) they have failed to plead facts material to the allegation that their shares were undervalued at the price of 5 cents. This failure to comply with the obligations imposed by RSC O18 rule 7(1) must, in my opinion, prejudice, embarrass or delay the fair trial of the action within the meaning of rule 19(1)(c). No ground is pleaded upon which the inference can be drawn that the true value would be higher rather than lower. As Brett LJ said in Philipps v Philipps (1878) 4 QBD 127 at p 132 (an authority which counsel were loath to cite): -

"I am of opinion that this pleading is embarrassing within the rule, and therefore it ought to be set aside. I think it is embarrassing because, by a general statement, the plaintiff has prevented the defendants from demurring, and at the same time has omitted to state the facts which he ought to have stated, and the facts on which he will have to rely at the trial if he has any case. If the only defect in the pleading was that it was demurrable, I should not on that ground have thought it embarrassing; but the embarrassment consists in putting in a general statement which prevents a demurrer, and at the same time leaving out the particular facts which would give the defendants the knowledge of what the plaintiff's case is."

A plaintiff must plead his case with sufficient particularity to enable the defendant to gauge its strength, to admit or deny the allegation made and reasonably to assess the propriety of a payment into court. In an accident case, for example, a plaintiff will allege that his motor car is irreparable or that he has suffered personal injury and only then that he has suffered damage. He does not make the latter averment cold. In the instant case at least : -

"the omission of this link is a transgression of the modern rule that, however concisely expressed a statement of claim may be, it must contain sufficient information to put the defendant on his guard as to the case he will have to meet at the trial"

per Scott LJ in Bruce v Odhams Press [1936] 1 KB 697 at p 711. The fact that the appellants were initially prepared to afford the respondents an opportunity to make good the lacuna by the provision of particulars does not disentitle them from seeking to strike out their opponents' pleading now.

5. The Re-Amended Statement of Claim has a speculative savour as against the appellants.

6. I regard this as a plain and obvious case and would allow the appeal in the terms of the Amended Notice and strike out the Re-Amended Statement of Claim insofar as the claims therein are made against the appellants. They do not ask for the action to be dismissed as against them "or judgment to be entered accordingly as the case may be" within the terms of RSC O18 rule 19(1) or otherwise. I would also give both parties to this appeal liberty to apply and make an order nisi that the appellants should have their costs before us and before Mortimer J.

Clough, JA :

7. I agree.

Penlington, JA :

8. There can be no doubt that a plaintiff is under a duty to plead all relevant material facts on which he relies, and "material" means what is necessary for a complete cause of action, Bruce v Odhams Press. He need not however set out all the relevant particulars and as Mr Thomas has said the line between material facts and particulars is often difficult to draw. Here I am satisfied that the failure to specifically plead that the shares were undervalued and the basis for that allegation is the omission of material facts and not a matter for further particulars, to be supplied after discovery. I agree that this claim should be struck out.

Representation:

Richard Mills-Owen, QC and Paul Shieh (M/s JSM) for D3/Appellant

Neville Thomas, QC and Patrick Fung (M/s Boase & Cohen) for Plaintiffs/Respondent