Wong Keaven Ka Hay t/a Hoi Shing Seafood Co. v. Central International (HK) Ltd

DCCJ 5753/2017

[2021] HKDC 715

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 5753 OF 2017

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Before: Deputy District Judge Eugene Yim in Chambers (Open to Public)

Date of Hearing: 12 and 15 October 2018

Date of Decision: 21 July 2021

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DECISION

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INTRODUCTION

1.This is the plaintiff’s application to strike out the defendant’s counterclaim and enter judgment against the defendant on his claim.

2.The plaintiff (by original action), namely WONG KEAVEN KA HAY (“WKKH”), commenced these proceedings to recover from the defendant (by original action), namely CENTRAL INTERNATIONAL (HK) LIMITED (“CIL”), a sum of $754,323.38, being the outstanding payment for goods sold and delivered by WKKH to CIL.

3.In its Defence and Counterclaim filed on 9 May 2018 (“D&CC”), CIL admitted such claim of WKKH but brought a counterclaim against WKKH as the 1^st defendant and EXTREME INTERNATIONAL LIMITED (“Extreme”) as the 2^nd defendant in relation to a sum of HK$772,895.70, being allegedly the outstanding payment for goods sold and delivered (“Goods”) by CIL to a 卓賢國際發展有限公司 (“Cheuk Yin”), which CIL subsequently found to be neither a limited company registered under the laws of Hong Kong (see §22 of the D&CC) nor a business registered under the Business Registration Ordinance, Cap 310 (“BRO”) (see §23 of the D&CC).

4.It is not the pleaded case of CIL that CIL had any contractual relationship with either WKKH or Extreme. 

5.Instead, in the D&CC, the entire claim brought by CIL against WKKH and Extreme is based on the tort of conspiracy to injure.  No other causes of action are being relied upon in the D&CC.

6.The present striking-out application concerns only CIL’s claim against WKKH and does not concern its claim against Extreme.

7.At the hearing, WKKH was represented by counsel, Mr Lincoln Cheung, and CIL was represented by counsel, Ms Kwok Sin.

8.At the beginning of the hearing, by consent, leave was granted to WKKH to amend the present summons to essentially correct a typographical error in relation to the date of the D&CC. 

9.The hearing was therefore conducted on the basis of WKKH’s summons dated 25 May 2018 as amended on 15 October 2018 (“Amended Summons”). 

10.By the Amended Summons, WKKH applies to, inter alia, strike out CIL’s counterclaim in its entirety and to enter judgment against CIL on his claim (by original action).

11.Under paragraph 1 of the Amended Summons, WKKH seeks to strike out CIL’s counterclaim on the ground that the same: (a) discloses no reasonable cause of action against WKKH; (b) is scandalous, frivolous or vexatious; (c) may prejudice, embarrass or delay the fair trial of the action; (d) is otherwise an abuse of the process of this Court; or (e) fails to be verified by a valid statement of truth.

12.As to (e), it was pointed out by Ms Kwok that any such defect was rectified by a Statement of Truth verifying the D&CC subsequently filed and served on 19 June 2018.  For that reason, I am not satisfied that the D&CC ought to be struck out on this ground.  Very sensibly, Mr Cheung did not insist on this point.

13.For the remaining grounds for striking out as set out in the Amended Summons, it is clear from Mr Cheung’s skeleton submissions and how he developed his arguments at the hearing that the main focus of the present application is on (a), namely the counterclaim as pleaded in the D&CC discloses no reasonable cause of action against WKKH.

LEGAL PRINCIPLES ON STRIKING OUT

14.Order 18 rule 19(1) of the Rules of District Court, Cap 336H (“RDC”) provides that:-

“The Court may, either of its own motion or on an 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 be entered accordingly, as the case may be.”

15.Both parties in their respective skeleton submissions referred me to the relevant principles governing striking-out applications, which are well-established.

16.It is trite that the court should strike out a pleading only in plain and obvious cases and any disputed facts are to be taken in favour of the party sought to be struck out.  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 out.

17.I was reminded by Ms Kwok that, when considering the present application on the ground of no reasonable cause of action, the court is obliged to look at the pleading without extrinsic evidence and decide whether on the assumption that the facts as pleaded are true the pleading discloses a cause of action or defence in law.  This is not disputed by Mr Cheung.

DISCUSSION

18.As noted above, WKKH’s claim (by original action) against CIL is for the sum of $754,323.38, being the outstanding payment for goods sold and delivered by WKKH to CIL.

19.In paragraph 3 of the D&CC, WKKH’s claim is expressly admitted by CIL subject to a defence of set off by way of its counterclaim, which is the subject-matter of the present application.

20.As pleaded in the D&CC, CIL’s counterclaim can be summarized as follows:-

(1) CIL was a limited company incorporated under the laws of Hong Kong engaging in the business of seafood wholesale and retailing (see §2(a) of the D&CC).

(2) WKKH was a sole proprietorship engaging in the business of seafood trading in the trade name of HOI SHING SEAFOOD CO (“HSSC”) (see §2(b) of the D&CC”).

(3) Extreme was a limited company incorporated under the laws of Hong Kong (see §2(c) of the D&CC).

(4) In about October 2016, CIL agreed verbally with Cheuk Yin (see paragraph 3 above) that CIL would sell and Cheuk Yin would purchase seafood from CIL on “need” basis (see §6 of the D&CC).

(5) CIL requested Cheuk Yin to provide its business details by filling in an Account Opening Form and provide a copy of its Business Registration Certificate for CIL for record (see §7 of the D&CC).

(6) Upon such request, Cheuk Yin filled in the Account Opening Form provided by CIL but refused to provide a copy of its Business Registration Certificate (see §8 of the D&CC).

(7) CIL supplied seafood to Cheuk Yin during the period from October 2016 to 20 March 2017 (see §9 of the D&CC).

(8) During such period, Cheuk Yin placed orders for seafood by calling CIL and once the orders were duly prepared by CIL, WKKH (trading as HSSC) or his agent(s) or employee(s) would collect the seafood ordered from CIL for and on behalf of Cheuk Yin (see §9(a) of the D&CC).

(9) The agent(s) and/or employee(s) of WKKH trading as HSSC represented to CIL that WKKH (or HSSC) was responsible for transporting the seafood to Cheuk Yin (see §9(a) of the D&CC).

(10) As the seafood was collected by WKKH (or HSSC) from CIL on behalf of Cheuk Yin, CIL would fax the invoice of the seafood collected to the fax number stated in the Account Opening Form filled in by Cheuk Yin (see §9(b) of the D&CC).

(11) At the end of every billing period, CIL’s employee would call the telephone number stated on Cheuk Yin’s Account Opening Form to confirm receipt of the invoices by Cheuk Yin and demand for payment (see §9(c) of the D&CC).

(12) In about October 2016 when WKKH trading as HSSC started to collect seafood from CIL for Cheuk Yin, CIL requested WKKH to provide its business details by filling in an Account Opening Form and to deposit a copy of his Business Registration Certificate to CIL for record, which WKKH did (see §§10-11 of the D&CC).

(13) During the initial stage of the trading period between CIL and Cheuk Yin, CIL requested Cheuk Yin to sign the receipts of the seafood that it ordered and was collected by WKKH but Cheuk Yin refused to do so (see §12 of the D&CC).

(14) CIL also requested WKKH to sign the receipts for the seafood collected for Cheuk Yin and WKKH refused to do so (see §12 of the D&CC).

(15) Despite that, CIL started trading with Cheuk Yin and CIL was duly paid for the seafood ordered by Cheuk Yin for the months of October, November and December 2016 (see §14 of the D&CC).

(16) Cheuk Yin failed to make punctual payment for the seafood received for January 2017 in the total sum of HK$331,964.11 (see §15 of the D&CC).

(17) After CIL contacted the responsible person of Cheuk Yin according to the Account Opening Form, CIL received a cheque issued by a company known as Top International Development Limited (“Top International”) in the sum of HK$331,964.11 in about February 2017 (see §§2(e) & 16 of the D&CC).

(18) CIL presented the cheque for payment and the cheque was dishonoured and returned to CIL on 13 March 2017 (§17 of the D&CC).

(19) CIL continued to supply seafood to Cheuk Yin for February and March 2017 and Cheuk Yin failed to make punctual payment in the total sum of HK$469,670.34 (see §§18-19 of the D&CC).

(20) In about April 2017, CIL contacted the responsible person of Cheuk Yin (as per the Account Opening Form), who told CIL to contact the wife of the owner of Cheuk Yin (“Mrs Kwan”) (see §21 of the D&CC).

(21) In about April 2017, CIL telephoned Mrs Kwan to demand payment and Mrs Kwan told CIL that Cheuk Yin was in financial difficulty and asked whether it could settle the outstanding amount later (see §21 of the D&CC).

(22) Subsequently, an employee of CIL went to the address of Cheuk Yin as stated in the Account Opening Form and found that the address was a vacant open space (see §22 of the D&CC).

(23) CIL later discovered that Cheuk Yin was neither a limited company registered under the laws of Hong Kong nor a business registered under the BRO (see §§22-23 of the D&CC).

(24) CIL ceased trading with Cheuk Yin on 21 March 2017 and reported the matter to the Police on 29 May 2017 (see §23 of the D&CC).

(25) Subsequently, CIL sued and obtained a default judgment against Top International, and recovered a sum of HK$8,738.75 by instituting garnishee proceedings against Top International (see §24 of the D&CC).

(26) Starting from August 2017, CIL received a number of cheques from Extreme for payment of the outstanding amount owed by Cheuk Yin.  Among those cheques, CIL only successfully banked in one cheque in the sum of HK$20,000 (see §25 of the D&CC).

(27) CIL also found that the Chinese name of Extreme was almost identical to the Chinese name of Cheuk Yin (see §26 of the D&CC).

(28) After deducting the sum recovered from Top International and the above cheque from Cheuk Yin, it is CIL’s case that there was allegedly still an outstanding sum of HK$772,895.70 for the seafood supplied by CIL to Cheuk Yin (“Outstanding Sum”) (see §33 of the D&CC).

(29) CIL avers that since December 2016 the latest, WKKH and Extreme “conspired together and with intent to injure CIL unlawfully by depriving CIL of the payment of the [Outstanding Sum]” (see §31 of the D&CC).

(30) A number of matters were pleaded in §34 of the D&CC, as a result of which CIL avers in §34(i) of the D&CC:-

“(i) Accordingly, HSSC and Extreme must have conspired to have received the seafood delivered by CIL for the period of January 2017 to 20^th March 2017 and evaded paying the remaining part of the Outstanding Amount due and owing to CIL.”

(31) It is also pleaded in §35 of the D&CC that “[a]s a result of the wrongful and fraudulent acts committed by HSSC and Extreme individually or in combination with each other as pleaded hereinabove, CIL suffered a total loss of HK$772,895.70”.

21.The only cause of action pleaded in the D&CC against WKKH is on the tort of conspiracy to injure.

22.The law on conspiracy to injure was set out by Ma CJHC (as he then was) in Pido v Compass Technology Co Ltd [2010] 2 HKLRD 537 at 541-542:-

“Conspiracy to injure: the law

13. The law need only be briefly dealt with. As stated above, the tort of conspiracy to injure is an economic tort. Essentially, the tort consists of a conspiracy to injure the plaintiffs resulting in (usually, if not invariably) pecuniary damage.

14. There are two types of conspiracy to injure:

(a) First, there is the conspiracy to injure the plaintiff using lawful means. Here, a requisite element of the tort is the predominant motive to injure: see Lonrho Plc v Fayed [1992] 1 AC 448, 464B-C, 465C, 465H-466A.

(b) The second type of conspiracy is the conspiracy to injure by the use of unlawful means. Here, the mental element is not the predominant motive to injure the plaintiff, merely an intention to do so: see Lonrho Plc v Fayed at pp.465C, 465H-466A. This is a lower requirement of intention, but it is still “needed” to found the cause of action: see Revenue and Customs Commissioners v Total Network SL [2008] 1 AC 1174, para 82.

15. …

16. …

17. As a matter of pleading, a case based on conspiracy, must contain the following elements:

(a) The agreement between two or more persons. The means of carrying out the agreement, whether lawful or unlawful, must be set out.

(b) The intention to injure the plaintiff, whether predominant (in the case of a lawful means conspiracy) or merely an intention to injure (in the case of an unlawful means conspiracy).

(c) The acts that were carried out pursuant to the agreement and the stated intention.

(d) The damage caused to the plaintiff.

See Bullen & Leake & Jacob’s Precedents of Pleadings (16^th ed, 2008) Vol 2, p 855 para 51-02.”

23.Both parties referred me to Aktieselskabet Dansk Skibsfinansiering v Wheelock Marden & Co Ltd & Ord [1994] 2 HKC 264.  In that case, the Court of Appeal stated at 272D-G:-

“Now, leaving aside any case such as the one in that example, the position is as follows. When it comes to a claim in the tort of conspiracy, what the pleader has to do in regard to pleading an overt act or overt acts is this. He has to plead at least one overt act which is the act of all the alleged conspirators or, failing that, a number of overt acts which include at least one act on the part of each conspirator. And the overt act or overt acts pleaded must be such as to show: (i) that the conspiratorial agreement alleged against the defendants had been entered into by each and every one of them; (ii) that the agreement, and not merely the intention of one person alone, was implemented; and (iii) that such implementation caused the damage complained of.” (emphasis added)

24.As to the meaning of “overt acts”, the Court of Appeal explained at 271H-272C:-

“As to the full meaning of the term ‘overt act’, three statements are of particular value.

The earliest is Salmon J’s statement in Marrinan v Vibart [1963] 1 QB 234, 238 that ‘the gist of the tort of conspiracy is not the conspiratorial agreement alone, but that agreement plus the overt act causing damage’.

Next, there is Lord Wilberforce’s statement in R v Doot [1973] AC 807 at p 818 where he said, ‘Often in conspiracy cases, the implementing action is itself the only evidence of conspiracy – this is the doctrine of overt acts.’ As to the context in which that was said, it is clear from the speeches in that case, particularly Lord Pearson’s at p 85, that there were overt acts of actual importation of dangerous drugs on the part of each of the accused men, the conspiracy charged against them being one to import such drugs. And what was left to inference was, as one sees from, in particular, Viscount Dilhorne’s speech at p 822, that in doing as each of them did, the accused men were ‘acting in concert and in pursuance of an agreement’.

Finally, there is the well-known statement in Belmont Finance v Williams Furniture [1979] 1 Ch 250, 263 of Buckley LJ, with whom the other two members of the Court of Appeal agreed, that ‘an overt act establishing the existence of a conspiracy is an overt act which shows that the agreement which is alleged to be conspiratorial has already been made’.” (emphasis added)

25.Ms Kwok also cited Kuwait Oil Tanker Company Sak, Sitka Shipping Incorporated v Abdul Fattah Sulaiman Khaled Al Bader & Ors [2000] 2 All ER (Comm) 271, CA (Westlaw copy), in which the English Court of Appeal stated at p 32, §§111-112:-

“111. A further feature of the tort of conspiracy, which is also found in criminal conspiracies, is that, as the judge pointed out at page 124, it is not necessary to show that there is anything in the nature of an express agreement, whether formal or informal. It is sufficient if two or more persons combine with a common intention, or, in other words, that they deliberately combine, albeit tacitly, to achieve a common end. Although civil and criminal conspiracies have important differences, we agree with the judge that the following passage from the judgment of the Court of Appeal Criminal Division delivered by O’Connor LJ in R v Siracusa (1990) 90 Cr App R 340 at 349 is of assistance in this context:

Secondly, the origins of all conspiracies are concealed and it is usually quite impossible to establish when or where the initial agreement was made or when or where other conspirators were recruited. The very existence of the agreement can only be inferred from overt acts. Participation in a conspiracy is infinitely variable: it can be active or passive. If the majority shareholder and director of a company consents to the company being used for drug smuggling carried out in the company’s name by a fellow director and minority shareholder, he is guilty of conspiracy. Consent, that is agreement or adherence to the agreement, can be inferred if it is proved that he knew what was going on and the intention to participate in the furtherance of the criminal purpose is also established by his failure to stop the unlawful activity.

Thus it is not necessary for the conspirators all to join the conspiracy at the same time, but we agree with the judge that the parties to it must be sufficiently aware of the surrounding circumstances and share the same object for it properly to be said that they were acting in concert at the time of the acts complained of. In a criminal case juries are often asked to decide whether the alleged conspirators were ‘in it together’. That may be a helpful question to ask, but we agree with Mr Brodie that it should not be used as a method of avoiding detailed consideration of the acts which are said to have been done in pursuance of the conspiracy.

112. In most cases it will be necessary to scrutinize the acts relied upon in order to see what inferences can be drawn as to the existence or otherwise of the alleged conspiracy or combination. It will be the rare case in which there will be evidence of the agreement itself…” (emphasis added)

26.Ms Kwok further referred me to the similar observations made by Master M Ng (as she then was) in Yong Wend Chye v Ho Yu Kuen & Ors, HCA 1303/20009, 17 March 2010, unrep, as quoted in Ammolite Wealth Limited v King China Properties Limited & Ors, HCA 2514/2014, unrep, 18 April 2016 at p 12, §§36(b)-(c) (which is an authority cited by Mr Cheung).

27.It can be seen from the above authorities that while the law acknowledges that in most cases the existence of the conspiracy agreement is deliberately concealed, to found a cause of action for conspiracy to injure, a claimant is required to plead an overt act(which is the act of all the alleged conspirators) or failing which, a number of overt acts (which include at least one act on the part of each alleged conspirator) which must be capable of showing (or from which it can be inferred) that (i) the conspiratorial agreement alleged against the defendants had been entered into by each and every one of them; (ii) that the agreement, and not merely the intention of one person alone, was implemented; and (iii) that such implementation caused the damage complained of.

28.The function of such requirement for the claimant to plead overt act(s) is to enable the defendant to know the claimant’s case on the alleged conspiracy to injure that he/ she has to meet.

29.For completeness sake, in addition to the above, counsel for both parties in their respective skeleton submissions referred me to a number of authorities on the law relating to the tort of conspiracy to injure, which I have considered and do not intend to rehearse here.

30.A number of factual circumstances were pleaded in the D&CC in a rather convoluted manner.  It is not clear from a plain reading of the D&CC what are the overt act or overt acts relied upon by CIL in support of its counterclaim against WKKH.

31.In paragraph 41 of her skeleton submission, Ms Kwok clarified that:-

“CIL has pleaded the following overt acts on part of Extreme and [WKKH]:-

(a) Extreme issued 12 cheques each of HK$20,000 from 31^st August 2017 to 31^st August 2018 to CIL to settle the Outstanding Amount owed by the Cheuk Yin to CIL. 11 cheques out of 12 were bounced [paragraph 25/18];

(b) during the entire trading period with Cheuk Yin, HSSC and/or its employee/ agent namely WKH and/or 志晨 were the only parties that CIL had face to face contact and/or dealing with who claimed to represent Cheuk Yin and collected all the seafood ordered by Cheuk Yin [paragraph 13/p. 13];

(c) upon CIL’s request, HSSC provided its BRC to CIL [paragraph 11/p.13];

(d) HSSC refused to sign any receipt for the seafood that it collected for Cheuk Yin [paragraph 12/p.13].” (emphasis added)

32.During the hearing, in addition to the “overt acts” above, Ms Kwok also relied upon an allegation that, unbeknownst to CIL at that time, WKKH deregistered its business registration for WKKH trading as HSSC on 31 March 2017 (see §§4 & 34(g) of the D&CC).  I shall refer to this as “overt act (e)” in the discussion below.

33.It is to be noted that CIL is not relying on any overt act which is said to be the act of all the alleged conspirators.  Nor has any such overt act been pleaded in the D&CC.

34.Mr Cheung’s main complaint is that the “overt acts” pleaded or relied upon by CIL are incapable of showing the 3 elements identified in Aktieselskabet Dansk Skibsfinansiering, supra.

35.Of the five “overt acts” relied upon by Ms Kwok, “overt act” (a) concerns only Extreme, which is alleged to have issued some cheques (which were subsequently dishonoured) to CIL after CIL demanded payment from Cheuk Yin.  It is difficult to see how such an act can be said to implicate WKKH in any way.

36.“Overt acts” (b), (c), (d) and (e) can be analyzed as follows:

(1) “Overt act” (b) refers to WKKH (or his agent(s) or employee(s)) being the one who collected the seafood from CIL for Cheuk Yin, with whom CIL did not have any face to face contact throughout the whole trading period.  However, this is entirely consistent with CIL’s own pleaded case that WKKH (or his agent(s) or employee(s)) collected the seafood for and on behalf of Cheuk Yin and represented to CIL that he was responsible for transporting the seafood to Cheuk Yin (see §9(a) of the D&CC).  One can hardly see anything unusual about such an arrangement in this day and age.

(2) “Overt act” (b) refers to the fact that WKKH provided his Business Registration Certificate to CIL.  However, upon CIL’s own pleaded case, that was done by WKKH upon CIL’s express request (see §11 of D&CC).

(3) “Over act” (c) refers to WKKH’s refusal to sign any receipt for the seafood collected for Cheuk Yin.  However, it is CIL’s own case that CIL was prepared to trade with or continue to trade with Cheuk Yin even after WKKH indicated his unwillingness to sign any receipts as requested (see §§12-19 of the D&CC).

(4) “Overt act” (e) refers to the deregistration of WKKH’s business registration as a sole proprietor in the name of HSSC.  It is suggested on behalf of CIL that this was an act to evade liability on the part of WKKH.  However, as pointed out by Mr Cheung, it is trite that a sole proprietor (i.e. an individual person) cannot evade liability by deregistering his/her business registration.   The fact that CIL is pursuing the present counterclaim as well as a separate action under DCCJ 1571/2018 in relation to another subject-matter (which I shall turn to below) against WKKH speaks for itself.

(5) In response to this, Ms Kwok further argues that it “can be inferred that, [WKKH] as a layman without the necessary legal knowledge thought that he could evade liability of his conspiratorial acts by deregistering the business entity that committed the scam, HSSC” (see §43(e) of CIL’s skeleton submission). 

(6) With respect, I am unable to see how WKKH’s knowledge and what he allegedly thought can be inferred from the existing pleading. 

(7) Most importantly, this is nowhere pleaded in the D&CC.  The formulation of a party’s cause of action should clearly and cogently be made in the pleadings, and should not be left to an exercise of drawing inferences (see Pido, supra at 544, §25).

(8) All in all, even when viewed together with “overt act” (a) (which concerns Extreme only), “overt acts” (b), (c), (d) and (e) can at best show that WKKH collected seafood from CIL for and on behalf of Cheuk Yin and whilst WKKH refused to sign any receipt on behalf of Cheuk Yin, it is CIL’s pleaded case that WKKH was willing to and did provide a copy of his Business Registration Certificate to CIL so as to enable CIL to be apprised of the identity and contact details of the entity that collected seafood for Cheuk Yin.  The deregistration of the business registration in the name of HSSC can at best be a neutral act.

37.For the above reasons and having considered the D&CC carefully, I am unable to see how it can be inferred from the “overt acts” relied upon by CIL, whether read individually or together, that WKKH and Extreme have each entered into a conspiracy agreement to deprive CIL of the Outstanding Sum as alleged, not to mention the implementation of the same or any damage arising therefrom.  It is clear that CIL’s counterclaim against WKKH as pleaded in the D&CC falls short of what is required by the rule of pleadings for conspiracy claims as explained above.

38.I should also mention that in paragraph 30 of the D&CC, CIL pleaded, likewise in a convoluted manner, a series of matters allegedly relating to the shareholding, directorship and registered addresses in respect of Top International, Cheuk Yin, Extreme and a company known as Hoi Shing Seafood Limited (“HSSL”). 

39.Most of such matters pleaded do not concern WKKH save that it is alleged that HSSL was set up on 23 March 2017, WKKH was appointed a director of HSSL on 23 March 2017 (in place of a Ip Kar Yuan Kevin (“Ip”) who resigned on the same day) and became the sole shareholder of HSSL on 30 March 2017 (in place of a company known as New Form Limited (“New Form”), which was the sole shareholder at the time when HSSL was set up), and HSSL subsequently changed its registered address to one similar to the business address of WKKH (see §§30(i)-(j) of the D&CC).  It is also pleaded that when Extreme was set up on 27 August 2016, New Form was its initial sole shareholder and Ip was appointed as the sole director until they were respectively replaced by one Kwan Tzs Ngon Andy (“KTN”) as the sole director and sole shareholder shortly afterwards (see §§30(c)-(e) of the D&CC). 

40.I am unable to see how the shareholding and directorship of HSSL can advance CIL’s conspiracy claim against WKKH.  HSSL is a separate legal entity from WKKH.  This is more so as it is not CIL’s pleaded case that HSSL was part of the alleged conspiracy.  There is also no suggestion whatsoever in the D&CC that New Form or Ip was part of the alleged conspiracy.  I must also add that Ms Kwok did not seek to rely on the change of shareholding and directorship of HSSL as one of the “overt acts”.       

41.Further, as pointed out by Mr Cheung, it is not clear from the D&CC who are the alleged conspirators upon CIL’s case.  During the hearing, Ms Kwok submitted that it is clear from the pleading that the conspiracy was between 2 parties by referring me to paragraph 31 of the D&CC (where it is pleaded that “[WKKH] and Extreme conspired together …”) and paragraph 34(i) of the D&CC (where it is pleaded that “[WKKH] and Extreme must have conspired …”). 

42.However, it is pleaded in paragraph 34 of the D&CC that “it could be inferred that the wrongful default of payment as pleaded in paragraph 33 hereinabove had been effected through wrongful and fraudulent acts committed by [WKKH], Cheuk Yin and Extreme individually or in combination with each other to obtain seafood from CIL fraudulently from January 2017 to 20^th March 2017 without payment” (emphasis added).

43.Likewise, it is pleaded in paragraph 34(h) of the D&CC that “it is obvious from the facts uncovered that at all material times Extreme acted in conspiracy with [WKKH] and Cheuk Yin Cheuk Yin (sic) to fraudulently obtained seafood without payment from CIL…” (emphasis added)

44.I agree with Mr Cheung that on a fair reading of the D&CC, one is unable to tell whether CIL is alleging a conspiracy involving 2 conspirators or 3 conspirators.  This is another fundamental defect of the D&CC.

45.I shall also add that in the D&CC, CIL is essentially alleging a case of conspiracy to injure with fraudulent means.  As rightly pointed out by Mr Cheung, it is trite that fraud must be distinctly alleged and pleaded, and it is not allowable to leave fraud to be inferred from the facts (see Davy v Garratt [1877] 7 Ch D 473 at 489).  As analyzed above, it is clear that the D&CC fails to provide sufficient particulars to enable WKKH to know what is the case that he has to meet. 

46.In paragraph 5 of her supplemental submissions, Ms Kwok seeks to argue that what is pleaded in the D&CC is sufficient to inform WKKH of the case that he has to meet:-

“In fact, CIL’s Defence & CC is sufficient to inform [WKKH] of the case it has to meet:-

a) Under para.34 of the Defence & CC:

i.  Cheuk Yin was a fictious party (para. 34a)

ii.  [WKKH] has collected all the seafood that was ordered by Cheuk Yin refusing to sign any receipt for it (para. 34b);

iii.  Extreme had an almost identical Chinese name with Cheuk Yin (para. 26) issued dishonoured cheques purported to settle the [Outstanding Sum] owed by Cheuk Yin (para. 34h (v));

iv.  [WKKH], unbeknown to CIL deregistered shortly after CIL ceased trading with Cheuk Yin (para.34f)

v.  [WKKH] conspired with Extreme and/or Cheuk together to have fraudulently obtained seafood from CIL (para. 34d);

vi.  [WKKH], Cheuk Yin and Extreme acted in combination with each other to obtain seafood from CIL fraudulently from January to March 2017 (para.34);

vii.  [WKKH] and Extreme must have conspired to have received the seafood delivered by CIL for the period of January 2017 to 20^th March 2017 and evaded paying the remaining part of the [Outstanding Sum] due and owing to CIL (para. 34i).

viii.     As a result of the wrongful and fraudulent acts committed by [WKKH] and Extreme individually or in combination with each other as pleaded above, CIL suffered a total loss of HK$772,895.7 (Para.35)

As CIL has fully set out the claim that HSSC and Extreme acted in combination to fraudulently received seafood from CIL by [WKKH] collecting seafood by using Cheuk Yin as a façade, it has fully informed [WKKH] of the case that it has to meet.”

47.With respect, I reject Ms Kwok’s argument.  Quite the contrary, the submission from Ms Kwok recited above actually serves to highlight the deficiencies of the current pleading for a claim on the tort of conspiracy to injure:

(1) It remains the case that it is impossible to see how the matters alleged in (v) to (viii) under paragraph 5 of Ms Kwok’s supplemental submissions, namely the essential elements for a conspiracy claim, can be inferred from the matters under (i) to (iv) of the same paragraph.  This is precisely the complaint of Mr Cheung on behalf of WKKH (which I have dealt with in detail above). 

(2) Put simply, one is unable to see how it can be said that WKKH “must have conspired to have received the seafood delivered by CIL” or “acted in combination” with Extreme as a result of the matters under (i) to (iv).  As explained above, I consider this fatal to CIL’s conspiracy claim against WKKH.

(3) Even upon Ms Kwok’s submission, it is unclear whether the alleged conspiracy is said to be amongst WKKH, Cheuk Yin and Extreme or just between WKKH and Extreme.

48.It is further submitted in paragraph 6 of CIL’s supplemental submissions that even “if the Defence & CC lacks essential particulars but the defect is capable of being cured by an amendment, it is not appropriate to order a strike-out”. It suffices to say that before or during the hearing, there were no proposed amendments put forward by CIL.  Nor was there any request to amend the D&CC. 

49.For the above reasons, I have come to the conclusion that CIL’s counterclaim as pleaded in the D&CC is unarguably bad in that even taken to the highest, it fails to disclose any reasonable cause of action against WKKH and it is impossible for the counterclaim to succeed.  Accordingly, CIL’s counterclaim ought to be struck out insofar as it relates to WKKH.

50.Given my analysis above, it is unnecessary for me to deal with other grounds relied upon by Mr Cheung.

51.In paragraphs 27 to 29 of the D&CC, CIL referred to WKKH’s failure to pay for some seafood sold directly by CIL to WKKH for the period from May to October 2017 in the sum of HK$378,967.65. 

52.However, this does not form part of CIL’s counterclaim, which is based solely on the alleged conspiracy claim (see §36 of the D&CC). 

53.In fact, CIL already commenced separate legal proceedings under DCCJ 1571/2018 against WKKH to recover the said sum of HK$378,967.65. 

54.Most importantly, in the D&CC, CIL is not seeking to set off WKKH’s claim with the said sum of HK$378,967.65. 

55.This is confirmed by paragraph 50 of CIL’s skeleton submission which states that “CIL’s set off defence and counterclaim are premised on a conspiracy between [WKKH] and Extreme to defraud CIL for the Outstanding Amount”.

56.As such, with CIL’s counterclaim against WKKH being struck out, it follows that judgment should be entered against CIL on WKKH’s claim, which is expressly admitted by CIL in paragraph 3 of the D&CC, pursuant to Order 27, RDC.

DISPOSITION

57.For the above reasons, I order that (a) CIL’s counterclaim against WKKH be struck out; and (b) judgment be entered on WKKH’s claim against CIL in the sum of HK$754,323.38 as pleaded in the Statement of Claim endorsed with the Writ of Summons issued on 21 December 2017 with interest thereon at judgment rate from the date of writ until full payment.

58.There is no reason why costs should not follow the event.  Mr Cheung in his skeleton submissions asks for costs on an indemnity basis.  I am not satisfied that costs should be awarded on any higher basis as the decision to strike out CIL’s counterclaim above is by reason of insufficiency of the pleading (which is different from the cases cited by Mr Cheung in support of his request for indemnity costs).  I therefore make a costs order nisi that CIL shall pay WKKH costs of this action, including the costs of and occasioned by the Amended Summons, with certificate for counsel, to be taxed if not agreed (on a party and party basis).  The costs order nisi shall become absolute in 14 days in the absence of any application by way of summons for its variation.

59.For the avoidance of doubt, the above decision to strike out CIL’s counterclaim against WKKH does not concern CIL’s conspiracy claim against Extreme, although I note that in the prayer of the D&CC, CIL is not actually seeking any relief against Extreme.

60.Lastly, it remains for me to thank both Mr Cheung and Ms Kwok for their able assistance, and to offer my sincere apology for the time taken for delivering this decision.

Mr Lincoln Cheung, instructed by B Mak & CO, for the plaintiff (by original action)

Ms Kwok Sin, instructed by Henry Wan & Yeung, for the defendant (by original action)