Tdc Capital Solution Ltd v. Wong Sung King Dorothy and Others

HCA 1598/2022

[2024] HKCFI 1373

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1598 OF 2022

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D E C I S I O N

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INTRODUCTION

1.This is the appeal of the 1^st to 5^th Defendants (together “Ds”) against a Master’s order dated 25 October 2023 (“Master’s Order”) to dismiss Ds’ summons dated 18 April 2023 (“Summons”) issued under O18 r19(1)(a)-(d) RHC to strike out the Plaintiff’s Writ of Summons and Statement of Claim (“SOC”) and to dismiss its action.

BACKGROUND

The Parties

2.The Plaintiff (“P”) is a Hong Kong incorporated company that mainly provides consultancy services on asset restructuring and merger and acquisition.  Qianhai Hongsheng Capital Limited (前海弘晟資產管理（深圳）有限公司) and VC Management Corporation (together the “Original Intermediaries”) are related companies of P, all of which are under the control of a Mr Chen Xiaohui, Victor (“Mr Chen”).

3.The 1^st and 2^nd Defendants (“D1” and “D2” respectively) are husband and wife.  They are the ultimate beneficial owners of the 3^rd, 4^th and 5^th Defendants (“D3”, “D4” and “D5” respectively).

4.D3 is a company incorporated under the laws of the British Virgin Islands whose authorised representatives are D1 and D2.  D3 was a controlling shareholder of D4 and D5.

5.Until the completion of the Sale (as defined below), D4 and D5 were the sole shareholders of 增城荔丰房地产有限公司 (“Lifeng”) and 增城荔涛房地产有限公司 (“Litao”) respectively (together the “Target Companies”).  The Target Companies were companies incorporated in the PRC which owned a piece of land in Guangzhou (“Subject Land”).  D1 and D2 also operated an international school on the Subject Land (“School”).

The Service Agreement

6.The Original Intermediaries and Ds entered into a written agreement (增城北区项目独家咨询与居间服务协议) dated 5 September 2016 (“Service Agreement”) pursuant to which the Original Intermediaries agreed to assist D1 to D3 in selling the shares in D4, D5, Lifeng and/or Litao to an external buyer in return for a service fee (“Service Fee”).

7.The Service Agreement was varied by a supplemental agreement (增城北区项目独家咨询与居间服务协议之补充协议) dated 16 January 2017 (“Supplemental Service Agreement”) whereby P assumed the rights and obligations of the Original Intermediaries.

8.The following terms in the Service Agreement are material for present purposes:

a.  By Clause 1.1, the Original Intermediaries “undertook to complete various matters stipulated below” (“承诺完成以下事宜”) including, inter alia, to assist Ds such that Ds would receive a cooperation framework agreement and/or sign a framework agreement and/or sign an asset or share purchase agreement (“SPA”) by 30 November 2016 on the basis that the terms of the sale should “satisfy the conditions stipulated below” (“满足以下条件”).

b.  In relation to the Southern Land, Clause 1.1.2 requires that the SPA shall expressly provide that the buyer (“Southern Land Conditions”):

i.    shall use its best endeavours to assist the Target Companies in recovering from the local authority the “Southern Land”, namely 300 mu that had been resumed by the local authority and 400 mu for which no land premium had yet been paid (collectively 700 mu outside the Subject Land), including but not limited to providing information and the Target Companies’ chops, and sending representatives to assist in the negotiations between the Target Companies and the local authority;

ii.   confirms that any land premium paid on behalf of the Target Companies for the Southern Land or compensation payable therefor would belong to Ds;

iii.  shall use its best endeavours to assist D1 to D3 in setting up one or more project companies for the purposes of holding the grants approved by the local authorities over the Southern Land, and transferring the benefit of the land premium paid by the Target Companies to the new project company/companies; and

iv.  confirms that its interests to be acquired through the SPA shall be limited to the Subject Land.

c.  In relation to the School, Clause 1.1.3 requires that the SPA shall expressly provide that (“School Conditions”):

i.    the buyer would assist Ds in their application to the local authorities to move the School from its then current location on the Subject Land to the Southern Land;

ii.   in the event that the School is moved to the Southern Land, the buyer shall provide all necessary assistance free of charge; and

iii.  in the event that the move to the Southern Land is not approved by the local authority, the buyer agrees to allow the School to remain in the Subject Land occupying no less than 40 mu by way of a 70-year lease at nominal rent, and the sale consideration and the reserve price would be correspondingly reduced to reflect the reduction of 40 mu buildable area.

The Southern Land Conditions and the School Conditions are collectively referred to as the “Conditions”.

9.By Clause 2.1, Ds agreed that the Service Fee shall become payable upon the Original Intermediaries’ “completion of their services under Clause 1.1” (“完成本协议第1.1项的服务”).

Subsequent SPAs

10.Ds subsequently decided to sell the Subject Land to 泰禾集团股份有限公司 (“Tahoe”) and its affiliated companies (“Tahoe Companies”).

11.In this regard, 深圳瑞德置业有限公司and 深圳红悦置业有限公司 (together the “1^st Tahoe Buyers”) entered into a sale and purchase agreement dated 18 November 2016 with D1, D2, D4 and D5 and (“18/11/16 SPA”) for the sale of all of the shares in the Target Companies (“Sale”).

12.The terms of the 18/11/16 SPA were subsequently varied and/or supplemented by a total of five written agreements entered into on the following dates:

a.  6 January 2017 (“6/1/17 SPA”);

b.  6 July 2017 (“6/7/17 SPA”);

c.  25 July 2017 (“25/7/17 SPA”);

d.  November 2017 (“11/17 SPA”).  Under the 11/17 SPA, the remaining shares in the Target Companies were to be transferred to 广州增城区泰禾置业有限公司and 广州增城区泰禾恒昇置业有限公司 (together the “2^nd Tahoe Buyers”); and

e.  16 April 2018 (“16/4/18 SPA”).

13.In relation to the Southern Land Conditions:

a.  In the 18/11/16 SPA, the terms of Clause 5.4.1 are similar to those contained in Clause 1.1.2 of the Service Agreement, save that Clause 5.4.1 does not provide for the transfer of the benefit of land premium paid by the Target Companies to the new project companies, but rather that the Tahoe Companies have undertaken the obligation to facilitate the acquisition of the Southern Land and that Ds and Tahoe would separately agree on the mechanism to transfer the land premium to Ds.

b.  In the 6/7/17 SPA, there is no provision for Tahoe and the 1^st Tahoe Buyers to use best their endeavours to assist D4 and D5 in obtaining grants over the Southern Land, and in transferring the benefit of land premiums to the new project companies.

14.In relation to the School Conditions:

a.  In the 18/11/16 SPA, Clause 5.4.2 provides that D4 and D5 shall procure the move of the School to the Southern Land within 2 years after full payment of the sale consideration at their own costs.  Alternatively, upon the 1^st Tahoe Buyers’ written consent, D4 and D5 may relocate the School to a temporary site within the Subject Land designated by the 1^st Tahoe Buyers for 3 years pending its move to the Southern Land.

b.  In the 6/7/17 SPA, Clause 5 provides that within half a year after the 1^st Tahoe Buyers obtain the construction permit for the Subject Land, they would complete the necessary land formation and setting back works for a site in the Subject Land designated for the new School and handover the same to D4 and D5, whereupon D4 and D5 would complete construction of the new School at their own costs within 2 years and the move of the School to such site within one year thereafter.

c.  In the 16/4/18 SPA:

i.  Clause 1 provides that the 1^st Tahoe Buyers and the 2^nd Tahoe Buyers (together the “Tahoe Buyers”) agreed to procure the surrender and regrant of a portion of the Subject Land which shall be designated as the new School site and to facilitate the local authority’s land use change procedures.

ii.  Clauses 2 and 3 provide, inter alia, that upon the Tahoe Buyers agreeing to the surrender and regrant at nil land premium and signing necessary documents and payment of RMB200 million to D4 and D5, the Tahoe Buyers would be treated as having fully discharged their obligations under the 18/11/16 SPA (as varied) with respect to the School.

15.Between 10 January 2017 and 23 January 2018, Ds received full payment totalling around RMB4.3 billion from Tahoe’s side in respect of the Sale.

16.Since 19 September 2017, Ds began to make payment of the Service Fee under the Service Agreement to P.  However, payment stopped after 2018 and resumed again in 2020 when P demanded for the same.  The last payment was made on 9 October 2020.  In total, P has received RMB728,260,451.65, ie around 54% of the Service Fee due.

Writ of Summons and SOC

17.In view of the non-payment of the outstanding balance of the Service Fee, P issued the Writ of Summons with indorsement of claim on 17 November 2022 and subsequently filed the SOC on 16 December 2022 against Ds.

18.The salient parts of the SOC are as follows:

a.  In Section B entitled “Service Agreement”, P first pleads the background of the Service Agreement, namely that Ds were unable to develop the Subject Land on their own and engaged Mr Chen to “introduce potential buyers and to negotiate the terms with such buyers” (SOC §§10 – 11).

b.  The relevant express terms of the Service Agreement, including Clauses 1.1 and 1.1.1 – 1.1.3, are then pleaded in Section B of the SOC.  Notably, it is pleaded that:

i.  by Clause 1.1, the terms of the sale should “satisfy” the Conditions (SOC §13.1);

ii.  Clauses 1.1.2 and 1.1.3 require the SPA to include terms “to the effect” that the stipulated matters in the Southern Land Conditions and the School Conditions are performed (SOC §13.2);

iii.  by Clause 2.1, Ds agreed that, upon completion of the relevant services set out in Clause 1.1, Ds shall pay the Original Intermediaries the Service Fee (SOC §13.3);

iv.  by “Clauses 2.4 and 2.4.4…the Service Fee…would be payable in the event that the Defendants reached final agreement with Tahoe or…Tahoe Companies”  (SOC §13.4); and

v.  P shall “rely on the Service Agreement and the Supplemental Service Agreement for their full terms and effect at trial” (SOC §15). 

c.  In Section C entitled “Performance of the Relevant Services”, P proceeds to plead that the Original Intermediaries and P have “fully performed the Relevant Services and discharged their obligations under the Service Agreement and the Supplemental Service Agreement” (SOC §17).

d.  It then pleads the material express terms of altogether 6 agreements between Ds and the Tahoe Companies, namely the 18/11/16 SPA, the 6/1/17 SPA, 6/7/17 SPA, 25/7/17 SPA, 11/17 SPA and 16/4/18 SPA (together “SPAs”) (SOC §§18-24, 28).

e.  At the end of Section C, P then pleads:

“In the premises, the Original Intermediaries and the Plaintiff have fully discharged their obligations under the Service Agreement and the Supplemental Service Agreement by procuring Tahoe and the Tahoe Buyers to enter into the [18/11/16 SPA] (as subsequently varied) which satisfied the Conditions, and to complete the Sale, for which the Defendants received sale consideration as pleaded in paragraphs 26 to 27 above” (SOC §29) (emphasis added).

THE DEFENDANTS’ STRIKING OUT SUMMONS

19.On 18 April 2023, Ds issued the Summons to strike out the Writ of Summons and the SOC.

20.Although all 4 limbs under O18 r19(1) RHC are relied upon in the Summons, Ds’ primary contention is that the SOC discloses no reasonable cause of action and it ought to be struck out pursuant to O18 r19(1)(a).

21.In particular, as will be further discussed below, Ds contend that even on P’s own pleaded case, there is a mismatch between the Conditions (the satisfaction of which would trigger Ds’ obligation to pay the Service Fee to P) and performance under the Service Agreement.  Ds point to the fact that some of the key Conditions do not feature at all in the SPAs eventually entered into between Ds and the Tahoe Buyers.

22.Ds therefore contend that the obligation to pay the Service Fee under the Service Agreement had therefore not been triggered.  Accordingly, P is not entitled to any Service Fee and its Writ of Summons and SOC therefore ought to be struck out and its action dismissed.

RELEVANT LEGAL PRINCIPLES

23.The principles relating to a strike out application are trite.  The court’s jurisdiction to strike out a claim is to be exercised only in a plain and obvious case, although plain does not mean simple and obvious does not mean short.  The mere fact that the case is weak and not likely to succeed are not grounds for a strike out: Hong Kong Civil Procedure 2024, Vol 1 at §18/19/4.

24.The court may strike out a statement of claim without dismissing the action and give the plaintiff an opportunity to amend the statement of claim when it finds the pleading to be defective, but cannot go so far to say that no reasonable cause of action could ever be pleaded.  After all, as provided in O1A r2(2) RHC, in giving effect to the underlying objectives of those rules, the Court shall always recognise that the primary aim in exercising the powers of the Court is to secure the just resolution of disputes in accordance with the substantive rights of the parties.  See Suen Wah Fai & Anr v CIS Global Opportunities Fund SPC & Ors [2023] HKCFI 2493 at §43 per DHCJ H Au-Yeung; Sun Focus Investment Ltd v Tang Shing Bor & Anr (unrep, HCA 538/2007, 5 Oct 2009) at §35 per Recorder Shieh SC.

25.As regards the need to plead the meaning of a contractual term, when a plaintiff seeks to enforce its rights under an agreement, and the fulfilment or non-fulfilment of contractual conditions forms the basis of the claim, the plaintiff ought to plead the relevant clause and the meaning which he or she contends, especially when such meaning is different from the apparent meaning of the clause.  In this regard, in Schindler Lifts (Hong Kong) Ltd v Nikko Services Ltd (unrep, HCMP 270/2014, 20 May 2014), Kwan JA (as she then was) held at §§11 – 12 as follows:

“11. Express term (a) is clearly a material provision to the plaintiff’s claim to enforce its rights under the settlement agreement. If the plaintiff should contend that this term should not be construed as a pre-condition, contrary to what might have been suggested on the face of the wording, this should be pleaded in the statement of claim, as the meaning and effect of this term is different from the apparent meaning. And if this term had not been fulfilled, or was not fulfilled within time, what is the basis of the plaintiff’s case for asserting that the defendant was in breach of the implied terms as alleged in paragraphs 11 and 12 of the statement of claim? This is not apparent from the statement of claim, nor is it apparent in what way it is alleged that the defendant failed and/or refused to achieve the withdrawal of the appeal or to co-operate with the plaintiff to achieve the withdrawal of the appeal.

12. These are crucial matters that should be pleaded in the statement of claim, not in the reply, because they formed the basis of the plaintiff’s assertion that it is entitled to enforce its rights to claim damages under the settlement agreement.  The three material paragraphs in the statement of claim quoted above are inadequate.  Pleadings are not a game of words.  They serve the important function of informing the other party and the court the factual and legal issues in dispute, so that proper preparation for trial may be made and the trial may be conducted in a manner in compliance with the underlying objectives of the rules of court.”

THE SOC DEMURRABLE ON ITS FACE?

26.Ds’ primary contention in this striking out application is that the SOC is demurrable on its face as there is a mismatch between the Conditions and performance even on P’s own pleaded case.

27.As mentioned in §18.b above, P has pleaded in the SOC that Clauses 1.1 and 2.1 of the Service Agreement require that the SPA to be entered into should “satisfy” the Conditions and that the Service Fee would only become payable after “completion” of the relevant services under Clause 1.1.

28.However, as pointed out by Ds, some of the key provisions of the Conditions simply do not appear in the SPAs as entered into between Ds and the Tahoe Buyers:

a.  In respect of the Southern Land Conditions, none of the SPAs mentions the transfer of land premium to newly established project companies.  Further, the Tahoe buyer side’s best endeavours obligations to assist D4 and D5 in obtaining grants over the Southern Land and the benefit of land premiums for the new project companies are mentioned only in the 18/11/16 SPA but not in the subsequent versions of the SPAs.

b.  In respect of the School Conditions, it was primarily envisaged that the School would be moved to a new site in the Southern Land upon obtaining the authorities’ approval.  Under Clause 1.1.3 of the Service Agreement, it was only when approval was not forthcoming that the School would be moved to the Subject Land.  In any event, none of the SPAs refers to the provision of a 70 year lease at nominal rent in the event that the School had to be moved to the Subject Land.  The final terms agreed between Ds and the Tahoe Buyers as recorded in the 6/7/17 SPA and the 16/4/18 SPA could not amount a 70 year lease at nominal rent.

29.In circumstances where the pleaded performance and the payment conditions do not match, there is prima facie no cause of action for the payment of the sum payable upon satisfaction of the conditions.

30.As Mr Man SC, Counsel for Ds, colourfully puts it, if Y pleads a term that X shall pay Y $100 if Y provides him with 10 bananas and the plea is that Y has given X 10 apples, there can be no viable claim for $100.  To the extent that there is a construction that one can put on the word “bananas” such that it may be deemed as “apples”, such a construction would have to be pleaded.

31.This analogy is apt in the present case.  Using the School Conditions as an example, it is not readily apparent to me from reading the SOC how a surrender and regrant by the target companies of the Subject Land and the payment of RMB200 million by the Tahoe Buyers to Ds as compensation or contribution towards any land premium payable for the regrant (as the arrangement provided for under the 16/4/18 SPA) could constitute the satisfaction of the School Conditions as originally envisaged under the Service Agreement.

32.In such circumstances, following the pleading requirements expounded in Schindler Lifts as discussed in §25 above, it is incumbent upon P to explain how the terms provided for in the SPAs could be construed as satisfaction of the Conditions.  However, such an explanation is absent in the SOC.  In this regard:

a.  Whilst §29 of the SOC pleads that the 18/11/16 SPA (as subsequently varied) satisfied the Conditions, P has not explained how the eventual terms found in the SPAs (which are materially different from the Conditions) could be construed as being equivalent to the Conditions for the purpose of triggering Ds’ obligation to pay the Service Fee under the Service Fee Agreement.

b.  Whilst §13.2 of the SOC pleads that the SPAs should include terms “to the effect” of the Conditions such that P’s case can be construed as being that the eventual SPAs do not need to contain terms identical to the Conditions but only terms to the effect of the Conditions before the payment obligation under the Service Agreement is triggered, the fact remains that P has not explained why the terms eventually found in the SPAs, which as I have mentioned are materially different from the Conditions, nevertheless can be construed as having the effect of the Conditions.

33.However, Mr Chang SC, Counsel for P, contends that:

a.  What P was required to do under the Service Agreement was to obtain for Ds a written document with legal effect and the Conditions of which would be reflected and be consistent with Clauses 1.1.1 – 1.1.3.

b.  Given that:

i.  the Service Agreement preceded any agreement P was to obtain for Ds;

ii.  the contemplated sale involved not only a straightforward transfer of shares but also the need to apply for and obtain increased plot ratio, seek re-vesting of and compensation for the Southern Land, and cater for the move of the School,

all these were contingencies which were not part of P’s responsibilities and their outcomes could not be guaranteed by P.

c.  As such, as a matter of construction, P’s obligations are limited to providing a contractual framework consistent with Clauses 1.1.1 – 1.1.3.  This is reinforced by Clause 2.4 of the Service Agreement which provides that “any” final agreement reached between Ds and, inter alia, Tahoe would be treated as the result of the services rendered by the Original Intermediaries to which the obligation to fully pay the Service Fee shall apply.

d.  As far as the SPAs are concerned, whilst the 18/11/16 SPA contemplates a successful move to the Southern Land, it importantly makes clear that Tahoe was committed to exploring alternatives including allowing the School to operate within the Subject Land if such need should arise.  Indeed, this was what happened.  The Conditions are only “contingencies” beyond P’s control and not something which P has promised to deliver.  The 18/11/16 SPA has indeed provided the framework to cater for the contingencies that the Southern Land could not be obtained and that the School could not be moved there.

e.  As such, P has clearly performed its obligations under the Service Agreement and is entitled to full payment of the Service Fee.

34.Whilst this construction of the Service Agreement by P (“P’s Construction”) cannot be dismissed as unarguable at this stage (see also further discussions in §43 below), the fact remains that this has not been pleaded in the SOC, nor is the meaning/construction of the terms of the Service Agreement now advanced by P apparent from reading the terms themselves.

35.Although the relevant averments supporting P’s Construction have now been pleaded in §4 of P’s Reply filed on 22 November 2023 (ie after the last hearing before the Master on 25 October 2023), they should have been pleaded in the SOC and not in the Reply because they formed the basis of P’s assertion that it is entitled to enforce its rights to recover the outstanding Service Fee under the Service Agreement (see Schindler Lifts at §12).

36.As an alternative to P’s Construction, P contends that even if the terms of the SPAs did not satisfy Clauses 1.1.2 – 1.1.3 of the Service Agreement:

a.  Ds had waived any alleged non-compliance since:

i.  these clauses operated solely for Ds’ benefits;

ii.  Ds being privy to the Service Agreement plainly knew that these terms existed and were for their benefit; and

iii.  Ds communicated its waiver to P by entering into various SPAs and the Supplemental Service Agreement and by making part payments of the Service.

(“Waiver Contention”)

b.  Ds are estopped from insisting upon full compliance with Clauses 1.1.2 – 1.1.3 since:

i.  Ds made an unequivocal representation by conduct to P that Ds had waived Clauses 1.1.2 – 1.1.3 in entering into the 18/11/16 SPA, the 6/1/17 SPA and the Supplemental Service Agreement;

ii.  Ds’ payments to P as mentioned in §16 above further perpetuated the aforesaid representation;

iii.   P detrimentally relied on Ds’ representation, for eg, by procuring Tahoe to continue to perform the various SPAs and expending its connections and resources to achieve the above, and by abstaining from taking measures for the protection of its rights under the Service Agreement etc.

(“Estoppel Contention”)

37.However, similar to P’s Construction, the Waiver Contention and the Estoppel Contention have not been pleaded in the SOC but only in the Reply.

38.Whilst a plaintiff does not need to anticipate the defence, if a plea is invoked as effectively founding a cause of action, this should not be done in the reply but be introduced in the statement of claim (see Herbert v Vaughan [1972] 1 WLR 1128 at 1133C per Goff J (as he then was)).

39.P has referred me to Sports Mantra India Private Ltd & Anr v Force India Formula One Team Ltd (In Liq) [2019] EWHC 2514 at §114 per DHCJ Ashworth QC and Amalgamated Investment & Property Co Ltd v Texas Commerce International Bank Ltd [1982] QB 84 at 131F-H per Brandon LJ as suggesting that the proper place of pleading estoppel/waiver is in the reply. 

40.These seem to be cases where despite the plea of estoppel, there were already complete causes of action pleaded on the face of the statement of claims (see Sports Mantra at §§19-21, 23(c), 93-94, 114-116 and Amalgamated Investment & Property Co Ltd at 131F-H).  However, in the present case, in light of my view expressed above that there is a mismatch between the Conditions and performance and that a complete cause of action has not been pleaded in the SOC, these authorities do not assist P.

41.In the circumstances, I am of the view that the SOC is demurrable on its face and is liable to be struck out on this basis.

PROPER ORDER TO BE MADE

42.As Mr Man acknowledged at the hearing, based on the authorities referred to in §24 above, if I am of the view that the present SOC is demurrable on its face but that a non-demurrable SOC could have been pleaded, this Court may nevertheless give an opportunity to P to amend the SOC to salvage its claim without dismissing the action.

43.Whilst Ds contend that P’s claim is bound to fail anyway because, inter alia, as a matter of contractual interpretation, Clauses 1.1.2 and 1.1.3 of the Service Agreement demand strict and literal compliance and that they have not been satisfied in the present instance, I cannot dismiss P’s Construction as unarguable for the following reasons:

a.  Clear words are required before a clause is classified as a condition precedent (in the sense that the condition must be precisely fulfilled), since it may deprive a contractual party of a right for a trivial breach that bears little or no prejudice and loss on the other: Lewison on the Interpretation of Contracts (7^th Ed, 2020) at §16.14.

b.  Clause 1.1 of the Service Agreement provides that the conditions set out in Clauses 1.1.1 – 1.1.3 are to be satisfied or “滿足”.  It may be argued that those words do not call for strict and literal compliance.

c.  In light of the contextual matters set out in §33 above, it is not unarguable that Clauses 1.1.2 – 1.1.3 did not intend to operate as conditions precedent requiring strict and literal compliance before P would be entitled to the Service Fee.

d.  Indeed, it may be said that a literal and strict interpretation of the Conditions would be against Ds’ own interests as sellers as this would leave no room for negotiation with the potential buyers on those conditions, and thus making a successful sale more difficult.

44.In the circumstances, I am unable to conclude that P’s claim is bound to fail on the ground that P failed to “satisfy” the Conditions because they are not strictly and literally complied with.

45.During the hearing, Ds also contended that P’s alternative case on waiver/estoppel is bound to fail.  However, in light of my ruling above that P’s claim is not bound to fail on its contractual interpretation contention, it is not necessary for me to rule on these alternative grounds.

46.In light of the above, since it cannot be said that P’s claim is unarguable or bound to fail, I am of the view that the proper order to be made is to strike out the SOC but to give P an opportunity to amend. In this regard, Ds have helpfully drawn my attention to Suen Wah Fai at §46 per DHCJ H Au-Yeung for an example of the orders made in similar circumstances which I have considered in arriving at the orders set out below.

DISPOSITION

47.For the above reasons, I allow Ds’ appeal and make the following orders:

a.  Paragraphs 1 and 2 of the Master’s Order be set aside.

b.  P’s SOC be struck out.

c.  P is at liberty to lodge and serve its draft Amended Statement of Claim (“Draft ASOC”) within 28 days from the date of this decision.

d.  P and Ds shall write jointly to the Court within 28 days thereafter and seek directions in relation to the Draft ASOC.  In the event that Ds contend that P’s claims cannot be salvaged by the amendments as proposed in the Draft ASOC, parties shall endeavour to agree on how the issue may be further dealt with by the Court.  In such circumstances, they shall also consider, inter alia, whether any further argument may be dealt with by way of paper disposal.

e.  In the event that P fails to comply with §47d above, the Writ of Summons filed herein be struck out and the action be dismissed.

48.As for costs, I see no reason why costs should not follow the event.  I therefore make an order nisi that costs of the appeal and the Summons be paid by P to Ds with certificate for two counsel, such costs to be taxed if not agreed.  The costs order nisi shall become absolute 14 days after the date of handing down of this decision.

49.I thank all Counsel for their assistance.

Mr Jonathan Chang SC and Mr Cedric Yeung, instructed by DLA Piper Hong Kong, for the Plaintiff.

Mr Bernard Man SC and Mr Danny Tang, instructed by Gallant, for the 1^st to 5^th Defendants.