Li Yuhong v. Ooo Securities (HK) Group Ltd (Formerly Known As Orientiert Xyz Securities Ltd) (Formerly Known As Amtd Global Markets Ltd) (Formerly Known As Amtd Asset Management Ltd)

HCA 475/2020

[2024] HKCFI 2253

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 475 OF 2020

________________________

BETWEEN

________________________

________________________

DECISION

________________________

Introduction and procedural history

1.This is the hearing of the re-amended summons of 22 July 2024 (the “Re-Amended Summons”)  taken out by the Plaintiff (“P”)  for leave to (a)  amend her statement of claim of 6 May 2020 as per the attached draft; (b)  to file and serve her supplemental witness statement as per the attached draft, and (c)  to adduce expert evidence on the question of quantum.

2.The pre-trial review of the case is due to take place on 10 September 2024, with the trial itself set down to commence on 25 November 2024 (with 8 days reserved).

3.Parties first came before this Court on 18 July 2024.  That was for the first hearing of the Re-Amended Summons in its original form (the “Summons”). That morning, P sought leave to amend the Summons to incorporate events that had taken place since the filing of the Summons (the “Amended Summons”). I granted P leave to do so.  I also granted P liberty to re-amend the Amended Summons to update the proposed questions for the experts.  Further, and noting the approaching pre-trial review and the trial, this Court handed down tight schedule for the filing of evidence.

4.P filed her Re-Amended Summons on 22 July 2024.  Evidence has been filed: He Chuan’s affirmation dated 1 August 2024 for the defendant (“D”)  in opposition, and P’s 4^th affirmation in reply.

5.The parties now come back before this court for substantive hearing of the Re-Amended Summons.  Ms Eva Leung and Mr Jason Fee appeared for P.  Mr Danny Tang appeared for D.

Preliminary matters

6.D in the affirmation filed on its behalf has taken a procedural and highly technical point as to whether D has been given leave to file the Re-Amended Summons, or simply given leave to file a summons to amend the Amended Summons.  I on 18 July 2024 granted P liberty to file her Re-Amended Summons.  There is no merits and utility in that point whatsoever.  The objection has not been repeated by Mr Tang.

7.On 15 August 2024, D filed its summons for leave to file a further affirmation in opposition.  The proposed new evidence concerns the part of P’s application for adducing expert evidence.  Ms Leung objects to it on the basis of lateness.  I will come back to this. 

P’s case

8.According to P’s case, she is a housewife.  D is a limited company licensed by the Securities and Futures Commission to carry out Types 1, 4 and 9 activities.  She says that she was introduced by D to invest in the bonds issued by a listed company called China Agroforestry Low-Carbon Holdings Limited (the “Listco”).  The investment turned out to be a total failure.  The Listco has defaulted in redeeming the bonds on the promised date.  By the present action P sues D for misrepresentation and breach of duties.

9.As submitted by Ms Eva Leung, the proposed amendments comprise 4 categories: (a)  stylistic or clerical[1] (“Cat #1”), (b)  the addition of a fresh cause of action on breach of contract[2] (“Cat #2”), (c) pleading in relation to D’s role as placing agent and the Listco’s default[3] (“Cat #3”), and (b)  events after the commencement of the action and subsequent development of the Listco’s restructuring scheme, including a Creditors’ Scheme, leading to P’s receipt or expected receipt of certain entitlements, in the forms of cash, Scheme Shares, and Promissory Notes[4] (“Cat #4”).

Discussion

10.I have considered the proposed amendments (“Cat #2”).  They relate to pre-existing events.  They could have been pleaded in the original Statement of Claim.  Whilst the relevant alleged breach has been pleaded in P’s Reply filed in December 2020 (relevantly §§10 and 11 thereof), no application had until the Summons been made for amendment of the Statement of Claim so as to add that cause.  P has to do so before she can rely on the same as an additional cause of action.  As observed by Lam J (as the PJ then was)  in Magic Score Ltd v The Hongkong and Shanghai Banking Corp Ltd (HCA 11077/1994, 23 June 2006)  §20, “it is not appropriate to raise in the reply a new cause of action”.  No explanation has been given as to why amendments have not been sought earlier. 

11.Ms Leung submits that those amendments do not require any further factual evidence to be adduced, but merely concern legal argument.  That may be P’s position.  But they are by nature facts sensitive.  As also observed by Lam J also in Magic Score Ltd (in §21):

“A defendant to an action is entitled to know from the writ and statement of claim what are the precise limits of claims he is faced with. He should focus on the same and then put forward his case in his defence and prepare for the evidence accordingly. He should be able to conduct the litigation and arrange his affairs on the basis that all the relief and remedies claimed against him have been set out in the statement of claim, subject to any amendments that might be made to that document. He could, for example, consider whether to make any payment into court or any offer for settlement based on this. He could also decide what is the proportionate time and costs that he should spend on the litigation by reference to those claims. A reply (or any subsequent pleadings)  is not the right place for new claims to be put forward as it does not contain any prayers and a defendant does not have any automatic right to file any pleadings subsequent to reply (see Order 18 rule 4). It would also be confusing for new claims to be buried amongst other positive allegations made in genuine reply to a defence.”

12.If the Cat #2 proposed amendments are allowed, they would need to be considered and investigated by D.  D may then need to decide whether to adduce new evidence in reply.  The lateness of the application poses material prejudice to D, and poses a real risk that the trial (scheduled to take place in November)  may be derailed.

13.I also accept Mr Tang’s submissions that the proposed pleas lack sufficient particulars, and in particular, in relation to §24A(1), particulars on the “investment guidelines”, in relation to §24A(2), particulars on the “fiduciary obligations and duties”, and in relation to §24(B), the steps said to be necessary for the purpose of “due diligence”.

14.I refuse the application in relation to Cat #2.

15.In respect of Cat #1, save those proposed in §5(3), D does not object.

16.§5(3)  pleads to the capacity of Ariel Liu on behalf of D.  That, similar to those under Cat #3 are relevant as part of the overall background facts.  Mr Tang objects on the basis of alleged lack of particulars or relevance.  I do not agree.  In particular, in relation to §24F, the basis of the knowledge is clear in context.  I further see no prejudice to D.

17.I allow the application in relation to Cat #1 and Cat 3.

18.In respect of Cat #4 and the proposed expert evidence:

(a)  They relate to events after the commencement of the action, and in particular to events relevant to the re-structuring scheme that took place between January and July this year;

(b)  They can have the effect of reducing the quantum of P’s claim;

(c)  They are related to the proposed new expert evidence, in the following sense.  Whilst the receipt of those entitlement may reduce the quantum of P’s claim, the issue is by how much.  Cash poses no difficulty.  But in relation to the Scheme Shares and Promissory Notes, P says that they in fact worth less than their face values, issued or nominal.  For that, she seeks leave to adduce expert evidence;

(d)  I see the relevance of both the Cat #4 proposed amendments and the need for expert evidence;

(e)  D was first notified of the proposed amendments in May 2024.  There had been no delay in the present application;

(f)  After a prolonged period of consideration, D now indicates that it would not oppose the amendments in relation to the receipt of entitlements, but object to those in relation to the values of the same.  They also object to the proposed adducing of expert evidence;

(g)  Quite clearly, D wants to have the best of both worlds, by claiming maximum benefit of P’s receipt of those entitlements through reduction of the quantum in their full face values, whilst at the same time seeking to block P’s attempt to prove that the actual values of those entitlements are in fact less;

(h)  The proposed expert evidence satisfies the subject matter condition, the expertise condition and the relevance condition which this Court explained in Lei Shing Hong Credit Ltd v Accufast Ltd [2021] HKCFI 853 at §22;

(i)  I do not accept Mr Tang’s submissions on the basis of lack of particulars.  Sufficient particulars have at this stage been pleaded. The rest is evidence;

(j)  Mr Tang takes issues with the proposed dates of valuation.  In relation to the Scheme Shares, P has not actually received them.  The valuation date is therefore proposed to be the date of the valuation report.  In relation to the Promissory Notes received on 12 July 2024, the valuation dates are proposed to be the date of receipt and the date of maturity;

(k)  The above raise issues of concern.  Facts relevant to quantum are still developing.  In particular, the Scheme Shares have not yet been received.  The broadening of the expert evidence (on top of that for which leave has previously been granted)  also raises concern as to the adequacy of the days reserved for the trial.  The liquidity of things at this stage has also led to D’s application for leave to rely on further evidence for the purpose of this application, which I have mentioned above;

(l)  In the end, and having considered all the circumstances, and in particular that events relevant to quantum are still developing, I form the view that this is an appropriate case for a split-trial direction, such that issues in relation to liability be tried first during the scheduled trial dates.  I grant parties liberty to seek further directions during the PTR (if necessary and depending on the development of events)  or during the trial from the trial judge in relation to the further conduct of the matters on quantum;

(m)  In the light of the matters before this court, I allow P’s application in relation to Cat #4.  I see the possible need for further amendment on quantum in the future.  While that this so, the present proposed amendments Cat #4 are justified by the known facts.

19.For the above reasons, I allow P’s application in relation to Cat #1, Cat #3 and Cat #4.  I refuse Cat #2.

20.In the end, parties are able to reach agreement on the filing of P’s supplemental statement, the terms of the split-trial directions, and other consequential directions.  I make those directions as agreed, and as modified by this Court. 

21.Given the split trial directions, there is no need for P at this stage to proceed with the part of the Re-Amended Summons on expert evidence, or for D to proceed with its application to adduce further evidence for the purpose of this application.  Parties at one stage suggest that those matters be adjourned sine die.  I have considered those suggestions.  I do not believe they need to be adjourned.  I simply make no order in those regards, without prejudice, if need arises, for parties to make renewed applications for the same, or to seek further directions pursuant to the liberty I have granted.

22.On costs, and having heard parties, I order that the costs of an occasioned by P’s applications under §§1 – 4 of the Re-Amended Summons (except the costs of the hearings on 18 July 2024 and 19 August 2024)  be to D in any event.  80% of the costs of those hearings be in the cause of the trial on liability.

Ms Eva Leung and Mr Jason Fee instructed by Hugill & Ip, for the Plaintiff

Mr Danny Tang instructed by Gibson, Dunn & Crutcher, for the Defendant