Luen Cheong & Co and Another v. Mak Yeuk Chi and Others

HCA001204/1974

IN THE SUPPREME COURT OF HONG KONG

(ORIGINAL JURISDICTION)

ACTION NO. 1204 OF 1974

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Coram: LI, J.

Date of Judgment: 10th July, 1975 at 3.35 p.m.

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JUDGMENT

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1. This is an application on behalf of the Plaintiffs to strike out the whole of the Amended Defence and Counterclaim filed on the 16th of May, 1975 by the 2nd, 3rd and 4th Defendants (hereinafter referred to as the Amended Pleadings.)

2. The Action arose out of an alleged trust created and established since April, 1943, for the benefit of the 1st Plaintiff. By their Statement of Claim the Plaintiffs alleged in paragraph that:-

It went on to allege that by written agreements between the 2nd Plaintiff, the 1st Defendant and one Pak Hing Chong, certain properties were acquired in the name of Pak Hing Chong out of the money belonging to the 1st Plaintiff and as a result there was a trust for the benefit of the 1st Plaintiff and that in breach of trust the Defendants refused to deliver to the 1st Plaintiff the title deeds and refused to account for the rents and profits in respect of the said properties.

3. The Defence filed by the 2nd, 3rd and 4th defendants on the 30th of July, 1974, admitted the contents of paragraph 1 of the Statement of Claim. It further admitted the existence of the said agreements between the 2nd Plaintiff, the 1st Defendant and a Pak Hin Chong. However, it contended that the agreements between these three persons were merely to borrow money from the 1st Plaintiff for the purposes of acquiring the said properties alleged in the Statement of Claim for the benefit of the parties concerned, not for the 1st Plaintiff, and that if the properties were sold the capital only would be returned to the 1st Plaintiff.

4. A Reply was filed on the 23rd of December, 1974, to join issue with the Defendants.

5. The 2nd, 3rd and 4th Defendants gave notice on the 15th of February, 1975 about the names and addresses of the partners constituting the 1st Plaintiff. On the 1st of April, 1975, a summons had to be taken out for this purpose and also for the purpose of asking the Action to be stayed. This summons was heard on the 9th of April, 1975, but at the time of the hearing it was withdrawn by consent because by that time the Plaintiffs' solicitors had already supplied a list of partners at the time when the right of action accrued as required by the Defendants. This is in the Affidavit of MAK Shing-oy dated the 8th of April, 1975.

6. In the meanwhile, the Plaintiffs took out a summons for direction and it was heard and adjourned sine die by the Registrar.

7. The Plaintiffs appealed to me against the Registrar's Order. At the time of the hearing of the appeal, one of the Defendants' grounds for resisting the case being set down was that the identities of the partners were in dispute and that it was necessary to amend the Defence and Counterclaim. I rescinded the Registrar's Order and directed that the case be set down. Further, at the end of the hearing, there was an Order by consent of the parties that the Defendants be given leave to amend their Defence and Counterclaim.

8. Paragraph to this Consent Order, the three Defendants, the 2nd, 3rd and 4th Defendants, filed the Amended Pleadings on the 16th of May, 1975.

9. Paragraph 1 of the Amended Pleadings reads this:

10. The Particulars:

"Pak Hing Chong was at the date of his death a partner in the said 1st Plaintiff firm to the extent of two thousand parts of thirty thousandth.

3. No admission is made as to Paragraph 1(b) of the Statement of Claim. The 2nd, 3rd and 4th Defendants will put the 2nd Plaintiff to strict proof as to the extent of his alleged right title and interest (if any) in the subject-matter of this action. Further or alternatively the 2nd, 3rd and 4th Defendants will put the 2nd Plaintiff to strict proof as to his authority to commence and maintain this action on behalf of the 1st Plaintiff."

11. It is observed that paragraph 1 to 3 of the Amended Pleadings contain withdrawal of admissions made in paragraph 1 of the original Defence and Counterclaim.

12. The Plaintiffs' case is that the whole of the Amended Pleadings was not made in accordance with the Consent Order and disclosed new defences without pleading material particulars, withdrew admissions without leave and explanation and that it improperly challenged the authority of the 1st Plaintiff's solicitors and that, in all, it was embarrassing and an abuse of process.

13. Mr. Bernacchi, learned counsel for the Plaintiffs, contends that the Amended Pleadings withdraw admissions made in the original Defence and Counterclaim. This is improper because they were made without leave of the Court and leave is given to withdraw only if the Court is satisfied by explanation that the admission was made by mistake due to inadvertence. In the present case no explanation whatever had been given to the Court. He further contends that the Amended Pleadings are full of negatives pregnant and that it is embarrassing and an abuse of process.

14. Mr. Dicks, learned counsel for the Defendants, contends, however, that the amendments and withdrawals made were as a result of leave to amend by consent. There was no limitation placed in the Order granting leave to amend. Before the Consent Order was given, it was abundantly clear that the identity of the 1st Plaintiff was in dispute. The withdrawals of the admissions in the Amended Pleadings were really brought about by the disclosure of the list of partners which were given late in the stage of the interlocutory proceedings. Parts of the Amended Pleadings were not objected to and it was the obligation of the Plaintiffs to satisfy which part of the Amended Pleadings was to be struck out. Unless there is no defence at all in the Amended Pleadings, this summons should be dismissed. This application to strike out the whole of the Pleadings is altogether defective.

15. A number of authorities have been cited by counsel for both parties in support of their arguments. I will now consider a few of them which to me are relevant.

16. In the case of Squire v. Squire ⁽¹⁾, it was held that:

"... a defendant was entitled without special leave to make amendments to his defence which were consequential upon the amendments to the statement of claim but not amendments which related only to allegations in the statement of claim which were not affected by subsequent amendment; ..."

17. In the case of Rickmers Rhederai A-G.v. The Bank of Taiwan Ltd. ⁽²⁾ the Full Court of Hong Kong, following the decision in Hollis v. Burton, ⁽³⁾ held that before leave would be granted to withdraw an admission in the pleadings the court must be satisfied by an explanation that such admission was made by a mistake caused by an inadvertence.

18. In these two cases, however, the question was whether leave was required and in what circumstances leave could be granted. In the present case the question is whether the Defendants are entitled to withdraw admissions after leave had been granted by consent without any limitation. In the course of the previous hearing of the summons for direction, it was abundantly clear that the defendants intended to dispute the identity of the 1st Plaintiff which was disclosed at a late stage of the interlocutory proceedings. Nevertheless, the Plaintiffs gave consent to amend to the Defence and Counterclaim without qualifications. I am of the opinion that leave to amend without limitations permits the Defendants to amend their Pleadings in such a way that they may even withdraw former admissions for the purposes of putting the material facts in issue. No further leave was required and the Plaintiffs must fail on this ground.

19. Mr. Bernacchi also objects to the Defendants introducing a new Defence by pleading this Limitation Ordinance. However, such a defence is created as a result of leave to amend before trial. This cannot be prejudicial to the Plaintiffs who were also given leave to amend their Reply. Now, the facts in the present case are different from those of the case of James v. Smith ⁽⁴⁾ where the amendment of the defence was applied for at the very last moment after the close of the plaintiff's evidence. The case of Hills and Grant Ltd. v. Hodson ⁽⁵⁾ was decided on the same principle.

20. As I understand it, leave should be granted to amend pleadings so as to allow all triable issues to be raised provided that the other party is not prejudiced beyond compensation as to costs. In the present case, the amendment is made before trial by consent. I fail to see how the Plaintiffs can be prejudiced in any way and it is for the Plaintiffs to file their Reply to this Defence in order to join issue with the Defendants.

21. I further find that the Defendants have not challenged in any way the authority of the solicitors to act for the 1st Plaintiff although they do challenge the 2nd Plaintiff's authority to commence proceedings on behalf of the 1st Plaintiff and put the 2nd Plaintiff to strict proof of his authority. There is no substance in the objection to this Defence by the Plaintiffs.

22. I now come to the Plaintiff's criticism that the Amended Pleadings are full of negatives pregnant so as to be evasive, embarrassing, that they should be struck out. The question is whether I must strike out the whole of the Defence because I find in certain paragraphs of the Amended Pleadings that there are negatives pregnant. On this point some guidance can be found in the case of Pinson v. Lloyds and National Provincial Foreign Bank Ltd. ⁽⁶⁾ It was held in the case that:

".... while particulars cannot be ordered of a mere traverse, where the traverse is one of a negative allegation, and the defendant admits he is setting up an affirmative case, particulars ought to be ordered. ..."

In the case of Philipps v. Philipps ⁽⁷⁾ it was held that a plaintiff who put up a general claim must plead or give particulars so as to enable the defendant to defend the action.

23. In MacLulich v. MacLulich ⁽⁸⁾, the Court of Appeal ordered the Respondent to give particulars to his answer to a petition because the answer was not a mere traverse by the Respondent of the allegation in the petition put also involved affirmative allegations. It appears that the failure to plead particulars does not necessarily entail the defence being struck out.

24. In the Pinson's ⁽⁶⁾case at page 624, Mr. Justice Stable said:

"As regards the application to strike out the defence on the ground that it traverses a number of facts alleged in the statement of claim which are not really in dispute, and which have been admitted by the defendants on earlier occasions, in my judgment, it is sufficient to say that, while there may be exceptional cases in which a defence can be struck out on this ground, such cases must be rare, and the remedy is available only where it is apparent that the defence is a frivolous or vexatious document, not designed or presented as a serious piece of pleading. In my judgment, that is not this case, and, speaking generally, I see no reason why a defendant is not entitled to put a plaintiff to the proof of his whole case, if so advised. It is a commonplace of pleading to put in issue a fact as to which there is no real dispute, in order to compel the plaintiff to call a particular witness to prove that fact, and so afford the defendant an opportunity to cross-examine the witness on other matters material to the case. This seems to me a legitimate and well - recognised method of pleading, and one which, on occasion, serves a useful purpose. If the appeal were confined to this point, in my judgment, it would fail."

25. Then the same approach was made in the case of Cropper v. Smith ⁽⁹⁾ at page 710, Lord Justice Bowen said this:

"... Moreover, every power of amendment given by the Judicature Act seems to me to be applicable to this kind of suit as well as to any other. Now, I think it is a well established principle that the object of Courts is to decide the rights of the parties, and not to punish them for mistakes in the conduct of their cases by deciding otherwise than in accordance with their rights. Speaking for myself, and in conformity with their rights. Speaking for myself, and in conformity with what I have heard laid down by the other division of the Court of Appeal and by myself as a member of it, I know of no kind of error or mistake which, if not fraudulent or intended to overreach, the Court ought not to correct, if it can be done without injustice to the other party. Courts do not exist for the sake of discipline, but for the sake of deciding matters in controversy, and I do not regard such amendment as a matter of favour or of grace. Order XXVIII rule 1, of the Rules of 1883, which follows previous legislation on the subject, says that, 'All such amendments shall be made as may be necessary for the purpose of determining the real questions in controversy between the parties.' It seems to me that as soon as it appears that the way in which a party has framed his case will not lead to a decision of the real matter in controversy, it is as much a matter of right on his part to have it corrected, if it can be done without injustice, as anything else in the case is a matter of right. It was said by Mr. Baber in his very powerful speech to us, 'You are taking away an advantage from the Plaintiffs who have got judgment below, by making an amendment at the last moment.' In one sense we should be taking away an advantage from them, but only an advantage which they have obtained by a mistake of the other side, contrary to the true bearing of the law on the rights of the parties."

26. Similarly, the Full Court in V. Berg and Sons Ltd. v. Kian Gwan Company (China) Ltd. ⁽¹⁰⁾ even in a case where certain pleading was found embarrassing, leave was given to amend the offending parts.

27. The case of Clark v. Wray ⁽¹¹⁾ was a case decided in circumstances different from those of the present case. In that case, leave was required to amend the defence by inserting a counterclaim which was totally inconsistent with the defence. As such, leave was refused. In the present case, the defendant did not even have to overcome that hurdle because leave had already been given by consent.

28. In my opinion, if the objection to the Amended Pleadings is merely that of containing negatives pregnant, the remedy is to ask for particulars rather than to apply to strike out the Pleadings. With this principle and the aforesaid authorities in mind, I now come to consider the Amended Pleadings paragraph by paragraph.

29. Once the question of withdrawal of an admission is resolved, there appears to be no further objection to paragraph 1 of the Amended Pleadings as it stands. The Defendants are quite entitled to put the Plaintiffs to strict proof. However, reading paragraph 1 with the rest of the Amended Pleadings, in particular paragraph 7, it is apparent that the Defendants dispute the identity of the 1st Plaintiff with an implied affirmative allegation that the 1st Plaintiff is not the same firm which existed in 1943. As such, it is for the Defendants to come up in the open to plead that the 1st Plaintiff is not the same firm as the one in 1943 for whose benefit or for whatever benefit the trust might have been created as alleged by the Plaintiffs.

30. I do not find any objection, however, in paragraphs 2, 3 and 18.

31. No objection has been raised by the Plaintiffs in respect of paragraphs 4, 5, 8, 12, 13 and 16.

32. As to paragraph 6 of the Amended Pleadings, it is observed that paragraph 2 of the Statement of Claim never alleges that the 2nd Plaintiff entered into the agreements on behalf of any person comprising the 1st Plaintiff. Indeed, it is never the 2nd Plaintiff's case that he entered into the agreements on behalf of the 1st Plaintiff. It merely alleges that the 2nd Plaintiff agreed with the 1st Defendant and one PAK Hin-chong to acquire properties with the money of the 1st Plaintiff and then it lists the list of properties so acquired. Paragraph 6 of the Amended Pleadings, in further answer to paragraph 2 of the Statement of Claim, put the 2nd Plaintiff to strict proof of his capacity and power and authority to enter into the said agreements for or on behalf of any person or persons comprising or said to comprise the 1st Plaintiff. Whatever is challenged was never pleaded in the Statement of Claim at all. I find it embarrassing indeed to the Plaintiffs to have to reply to this. It is an abuse of process.

33. Paragraph 7 of the Amended Pleadings reads this:

"7. In further or alternative answer to Paragraph 2 of the Statement of Claim if the said parties made such an agreement the moneys used for the purchase of the properties therein set forth were moneys borrowed by the said parties from the 1st Plaintiff or from a predecessor firm bearing a title similar to that of the 1st Plaintiff."

As such it is evasive pleading, embarrassing to the Plaintiffs and carrying a negative pregnant. Whoever and wherever the money was obtained for the purchase of the properties, should be within the knowledge of the Defendants. If so, they either say that the money was borrowed from the 1st Plaintiff or borrowed from somebody else. It has been said, in the course of argument, of course the Defendants cannot be pinned down to the allegation of alleging any particular person because the Chinese document or partnership document had not been translated before the 30th of April when the summons for direction was heard. But by May and June there should have been sufficient time to translate that document. I find it an extremely thin excuse.

34. Paragraph 9 of the Amended Pleadings again implies an affirmative allegation. Reading this paragraph together with paragraph 19 and the Prayer in the Counterclaim, it is apparent that the Defendants claim an interest in the trust. That has not been pleaded in paragraph 9 at all.

35. There are objections to the term 'purportedly' in paragraph 10 and 14 and the term 'inter alios' in paragraph 11 and 15. These can be cured certainly by notice for admissions or further particulars.

36. As to paragraph 17, I have already found that the Defendants are entitled to put up, if they want, a new Defence even at this stage and that it is not prejudicial to the Plaintiffs in any way.

37. Paragraphs 19 and 20 of the Counterclaim refer to paragraphs 4, 6, 9 and 13 of the Amended Pleadings. None of these paragraphs so referred to assert that the Defendants or their predecessor in title, Pak Hing Chong, had a beneficial interest in the properties. Only paragraph 2 of the Amended Pleadings alleges that the late Pak Hing Chong had a 2/30th share in the 1st Plaintiff subject to a denial as to the existence of the 1st Plaintiff. Paragraph 9 of the Amended Pleadings expressly denies that there was any trust for the benefit of the 1st Plaintiff. As such, there appears to be no foundation whatever for this Counterclaim as it is totally inconsistent with the Defence that has been raised. I would have no objection to the Defendants introducing a new course of action in their Counterclaim if it were founded on facts expressly pleaded. As they stand, the Amended Pleadings are evasive and embarrassing on a whole. It is for this reason that Mr. Bernacchi asked for the whole of the Amended Pleadings to be struck out. He has, however, not set out any particular parts of the Amended Pleadings to be struck out, even though he has no objection to quite a number of paragraphs therein. There are many instances that a notice for particulars should be sufficient to cure the defects in the Amended Pleadings.

38. For these reasons, I shall follow the decision of the Full Court in v. Berg and Sons' ⁽¹⁰⁾ case and order that the offensive paragraphs of the Amended Pleadings to be struck out with further leave to amend and leave to the Plaintiffs to ask for further and better particulars in the other paragraphs in which I find that a notice for particulars would cure such defects.

39. In conclusion, I order that defence in paragraph 6 and the Counterclaim in paragraphs 19 and 20 of the Amended Pleadings be struck out, but that the Defendants may be given liberty to amend in order to fill the gap or vacuum if they wish to do so within fourteen days. It will be necessary for the Plaintiffs to ask for further and better particulars within, say, seven days and then file a Reply seven days thereafter.

Representation:

(1) (1972) 2 W.L.R. 363

(2) 27 H.K.L.R. 27

(3) (1892) 3 Ch. 226

(4) (1891) 1 Ch. 384

(5) (1934) 1 Ch. 53

(6) (1941) 2 A.E.R. 636

(7) (1879) 4 Q.B. 127

(8) (1920) Probate 439

(9) (1884) 26 Ch. 700

(10) (1956) 40 H.K.L.R. 377

(11) (1886) 31 Ch. 68