Gobind Mohan and Another v. Brian Shane Mcelney and Others

HCA004611/1978

No. 4611 of 1978

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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BETWEEN

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Coram: The Hon. Mr. Justice Hunter

Dates of Hearing: 21 September 1984

Date of Delivery of Judgment: 24 September 1984

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DECISION

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1. This is an application by the plaintiffs for leave to re-amend their Statement of Claim. The bulk of the amendments are cosmetic and convenient because they get rid of the allegations originally made against the 3rd and 5th defendants which allegations are no longer being pursued. So there is no difficulty about giving leave to make those amendments. What I am going to concentrate on is the parts of the new draft where the application is opposed. The opposition is based upon two grounds of principle. The first is that the new matters or some of them raise new causes of action and that others are much too late.

2. As far as the first ground of objection is concerned the legal position is not in dispute. At an earlier stage in this particular litigation, it was discovered that Order 20 rule 5(5) had feet of clay for want of enabling, underlying legislation, and was declared by the Court of Appeal to be ultra vires. The legislature intervened to restore that position in a way that does not effect pending litigation.

3. So I am back to the old common law position. The question for me now is whether these allegations constitute new causes of action within the pretty wide definition of those words in Reed v. Brown 22 Q.B.D. 128 by Lord Esher and the other members of the Court of Appeal. I have no doubt whatever that this objection is well founded in respect of the paragraphs to which it is directed; first paragraphs 6 and 7, and then paragraphs 25, 26, 27 and 39.

4. Now as far as paragraph 6 is concerned, this introduces a new basis for asserting a breach of duty against the 1st plaintiff. The original Statement of Claim was based upon a breach of duty by a solicitor. The amendment seeks to introduce a breach of duty against that man as a financial adviser and seeks to assert that he held himself out and accepted responsibility as a financial adviser. That is totally different to the original claim which charged him simply with negligence as a solicitor, and must constitute an attempt to assert a new cause of action.

5. The same is true of paragraphs 25, 26 and 27 which specifically introduce new allegations of negligence. Almost by definition those are new causes of action. Mr. Eddis sought to persuade me that this was not the case and that they were, what he described simply as, pieces of evidence. With respect to him when they are introduced in a pleading they are nothing of the sort. You do not plead evidence. The paragraphs are introduced into the pleading as material allegations, in support of matters upon which the plaintiff is now seeking relief. They are no longer pieces of evidence, background facts which are liable to emerge in the case in any event. They are being brought into close-up; they are being brought into the foreground, or that was the attempt. It seems to me that it must fail on the application of the old common law principle.

6. As far as paragraph 6 is concerned, I think there are a number of other objections to this amendment which also are well founded. First it is in my judgment much too late to make a fundamental alteration to the claim such as is envisaged by the amendment. Secondly it is (I regret to say) totally obscure. I cannot begin to understand a continuing offer and a continuing acceptance extended over three years which at some stage is said to fructify into a contract. Thirdly, there is a particular point about this amendment to which objection is taken. The original Statement of Claim asserted that advice was sought from the 1st and 2nd defendants in relation to obtaining a public listing for a particular company. By their defence the same defendants asserted that the plaintiffs went to them for advice along these lines but themselves put a figure upon the capitalization of the company, that figure begin $50m. The Statement of Claim was then amended and the advice was then pleaded as being sought to obtain a public listing for MPIL "based upon an assert value of HK$50m". What is sought by this proposed amendment both here and in paragraph 7(b) is to delete those words. I do not believe it is right for the court to allow that deletion to be made now without further explanation and without hearing the evidence. Simply from a reading of this Statement of Claim, this could be a matter of some considerable importance. The basic complaint these plaintiffs make is that in substance the existing remaining defendants permitted them to become over-stretched, over-committed financially, over-committed to loans with the result that when the market turned against them the results were totally catastrophic. Now when someone complains that they were over-stretched or permitted to become over-stretched financially, it may be of some significance to see that at one stage it seemed to be common ground on the pleadings, that the degree of stretch, the goal of the capitalization of this company, was in fact prescribed by the client and not by the adviser. The position may change in the course of the evidence, but I regard this as akin to an admission in the pleadings. I do not believe that the court should readily allow admissions of this nature to be withdrawn at this very late stage without sufficient explanation. The explanation that I was offered in respect of date, that this all was tied in with the change of chronology in this proposed amendment, I did not find sufficient or satisfying. So for those several reasons I am not prepared to allow the amendment sought in paragraph 6, or for the same reasons in paragraph 7.

7. Paragraph 9 the only contested matter there arises on the last 3¹/₂ lines in the paragraph where it is desired to add the words: "the 1st defendant specifically advised the said method in preference , to a reverse take-over method being the preferred method of the 1st plaintiff".

8. Two objections are taken to that. First is it in conflict with some further and better particulars already given to the plaintiff's bank, namely the 4th defendant. Secondly, that as it stands this allegation is almost totally meaningless. The phrase "reverse takeover" conveys many things to different people. To assert a preferred method in the context of this case without at the same time asserting, the chosen method of finance in respect of that preferred method seems to be a complete waste of time. So I cannot allow those three lines to be added to paragraph 9.

9. The next matter (and I should add that the numbering I am using is the new numbering not the old) is paragraphs 14 and 15. That application was not pursued. The same is true of the word to which objection was taken "and/or coerced" in paragraph 20. That application was abandoned. I have already disallowed 25 to 27 inclusive. The next one is paragraph 36. There was some objection to that as a matter of terminology. I do not think that that is any real substance to it, I allow that. I also should have pointed out that there was an objection to paragraph 8(3) where the amendment substitutes the words "advised" for a formula which started originally as "represented" and then became "represented and promised". It seems to me that these words in the context come down to an allegation that this is what the plaintiffs were told. The present formula is completely neutral and there is no reason to object to it. So I allow that in paragraph 8, and in the subsequent paragraph where the same point is made.

10. Again I allow 37, likewise with the further deletion of the words "and have been put to inconvenience and expense suffered loss and damage".

11. The last one is paragraph 39 which I have already disallowed. I think that covers all the matters. So I will grant leave to amend in respect of all the paragraphs which I have not specifically disallowed. Running down those again, they are 6, 7, the last three lines in 9, 25, 26, 27 and 39. That I think covers everything.

Representation:

Mr. Francis Eddis instructed by M/s Haldane Midgley & Co. for Plaintiffs.

Mr. Andrew Li instructed by M/s Lo & Lo for 1st and 2nd Defendants.

Mr. Anthony Dicks instructed by M/s Baker & McKenzie for 4th Defendant.