Eldo Trading Co Ltd v. Thorogood Estates Ltd
Read the full judgment text of HCMP 2009/1982 on BabelCite. This High Court CFI judgment was delivered on 3 February 1981.
1. On the 2nd November 1983, I dismissed the application of the Defendant in this action to strike out the Plaintiff's amended Statement of Claim under 0.18 r.19. I now give my reasons for that decision made after having had the benefit of the submissions of leading counsel, namely Mr. John Swaine, Q.C. for the Defendant and Mr. Charles Ching, Q.C. for the Plaintiff. The background of the case is regrettably complex.
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HCMP002009/1982
IN THE SUPREME COURT OF HONG KONG HIGH COURT MISCELLANEOUS PROCEEDINGS ------------------------
BETWEEN
Coram: Hon. Clough, J. Date: 30 NOV 1983 ------------------------ J U D G M E N T ------------------------ 1. On the 2nd November 1983, I dismissed the application of the Defendant in this action to strike out the Plaintiff's amended Statement of Claim under 0.18 r.19. I now give my reasons for that decision made after having had the benefit of the submissions of leading counsel, namely Mr. John Swaine, Q.C. for the Defendant and Mr. Charles Ching, Q.C. for the Plaintiff. The background of the case is regrettably complex. 2. The Plaintiff began these proceedings by issuing an Originating Summons against the Defendant dated the 6th November 1982. The Originating Summons was supported by an affirmation of Mr. Ho Sau Ki ("Mr. Ho"), a director of the Plaintiff, filed on the 8th November 1982. The proceedings relate to an Agreement dated the 3rd February 1981 made between the Plaintiff and the Defendant under which the Plaintiff agreed to purchase and the Defendant agreed to sell the 3rd to the 13th floors and the main roof together with the portion of the ground floor forming the entrance of a building known as Tower B which was in the course of construction by the Defendant on a site at Hok Yuen Street, Kowloon of which the Defendant was the registered owner. 3. Under Clause 2 of the Agreement the purchase price was to be calculated at the rate of HK$1,100.00 per square foot on the gross covered floor area of the part of Tower B to be purchased by the Plaintiff. The gross covered floor area was expressed in Clause 1 to be 303,118 sq. ft. approximately (exclusive of the roof area) and, subject to adjustment on completion, the purchase price was expressed in Clause 3 to be the sum of $333,429,800.00. Of this purchase price, $666,685,960.00 was stipulated under Clause 3 to be payable in four equal instalments to be paid by the Plaintiff on the following successive dates, namely (i) upon the signing of the Agreement, (ii) on or before the 3rd April 1981, (iii) on or before the 18th May 1981 and (iv) on or before the 3rd July 1981. The balance of $266,743,840.00 was stipulated to be payable by the Plaintiff within 14 days after the issuance of the Occupation Permit for Tower B. 4. Under Clause 4 of the Agreement, the Defendant was obliged to complete Tower B within 1100 weather working days from the 3rd of February 1981 and my understanding from Mr. Swaine is that on this basis the date by which Tower B should have been completed was the 3rd February 1984. 5. Under Clause 5 of the Agreement the purchase was required to be completed within 14 days of notice in writing to be given by the Defendant to the Plaintiff that the Occupation Permit in respect of Tower B had been issued by the Building Authority. On that date the Plaintiff as purchaser was obliged to pay the balance of the purchase money. 6. Under the Originating Summons dated the 6th November 1983 the Plaintiff claimed three declarations. The first declaration sought was a declaration that the Plaintiff was entitled to have the agreement annulled on account of the material misdescription by the Defendant of the property comprised in the Agreement, the alleged misdescription being expressed to be the description of the property comprised in the Agreement as 11 storeys of offices whereas in fact the premises consisted of only 10 storeys of offices and 1 machine floor. 7. The second declaration sought by the Plaintiff was a declaration that the Plaintiff was entitled to rescind the Agreement for misrepresentations by the Defendant that the property to be sold would consist of 11 storeys of offices and gold coloured tinted glass windows. Further and in the alternative the Plaintiff sought a third declaration that the Plaintiff was entitled to rescind the Agreement for breach of a term thereof in that the glass windows provided by the Defendant failed to comply with the mode of finish as depicted in a coloured sketch furnished by the Defendant to the Plaintiff. 8. The fourth item of relief sought under the Originating Summons was as follows –
The remaining relief sought by the Plaintiff under the Originating Summons consisted of costs and further and other relief. 9. On the 1st appointment for the hearing of the Originating Summons on the 3rd December 1982, Hunter, J. made an order pursuant to 0.28 r.8 that the action should continue as if begun by writ. He gave directions for pleadings, discovery and evidence and the date for the hearing of the action was fixed by him as being on or after the 30th January 1983 with 10 days reserved. He gave liberty to the parties to apply and directed that the costs of the hearing before him on that date should be in the cause. 10. On the 14th December 1982 the Plaintiff filed its Statement of Claim. The wording of the prayer for relief at the end of the Statement of Claim was not the same as the wording in the Originating Summons in respect of the first four items of relief mentioned above but the substance of the relief sought was the same, namely a declaration of the entitlement of the Plaintiff to have the Agreement annulled, 2 declarations of its entitlement to rescind the Agreement and an order for the payment of $66,685,960.00 paid by way of deposit, "in the event of" any of the above mentioned declarations being made. However the prayer for relief in the Statement of Claim introduced for the first time a claim for interest. 11. On the 4th January 1983 the Defendant filed its defence denying all the claims of the Plaintiff and on the 20th January 1983 the Plaintiff filed its Reply. On the 29th January 1983 the action came before me for directions and an order was made requiring the Plaintiff to make further discovery on or before the 1st February 1983 and in respect of the application resulting in that relief the Defendant was awarded costs. At the same hearing the Defendant was ordered to file Further and Better Particulars of Defence and a List of Documents on or before the 1st February 1983 and the costs of the relevant application were awarded to the Plaintiff. Finally the order made by me on the 29th January 1983 directed the trial date to be vacated and that costs of the adjournment be costs in the cause. 12. On the 17th March 1983 the Defendant's solicitors wrote a letter to the Plaintiff referring to the Agreement and the subsisting action, informing the Plaintiff that the Occupation Permit for Tower B has been issued and giving the Plaintiff notice under Clause 5 of the Agreement to complete the purchase within 14 days of the letter in question. The remainder of the letter dealt with the adjusted purchase price which was expressed to be $330,660,000, at the rate of $1,100 per sq. ft., requiring payment by the Plaintiff of the balance of the purchase price on completion being $263,974,040 and dealing with other matters in respect of the transaction which are not relevant to the application now under consideration. 13. There followed inconclusive correspondence between the solicitors for the parties in the course of which the Plaintiff's solicitors sought a formal inspection of the premises on behalf of their clients on the 24th March 1983 on the basis that all the Plaintiff's rights and claims including those made in this action should not be prejudiced or deemed to be waived in anyway. Those terms were not accepted by the Defendant's solicitors and on the 29th March 1983 the Plaintiff's solicitors wrote to the Defendant's solicitors giving various reasons for rejecting the Defendant's notice to complete and indicating that it was the intention of the Plaintiff to amend its Statement of Claim in the present action. 14. In replying to that letter, the Defendant's solicitors warned the Plaintiff's solicitors on the 31st March 1983 that if the Plaintiff did not complete the purchase on or before the 31st March 1983 in compliance with the notice to complete the Defendant would rescind the Agreement. On the 6th April 1983, there having been no prior completion by the Plaintiff, the Defendant's solicitors wrote a letter to the Plaintiff informing it that the Defendant had determined the Agreement and rescinded the sale and forfeited all moneys paid by the Plaintiff under the Agreement. 15. Undeterred by the purported determination of the Agreement by the Defendant the Plaintiff, by its solicitors' letter dated the 23rd April 1983, sent to the Defendant's solicitors a copy of a draft Amended Statement of Claim and enquired whether the Defendant's solicitors would oppose an application for leave to amend. The proposed amendments included in the draft Amended Statement of Claim included, in paragraphs 13 to 16 inclusive, the pleading of the correspondence between the Plaintiff and the Defendant between the 17th March and the 6th April 1983 in the course of which the Defendant had purported to serve notice to complete upon the Plaintiff on the 17th March 1983 and subsequently, by its letter dated the 6th April 1983 purported to determine the Agreement, rescinded the sale and forfeited the moneys paid by the Plaintiff under the said Agreement. All these matters were proposed to be pleaded in the draft Amended Statement of Claim as matters arising after the issue of the writ in the action. 16. In paragraph 16 of the draft Amended Statement of Claim, it was proposed to plead the averment of the Plaintiff that the purported rescission of the Agreement by the Defendant was wrongful and constituted a repudiation of the Agreement which the Plaintiff have thereby accepted. 17. In paragraph 17 of the draft Amended Statement of Claim it was proposed to plead inter alia that the Plaintiff relied on the "breaches" of the Defendant pleaded in paragraph 16 as having caused loss and damage to the Plaintiff. 18. In the prayer for relief in the draft Amended Statement of Claim it was proposed to introduce under paragraph (d) a claim in the further alternative for a decIaration that the Agreement had been repudiated by the Defendant and accepted by the Plaintiff. In paragraph (f) of the prayer it was proposed to introduce a claim for "Damages". 19. By their letter dated the 29th April 1983 addressed to the Plaintiff's solicitors the Defendant's solicitors refused to consent to the proposed amendments contained in paragraphs 13 to 17 inclusive of the draft Amended Statement of Claim and in the proposed new prayers (d) and (f) on the ground that reliance was being sought to be placed upon a cause of action which did not exist at the date the proceedings were issued in November 1982. It was further contended by the solicitors for the Defendant in the same letter that the claim for damages contained in paragraph (f) of the prayer was wholly inconsistent with the case as formulated in the Originating Summons and in the Statement of Claim to the effect that the Plaintiff was seeking declarations by way of "elucidation of its right". After criticising the draft Amended Statement of Claim in other respects, the Defendant's solicitors concluded their letter by stating that the proposed amendment would be opposed. 20. Accordingly, by its summons dated the 13th May 1983 the Plaintiff applied for leave to amend the Statement of Claim in accordance with the draft Amended Statement of Claim. When the summons came up for hearing before Hunter, J. on the 15th July 1983 the parties were represented by their leading counsel and a consent order was made. 21. Leave was granted to the Plaintiff to amend the Statement of Claim in the form of an initialled draft order. Evidently Mr. Ching for the Plaintiff accepted that the matters pleaded in paragraphs 13 to 16 inclusive and relied upon in paragraph 17 were all matters relating to a new cause of action arising after the issue of proceedings in this action and the draft Amended Statement of Claim initialled by Hunter, J. omitted the matters referred to in paragraphs 13 to 16 inclusive of the previously proposed draft amended Statement of Claim and no reliance was placed upon them therein. The declaration previously contained in the proposed paragraph (d) of the proposed draft Amended Statement of Claim based on alleged repudiation by the Defendant accepted by the Plaintiff was deleted but the claim for damages originally inserted as paragraph (f) of the prayer was retained as paragraph (e) in the initialled draft. 22. Hunter, J.'s order was expressed to be without prejudice to two matters. The first matter was the right of the Defendant, if so advised, to assert that the whole or any part of the amended Statement of Claim be struck out. The second matter was the right of the Plaintiff, if so advised, to issue fresh proceedings based upon the matters asserted in paragraphs 13 to 16 of the original draft amendment. 23. Having crossed forensic swords by reserving their respective rights as indicated above before Hunter, J., the parties then proceeded to exercise the rights which had been thus reserved. The chronological sequence of events was as follows. The Plaintiff filed its Amended Statement of Claim on the 18th July 1983. On the 2nd August 1983 the Defendant issued a summons under 0.18 r.19 and under the inherent jurisdiction of the court applying for an order striking out the Plaintiff's Amended Statement of Claim on the ground that it was an abuse of the process of the court as the relief claimed therein by the Plaintiff had been rendered academic by reason of events occurring subsequent to the issue of the proceedings culminating in the Plaintiff's act in accepting what the Plaintiff contended was the Defendant's repudiation of contract on the 6th April 1983. The Defendant's summons further applied for an order dismissing the action and that the Defendant be at liberty to enter judgment for its costs, including the costs of the application. The returnable date for the Defendant's summons was the 1st November 1983. 24. In the meantime the Defendant filed its Amended Defence on the 17th August 1983 and the Plaintiff filed its Amended Reply on the 27th September 1983. Finally, on the 27th September 1983, the Plaintiff issued a writ in a new action (High Court Action 1983, No.11995). In that action the Plaintiff sues the Defendant as 1st Defendant together with Cheung Kong (Holdings) Ltd. as the 2nd Defendant. In paragraph 14 thereof the Plaintiff pleads that the purported rescission of the Agreement dated the 3rd February 1981 for the sale of the Tower B offices (referred to therein as "the Office Agreement") by the Defendant's solicitors' letter dated the 6th April 1983 was wrongful. It is further pleaded in paragraph 14 of the Statement of Claim in the second action that "If, which is not admitted, the Plaintiff had not hitherto accepted the 1st Defendant's repudiation by institution of the proceedings in H.C.M.P. NO. 2009 of 1982, the Plaintiff on or about the 24th April, 1983 accepted the further repudiation by the 1st Defendant." 25. My understanding of the use of the double negative in the context of the above quoted pleading is that the Plaintiff is seeking to contend in the second action that the bringing of the first action constituted an acceptance of the 1st Defendant's repudiation of the 1981 Office Agreement and that, if that contention fails, the Plaintiff contends that the purported rescission of that Agreement by the 1st Defendant's solicitors' letter dated the 6th April 1983 amounted to a repudiation of the Office Agreement which the Plaintiff accepted on or about the 24th April 1983. This approach is reflected in paragraph 1 of the prayer for relief. 26. Against that background the Defendant's summons dated the 2nd August 1983 came up for hearing before me on the 1st November 1983. The substance of the Amended Statement of Claim against the Defendant in the first action which it is now sought to strike out is as follows. It is pleaded in paragraph 1 that the Plaintiff acted at all material times by the above mentioned Mr. Ho and, by paragraph 2, that the Defendant was at all material times, the owner of the site on which Tower B was to be erected. By paragraph 3, it is pleaded that a Mr. George Zi Zang ("Mr. Zang") is the Executive Director and Deputy General Manager of Cheung Kong (Holdings) Limited ("Cheung Kong"), that the site was being developed by Cheung Kong and that in all matters thereinafter set out Mr. Zang acted on behalf of the Defendant. By paragraph 4 it is pleaded that at meetings held between Mr. Ho and Mr. Zang in the middle and late December 1980 Mr. Zang indicated to Mr. Ho that a company within the Cheung Kong Group was in the course of developing the site. It is further pleaded that Mr. Zang orally represented to Mr. Ho in relation to the intended development that –
27. By paragraph 5 the Plaintiff pleads that in reliance on the matters pleaded in paragraph 4 of the Amended Statement of Claim the Plaintiff entered into the Agreement dated the 3rd February 1981 with the Defendant and goes on to plead the material terms of that Agreement including the alleged implied term that the roof of Tower B should be of the same size as the 3rd to 13th floors and that reasonable access to the roof of the 13th floor would be provided. 28. In paragraphs 6 and 7 two collateral Agreements are pleaded. The first collateral Agreement is pleaded in paragraph 6 and is therein described as "the Management Agreement" allegedly made between the solicitors acting for the Plaintiff and the Defendant respectively, on or about the 31st January 1981, whereby, it is alleged, it was agreed between the parties that in consideration of the Plaintiff executing the Agreement the Defendant would confirm by letter the Plaintiff's right to manage the 3rd to 13th floors and to name Tower B. 29. The second collateral Agreement is pleaded in paragraph 7 and therein described as "the Curtain Wall Agreement" allegedly made between the parties on or about the 10th February 1981 when Mr. Ho received from Mr. Zang a coloured sketch pertaining to the curtain wall in relation to the building which, it is pleaded, served as a confirmation of the earlier representation made by Mr. Zang regarding the provision of gold-coloured curtain wall for the building and constituted a collateral Agreement. 30. By paragraph 8 of the Amended Statement of Claim the Plaintiff pleads that it resold the 3rd to 13th floors of Tower B on the 9th February 1982 to a named sub-purchaser at a gross profit of $167 per sq. ft. 31. After pleading the breach of the Management Agreement by the Defendant in advertising Tower B as Hunghom Commercial Centre the Plaintiff goes on to plead, by paragraph 10, the following matters:-
32. By paragraph 11 of the Amended Statement of Claim the Plaintiff pleads that in the premises -
33. After pleading in paragraph 12 a reference to the institution of proceedings by the Originating Summons issued on the 6th November 1982 "............ to seek elucidation of its rights pertaining to the matters pleaded herein", the Plaintiff goes on in paragraph 13 to plead that by virtue of the Defendant's breaches pleaded in paragraph 11 "............ the Plaintiff suffered loss and damage in the loss of profit at the rate of $167 per sq. ft. on the gross floor area as finally certified by the architect of the project". 34. Paragraphs (a), (b), and (c) of the prayer for relief contained in the Amended Statement of Claim seek declarations. The declaration sought in paragraph (a) is in substance a declaration of the Plaintiff's entitlement to have the Agreement annulled on account of "material mis-statements" or "mis-descriptions" by the Defendant of the premises comprised in the Agreement and therein described as 11 storeys of offices, whereas in fact the premises are not so comprised. Further and in the alternative to paragraph (a) the Plaintiff seeks by paragraph (b) a declaration that the Plaintiff is entitled to rescind the Agreement for mis-representations by the Defendant. Further or in the alternative the Plaintiff seeks a declaration under paragraph (c) that the Plaintiff is entitled to rescind the Agreement by virtue of breaches of the Management and the Curtain Wall Agreements. 35. Paragraph (d) of the prayer seeks repayment of the deposit of $66,685,960 paid by the Plaintiff under the Agreement but relief is sought "In the event of any of the said declarations being made". Under paragraph (e) the Plaintiff claims "Damages" and under paragraph (f) interest is claimed. 36. Mr. Cheung Wai Hing's affirmation filed on the 3rd of August 1983 in support of the Defendant's application to strike out exhibits the draft Amended Statement of Claim and the correspondence between the parties and their solicitors between the 17th March 1983 and the 29th April 1983. He contends that the relief sought in the present action has become academic because on the 23rd April 1983 the Plaintiff accepted what it contended was the Defendant's repudiation of the contract on the 6th April 1983. As Mr. Ching stressed in argument, the application was confined to the one ground that the relief sought in the Amended Statement of Claim had been rendered academic by reason of subsequent events so that the whole of the Amended Statement of Claim should be struck out and the action dismissed. 37. The clear implication was that the continuance of the action could have no further useful purpose and since it was doomed to failure it should not be allowed to continue solely for the purpose of determining the incidence of costs which should in any event be the Defendants'. 38. Mr. Swaine pointed out that the Plaintiff, when it began these proceedings by its Originating Summons on the 6th November 1982 had sought to take advantage of the discretionary jurisdiction of the court. It was sitting on the fence and avoiding actual rescission of the Agreement. He accepted that the authority of Société Maritime et Commerciale v. Venus Steam Shipping Co., Ltd. 9 Com. Cas. 289, a decision of Channell J. approved and followed by the Court of Appeal in Spettabile Consorzio Veneziano, & C. v. Northumberland Shipbuilding Co. Ltd. (1919) 121 L.T.R. 628 (C.A.) was some measure of authority for the adoption of such procedure in commercial cases. However he questioned the usefulness of this procedure where the sale of real property was involved. It was, he contended, a procedure appropriate where speed was necessary as in the Commercial Court. 39. Mr. Swaine contended, and I accept, that the prayer for relief in the Amended Statement of Claim is expressed in terms which do not claim relief in the form of the repayment of the deposit paid by the Plaintiff except in the event of declaratory relief being granted. In my judgment there is a well known formula for seeking relief in the form of actual rescission by the bringing of proceedings and, in the present case, if the Plaintiff had intended to rescind the Agreement by bringing the proceedings nothing could have been easier than for it to claim actual rescission, in the usual way, in the prayer for relief. 40. On the footing that there could be no question of a claim for damages arising unless the claim for entitlement to rescind was successful and rescission were to follow Mr. Swaine contended that the subsequent events leading to the admitted determination of the Agreement on the 6th or 23rd April 1983 had produced the result that it was now impossible for the Plaintiff to obtain any of the relief sought in the Amended Statement of Claim. The court would never, be contended, grant declaratory relief if it would be academic. 41. He cited Howard v. Pickford Tool Co. Ltd. (1951) 1 K.B. 417(C.A.) for this proposition which I accept as trite law whilst not accepting that the facts of that case are material here. He further contended that if the court was satisfied that no relief could be granted in this action because it had become academic the proper remedy was to strike it out. He relied on the decision of Megarry J. in Domer v. Gulf Oil (Great Britain) Ltd. reported briefly in 119 S.J. 392 where Megarry J. struck out a tenant's application for a new tenancy under Part II of the Landlord and Tenant Act 1954 after the tenant had gone out of possession and the landlord had resumed possession subsequent to the initiation of the proceedings but while they were still pending. 42. Mr. Swaine stressed that the proceedings had begun on the 6th November 1982 and the trial date had been fixed by Hunter J. on the 3rd December 1982 for the 30th January 1983. The continuation of the action after April 1983 would, Mr. Swaine contended, be an abuse of the process of the court. Having elected to take advantage of the discretionary jurisdiction of the court by sitting on the fence and putting the Defendant in the position where it still had to go on with the development after it had been alleged to be in fundamental breach, it was up to the Plaintiff to get on with the action and have it disposed of with expedition. The events which had occurred in April to change the situation and make the action academic were not to be laid at the door of the Defendant and the action should be dismissed with costs. 43. Mr. Ching for the Plaintiff was quick to draw attention to the precise scope of the application and to emphasise the matters which stood outside it. It was not, he pointed out, directed to striking out part of the Amended Statement of Claim but all of it and the summons itself and the evidence in support of it indicated only the ground that subsequent events had made the proceedings academic. There was no evidence of delay or of the responsibility for delay, he contended, nor was the application or the supporting evidence directed to show that the action as originally brought was one which the court should not entertain. 44. Furthermore, he contended, the application was not based on duplication of proceedings, or the question whether the Plaintiff had actually rescinded the Agreement, nor was it about an improper claim for interest or an improper or insufficiently particularized claim for damages. 45. He resisted the Defendant's application on two main grounds. First he contended that there was no authority to prevent the continuation of an action for the purpose of determining the incidence of costs. He relied on the note at p.979 of the English Annual Practice to emphasise that the discretion to determine the incidence of costs was given to the court or a judge only. 46. He stressed that the application was not made on the footing that the Plaintiff was at fault in bringing the action and it had not been shown that it was the Plaintiff's fault that events have overtaken the action, if indeed that is the case. It would not therefore be right, he contended, to strike out the claim and order the Plaintiff to bear all the outstanding costs. 47. Mr. Ching's second ground of oppostion was that the Plaintiff's claim for damages was maintainable independently of any claim for rescission because Section 3(1) of the Misrepresentation Ordinance (Cap. 284) expressly permitted such a claim. This basis for the claim for damages had, he contended, been overlooked by the Defendant who had consented to the amendment introducing the claim for damages under the order of Hunter J. There was no claim by the Defendant to strike out the claim for damages on the ground that it was improperly made. 48. Mr. Ching pointed out that the Plaintiff had been constrained to start the second action and plead its claim as appears in the Statement of Claim therein. Any attempt to claim the same relief in the first action would have meant defeat. The Plaintiff therefore could not, he contended, be compelled to discontinue the first action at the risk of costs. The first action remained valid and the Plaintiff intended to apply to consolidate both actions. 49. In addition to his two main points Mr. Ching advanced additional arguments. He submitted that in the second action the Plaintiff claimed damages for wrongful repudiation of the Office Agreement and not for misrepresentation. Also the claim for damages for negligent mis-statement was, he submitted, made against both Defendants and the 2nd Defendant was not a party to the first action. 50. As to the Amended Statement of Claim in the first action, Mr. Ching referred to the final paragraph of the affirmation evidence of Mr. Ho in support of the Originating Summons initiating the proceedings. Mr. Ho's affirmation should, he contended, be treated as a pleading. He relied on Mr. Ho's claim in that affirmation for the return of the deposit of $66,685,960.00 paid by the Plaintiff under the Agreement. The Plaintiff intended to argue, Mr. Ching said, that the bringing of the first action and the terms of the Originating Summons and Mr. Ho's evidence amounted to an acceptance of the Defendant's repudiation of the Agreement by breach or alternatively to actual rescission of the Agreement by the Plaintiff. Even if that could not ultimately be established it was arguable and a matter fit for trial and it was not plain and obvious that the Amended Statement of Claim should be struck out. He also invoked Section 2(2) of the Misrepresentation Ordinance but by this time he was clearly on the fringes of his argument. 51. Replying to Mr. Ching's argument, Mr. Swaine contended that as it stood the Amended Statement of Claim showed a cause of action for loss of profit of the sub-sale only on the basis of rescission of the Agreement. As pleaded the claim in damages was predicated on the principal declaratory relief being granted. He submitted that loss of bargain in the sense of the sub-sale going off was only possible either if the principal contract went off or the sub-sale went off. It was not pleaded that the Plaintiff had repeated the representations to the sub-purchaser. 52. If the pleading was inadequate the inadequacies should, Mr. Swaine contended, lie where they fall. Moreover, he stressed, the Plaintiff was clearly not electing to rescind in November when the proceedings began. It had been overtaken by the events in March and April and then attempted to introduce matters arising after writ. The introduction of the claim for damages had been made specifically without prejudice to the striking out application. 53. Furthermore, he contended, the Statement of Claim in the second action contained the same claim for damages for the same alleged breach and "Mis-statement" in paragraph 3 of the prayer included misrepresentation. Any ambiguity could be cured by amendment. 54. Mr. Swaine accepted that the basis for his application was that the relief sought in the first action was now academic. He also accepted that if the misrepresentation claim survived a consolidation situation arose but there was, he said, nothing to prevent the Plaintiff from launching fresh proceedings as it had done. 55. He finally contended that if the action as a whole was sterile it should not be kept alive only for the sake of costs or a claim in damages and if, on a fair construction of the Amended Statement of Claim, the claim for damages was dependent on the principal reliefs sought, then the court should adopt a robust view and strike out the whole action. The Plaintiff's real concern up to April 1983 had been to test the question whether it had the right to rescind. The prevent device of the Plaintiff to continue the action should not be permitted to succeed. It had been for the Plaintiff who brought the action to ensure that it came on for trial while the issues were still alive. The question of costs should not now be allowed to save the action for the Plaintiff. 56. I accept, as Mr. Swaine argued, that there can be no arguable case for contending that either the Originating Summons together with Mr. Ho's affidavit or the Statement of Claim filed on the 14th December 1982 were so expressed as to rescind the Agreement or amount to an acceptance by the Plaintiff of any repudiation by the Defendant of the Agreement. 57. No facts are pleaded to justify acceptance of alleged repudiation or to justify an allegation of rescission. The terms of the declaratory relief sought and the prayer in the Originating Summons and Statement of Claim for return of the deposit "in the event of" declaratory relief being granted make this clear. Likewise the words "in the event of" in the final paragraph of Mr. Ho's affidavit preceding the reference to a ruling in the Plaintiff's favour make it clear beyond doubt that the Plaintiff was bringing the first action to ascertain its rights and not committing itself to purported rescission by bringing the proceedings. 58. Put another way, if the action had been heard and the court had declined to make any declaration of the Plaintiff's entitlement to rescind it would not have ordered repayment of the deposit and it would have been open to the Plaintiff to perform the Agreement in accordance with its terms. 59. However, although the claim for damages was introduced at a late stage into the Amended Statement of Claim and without reference to Section 3(1) of the Misrepresentation Ordinance, I consider that the matters actually pleaded in the Amended Statement of Claim do comply with 0.18 r.7(1) by stating the material facts on which the Plaintiff relies for his claim for damages independently of rescission. Thus it is pleaded in paragraph 3 that Mr. Zang acted on behalf of the Defendant. In paragraph 4 it is alleged that various representations were made by Mr. Zang to Mr. Ho who acted for the Plaintiff and, in paragraph 5(a), it is pleaded that in reliance on the matters pleaded in paragraph 4 the Plaintiff entered into the Agreement. By paragraph 8 the re-sale is pleaded and so is the expected gross profit of $167 per sq. ft. In paragraph 10 and 11(b) the alleged untruthfulness of the representations of Mr. Zang is pleaded. 60. In particular, in paragraph 11(b) it is pleaded that Mr. Zang made his representations negligently "........ in that Mr. Zang failed to take any step or any reasonable step to ascertain or to acquaint himself with the precise redevelopment contemplated". This last quoted pleading was not necessary to establish innocent misrepresentation justifying rescission but was added by way of amendment and is clearly intended to anticipate any defence of "reasonable grounds to believe" for the purposes of Section 3(1) of the Ordinance. 61. Paragraph 13 of the Amended Statement of Claim is not elegantly pleaded and the reference to "breaches of the Defendant pleaded in paragraph 11" is not a model of clarity but the paragraph does identify the loss of profit on the sub-sale as the loss and damage alleged to have been sustained by the Plaintiff. 62. Although paragraph (e) of the prayer of the Amended Statement of Claim does not label the claim for damages as being both dependent on the success of the claim to entitlement to rescission and also on the statutory relief afforded by Section 3(1) of the Ordinance, I do not consider that omission produces the result that the pleading can only be interpreted on a fair and sensible reading as claiming damages only if the entitlement of the Plaintiff to rescind is established. The material facts are sufficiently pleaded. 63. If the action were to proceed and the Plaintiff succeeded in proving all the above mentioned allegations it is by no means plain and obvious, in my judgment, that the Plaintiff would not succeed under Section 3(1) of the Ordinance in the claim for damages even if the declaratory relief of entitlement to rescind were refused. 64. I emphasise that the attack by the Defendant on the pleading was made on the footing that on a fair interpretation of the Amended Statement of Claim the claim for damages was predicated on the success of the claim for the principal declaratory relief. I have rejected that argument. No argument was developed to the effect that even if the material facts to establish a claim for damages under Section 3(1) of the Ordinance were pleaded, nevertheless the damages claimed were confined to damages for loss of bargain whereas such damages are not recoverable under Section 3(1) because the tortious measure of damages applies. 65. Since the hearing I have considered the careful treatment of that issue in Mcgregor on Damages at pp. [996] to [1002] and, in my judgment, the conclusion at paragraph 1489 of that work, after a review of the authorities, is sufficiently tentative to indicate that for the purposes of this application it is not plain and obvious that the Plaintiff's claim under Section 3(1) of the Ordinance would fail if the claim proceeded to trial in this action. 66. Accordingly I conclude that the relief sought in the action is not purely academic and the Defendant's advisers failed to appreciate this when they applied to strike out the Amended Statement of Claim. Having arrived at that conclusion, it seems to me that the admitted basis for the application to strike out has gone. 67. I have accepted Mr. Swaine's argument that the claim for damages for "negligent mis-statement" in paragraph 3 of the prayer of the Statement of Claim in the second action does, on a fair and sensible reading of that pleading, include the claim under Section 3(1) of the Ordinance against the 1st Defendant in that action who is the sole Defendant in the present action. The material facts giving rise to that claim are pleaded in the Statement of Claim in the second action. Admittedly a claim under Section 3(1) of the Ordinance does not, strictly speaking, involve a question of negligence, but as indicated in Chitty on Contract, 25th Edition, Volume 1 at para.418, for practical purposes, it will usually be correct to equate liability under Section 3(1) of the Ordinance with liability for negligence in accordance with the principles applied in Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. (1964) A.C. 465. 68. However, as Mr. Ching pointed out, multiplicity of proceedings was not the basis for the Defendant's application to strike out in this case. Moreover, having found that the claim for damages under Section 3(1) of the Ordinance survives in the first action I am unable to conclude that the introduction of that claim, albeit at a late stage in the proceedings and as a procedural device to keep the action alive so as to keep alive the question of costs after consolidation of the two actions, amounts to an abuse of the process of the court. 69. The basis of the application to strike out was not that the bringing of proceedings for declaratory relief by the Plaintiff in November 1982 was improper. The Plaintiff found itself in the position in April where it had been overtaken by events so far as declaratory relief for rescission was concerned and the rules of procedure required that it should continue its litigation regarding the determination of the Agreement by bringing a fresh action. If the court is unable to conclude that the institution of the first action was in anyway improper it seems to me that it is in no way "an abuse of the court" within the meaning of that expression as understood by Lord Diplock in Hobbs v. Marlow (1978) A.C. 16 at p.40, for the Plaintiff to seek to keep alive the first action and consolidate it with the second action so that the question of costs may be dealt with at the end of the combined proceedings when the court has been able to determine the merits of the dispute between the parties. 70. Even if I had not concluded that the action had not become completely academic I would have felt reluctant to exercise the discretion of the court to strike out the Plaintiff's claim and dismiss the action on the footing that the Plaintiff was to bear all outstanding costs. The circumstances of this case are, in my judgment, clearly distinguishable from those very briefly reported in Domer v. Gulf Oil (Great Britain) Ltd. 119 S.J. 392. In that case the proceedings were doomed to failure as a result of the conduct of the Plaintiff who had destroyed his own action. It was therefore right that his claim should be struck out and his action dismissed with costs. In the present case the circumstances are much more complex and it is, in my judgment, by no means plain and obvious that the Plaintiff should bear the costs of the first action even if I am wrong in concluding that the relief sought in that action is not purely academic. In my judgment the best time to determine the question of costs is at the conclusion of the second action when the merits of the case have been determined.
Representation: Mr. Charles Ching, Q.C. with Mr. Ronny Wong instructed by M/s Fan & Fan for the Plaintiff. Mr. Swaine, Q.C. with Miss G. Li instructed by M/s Woo, Kwan, Lee & Lo for the Defendant. |