Gobind Mohan and Another v. Brian Shane Mcelney and Others

HCA004611D/1978

Action 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

Date of Hearing: 10 October 1984

Date of Delivery: 10 October 1984

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RULING

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1. The position we have now reached in this trial is this. The defendants have produced the third edition of their summary of the allegations made against the 1st and 2nd defendants in the main body of this pleading. It is an exceedingly useful document because the pleading as originally drawn (and I hasten to say that Mr. Eddis had nothing to do with that at all) was redolent with generality and repetition. Therefore it was highly desirable and exceedingly useful to distill what is there into a three-page document. Fortunately there is now very little issue about the third edition of that document as it stands. The issue is whether two things should be added to it: one deriving from the old paragraph 32 of the Statement of Claim, and the other from the old paragraph 35.

2. Now the old paragraph 32 contains this allegation against I think all the defendants except the third. "They jointly and severally failed to advise the plaintiffs properly or at all in respect of the said Herald Luxim transaction, and further after the stock market had declined, wrongfully and negligently failed to advise the plaintiffs as to their best interests and how to protect those interests". That was the totality of the allegation in that paragtaph. There was not a single particular given. It seems to me about as bad an exercise of the pleader's art as you could ever find.

3. A long request for particulars was then advanced. The pleader was asked to say, first of all, what advice should have been given. The answer to that was nothing: go round the pleadings, look at a lot of other references, and you find nothing. In respect of the second half, of the failure to advise the plaintiffs as to their best interests advice was said to have been required on a number of matters.  In answer to a further request about best interest, advice was said to have been required of a number of further matters.   In both cases the pleader uses the formula "but not limited thereto".

4. Again there then follow a series of heads of complaint. As an exercise in the giving of particulars it was a total disaster. It did not start to comply with the purpose of particulars set out conveniently in the note to Order 18 rule 12 not 2 in any material respect at all. It gave no sort of information as to what was really the plaintiff's case. It gave the opposing parties (which in that case I think included all but one of the defendants) no sort of idea of the case that they had to meet. What has happened as a result of this is that Mr. Eddis has been striving manfully to extract something from this mess.

5. The first issue which I have to decide is what is open to the plaintiffs to assert on this pleading. The rival viewpoint can be simply put. Mr. Eddis submits, and indeed has to submit, that anything is open under this pleading any allegation at all which can be brought in under the framework of reduction of capital and refund of monies. I should have recorded that the two material paragraphs to which my attention is now directed is an allegation that advice was necessary, this is 4 on page 90, "in relation to the sale of MPIL property and a consequent reduction in the issued capital of MPIL"; and item 4 on the next page, "to be advised as to whether MPIL should reduce its capital and refund the monies expended on its behalf in the acquisition of assets for it". What Mr. Eddis said is that any proposition, any sale of anything resulting in a reduction of capital, can be led in evidence, and advanced as negligence against these defendants, from the period when the market started to fall, which must be 9th March 1973, "until at least December of 1976". He has to make that assertion because he said that he is not adding to the paragraph, he is narrowing it down. He is simply specifying matters which are already encompassed by the pleading.

6. Conversely Mr. Scott submits that really this pleading as it stands is totally useless. It tells nobody anything. He really repeats the submission made to me at an earlier stage in this case by Mr. Irvine for the bank. The paragraph as it stands is useless. Therefore if you add anything to it by way of particulars, which is what is sought now to be done, you are for the first time giving it teeth.

7. For my part I have no hesitation in accepting Mr. Scott's proposition and in saying that this pleading as it stands is a complete waste of time. I am not prepared to do anything to encourage what I regard as an abuse of the rules and which produces a document which totally unhelpful to everybody, the court, or the opposing parties. It does nothing to define the issues. It simply gives you heads of complaint which (it is said) allows a party, a free vein to say whatever he likes within that umbrella. It necessarily follows in my judgment that what is being sought to be added to paragraph 32 here is a particular, which is not there in the pleading. It must be rejected on the two grounds which I no longer need to repeat from my repeated rulings in this case. The first relates to limitation and the second relates to discretion. So on that first ground this application must fail:

8. There are two additional grounds which leads to the same conclusion. The first ground is that in my judgment this allegation is simply not open on this Statement of Claim. This claim is brought by the plaintiffs in their personal capacity and as shareholders and directors of MPIL. But the advice which is alleged, the solicitors should have volunteered in these two paragraphs, is advice to MPIL itself. I can see no sort of basis on which personal complaint can be made of a failure to advise MPIL, and I can see no sort of basis on which anyone, other than MPIL, through the Board of MPIL could advance the contention which is sought to be advanced here. It is common ground that all these matters were matters for the Board of MPIL. It is MPIL that had to consider whether it sold any, and if so what property. It is MPIL that had to consider whether it reduced its capital. I do not see how this complaint in that form could be advanced in a personal action brought by two individuals. In addition it is apparent (and this is perhaps in echo of the first point) that this is a matter which would have had to have been considered by the Board of Directors. If this matter was to be pursued it seems to be inevitable that evidence would have to be given on these matters by the Board members. If there is any duty to advise, the duty was owed, in my judgment, to the Board of MPIL and to nobody else.

9. The third point is this. It is said that the particulars at present advanced raise more questions than they solve and that they, themselves open some pandora's box leading to a hundred and one other questions. Having listened to the argument and having listened particularly to Mr. Eddis's attempt to answer that, I can only say I am convinced that that submission is right.

10. These particulars simply lead to a whole series of fresh questions. If this matter is allowed it would unquestionably add appreciably to the length of this case by the time one had mailed down a whole series of new points which were constantly being advanced in this context by Mr. Eddis. I invited him to put it in writing because it seemed to me that I was getting two very confused differing accounts at an earlier stage.  Having put it in writing it is perfectly obvious that this has not in fact clarified the point, and it has simply raised yet more problems.

11. So that on those three grounds in my judgment this matter cannot be allowed to be added by way of voluntary particulars to paragraph 32 or at all.

12. The other paragraph where a dispute arises is paragraph 35. Now this raises, again in language of supreme generality, complaints against these solicitors in respect of the Herald Luxim transaction because it is said: "in breach of their duty as solicitors and/or breach of trust, and/or breach of fiduciary duty, and/or negligently" in the said Herald Luxim Building transaction that "they failed to advise the plaintiffs properly or at all". I pause there because that gave rise to three specific particulars later. I need not trouble to refer to those because it is now common ground that those particulars add nothing to what is already in the pleading. The important allegation is what follows in paragraph 35 to this effect: "and/or to seek separate legal advice for the plaintiff well knowing at the time that they were acting for (and then their other clients are set out) and were or would be accordingly exposed to serious conflicts of interest and duty". What is said in respect of that by Mr. Scott is that those words in the paragraph reveal no cause of action; are prejudicial and embarrassing; and can prejudice the fair trial of this case by an inquiry into a solicitors' duty in acting for two parties, Hong Kong Practice in that respect, and so on. You only had to look at the paragraph to see that it must fail.

13. Now Mr. Eddis' first argument in support of that paragraph is That the existence of a conflict of duty itself shows a cause of action, and that therefore the paragraph is sufficient because it pleads the existence of a conflict. I cannot accept that proposition. It is perfectly true that a solicitor who acts for both parties in a transaction can put himself at risk, but the fact that there is a potential risk it does not necessarily give rise to liability. The sort of situation which can arise, and which is referred to in the cases is where in the course of acting for A and B, the solicitor in his capacity as A's solicitor learns certain information from A which is his duty to A to keep quiet about; whereas in his capacity as solicitor to B it is his duty to reveal to B. What is said in the cases is that given that situation the solicitor is in a mess. He must act in breach of his duty to one or the other. That is the sort of situation that can arise if you have a conflict of duty. But it is only in that special sort of situation that any breach of duty must arise.

14. If you have got a conflict of duty situation which you want to rely upon as giving rise to an action of negligence, it seems to me that you have to assert at least the following propositions. First that he put himself in a position of potential conflict; secondly that a particular problem arose; thirdly that that gave rise to a duty on him to do something or other; fourthly that he was in breach of that duty and fifthly what the consequences are?  In other words a properly pleaded case of negligence arising out of conflict of duty involves something like five propositions not one. All that I have in this Statement of Claim at the moment is the first proposition. On that basis I have absolutely no doubt that this allegation is not sufficient and is embarrassing. This seems to me to emerge precisely from the authorities to which Mr. Eddis was referring this morning.

15. When Mr. Eddis realised the difficulties that faced him on this pleading (I repeat it is not his handly work), he then advanced a different proposition which really was that he should have leave to amend by adding some particulars. The application arises in this way.

16. It seems to have been assumed by the various pleaders in this case that because the Herald Luxim contracts were expressed to be conditional, they created no more than options to purchase, and that the plaintiffs and MPIL could resile from those contracts at will by stopping the company floatation. The assumption seems to go right through the pleading. I had yesterday to give a ruling on whether or not that allegation was sufficiently pleaded (I think in the original of 32). I had no difficulty in ruling that it simply did not start to leave the ground as at the date of the agreement, because no such plea was remotely advanced in that paragrraph. I ruled likewise that it could not be raised at a later date. In the cause of that ruling I expressed some surprise that this assumption had been made, and that the prospect of self-induced frustration had never crossed anyone's mind.

17. The effect of Mr. Eddis' current application to amend this paragraph is now to add specifically into the document a plea which is almost indistinguishable from that which I was considering yesterday. Yesterday it was being put upon the basis that it was negligence of the solicitor not to volunteer advice that there was no risk in the Agreement. Today it is being put that it was negligent of the solicitor not to have advised some release mechanism in that same document. I can only assume that this application is made because having seen the way my mind was going, it is now desired to add in this allegation under a fresh guise by way of particulars in this paragraph.

18. The assertion sought to be added, is that it was negligent of Mr. McElney in drawing the guarantee agreement not to advise the 1st plaintiff that there must be some release mechanism, and it must be some release at his option. I am bound to say I find it an astonishing matter to be advanced. It seems to me apparent from what appears in the Statement of Claim itself that Mr. Bloch's answer to that would have be short and very simple. It would have been "no". He wanted a fixed price in substance for this property and this agreement was the only way of achieving it. There was no prospect, as far as I can see, of any release mechanism ever been remotely acceptable to him.

19. That this is a brand new allegation now being made is obvious as can be. Furthermore it is being made only after I had given a ruling adverse to the plaintiffs which more or less covers the same ground yesterday. It seems to me quite impossible even to consider allowing this brand new application to be made at this juncture: again on the same two bases of limitation and discretion which I have been through so often in the case. So that for those reasons it is plain, I think, that there is nothing left in paragraph 35.

20. At one stage I was minded to think that I could only strike out half the paragraph; that part of the paragraph which deals expressly with conflict of interest. But since I am told there is nothing else in the paragraph which is worth keeping, and I am told that by both parties, the solution is now simple I direct that paragraph 35 be struck out. That means that the third edition of the defendant's summary of the live allegations of negligence in these pleadings now accurately summarises what is left in this case for me to try.

Representation:

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

Mr. Peter Scott, Q.C., Mr. D.A.L. Wright and Mr. Andrew Li instructed by M/s Lo & Lo for 1st and 2nd Defendants.

Mr. Alexander Irvine, Q.C. and Mr. Anthony Dicks instructed by M/s Baker & McKenzie for 4th Defendant.