Imada Luenwah World Ltd v. Yip Ming Cheong and Another

Read the full judgment text of DCCJ 5540/2003 on BabelCite. This District Court judgment.

1. The Summons returnable before me on 25 th October 2006 (“ 2 nd Summons ”) is an application by Imada Luenwah World Ltd (“ Imada ”) for leave (a) to amend its Re-Re-Amended Statement of Claim and (b) to dispense with service of the Re-Re-Re-Amended Statement of Claim on the opposite party, ie Yip Ming Cheong (“ Yip ”) and Wong Chi Nang (“ Wong ”) both trading as Mei-King Machinery Engineering (“ Mei-King ”).

Case No.DCCJ 5540/2003
Court
District Court
Date
Judge
Case Document
100%Judiciary

DCCJ5540/2003

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 5540 OF 2003

                                     

BETWEEN

  IMADA LUENWAH WORLD LTD. Plaintiff
  and  
  YIP MING CHEONG and WONG CHI NANG Defendant
  both trading as MEI-KING MACHINERY ENGINEERING  

____________________

DCCJ6521/2003

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 6521 OF 2003

BETWEEN

  YIP MING CHEONG and WONG CHI NANG Plaintiff
  both trading as MEI-KING MACHINERY ENGINEERING  
  and  
  IMADA LUENWAH WORLD LTD. Defendant

Coram:   H H Judge Marlene Ng in Chambers (Open to the Public)

Date of Hearing:    25th October 2006

Date of Decision:   25th October 2006

Date of Handing Down Reasons for Decision:    27th October 2006

______________________________

REASONS FOR DECISION

______________________________

Introduction

1.The Summons returnable before me on 25th October 2006 (“2nd Summons”) is an application by Imada Luenwah World Ltd (“Imada”) for leave (a) to amend its Re-Re-Amended Statement of Claim and (b) to dispense with service of the Re-Re-Re-Amended Statement of Claim on the opposite party, ie Yip Ming Cheong (“Yip”) and Wong Chi Nang (“Wong”) both trading as Mei-King Machinery Engineering (“Mei-King”).

2.After hearing submissions, I made the following orders at the hearing :

(a) leave be granted to Imada to re-re-re-amend the Re-Re-Amended Statement of Claim in DCCJ5540/2003 as per paragraphs 3, 4A, 7, 8a and 8b of the draft annexed to the 2nd Summons (“Draft”);

(b) Imada be entitled to retain the existing paragraph 8a of the Re-Re-Amended Statement of Claim in DCCJ5540/2003 relating to the plea of total failure of consideration if it sees fit and the same shall be re-numbered as paragraph 8c;

(c) Imada do on/before 27th October 2006 file and serve the Re-Re-Re-Amended Statement of Claim in DCCJ5540/2003;

(d) leave to Yip and Wong trading as Mei-King to file and serve an Amended Defence and Counterclaim in DCCJ5540/2003 if so desired on/before 9:30am on 6th November 2006;

(e)        Imada do arrange for paginated copies of all newly filed/served pleadings for insertion in the trial bundle for Yip, Wong and the court before/upon the resumption of the trial on 6th November 2006;

(f) Imada do pay costs of the 2nd Summons to Yip and Wong to be taxed if not agreed.

3.After the hearing, a review of the papers reveals that on the second day of trial (ie 19th July 2006) I granted leave to Yip and Wong to amend paragraph 11 of the Defence and Counterclaim in DCCJ5540/2003 by replacing the phrase “Paragraph 8 is denied ……” with “Paragraphs 8 and 8a are denied ……”. In light of the minor amendment and the fact that Yip and Wong act in person, I further directed the filing and service of the Amended Defence and Counterclaim in DCCJ5540/2003 be dispensed with.

4.In the circumstances, the order made in paragraph 2(d) above should refer to the Re-Amended Defence and Counterclaim and not the Amended Defence and Counterclaim.

5.Ms Lau, counsel for Imada, informed me that if Yip and Wong do not further amend Mei-King’s pleadings pursuant to the above order, they will be taken to have traversed Imada’s new averments in the Re-Re-Re-Amended Statement of Claim and no pleading point will be taken against them.

6.I informed the parties that I will hand down my reasons for decision in due course and this I now do. I also told Yip and Wong that they can liaise with my clerk to arrange for the court interpreter to interpret these reasons to them in the punti language.

Background

7.For proper understanding of the application, it is necessary to set out the background in some detail. The trial of the present proceedings commenced on 17th July 2006 with three days reserved. Shortly before the trial, Imada issued a Summons (“1st Summons”) returnable before a Master in chambers inter alia for leave to be granted to Imada to :

(a) file/serve the affirmation of Suen Ching as per the draft attached to the 1st Summons (“SC Affirmation”) and for the SC Affirmation to be read at the trial or as the trial judge may direct otherwise;

(b) amend the Reply and Defence to Counterclaim as per the draft attached to the 1st Summons.

8.The learned Master adjourned the 1st Summons to be heard before me on the first day of trial. After hearing submissions, I granted leave to Imada to file/serve the expurgated SC Affirmation and for the same to be read at the trial, but refused leave for Imada to amend the Reply and Defence to Counterclaim. Full reasons were given in my ruling on 17th July 2006.

9.Briefly, I held that Imada’s proposed amendments to add a new line of defence to Mei-King’s counterclaim (ie Mei-King agreed to waive the balance price of the subject machine (“Machine”) in the sum of HK$39,560.00) was late and there was no satisfactory explanation for the lateness. Further, such proposed amendments were bare averments with no particularity and no supporting evidence identifiable from the discovered documents or Imada’s witness statements. I also bore in mind the litigation prejudice that would be caused to Yip and Wong as a result of Imada’s intention not to call Suen Ching as a live witness for cross-examination on the alleged agreement. In the circumstances, the proposed amendments to Imada’s pleadings were disallowed.

10.However, I granted leave for Imada to read the SC Affirmation (but without some new assertions therein) at the trial. The contents of the expurgated SC Affirmation were consistent with the filed witness statement of Suen Ching. At that time Suen Ching had a serious illness and his prognosis was uncertain. The new assertions raised a pleading point, but more importantly, if they were allowed Yip and Wong would suffer litigation prejudice in not being able to cross-examine Suen Ching on those matters. Consequently, the new matters were excised from the SC Affirmation.

11.On the second day of trial, in the course of Ms Lau’s opening submissions, I asked for clarification as to Imada’s cause(s) of action and the corresponding relief(s). Ms Lau at first submitted Imada rested its case on breach of contract (including breach of the requirement of “fitness for purpose”), and would not rely on any claim for total failure of consideration, restitution or rejection. Ms Lau explained there was no plea of rejection because Imada had never accepted the Machine in the first place. But she later submitted that although not specifically pleaded Imada was actually relying on a plea of rejection by averring that it had not accepted the Machine.

12.Ms Lau further submitted that the reliefs sought for the cause of action based on breach of contract were (a) repayment of Imada’s part payments of the price to Mei-King in the total sum of HK$440,440.00 (“Paid Price”) or alternatively (b) damages being and/or being equivalent to the Paid Price.

13.The hearing on the second day of trial was stood down twice at 10:06am and 10:23pm respectively for Ms Lau to take instructions on Imada’s cause(s) of action and the corresponding relief(s). After the adjournments, Ms Lau made further submissions on these matters. According to Ms Lau, Imada’s primary stance was that it rejected or never accepted the Machine (which failed to satisfy the contractual requirements), so it claimed for repayment of the Paid Price. Imada’s alternative stance was that if it failed to prove rejection or non-acceptance of the Machine (which was denied), it would claim for damages for breach of contract due to the Machine’s failure to perform as contractually stipulated and such damages would be or would be equivalent to the Paid Price. There was no claim for loss of profits or for loss of use of Imada’s factory space for storing the Machine.

14.The hearing was stood down again at 10:50am for Ms Lau to consider how damages under the aforesaid alternative cause of action would be or would be equivalent to the Paid Price. After the adjournment, Ms Lau reiterated that the Paid Price was equivalent to the value of the Machine and/or to Imada’s loss/damages, and she applied to further amend the Re-Amended Statement of Claim to add paragraph 8a to plead total failure of consideration with consequent liability on the part of Mei-King to repay the Paid Price.

15.Yip and Wong did not object to the proposed amendments and I granted leave for Imada to so amend the Re-Amended Statement of Claim and for Yip and Wong to amend Mei-King’s Defence and Counterclaim to deny such averment.

16.After Ms Lau completed her opening submissions, Imada’s sole witness Suen Hung was called to give evidence. On 19th July 2006, ie the last scheduled day for the trial, Suen Hung completed his evidence and Imada closed its case. The trial was then adjourned part-heard to 6th and 7th November 2006.

Proposed amendments : general

17.The present proposed amendments of the Re-Re-Amended Statement of Claim can be summarised as follows :

(a) to aver that the subject contract (“Contract”) was a written contract (paragraph 3 of the Draft);

(b) to aver that in order to give business efficacy there was an implied term for Mei-King to supply all relevant documents relating to “the instructions of the Machine” including 電腦方程式and電腦版圖 (paragraph 4A of the Draft);

(c) to aver that when the Machine did not work as contractually provided, was not in good function and was not fit for the purpose it was bought, Mei-King was in breach of the Contract (paragraph 5 of the Draft);

(d) to correct a typographical error (paragraph 7 of the Draft);

(e) to aver that apart from being unwilling to confirm the Machine was in order, Imada also refused to take delivery of and was entitled to reject the Machine, whereby Imada suffered damages being or being equivalent to the Paid Price (paragraphs 5, 8a and 8b of the Draft);

(f) to plead a new cause of action based on fraudulent and/or negligent misrepresentation (paragraphs 8c to 8h of the Draft);

(g) to expand the cause of action on total failure of consideration to rely on the new misrepresentation claim (paragraph 8h of the Draft);

(h) to add two new reliefs, ie return of the Machine to Mei-King and rescission of the Contract, which Ms Lau explained were the corresponding reliefs for the new misrepresentation claim (prayer of reliefs 1A and 1B of the Draft).

18.When the proposed amendments were explained to Yip and Wong, they indicated they had no objection to Imada’s request to amend the Re-Re-Amended Statement of Claim in respect of (a) to (e) above.

Proposed amendments : new misrepresentation claim

19.The main contention in relation to (f) to (h) concerns the new cause of action on fraudulent and/or negligent misrepresentation. Imada filed and served the affirmation of Shun Mei Mei Mimi (“Madam Shun”), Suen Ching’s daughter, in support of the 2nd Summons (“SMMM Affirmation”).

20.It appears that Suen Ching passed away on 25th September 2006. Madam Shun in her affirmation explained by way of background how Suen Ching was upset with the Machine’s failure to work properly, how he preferred to have the Machine fixed (if it could be so fixed) since Imada had paid for it, and how he was aggrieved by Mei-King’s irresponsible attitude.

21.The SMMM Affirmation went on to say that “to expedite the matter, [Suen Ching] asked my legal representative what minimum changes [Imada] would have to made so that [Imada] could claim the return of the purchase price as soon as possible”. Such statement is not particularly intelligible, but Ms Lau explained at the hearing that Madam Shun was referring to Suen Ching’s liaison with Imada’s legal representatives during the trial in July 2006 (see paragraphs 22-23 below).

22.The SMMM Affirmation continued to state that Madam Shun was advised by her legal representatives there was a need to amend the pleadings “to reflect our case which in law could amount to total failure of consideration as well as misrepresentations. [Madam Shun] have also been explained to [her] understanding that since the trial is ongoing, the more changes we made, the more likely that the court would refuse and/or the trial would be adjourned. Of course, these are legal issues and [Madam Shun] do not have any thorough understanding of these legal matters. After discussion, [Imada] decided not to make further changes for fear that the whole proceedings would be adjourned” (my emphasis).

23.I am informed by Ms Lau that the discussions and legal advice referred to by Madam Shun in paragraphs 21-22 above were given to Suen Ching, Imada and herself on/about the first and second days of the trial. Ms Lau submitted that at that time Imada received legal advice on two unpleaded causes of action (ie total failure of consideration and misrepresentation), but decided to apply to amend its pleadings to only include the plea on total failure of consideration but not the plea on misrepresentation.

24.Madam Shun went on to say in her affirmation that “[now] that the case had been adjourned, [Imada] decided to instruct counsel to apply to amend as per the Re-Re-Re-Amended Statement of Claim. [Madam Shun has] been explained that the risk of adjournment is minimal because (a) the trial would resume on 6th November 2006; and (b) the amendments involved evidence that have either been included in [the SC Affirmation] or given by [Imada’s] witness Mr. Suen Hung thus would not prejudice [Mei-King]. [Madam Shun] was further explained to [her] understanding by [her] legal representative that if [Imada] do not make the amendments now, [Imada] could not invite this Honourable Court to rule on this issue” (my emphasis).

25.Madam Shun added that whilst it might not be relevant to the application, it was Suen Ching’s wish to bring Mei-King to justice so that it should be made to understand “customers are not to be lied or misrepresented like that” (my emphasis).

26.I am not persuaded by Madam Shun’s explanation, which I find to be neither reasonable nor justifiable.

27.First, even on Madam Shun’s explanation, there is no excuse why the application was not issued promptly when the trial was adjourned on 19th July 2006. The 2nd Summons was not issued until 13th October 2006, almost three months after the adjournment of the trial and shortly before the part-heard trial dates were due to resume.

28.Secondly, even on Madam Shun’s explanation, it is plain that after receiving legal advice Imada made a conscious tactical decision in July 2006 to do the minimum possible by not to putting forward the misrepresentation claim so as to avoid the risk of (a) adjournment of the trial and/or (b) refusal by the court to grant leave to amend if too many amendments were asked for.

29.In fact, even on Madam Shun’s explanation (see paragraph 25 above), it was claimed that Suen Ching (and therefore Imada) knew Mei-King “lied and misrepresented”. Further, Imada had legal representation since the commencement of the present proceedings if not earlier and its legal representatives knew that without proper pleadings Imada could not ask this court to rule on any unpleaded cause of action (see paragraph 24 above). Yet Imada chose not to include the misrepresentation claim against Mei-King even though it amended the Statement of Claim three times and even though this court stood down the hearing three times on the second day of trial for Ms Lau to consider and take instructions on Imada’s cause(s) of action and corresponding relief(s).

30.By the SMMM Affirmation (as clarified by Ms Lau), Imada said that although it had the primary factual information as well as legal advice on the misrepresentation claim to hand during the trial in July 2006, it adopted a strategic decision to apply for further amendment of its pleadings to only raise the plea of total failure of consideration. But now that (a) Imada had led its evidence and closed its case, (b) Yip and Wong had completed their cross-examination of Suen Hung (Imada’s sole witness) when unbeknownst to them there was a misrepresentation claim in the wings, and (c) the trial was adjourned part heard, Imada deemed it appropriate to spring the misrepresentation claim on Yip and Wong because (i) Imada could rely on the fait accompli of having led its evidence and closed its case, and (ii) the risk of further adjournment was considered remote.

31.Such approach appears to run counter to the candour expected of parties in modern civil litigation, and Ms Lau’s oral and written submissions only served to underline such concern. Ms Lau acknowledged that the cause of action based on misrepresentation was not pleaded, but went on to emphasise that (a) Imada’s witness had “already in his evidence covered the said point” and (b) “[since] the case has been adjourned, [Imada] decided to apply for leave to make the amendments”.

32.But Ms Lau argued that amendments for the purpose of determining the real question in controversy between the parties to any proceedings “as well as of correcting any defect in the pleadings” should be allowed. In fact, the relevant extract from Hong Kong Civil Procedure 2006 Vol.1 at para.20/8/6 that Ms Lau relied on referred to “correcting any defect or error in any proceedings” and not “correcting any defect in the pleadings”.

33.Be that as it may, the reality here is (as I have said) on the second day of the trial time and opportunity were given to Imada to consider “the real issues in controversy between the parties” and to apply to amend its pleadings if appropriate. Indeed, a better part of the morning of the second day of trial was spent on such matters. Yet Imada not only did not intimate that a misrepresentation claim would be in the wings, Ms Lau in her submissions on the second day of trial in relation to Imada’s cause(s) of action and corresponding relief(s) indicated to the contrary :

“……

官: 咁所以如果一般嚟講,法理個原則或者如果妳係嘅,妳可以同本席提及法理原則,好讓本席理解,若然係breach of contract嘅話,咁個濟助就係damages,係賠償。

MISS LAU : 係。

官 : 咁如果你話係應該退回款項,一,就係total failure喇,二,就係話有rejection,咁呢一個想弄清楚個訴因。

MISS LAU : 係,唔該,法官閣下,咁所以如果從嗰個法理嘅立場講,而唔用嗰個籠统嘅……

官 : 或者如果本席所提及嘅法理係錯誤嘅,咁亦都歡迎大律師提出妳嘅意見。

MISS LAU : 我明白,法官閣下,但係當然喺合同入面,我哋都知道嗰個,如果嗰個contractbreach咗嘅,咁唔係有咩嘢mistake呀,唔係有咩嘢misrepresentation呀,咁佢唔會ab initio嘅,咁所以喺咁嘅情況之下,我哋可以得到嘅索償就係一個賠償喇,咁而喺呢一度,我吔要求嗰個賠償金額就係440,440

官 : 咁我想弄清楚喇,而家總結咗頭先嘅—頭先同大律師嘅對話,現在你哋所索償嘅濟助就係—訴因就係毀約嘅訴因?

MISS LAU : 係。

官 : 然後所索償嘅濟助雖然妳係有一個—提及一個數額,但係妳要求嘅係一個賠償嘅濟助。

MISS LAU : 賠償,係。

……” (my emphasis)

Since then up till the issuance of the 2nd Summons, Imada made no attempt to disabuse the court or Yip/Wong of the impression from the above submissions that there was no plea of mistake or misrepresentation in the wings. It was on such basis that the parties proceeded with the trial and dealt with Suen Hung’s evidence.

34.In balancing the interests of both parties and considering what is just, I am unable to say Imada’s approach has been fair and just.

35.It is incumbent on a claimant to set out its case with clarity. Imada being legally represented cannot be unaware of the purpose of pleadings. By the time the trial commenced or indeed before Suen Hung gave evidence, its pleadings should have been in order. Indeed, even on the second day of trial Imada was given time and opportunity to deal with these matters. I cannot ignore the fact that Imada amended its pleadings even on the second day of trial to add the plea of total failure of consideration.

36.I have referred Ms Lau to the judgment of Ma CJHC in Wing Hang Bank Limited v Crystal Jet International Limited & ors CACV255/2002 (unreported, 12th May 2005) which succinctly summarised the basic principles :

“6. …… (1) The purpose of pleadings is fairly and precisely to inform the other side of the stance of the pleading party so that proper preparation is made possible, and time and effort are not expended unnecessarily on other issues ……

(2) In a trial, particularly where evidence is given by witnesses, it becomes extremely important that each side knows exactly what are the live issues. Where issues are sought to be introduced that have not been adequately pleaded, amendments must be sought unless the consent of the other party or parties has been obtained. It will simply not do for the pleaded issues to be ‘slipped in’ when evidence is being given in the hope that the other side is not sufficiently alert to object. Much testimony given in the course of a trial may in truth relate to a number of possible aspects or may simply be background information. Obviously, counsel must be astute to object when necessary but the primary responsibility of ensuring that any issue is properly before the Court is on the party seeking to advance that issue. He must do so clearly and not ambiguously, and the usual way of doing so is through the pleadings. Care must be taken to plead issues clearly, and not draft pleadings either vaguely or ambiguously perhaps in the hope that the other side might not readily or easily understand a party’s real case. While vaguely or ambiguously drawn pleadings may enable a party to escape a strike out application (since striking out is only for plain and obvious cases), this is not to say that where a court has to decide whether or not an issue is to be permitted to be run, it will smile kindly on such types of pleading.

……

8. …… The object is not to invite prolixity in pleadings but to achieve what has always been the position : to fairly inform the other side and the Court of a party’s case, identifying the issues and the true extent of the dispute between the parties. ……” (my emphasis)

37.I have also referred Ms Lau to ADS v Wheelock Marden & Co Ltd [1994] 2 HKC 264, 269-270, where Bokhary JA (as he then was) had the following to say regarding pleadings :

What pleadings must do – generally …

Those complaints go to pleadings. So does the bulk of the other complaints ventilated before us. That being so, it is important to remember this. Our procedure aims to ensure that litigation, particularly the trial itself, is conducted fairly, openly, free from surprise, and without unnecessary delay or expense. In the attainment of that objective, pleadings have a fundamental role to play. Accordingly, there are a number of things which pleadings should do. Ideally, they would do them from the outset. In any event, they must do them by the time they have been properly particularized – whether particularized on the pleader’s own initiative, upon the other side request, or pursuant to the court’s order.

What those things are is to be gathered from the decided cases. That exercise has been performed by the learned editors of the 1993 Supreme Court Practice. And, as one sees from note 18/12/2 at pp 307-308 of Vol 1 thereof, the things which properly particularized pleadings must do are to:

(1) to inform the other side of the nature of the case they have to meet as distinguished from the mode in which that case is to be proved;

(2) prevent the other side from being taken by surprise at the trial;

(3)  enable the other side to know what evidence they ought to be prepared with and to prepare for trial;

(4) limit the generality of the pleadings, the claim and the evidence;

(5) limit and define the issues to be tried, and as to which discovery is required; and the hands of the party so that he cannot without leave go into any matters not included (although if the opponent omits to ask for particulars, evidence may be given which supports any material allegation in the pleadings).” (my emphasis)

38.In my view, to keep a cause of action up one’s sleeve without properly identifying the real issues in controversy in one’s pleadings (as required under the above principles and particularly when opportunity to do so was given) so as to avoid the risk of adjournment of the trial (and no doubt the potential cost implications that would flow from any such adjournment) and so that the opposite party would complete their cross-examination in ignorance of such cause of action is plainly an attempt to overreach. I bear in mind the new claim is based on inter alia fraudulent misrepresentation, and an assertion of fraud, albeit in the Derry v Peek sense, is not a light matter. Although there is no need at this stage for me to find the proposed misrepresentation claim to be mala fide, it is unlikely this court will, as Ma CJHC said, smile kindly on the approach adopted.

39.In Chau Mei Lee Fragrance & anor v Ng Yee Tim CACV97/1995 (unreported, 18th December 1996), Ching JA said as follows :

“Amendments should not be refused however late the application is made provided that they are not designed to over-reach and provided that no prejudice is caused to the other side which cannot be cured by costs and an adjournment if necessary.” (my emphasis)

The Court of Appeal endorsed Ching JA’s views again in Tang Kam Wah, Tang Ching Fan, Tang Ka Hi, Tang Ming Cheung (or Tsueng), Tang Luen Hing and Tang Tai Tong as Managers of Tang Mung (or Mang or Mun) Lau Tso & anor v Tang Ming Yat & anor CACV522/2000 (unreported).

40.And there is more. As regards the relevant principles on late amendment of pleadings, I have previously referred to the decision by Mr Recorder Kwok, SC in Lam Wai Hung v Lam Chun Hung and ors HCA2038/2004 (unreported, 22nd June 2006) in my ruling of 17th July 2006. Ms Lau relied on the principles set out in paragraphs 24-26 of the decision of the learned Recorder in support of the 2nd Summons. Those principles have been set out in paragraph 16 of my ruling and I do not propose to repeat them in detail.

41.Briefly, the learned Recorder said that for late amendments of pleadings, particularly applications to amend during the trial, the proposed amendments must be sufficiently intelligible and adequately particularised. “The court will always look at the materiality of the proposed amendment. An inconsistent or useless amendment will not be allowed, see Hong Kong Civil Practice 2006 paragraph 20/8/24. The court is entitled to have regard to the merits of the case in an application to amend if the merits are readily apparent and are so apparent without prolonged investigation into the merits of the case, see Hong Kong Civil Practice 2006 paragraph 20/8/6”.

42.As explained above, the new claim here is based on fraudulent and/or negligent misrepresentation. Fraud (even in the Derry v Peek sense) is viewed with more care than other civil wrongs. The learned Recorder said at para.8 of his decision that “[it] is well-known that fraud can only be pleaded when there is sufficient evidence and that it must then be specifically pleaded and the party making the allegations must give full particulars of them, see generally paragraph 18/8/13 of Hong Kong Civil Procedure 2006”. (my emphasis)

43.On the day after the learned Recorder delivered his decision, Lam J in his Reasons for Decision in Magic Score Limited v The Hongkong and Shanghai Banking Corporation Limited & anor HCA11077/1994 (unreported) reiterated that allegations of fraud are not to be pleaded lightly.

44.In the ADS case (supra) at p.270, Bokhary JA (as he then was) had the following to say on pleading fraud and the like :

… and especially where fraud is alleged

To the generality of the foregoing must be added the special rule that allegations of fraud must be pleaded distinctly and with the utmost particularity. The word 'distinctly' is the one used by Thesiger LJ in his well-known statement in Davy v Garrett (1878) 7 Ch. D 473 at p. 489 as to how fraud is to be pleaded. And the expression 'utmost particularity', as one sees from note 18/8/8 at p 297 of Vol 1 of the 1993 Supreme Court Practice, is the one chosen by its learned editors and has the authority of their combined experience. That special rule arises in this case.

Never before as much as now

None of the basic rules of pleading have anything to do with technicality. All of them have everything to do with practical justice. They have always been of importance. Never before as much as now. For these days, there are more and more cases so vast and so complex that they push practically to its limit our system's capacity effectively to cope with them. Any laxity in their proper management, whether in regard to pleadings or anything else, can all too easily result in such cases spinning into confusion if not chaos - even before trial but especially at trial. ……" (my emphasis)

45.In light of the aforesaid principles, which Ms Lau did not disagree, she submitted that the proposed amendments concerning the misrepresentation plea were pleaded with sufficient particularity and they would not result in any change of evidence by the parties. Ms Lau further confirmed Imada would not seek to re-open its case and/or adduce further evidence.

46.It is therefore necessary to study the proposed new pleadings to see if such submissions are made out. The gist of the proposed amendments in the Draft in respect of the misrepresentation claim are as follows :

(a) In/about April 1998 prior to execution of the Contract, Yip orally represented to Imada’s Suen Ching that the Machine (i) would produce or process about 3,000 to 4,000 bottles per hour with the volume capacity of 20ml – 100ml (“1st Representation”), (ii) was a fully automated machine custom designed for bottling and packaging Imada’s products (including filling medicinal oil into, putting caps on and labelling the bottles) to suit Imada’s business needs and to speed up Imada’s processing time (“2nd Representation”), and (iii) was easy to operate and maintain by one or two workers after simple training with minimal supervision required (“3rd Representation”) (collectively, “Oral Representations”).

(b) The Oral Representations were intended to induce Imada to buy the Machine.

(c) Acting on the faith and truth of the Oral Representations, Imada executed the Contract.

(d) Imada “has since” discovered and the fact was that the Oral Representations were untrue. The proposed amendments described how they were untrue.

(e) “Being an expert and experienced in this filed (sic) and the person designing and compiling the Machine, [Mei King] made the [Oral Representations] fraudulently and either will knowing (sic) that they were false and untrue or recklessly not caring whether they were true of (sic) false or negligently”.

(f) Imada would rely on the provisions of the Misrepresentation Ordinance Cap.284 as entitling it to the reliefs claimed.

(g) “As soon as [Imada] discovered that the representations were untrue, [Imada] repudiated the Contract by commencement of the said legal proceedings.”

47.The representation is undoubtedly a material element in any misrepresentation claim. But apart from the assertion that Yip orally made the Oral Representations to Suen Ching in/about April 1998, no particulars were given as to the circumstances, place or mode of communication (eg at face to face meeting or by telephone). It is also unclear whether they were made on one or more than one occasions. Bullen & Leake & Jacob’s Precedents of Pleadings 15th ed. Vol.2 para.49-10 at p.802 had the following to say in relation to pleading fraudulent misrepresentation :

“The particulars of claim must show the nature and extent of each alleged misrepresentation …… and contain particulars showing when, where (if relevant) by whom and to whom it was made, and how it was made, whether orally or in writing, and if in writing, identifying the relevant documents (Seligmann v Young [1884] W.N. 93).” (my emphasis)

48.In my ruling on 17th July 2006, I referred to Heibei Enterprises Limited and others v Livasiri & Co and others HCA20094/1998, Deputy Judge Poon (unreported, 3rd June 2004) and Wellfit Investment Ltd v Poly Commence Ltd & Ors CACV80 of 1995 (unreported, 18 July 2005) and explained why requests for further and better particulars are not an answer to lack of particularity in respect of late amendments to pleadings. Since Imada proposed to aver fraud (albeit in the Derry v Peek sense), it is unjust to ask Yip and Wong to address such new claim in the absence of full, specific and utmost particularity, especially when Imada has closed its case and does not propose to re-open the same.

49.More importantly, a plea of fraudulent misrepresentation should only be made if there is sufficient evidence, particularly as Imada’s case has been closed. I stood down the hearing to enable to Ms Lau to identify the relevant evidence. However, despite Ms Lau’s diligent search, she was unable to refer me to any evidence adduced by Imada on the Oral Representations.

50.In the circumstances, Ms Lau was constrained to seek leave at the hearing to amend paragraphs 8c and 8e of the Draft by deleting all references to oral representations made to Suen Ching in April 1998 prior to the execution of the Contract and replacing them with a proposed averment that the 1st to 3rd Representations were made to Imada’s Suen Ching “in writing as evidenced in the quotation MKQ-196-3198 (Revised 2) [“Quotation”] (and subsequently became a term of the contract entered into between [Imada] and [Mei-King])” (“Written Representations”). Yip and Wong did not object to the application and I granted leave accordingly.

51.But the Written Representations still required scrutiny. The Quotation does not appear to contain the following express written representations and no explanation is forthcoming :

(a) the Machine “would speed up the processing time of Imada’s medical oil bottles production process” under the 2nd Representation;

(b) the production process of the Machine would require “one or two workers under minimum supervision” under the 2nd Representation;

(c) “one or two workers” could operate the Machine under the 3rd Representation.

52.Likewise, Imada’s discovery of the falsity of the Oral Representations is a material element of the proposed misrepresentation claim. However, all Imada pleaded in the Draft was that it “had since” made such discovery and “as soon as” the discovery was made it repudiated the Contract by commencing “the said legal proceedings”. Ms Lau confirmed “the said legal proceedings” referred to the present proceedings. No particulars were given as to date or even the approximate time when Imada made the alleged discovery. It is clearly a pertinent particular given that (a) the Written Representations were made in April 1998 and (b) the present proceedings were commenced in September 2003 with an intervening lapse of more than five years.

53.I also note that the equitable remedy of rescission prayed for in the proposed amendments is a discretionary remedy. Mei-King in its Amended Defence and Counterclaim has already pleaded that any right by Imada to reject the Machine has been lost because it has already accepted the same. Plainly, even if the proposed amendments were allowed, there might possibly have been an issue as to whether there had been unreasonable delay and/or affirmation of the Contract debarring rescission.

54.Ms Lau accepted that late amendments required full particulars (particularly on a material averment) (see paragraph 48 above) and the opposite party should not be required to attempt understanding of the amendments by requesting for further and better particulars. Regrettably the aforesaid material particulars are conspicuously absent in the proposed amendments.

55.At the hearing before me, Ms Lau was again constrained to seek leave to amend the Draft by adding the following at the end of paragraph 8e :

“(e)   [Imada] will rely on the fact that [Imada] discovered the representations to be false or untrue base on various failing repairs conducted by [Mei-King] and the time of discovery is when [Imada] commenced the said legal proceedings in September 2003.”

Yip and Wong again did not object to Imada’s application and I so granted leave.

56.There is no prior pleading that Imada’s alleged discovery of the factual matters pleaded in sub-paragraphs (a) to (d) of paragraph 8e of the Draft was in September 2003, ie more than five years after delivery/ installation of the Machine. Cross-examination of Suen Hung was conducted in the absence of any misrepresentation claim or any claim for rescission of the Contract. I cannot help feel that had Yip and Wong been told Imada had a case of fraudulent/negligent misrepresentation and a claim for rescission in the pipeline, their cross-examination of Suen Hung might have been conducted differently or at least with additional focus.

57.Further, the evidence already adduced by Imada on this issue is not clear-cut. On Imada’s case, both Suen Hung in his evidence and the SC Affirmation stated that right from the start (ie from the test conducted shortly after installation of the Machine at Imada’s factory) the Machine could not operate properly and it was never properly operable ever since. Suen Hung gave evidence that by mid-1999 he concluded that the Machine could not function properly. There was no evidence Mei-King made further repairs after August/September 2002. Imada approached another company with a view to carry out repairs. The present legal proceedings were only commenced on 23rd September 2003.

58.Since the trial is ongoing, it is inappropriate for me to form (and I do not form) any view on the merits of Imada’s case. However, Ms Lau reminded me the court was entitled to have regard to the merits of the case if they were readily apparent and were so apparent without prolonged investigation into the same. In my view, the merits are not plainly obvious and it is inappropriate to delve further into the merits save to note the position is not clear-cut.

59.Ultimately it is a balancing exercise and the court has to hold the scales between the parties. Here, there is no doubt a new cause of action has been raised for the first time by the proposed amendments. Yip submitted (and his submissions were adopted by Wong) that Imada’s application vis-à-vis the new misrepresentation claim was unfair since all along Mei-King was led to believe it was facing a claim in relation to the quality/performance of the Machine, and a claim for fraudulent/negligent misrepresentation would give a new and unanticipated dimension that would put Mei-King at a disadvantage in the conduct of its defence against Imada’s claim.

60.In my view, a claim for misrepresentation, particularly fraudulent misrepresentation, will change the focus of the trial. Imada has indicated it does not propose to re-open its case and there will be difficulty for Yip and Wong to address the various matters I raised above. Even if Imada is prepared to tender Suen Hung for further cross-examination, Yip and Wong should not be asked to defend a last-minute additional claim when they have already cross-examined Imada’s key player without all cards on the table, a situation not of their doing but of Imada’s opportunism and tactical choice. I have strong misgivings about the fairness of requiring Yip and Wong to meet this new misrepresentation claim that has not been pleaded hitherto.

61.Further, if the misrepresentation claim (particularly the fraudulent misrepresentation claim) based on the Written Representations allegedly made to Suen Ching and on the alleged discovery of the falsity of the representations only in September 2003 were raised at an earlier stage, whether I would have allowed the SC Affirmation to be read without live evidence and without any opportunity for Yip and Wong to cross-examine Suen Ching on the broadened front opened by such new claim is something one cannot speculate. The way Imada has pleaded its case and its strategic decision to defer its application to plead misrepresentation has deprived Yip and Wong of the opportunity to adequately address such issue. In my view, the litigation prejudice that will be caused to Yip and Wong by the proposed amendments to add the misrepresentation claim cannot be compensated by costs and/or adjournment of the trial.

62.On the above analysis, I have refused to grant leave forImada to add the new misrepresentation claim to its pleadings. In reaching such view, I take no account of the fact that Yip and Wong are acting in person and I form no view on the merits of the substantive claim and counterclaim since the trial is still ongoing before me.

Costs

63.Ms Lau indicated that costs of the 2nd Summons should be in Yip’s and Wong’s favour in any event.

  (Marlene Ng)
District Judge

Representation:

Ms Lorinda Lau instructed by Messrs Huen & Partners for Imada Luenwah World Ltd.

Yip Ming Cheong, in person and present.

Wong Chi Nang, in person and present.