Poon Lai Bing v. Gold Dragon Ltd t/a Club Paris and Another
Read the full judgment text of CACV 136/2007 on BabelCite. This Court of Appeal judgment was delivered on 13 December 2007 before Cheung JA, Stone J.
Civil procedure – pleadings – striking out – fraud, dishonesty and forgery – sufficiency of particulars – Civil appeal from District Court – wrongful termination of employment – appeal against order striking out parts of amended defence and counterclaim – whether trial judge wrongly exercised discretion – whether particulars provided in pre-trial correspondence should be considered – whether allegations of fraud, dishonesty and forgery sufficiently pleaded – whether application to strike out brought too late – Background: plaintiff claimed damages for wrongful termination of her employment by Club Paris and New Oriental Palace Night Club; defendants counterclaimed alleging she had misappropriated scrap beer can proceeds and had procured subordinates to forge staff attendance records so as to claim full wages, allegedly defrauding Club Paris of between approximately HK$291,000 and HK$406,903 – Leave to amend defence and counterclaim granted by consent order of Registrar Chan on 15 June 2005; consolidated action transferred to District Court on 9 May 2006 as DCCJ 2299/2006 – Three days before trial, plaintiff's solicitors (M. K. Lam) demanded particulars; defendants' solicitors (Foo & Li) responded on 14 April 2007 with a 14-point schedule of particulars – On first day of trial original judge recused himself; Judge Chow acceded to plaintiff's strike-out application on 23 April 2007, striking out paragraphs 14, 24, 25, 26, 27, 29, 30 and prayer (2) on the ground that they contained vague and general statements of fraud, forgery and dishonesty unsupported by particulars – First issue: whether the trial judge wrongly exercised his discretion in striking out – Held, yes – The applicable rule is that fraud must be pleaded with the utmost particularity, following ADS, Three Rivers DC v Bank of England (No. 3) and Peconic Industrial Development v Yu Ka Hong – The judge wrongly confined himself to the four corners of the pleading and refused to consider the 14 April 2007 particulars, which were in substance particulars of the pleadings – Purpose of pleadings is to inform the other side of the case to be met, prevent surprise, enable preparation, limit generality and define the issues (Bokhary JA in ADS) – Second issue: whether, even treating the pleading alone, fraud, dishonesty and forgery were sufficiently pleaded – Held, yes – Paragraph 14 read with paragraphs 24 and 25 and the 14 April 2007 particulars identified the electronic fingerprint time recorders, the staff who prepared the attendance records, the staff allegedly coerced by Ms Poon, and the discrepancies relied upon, providing the plaintiff with adequate notice of the case to be met – Third issue: whether the underlying factual allegations of falsified attendance records could stand independently – Held, yes – Even if the words 'fraud', 'dishonesty' and 'forgery' were struck out, the factual allegations of misconduct, manipulation of records and overclaiming of wages were pertinent to the issue of summary dismissal and were properly pleaded – Fourth issue: whether the application was brought too late – Held, yes – The plaintiff had the amended pleading for ten months and took no action until the morning of trial; even on the English approach referred to in Goymer v Lombard North Central Wheelease Ltd and Tang Woung Shiu v Tang Kun Yeung, striking out should only be granted in the clearest circumstances – Witness statements already on file confirmed the allegations, so a final determination of the issues on the merits would better serve justice – Consent order and estoppel argument raised by Mr Kwok SC for defendants not decided because the court disposed of the matter on the merits – Outcome: appeal allowed, struck-out paragraphs reinstated, trial to be resumed before another judge, provisional costs order in favour of Club Paris and New Oriental with certificate for counsel.
Legal issues: Whether the trial judge wrongly exercised his discretion in striking out parts of the amended defence and counterclaim for want of particulars · Whether the allegations of fraud, dishonesty and forgery were sufficiently pleaded in the alternative
Outcome: Appeal allowed; the trial judge's order striking out parts of the amended defence and counterclaim set aside and the struck-out paragraphs reinstated; matter remitted to the District Court for trial before another judge.
Cited by 12 cases · Cites 1 case
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CACV 136/2007 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL CIVIL APPEAL NO. 136 OF 2007 (ON APPEAL FROM DCCJ 2299 OF 2006) ______________________ BETWEEN
______________________ Before : Hon Cheung JA and Stone J in Court Date of Hearing : 28 November 2007 Date of Judgment : 13 December 2007 ______________________ J U D G M E N T ______________________ Hon Cheung JA : 1.This is an appeal by Golden Dragon Limited trading as Club Paris (‘Club Paris’) and Oriental Las Vegas Night Club Limited trading as New Oriental Palace Night Club (‘New Oriental’) against the decision of H H Judge Chow who struck out part of their amended defence and counterclaim. Leave to appeal was granted by a single judge of this Court. Background 2.Poon Lai Bing (‘Ms Poon’) is the plaintiff in High Court Action No. 4315 of 2003. This action was initially commenced in the Labour Tribunal but later transferred to the High Court. Ms Poon claimed that she was an employee of New Oriental i.e. the 2nd defendant who subsequently transferred her employment to Club Paris i.e. the 1st defendant. She claimed that Club Paris and New Oriental were related parties. She claimed that her contract of employment was wrongfully terminated by Club Paris and she sued it and New Oriental jointly and severally for damages arising from the wrongful termination of her contract of employment. 3.Club Paris also commenced an action in the High Court against Ms Poon. These two actions were ordered to be consolidated. It appeared, however, that there were separate pleadings in respect of these two High Court actions after consolidation. 4.By a consent order dated 15 June 2005, Mr. Registrar Chan of the High Court gave leave to Club Paris and New Oriental to amend their defence and counterclaim in High Court Action No. 4315 of 2003. The amendment was made on 16 June 2005. 5.By an order dated 9 May 2006 the consolidated actions were ordered to be transferred to the District Court as District Court Action No. 2299 of 2006. The pleadings in their existing form were continued to be used in the District Court action. 6.The trial of the consolidated actions which was listed for 10 days was scheduled to commence in the District Court on 16 April 2007. The parties were unable to proceed with the case on that date because the judge previously assigned to handle this case had to excuse himself due to conflict of interest. 7.H H Judge Chow was then assigned to deal with this matter and the trial began on 18 April 2007. On 18 April 2007 in the course of his opening, Mr. Khaw, counsel for Ms Poon, submitted that certain parts of the amended defence and counterclaim regarding fraud, dishonesty and forgery did not contain the necessary particulars and were thus liable to be struck out. The Judge, however, indicated that he would not deal with any application to strike out without having a summons before him. The matter was then adjourned to the next day namely, 19 April 2007 when Ms Poon filed a summons for the application to strike out. This was opposed by counsel for Club Paris and New Oriental. The Judge then adjourned the argument to the following day. 8.On Friday 20 April 2007 the parties made their submission on striking out and the Judge gave the decision on Monday 23 April 2007. 9.Club Paris and New Oriental then applied for leave to appeal against the decision and adjourn the trial pending their application for leave to appeal. The next three days were taken up on this matter. On 27 April 2007 the Judge refused to grant leave to appeal to Club Paris and New Oriental. As the trial was originally fixed until 27 April 2007, the Judge then adjourned the trial to another date. The amended defence and counterclaim 10.In the amended defence and counterclaim Club Paris claimed that it was entitled to terminate the employment of Ms Poon by reason of her misconduct. The reasons that were relied upon by Club Paris were two-fold :
11.The application to strike out the amended defence and counterclaim was in respect of the following paragraphs : 14, 15, 24, 25, 26, 27, 29 and 30 and relief number (2) of the prayer. 12.The basis for striking out was that these paragraphs referred to fraud, dishonesty and forgery and insufficient particulars were provided for by the defendants. 13.The Judge, apart from paragraph 15, struck out those paragraphs I have referred to earlier. They related to the attendance record issue. I would set out the relevant paragraphs including paragraph 15 :
The correspondence 14.On 13 April 2007 which was three days before the commencement of the trial, Messrs M. K. Lam & Co (‘M. K. Lam’) solicitors for Ms Poon wrote to the solicitors for the defendants, Messrs Foo & Li (‘Foo & Li’), stating that allegations of fraud, forgery and dishonesty referred to in the amended defence and counterclaim were not supported by particulars. They required Foo and Li to supply particulars and threatened to strike out the pleadings. 15.On the next day, namely, 14 April 2007, Foo and Li wrote back and said that the amended defence and counterclaim contained all the necessary and material particulars to support the defendants’ claim for fraud, forgery and dishonesty but they further stated that :
16.The following particulars were provided :
The Judge’s reasoning 17.In acceding to the striking out the Judge stated that :
Particulars of fraud 18.I accept fully the requirement that where fraud is relied upon it must be distinctly pleaded with the utmost particularity : Aktieselskabet Dansk Skibsfinansiering v Wheelock Marden & Co Ltd & Ors (‘ADS’) [1994] 2 HKC; Three Rivers District Council and others v. Governor and Company of the Bank of England (No. 3) [2003] 2 AC 1 at 291 and Peconic Industrial Development and Another v. Yu Ka Hong Paul & Another CACV No. 285 of 2005. 19.As Bokhary JA (now Bokhary PJ) observed in ADS ‘none of the basic rules of pleading have anything to do with technicality’ but ‘all of them have everything to do with practical justice’. He identified the purpose of pleadings in the early part of his judgment :
The pleadings should not be struck out 20.In my view the Judge should not have struck out the relevant parts of the amended defence and counterclaim. Discretion wrongly exercised 21.The Judge was of course exercising a discretion when he ordered the relevant parts of the amended defence and counterclaim to be struck out. It is well established that an appellate court would not interfere with the exercise of a discretion in the first instance unless the discretion was wrongly exercised in the sense that, for example, the judge had taken irrelevant factors into account or ignored some relevant factors. 22.In my view the Judge had clearly wrongly exercised the discretion when he refused to consider the particulars provided by Foo & Li on 14 April 2007. While they were not voluntary particulars in the sense that they were provided before the request was made, they were in every sense particulars of the pleadings. Allegations sufficiently pleaded 23.To start with, the allegations of fraud, dishonesty and forgery of the attendance records pleaded in paragraph 14 must be read together with paragraphs 24 and 25 which particularized the misconduct of Ms Poon. They pleaded that :
24.The particulars provided on 14 April 2007 further showed :
25.In my view fraud and dishonesty had been sufficiently pleaded. Without outgoing into the technical meaning of forgery, the pleading together with the particulars provided clearly showed that Ms Poon had forged the attendance records in the sense that she signed a document which contained false information to be supplied to her employer as if it was a truthful document. Ms Poon was sufficiently informed of the nature and particularity of the allegations. Factual allegations 26.In any event, even if for the purpose of argument, the Judge was still not satisfied that sufficient particulars had been given of the allegations of fraud, dishonesty and forgery, he should merely strike out those words and the allegations relating to the falsification of the attendance records should be left intact. These are factual allegations pertinent to the issue of misconduct of Ms Poon in the employment. Irrespective of whether Club Paris could succeed on fraud, dishonesty or forgery, it would be entitled to rely on these factual allegations in support of its termination of Ms Poon. Reason for the striking out 27.Mr. Khaw informed the Court that he was instructed to act for Ms Poon in place of another counsel at a very late stage of the proceedings. Upon perusing the paper he considered that the amended defence and counterclaim lacked particulars and he immediately caused M. K. Lam to request particulars by the letter of 13 April 2007. He, however, considered that the particulars provided by Foo and Li were still not sufficient. He was concerned with the length of the trial and the numerous witnesses to be called. He was of the view that if the allegations were struck out then the issue would be narrowed and the length of the hearing would be greatly reduced. 28.While I accepted what Mr. Khawsaid as to the reason behind his application, the issue that I need to focus upon is still whether the matters relied upon by Club Paris were sufficiently pleaded. 29.Mr. Khawin his written submission relied on a number of recent English decisions such as Goymer v. Lombard North Central Wheelease Ltd (The Times, 1 April 1993) which indicated that as striking out can be undertaken at any stage of the proceedings, the Court is entitled to consider such an application even when the application is made at trial or shortly before trial for the purpose of excluding irrelevant matters so that costs and time can be saved. A summary of these cases is contained in Tang Woung Shiu v. Tang Kun Yeung & Another [2002] 3 HKLRD 627. 30.Although this point was briefly mentioned in the oral submission the cases were not examined at the hearing before us because the focus was on the sufficiency of the particulars. My view is that Ms Poon had the amended defence and counterclaim for 10 months and no action was taken on it until the eve of the trial. Without expressing any view on the English approach, even if Ms Poon was permitted to apply to strike out the pleadings on the first day of the trial, the Judge should only accede to this request in the clearest circumstances where, for examples, the particulars were totally lacking and the allegations were clearly unsustainable. 31.In this case the defendants had filed witness statements of various witnesses which confirmed the allegations relied upon in the pleadings concerning Ms Poon’s fraud, dishonesty and forgery of the attendance records. In my view the Judge should have refused the application and proceeded to hear the evidence. By then justice would be better served by a final determination of the issues in dispute. As it turns out this striking out exercise caused the remaining eight days that were available for the hearing to be wasted with enormous costs implications for the parties. Consent order and estoppel 32.Mr. Kwok S.C. who together with Mr. Alan Ng as counsel for Club Paris and New Oriental submitted that the Judge should not even entertain the application to strike out in the first place. He referred to the fact that leave to amend the defence and counterclaim was granted pursuant to a consent order and Ms Poon should not be allowed to re-open the issue on the amendment again. 33.This involves arguments on the nature of the consent order and the application of the principle of estoppel. In my view it is not necessary to deal with these issues in this case as I have dealt with the merits of the application to strike out. Conclusion 34.I accordingly would allow the appeal and reinstate the paragraphs that had been struck out. I would direct that the trial in the District Court is to be resumed as soon as possible before another judge. I would make a provisional costs order that Club Paris and New Oriental are entitled to the costs of the appeal and below with certificate for counsel. Hon Stone J : 35.I agree that this appeal must be allowed. 36.The history of this case has been set out in the judgment of Cheung JA. 37.This was a simple District Court trial on the essentially straightforward issue of whether the plaintiff, a former employee of the defendants, was or was not entitled to compensation for wrongful termination of her employment; in turn, the defendants mounted a counterclaim. 38.The size of plaintiff’s monetary claim was small, of something in the order of HK$300,000, with the counterclaim in the amount of a similar or slightly larger sum, and the facts were in narrow compass; in short, a far from complex matter. 39.However, that which the learned judge seized with the trial permitted to occur was, in effect, the complete hijacking of this case by an eleventh hour application – on the very morning of the first day of the trial on 16 April 2007 – by counsel on behalf of the plaintiff to strike out parts of the defendants’ pleaded case, notwithstanding that the matters objected to, namely parts of the Defence and Counterclaim as to alleged dishonesty, fraud and forgery, had been the subject of an amendment consent order of almost two years earlier, on 16 June 2005, prior to the transfer of this litigation to the District Court. 40.Instead of ordering the trial (which, in light of its fundamental simplicity, unaccountably had been set down for a period of 10 days) to proceed immediately, and thus to determine without further delay that which was no more than a very ordinary, albeit contentious, compensation claim and counterclaim, what was allowed to happen was that the judge acceded to the blandishments of counsel and entertained a strike out application – which he ordered should be formally mounted by an immediate short-served summons issued on the following day – an application which was not determined in favour of the plaintiff/applicant until fully 7 days after the purported commencement of the trial proper; thereafter the remaining 3 days which had been allocated in the court diary for this case was taken up by a correlative application by the defendants, ultimately refused by the learned judge, for leave to appeal, this latter decision being handed down on 27 April 2007. 41.In turn this necessitated a further hearing before a single judge of the Court of Appeal in order for the defendants to obtain leave to appeal the substantive strike out decision, and thereafter the substantive appeal has been entertained in this court. 42.In my judgment this sequence of events cannot be considered other than as a procedural travesty, the result of which is that the matter now has to be remitted to the District Court for trial before yet another judge, causing yet more expense and delay in addition to the no doubt significant amounts of time and costs hitherto unnecessarily wasted simply because the court below declined to take a robust view and to proceed to do precisely what it was supposed to do and to try the case which then had been called on before it. 43.As to the merits of this appeal, I agree entirely with what has fallen from Cheung JA. 44.In light of the particulars which had been proffered in correspondence by solicitors representing the defendants there was no question of there being no proper understanding of the substance of the defendants’ case, and the insistence of the learned judge that his attention be confined solely to the pleadings per se, thus effectively ignoring the particulars provided to the plaintiff’s solicitors, by letter dated 14 April 2007, is not a course the wisdom of which readily can be appreciated. 45.In the circumstances there should have been no question of a strike out, and most certainly the hopelessly late application so to do on the morning of the first day of the trial ought not to have been entertained; to the contrary, the plaintiff’s counsel should have been crisply instructed to get on with his task of opening the case on its merits. 46.I regret to say that the learned judge plainly was wrong to have exercised his discretion in the manner in which he did. In my view the case had been adequately particularized, there was no scope for any element of surprise, and in addition the existing witness statements made abundantly clear the nature of the case which had to be met. 47.Moreover, as Cheung JA has pointed out (at paragraph 26, supra), irrespective of whether the allegations of dishonesty, fraud and forgery were able to be established in the terms alleged, upon the existing factual matrix the defendants nevertheless were in a position to mount primary factual allegations of employment misconduct – which may or may not have been accepted by the court – in support/justification of their early termination of the plaintiff’s employment. 48.It strikes me that all that was required in this case was the application of modicum of common sense to process in timely and cost-efficient manner a dispute which was far from forensically challenging; instead, that which transpired is highly regrettable, and a course of events was set in train which in the event cannot have redounded to the advantage of either party to this litigation. 49.Although for my part I would have been tempted to order that costs be taxed and paid on a higher scale than party and party, ultimately I have persuaded myself that I should further agree with the costs ordernisi proposed by Cheung JA.
Mr. Richard Khaw, instructed by Messrs M. K. Lam & Co., for the Plaintiff Mr. Kenneth Kwok, SC and Mr. Alan Ng, instructed by Messrs Fong Yin Cheung & Co., for the 1st and 2nd Defendants | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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