Case Document

100%

CACV000100/1989

1989, No. 100
(Civil)

Headnote

A predominant intention to injure the plaintiff is an essential ingredient in the tort of conspiracy.

Lonrho Ltd. v. Shell Petroleum (No. 2), [1982], A.C., 173 and Metall und Rohstoff A.G. v. Donaldson Lufkin & Jenrette Inc. and Another, [1989], 3 W.L.R., 563 followed.

IN THE COURT OF APPEAL	1989, No. 100
	(Civil)

BETWEEN

	THE WING ON BANK LIMITED	1st Plaintiff
	THE WING ON FINANCE COMPANY LIMITED	2nd Plaintiff
	AND
	WAI MAN ESTATES LIMITED	1st Defendant
	LAWRENCE TSE SOON CHEUNG	2nd Defendant
	also known as
	LAWRENCE CHEUNG TSE SOON

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Coram: Cons, V.P., Clough & Power, JJ.A.

Date of hearing: 20 & 21 December 1989

Date of delivery of judgment: 11 January 1990

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JUDGMENT

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Cons, V.P., delivered the judgment of the Court:

1. This is an appeal against the decision of Nazareth, J., whereby he gave leave to the Plaintiffs further to amend their re-amended Statement of Claim and various consequential Directions.

2. The final version of the Statement of Claim, which for convenience is by way of complete substitution, contains six allegations of conspiracy to which objection is taken.We need look no further than the first of them, for it is accepted on both sides that this is sufficiently similar to the other five to be taken as representative of them all. It is set out principally in paragraphs 28A and 29 :

	"28A. On or about 6th February 1984, the 2nd Defendant and Albert Kwok (now deceased) wrongly, unlawfully, fraudulently and in breach of the said duties owed by Albert Kwok to the 1st Plaintiff conspired with each other : -
	(i)	intentionally to deceive and/or defraud the 1st Plaintiff and/or
	(ii)	to commit an offence under the Banking Ordinance Cap. 155 (1983 Revision) then in force ("Cap. 155") and/or
	(iii)	to commit offences under the Theft Ordinance Cap. 210

	in the manner particularised hereinafter. In so far as may be necessary, the 1st Plaintiff says that the aforesaid conspiracy was with the intent or predominent intent to injure the 1st Plaintiff.
	29. In furtherance of the conspiracy referred to in paragraph 28A above, the 2nd Defendant and Albert Kwok did the following overt acts : -
	(i)	On or about 6th February 1984, the 2nd Defendant purported to apply to the 1st Plaintiff for a temporary overdraft facility of $3,000,000.00 to be extended to him through his said Account No. 308-003-004992.
	(ii)	By a letter dated 6th February 1984, Albert Kwok purported to offer to extend to the 2nd Defendant on behalf of the 1st Plaintiff the said overdraft facility on the terms stated therein, one of which was that the said overdraft facility was unsecured.
	(iii)	The 2nd Defendant countersigned a copy of the said letter and returned it to Albert Kwok purportedly to indicate his acceptance of the terms set out in the said letter.
	(iv)	Albert Kwok purported to approve the grant of the said overdraft facility in conducting the ordinary business of banking of the 1st Plaintiff (and the same was processed by the 1st Plaintiff).
	(v)	Albert Kwok thus caused the 1st Plaintiff to advance the sum of $3,000,000.00 to the 2nd Defendant though his said Account No. 308-003-004992 on or about 6th February 1984.
	(vi)	The 2nd Defendant immediately on the same day issued a cheque drawn on the said Account No. 308-003-004992 in the sum of $3,000,000.00 in favour of Manifest Underwriters.
	(vii)	The said sum of $3,000,000.00 was credited to the account of Manifest Underwriters as a result of the cheque referred to in (vi) above and was then utilised by Manifest Underwriters and/or Albert Kwok.

Each of such acts was done by the 2nd Defendant and/or Albert Kwok on behalf of himself and themselves in furtherance of the conspiracy referred to in paragraph 28A above."

Paragraphs 30 to 41 deal with the overt acts in greater detail but take the substance of the allegations no further. All that need be explained is that the 2nd Defendant was a customer of the 1st Plaintiff bank, that Albert Kwok was a director of the bank and its chief manager, and that he is said to have been the "director, partner, manager or agent" of Manifest Industries, or was otherwise able to control the activities of that firm.

3. It is submitted by way of appeal that the judge's decision to admit the amended allegation of conspiracy is flawed in three ways :

	(1)	he misunderstood the law,
	(2)	he wrongly evaluated the evidence, and
	(3)	he failed to appreciate the inconsistencies within the allegations themselves.

4. Numbers (2) and (3) overlap to this extent, that each ultimately depends upon the same suggestion, namely, that the overt acts pleaded cannot establish a predominant intention in the alleged conspirators to injure the 1st Plaintiff. That suggestion is fatal to this aspect of the claim if

	(a)	it is sound in fact, and
	(b)	is based on a proper understanding of the law.

These thus become the two questions for our consideration.

5. Before turning to them as such we must first dispose of an objection raised by the first part of the Respondents' Notice lodged by the Plaintiffs :

"1. The Learned Judge should have held that it was not open to the Defendants to contend at the hearing of the Plaintiffs' Application to further amend the Statement of Claim that the tort of civil conspiracy was only maintainable when the Defendants' sole or predominant intention was to injure the Plaintiffs, the said argument having been advanced by the Defendants to Deputy Judge Rogers at the hearing before him in November 1988 and having been rejected by him and the Defendants not having appealed his said decision."

6. Mr. Rogers was concerned with allegations of conspiracy framed differently from the present, but the point of issue was the same. However, as we read his judgment, he declined to express a decided opinion thereon, but instead based his decision firmly upon the lack of particularity in the then proposed amendments.

7. What has been said to be the classic definition of conspiracy, per Buckley L.J., in Belmont Finance v. Williams Furniture (No. 2), 1980, 1 All E.R., 393, at 404, is to be found in Mulcahy v. R., 1968, L.R. 3, H.L. 306, at 301 :

"A conspiracy consists not merely of the intention of two or more, but in the agreement of two or more to do an unlawful act, or to do a lawful act by unlawful means."

8. The question is whether that is now a sufficient definition in the light of Lord Diplock's speech, with which the other Lords present specifically agreed, in Lonrho Ltd. v. Shell Petroleum (No. 2), [1982], A.C., 173. That case arose from sanctions upon the supply of oil to Southern Rhodesia imposed by the United Kingdom following the Unilateral Declaration of Independence in November, 1965. Lonrho Ltd. and others had just completed an oil refinery in Southern Rhodesia, connected by a pipeline to near the port of Beira in Mozambique, and alleged in their action that by promising and subsequently maintaining alternative oil supplies in breach of the sanctions, the Defendants encouraged the Declaration of Independence and prolonged its duration, to the detriment of the Plaintiffs and to their expected profits from the pipeline. Their claim was put in the alternative :

"...... either as an innominate tort, committed by Shell and by B.P. severally, of causing foreseeable loss by an unlawful act; or as a joint tort of conspiring together to do an unlawful act which caused damage to Lonrho."

The matter came before the court by way of arbitration proceedings and a series of questions. The question of interest before their lordships was No. 5 :

"Even if there were breaches by the respondents of the 1965 and 1968 Orders" [sc. the sanctions Orders] "(a) whether breaches of those Orders would give rise to a right of action in the claimants for damage alleged to have been caused by those breaches and (b) whether the claimants have a cause of action for damage alleged to have been caused by such breaches by virtue only of the allegation that there was an agreement to effect them."

9. Both were answered in the negative, but the words used by Lord Diplock in disposing of the second question gave rise to differences of judicial opinion. For example in Faccenda Chicken Ltd. v. Fowler and Others, [1984], I.C.R., 589, at 602, Goulding J., said :

"On my interpretation of the authorities a combination of persons resulting in damage to the plaintiff is an actionable conspiracy if either or both of the following conditions is fulfilled : (a) that acts done pursuant to the combination would be actionable if done by one person alone, or (b) that the sole or predominant purpose of the combination was to injure the plaintiff. it was indeed argued before me that the sufficiency of the former condition alone has been denied by the recent decision of the House of Lords in Lonrho Ltd. v. Shell Petroleum Co. Ltd. (No. 2) [1982] A.C. 173, but I do not so understand their lordships' speeches."

In Metall und Rohstoff A.G. v. Donaldson Lufkin.& Jenrette . Inc. and Another, [1989], 3 W.L.R., 548, at 555, Gatehouse J. dealt with the question more fully and concluded that the House had limited its consideration to one type of conspiracy alone, that usually known as "conspiracy to injure a man in his trade or business". He added at p.557 :

"It would be most surprising if the House of Lords had intended to alter radically the nature of all those types of conspiracy which have long been recognised and are generally known as "illegal means" conspiracies, where predominant purpose has hitherto been immaterial."

10. On the other hand Hirst. J., in his analysis of the authorities in Allied Arab Bank Ltd. v. Hajjar and Others (No. 2), 1988, 1 Q.B., 944, came to the conclusion :

"In my judgment, the defendants are right in their submission that the Lonrho case [1982] A.C. 173 on its proper interpretation has the effect of limiting the scope of the tort of conspiracy exclusively to cases where the predominant purpose of the defendants' agreement is to injure the plaintiffs' interests."

His view has been echoed by dicta of the English Court of Appeal in Midland Bank Trust Co. Ltd. v. Green (No. 3), 1982, Ch., 529.

11. Nazareth, J., appears to have been inclined to the latter approach, but felt that authority was not sufficiently clear to ground an interlocutory decision in substance equivalent to a striking out. He said,

"It seems to me that on the plain words of Lord Diplock in Lonrho, if the civil tort of conspiracy is relied upon then the sole or predominant intention to injure the plaintiff must be alleged and proved. That that requirement is dispensed with when the act done in pursuance of the conspiracy is actionable even if done by one person alone, seems to me to be no answer once the civil tort of conspiracy is authoritatively defined, as it appears to me to have been done. Nonetheless the position does not seem to me to be so clear as to be plain and obvious that the sole or predominant intention to injure is an essential ingredient of the tort of conspiracy."

To be fair, the judge did not have the benefit of the full report of the Court of Appeal in Metall und Rohstoff. The report of the Times Newspaper of the 2nd February of this year, which alone was available to him, hardly touches upon the conspiracy aspect of the case.

12. In the full judgment, reported in [1989], 3 W.L.R., 563, their lordships unhesitatingly reject the restrictive approach. They set out their reasons, which we find attractive, in a comprenensive analysis of the authorities and of Lord Diplock's speech in Lonrho itself. They accept that the House deliberately made a policy decision to define and confine what it considered the anomalous tort of conspiracy within limits that were forced upon it by decisions too well established to be set aside. Their conclusion is succinctly set out in one sentence at p.604 :

"In our view the House plainly intended the presence of a predominant intention to injure to be the touchstone of an actionable conspiracy."

and later at p.609 :

"In our view, however, Lonrho is an insuperable obstacle to his claim as pleaded and presented, since M. & R. are unable to contend that D.L.J. and A.C.L.I., in making the alleged agreement and performing pursuant to that agreement the acts which caused damage to them, had the sole or predominant purpose of injuring them. Lonrho establishes such a purpose as an essential ingredient of the English tort of conspiracy."

13. We would respectfully agree. Although Lord Diolock's reference at 189D2 to :

"damage causing acts, although neither done for the purpose of injuring the plaintiff nor actionable at his suit if they had been done by one person alone"

and the fact that, without being specifically mentioned, cases such as Belmont Finance v. Williams Furniture are on this view necessarily overruled, are both matters which may, we respecfully suggest, tend to raise doubt to some extent, we do not think they outweigh the other factors recited by the Court of Appeal.

14. Mr. Mills-Owens, for the Plaintiffs, suggests that we should not come to such a firm decision at this stage, but rather being satisfied that there is some uncertainty as to the law, leave the question open until the facts to which it will be applied have been discovered at first instance. This was the course adopted by Vinelott, J., in Derby & Co. v. Weldon (No.5) (Ch.D.), [1989], 1 W.L.R., 1244, in somewhat similar circumstances. But it is clear that the judge was influenced by the fact that the appeal from the Court of Appeal decision in Metall v. Rohstoff was likely to be heard before his own case was ready for trial. In the event it was not, the parties having eventually settled their differences without the assistance of the House of Lords.

15. Another case on which Mr. Mills-Owens relied was Lonrho Plc. v. Fayed, [1989], 3 W.L.R., 631, in which, refusing to strike out a Statement of Claim on the grounds that it disclosed no cause of action, Dillon L.J. remarked at 639 :

"Whether or not that can be made out is a matter for investigation, in my judgment, at the trial of the action. It is not right to endeavour to try complicated issues of causation on a striking out application on what might or might not appear to be on paper, on the balance of probabilities, the foreseeable outcome of a trial."

We have to observe, however, that the claim there was for wrongful interference with trade or business, a tort which Dillon L.J had earlier recognised as one for which the detailed limits have yet to be defined; this was, he said at 638C-D, something which should be done "on the actual facts as they emerge at the trial rather than on a set of hypotheses, more or less wide, in very comprehensive pleadings". That is a very different situation from the present, where we are faced with a self-contained question of law which can be answered quite simply as a preliminary point without reference to any fact whatsoever, as happened in Lonrho itself. Whether it can be expected, as in that case, to save an immense cost in time and money, is difficult to estimate. Mr. Bernacchi, for the Defendant, claims it will. Mr. Mills-Owens suggests otherwise, because the underlying facts will, in his view, still need to be established for the alternative claim in fraudulent misrepresentation. Be that as it may, we think it better that the question should be settled at this stage so that the parties and the trial judge will know where they stand in the course of the action. We appreciate that should the Plaintiffs wish to test the correctness of our conclusion there will, of necessity, be some delay. We foresee no other problem. In that case the Plaintiffs may prefer to defer their proceeding on the other claims until that is done. This should cause them no undue detriment. Each is a financial institution, and their claims must depend almost entirely upon documentary evidence. The ultimate resolution of the conspiracy claims must in any event depend upon a final resolution of the question of law.

16. We turn then to the second question, can the overt acts as pleaded possibly ground a predominant purpose to injure the 1st Plaintiff. We take them as they appear in the Statement of Claim, without allowing for anything more which may perhaps be unearthed by way of discovery or elicited in cross-examination from the Defendants or their witnesses. We are mindful of Lord Herschell's strictures in Dow Hager Lawance v. Lord Worreys and Others, [1890], 15 Appeal Cases, 210, at 219 :

"It cannot be doubted that the Court has an inherent jurisdiction to dismiss an action which is an abuse of the process of the Court. It is a jurisdiction which ought to be very sparingly exercised, and only in very exceptional cases. I do not think its exercise would be justified merely because the story told in the pleading was highly improbable, and one which it was difficult to believe could be proved."

17. But we do not see the present case within that category at all. Rather we find it more appropriate to the words used by Hirst, J., in Allied Arab Bank v. Hajjar (No. 2) at 953 :

"indeed to seek to place such an interpretation (i.e. a predominant purpose to injure the bank's interest) upon the facts relied on by the bank would be far-fetched almost to the point of absurdity".

In our view no reasonable judge could infer from the facts set out in the Statement of Claim a predominant purpose other than to benefit Albert Kwok himself. If, as we nave decided a sole or predominant purpose to injure the Plaintiff is an essential ingredient of the tort of conspiracy, the claims in conspiracy as presently put forward are doomed to failure. The judge was therefore wrong to admit them by way of amendment.

18. For this reason we allow the appeal and set aside the judgement below insofar as it extends to the claims in conspiracy, i.e. to paragraphs 28A - 41, 42 - 53, 54 - 65, 66 - 77, 78 - 91, and 92 - 103.