Global Bridge Assets Ltd and Others v. Sun Hung Kai Financial Ltd

CACV 242/2011, CACV 243/2011 & CACV 275/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NOS 242, 243 AND 275 OF 2011

(ON APPEAL FROM HCA 317 OF 2008)

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JUDGMENT

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Hon Kwan JA:

1.These three appeals before us arose out of an order of Deputy Judge Carlson made on 12 May 2011 in an application of the plaintiffs to amend the statement of claim. The judge had granted leave to amend. The defendant appealed with the leave of the judge in respect of the amendments relating to a new claim of fraud made by the 1^st and 2^nd plaintiffs (in CACV 243/2011) and with leave granted by Tang V-P in respect of the amendments relating to the claim of the 3^rd plaintiff (in CACV 275/2011). The plaintiffs appealed the costs order made by the judge in their application for leave to amend, with the leave of the judge (in CACV 242/2011).

2.This action has a chequered history. I will only mention the background matters that are relevant for present purpose.

The background

3.The writ was issued by the three plaintiffs against the defendant on 29 February 2008, with the statement of claim filed on 4 July 2008. The claim of the 1^st and 2^nd plaintiffs was for breach of an oral guarantee and an oral collateral contract and collateral warranty, all alleged to have been given by the defendant in July to August 2001 in respect of the transfer of the defendant’s shareholding of 40% in a joint venture company in the PRC (“the JVC”). The matters alleged as giving rise to these transactions may be summarised as follows:

(1)  The contract for the formation of the JVC was entered into by the defendant and a partner in the PRC in May 1993 for the operation of a power plant in Hubei province. The defendant owned 40% of the shares in the JVC. Under the said contract and the memorandum of the JVC dated August 1993, the defendant was required to make capital contribution of US$10 million. In 1997, the PRC partner transferred to the 3^rd plaintiff 20% of the shares in the JVC with the consent of the defendant.

(2)  The defendant contributed only US$7 million towards the capital of the JVC. In an award made by CIETAC in arbitration proceedings in July 2000, the defendant was ordered to contribute the outstanding US$3 million. This was not complied with.

(3)  On 3 August 2001, the 1^st plaintiff and Whirlwind Holdings Ltd (“Whirlwind”) entered into an agreement for the sale of Whirlwind’s shares in a listed company King Pacific International Holdings Ltd (“KPI”) to the 1^st plaintiff at HK$33.9 million. The 1^st plaintiff completed the agreement for sale and purchase in September 2001. KPI was wound up by the court in June 2002.

(4)  The alleged oral guarantee and collateral contract and warranty were made during the negotiations when the 1^st plaintiff raised concerns if Whirlwind or its guarantor Cheng Chao Ming Jenson (“Cheng”) should fail to perform their obligations in respect of the sale of the KPI shares. The oral guarantee was given that the defendant would undertake to guarantee due performance by Whirlwind and Cheng of their aforesaid obligations and it would transfer its 40% share holding in the JVC to the 1^st plaintiff or its nominee if Whirlwind or Cheng should fail to perform their obligations. The oral collateral contract and collateral warranty were to the same effect.

(5)  The 1^st plaintiff gave notice to the defendant in September 2001that it would enforce the oral guarantee, collateral contract and warranty, as Whirlwind and Cheng had failed to perform their obligations. In purported performance of its obligation to transfer its 40% share holding in the JVC, the defendant entered into a contract dated 12 October 2001 (“the CTC”) with the 2^nd plaintiff, which was the nominee of the 1^st plaintiff, by which the defendant agreed to transfer its 40% shares in the JVC to the 2^nd plaintiff at the nominal consideration of HK$1. At the same time as the CTC, the 2^nd plaintiff and the defendant entered into a deed of waiver and indemnification dated 12 October 2001 (“the Deed”).

(6)  The defendant had deliberately concealed from the 1^st and 2^nd plaintiffs that it had not obtained the written consent of the PRC partner for the transfer of its 40% share holding in the JVC and it was only in May 2003 that the lack of consent was discovered by the 1^st and 2^nd plaintiffs. The defendant failed to complete the transfer of its 40% shares to the 2^nd plaintiff and was in breach of the oral guarantee, collateral contract and warranty for which the 1^st and 2^nd plaintiffs claimed damages.

4.The claim by the 3^rd plaintiff was that the defendant had failed to pay the outstanding US$3 million as capital contribution to the JVC and it claimed this amount from the defendant.

5.The defendant applied to strike out the statement of claim in respect of the claims by all three plaintiffs. On 22 April 2009, Suffiad J dismissed the application and allowed the plaintiffs to apply to amend its statement of claim in respect of the 3^rd plaintiff’s claim to advance a case that the claim for US$3 million was made on behalf of the JVC.

6.On the defendant’s appeal, the Court of Appeal (Rogers VP and Le Pichon JA) allowed its appeal on 24 February 2010 (CACV 161/2009). The court held that the defendant had a clear defence to the claim of the 1^st and 2^nd plaintiffs by virtue of the Deed which was made under seal, and which contained a waiver and covenant not to sue in respect of any claims arising from the CTC and all interest the defendant may have in the JVC or any transaction related thereto. The 1^st plaintiff was equally bound by the Deed as the 2^nd plaintiff entered into the Deed as its agent. The court struck out the claim of the 1^st and 2^nd plaintiffs but provided that they should be at liberty to apply to the court below to amend the statement of claim if so advised. The judge’s order in respect of the 3^rd plaintiff’s claim was not disturbed.

7.On 26 March 2010, the 1^st to 3^rd plaintiffs issued a summons to amend the statement of claim, which was heard by Deputy Judge Carlson in February 2011 and resulted in the judgment under appeal on 12 May 2011.

8.By the draft statement of claim, the 1^st and 2^nd plaintiffs advanced a claim that they were entitled to set aside the CTC and the Deed on the ground of fraud or deceit of the defendant and claimed damages for fraud. The matters pleaded in support of this claim may be stated as follows:

(1)    In the defence filed in this action on 23 September 2008, the defendant disclosed for the first time that: (a) by an agreement dated 8 April 1998, the defendant had transferred its 40% shares in the JVC to Tian An China Investment Co Ltd (“TAC”) for HK$54 million and this transfer was consented to by the PRC partner and the 3^rd plaintiff, which was then represented by Cheng; (b) by an agreement dated 8 December 1998, TAC transferred its 40% shares in the JVC to Changjiang Power Development (HK) Co Ltd (“CJP”, a company controlled by Cheng) for the consideration stated; (c) TAC executed a declaration of trust dated 31 December 1998 in respect of its 40% shares in the JVC in favour of CJP; and (d) as of 31 December 1998, all the rights, liabilities and obligations of the defendant in the JVC had been transferred to CJP and the defendant only remained the registered shareholder as the PRC partner had refused to assist in the registration of the change of shareholder. The documents relating to the aforesaid transactions were exhibited to an affirmation filed by the defendant in this action on 22 December 2008.

(2)    The defendant thus knew it did not have beneficial interest in the 40% shares in the JVC when it offered them as security to the 1^st plaintiff in July to August 2001 and when the CTC was entered into with the 2^nd plaintiff in October 2001. Notwithstanding that a mere legal title in the shares was not of any value, the defendant offered the shares as security as if they were a valuable asset and had perpetrated a fraud or deceit on the 1^st and 2^nd plaintiffs.

9.In resisting the strike out application in 2009, the 3^rd plaintiff had argued before Suffiad J for leave to amend to make a derivative claim on behalf of the JVC. Such a claim was advanced in an earlier draft of the statement of claim but was abandoned when there was evidence showing that the defendant was not in control of the JVC. In the draft pleading annexed to the summons to amend in March 2010, the 3^rd plaintiff claimed US$3 million and damages suffered because the power plant operated by the JVC was closed down as a result of the defendant’s failure to pay the outstanding capital contribution. In the 3^rd plaintiff’s skeleton arguments lodged for the appeal before us, it was stated that the 3^rd plaintiff would withdraw the claim for US$3 million and only pursue the claim in damages against the defendant.

The judgment below

10.The judge found that the claim of the 1^st and 2^nd plaintiffs in fraud was a new cause of action based on new facts, so the plaintiffs would not have been able to take advantage of O 20 r 5(2) and (5) of the Rules of the High Court, which provide that an amendment to add or substitute a new cause of action may be allowed, even though it is made after the relevant period of limitation current at the date of issue of the writ has expired, where the new cause of action arises out of the same facts or substantially the same facts as a cause of action in respect of which relief has already been claimed in the writ. There is no appeal regarding this finding.

11.At the hearing before the judge, the plaintiffs relied on section 26(1)(a) or (b) of the Limitation Ordinance, Cap 347 that the new claim in fraud was not time barred in that they only discovered the fraud on 23 September 2008 when the defence was filed and that was when the limitation period would begin to run. The defendant contended that the 1^st and 2^nd plaintiffs knew precisely what was going on in 2001 when the CTC was signed, that the allegations of fraud were known to them no later than 2002 and, on any view, well before 2008 when the writ was issued, and that the claim in fraud could and should have been pleaded then.

12.On this dispute as to whether the plaintiffs could have discovered the fraud earlier with reasonable diligence, the judge took the view there is an arguable evidential case to be tried. He did not think there is any basis for saying that the plaintiffs’ case was so hopeless on the facts as to when the fraud was discovered to render it unworthy of being tried by the trial judge, and, if thought expedient by him, as a preliminary issue. And this issue would need to be pleaded out by the plaintiffs and the defendant and be decided then. The judge was of the view that the dispute regarding discovery of the fraud would remain perfectly “live” and was to be contested at the trial when he granted leave to amend to plead the new claim of fraud.

13.As for the amendments to the 3^rd plaintiff’s claim, the judge held that its claim was not time barred as the 3^rd plaintiff had pleaded various acts carried out by the defendant without the consent of the board of the JVC in 2007 and 2008 and that the 3^rd plaintiff has a viable claim for damages.

The arguments on appeal: the claim of the 1^st and 2^nd plaintiffs

14.Mr McCoy, SC argued that the judge was wrong to grant leave to amend in that he had lost sight of the relation-back provision in section 35(1) of Cap 347[1] and erroneously thought the limitation defence would remain a perfectly “live” issue at trial. If the new claim for fraud is allowed to be made in this action, by virtue of sections 35(1) and (2), it would be deemed to have been a separate action and to have been commenced on the same date as the writ in the original action, i.e. 29 February 2008. And if the court should find at trial that the plaintiffs discovered or could with reasonable diligence have discovered the fraud alleged more than six years before the application for amendment[2] on 26 March 2010 but within six years before the writ, the defendant would be unfairly deprived of a limitation defence it would otherwise have in that situation. As noted earlier, it is the defendant’s contention that the plaintiffs had known of the alleged fraud no later than 2002 and well before 29 February 2008.

15.Mr McCoy referred also to section 35(3), which requires the court to disallow a new claim to be made in a pending action if it is made after the expiry of the limitation period, unless it comes within the exception of the rules of court, i.e. in O 20 r 5. The court does not have jurisdiction to allow the amendment unless the plaintiffs could show that the defendant did not have a reasonably arguable case on limitation which would be prejudiced by the new claim.

16.Mr McCoy pointed out that after judgment was given by the judge in May 2011 and on 23 December 2011, in Sun Focus Investment Ltd v Tang Shing Bor [2012] 1 HKLRD 738, the Court of Appeal (Fok JA and Lam J)[3] allowed an appeal in a similar situation where the court below made the same erroneous assumption that limitation would be a live issue at trial in permitting an amendment to add new claims outside the limitation period. He submitted that Sun Focus Investment is determinative of the present appeal. Leave to amend should be refused, leaving the 1^st and 2^nd plaintiffs to bring a fresh action, to which, if they were correct in the contention that they could only have discovered the alleged fraud in September 2008, there would be no limitation defence.

17.Mr Ho, SC for the plaintiffs did not argue that Sun Focus Investment is plainly wrong so that this court should depart from its previous decision (Solicitor (24/07) v Law Society of Hong Kong (2008) 11 HKCFAR 117 at paras 45 to 51). He drew to our attention that a previous decision of the Court of Appeal in Extramoney Ltd & Anr v Chan, Lai, Pang & Co [1992] 1 HKLR 244 (Kempster JA, Penlington JA and Nazareth J) which decided on a contrary approach was not mentioned in the judgment of Sun Focus Investment. He urged this court to revisit Sun Focus Investment, taking into consideration the practical implications of resolving the dispute on limitation as a preliminary issue instead of at trial, such as the framing of issues, the scope of the evidence that would need to be canvassed, whether the findings made on the preliminary issue would be binding on the parties at the substantive trial so that new evidence or arguments on the limitation issue would not be entertained at trial. He cautioned against the pitfall of applying section 35(1) literally and sought to distinguish Sun Focus Investment and to limit its application to its facts. He submitted that in substance, no unfairness would be caused to the defendant in allowing the amendment and permitting the new claim of fraud to be made in this action, and that this court could and should postpone the operation of section 35(1) until the determination at trial of the plaintiffs’ case of an extended period for limitation in reliance on section 26(1).

18.As a fallback position, if the judge’s order giving leave to amend were to be set aside, Mr Ho submitted that the proper course is for this court to adopt the same option as in Sun Focus Investment, i.e. to remit the amendment summons to the court below, with the issue of the plaintiffs’ reliance on the extended limitation period in section 26 to be tried as an issue in the amendment summons.

The decision in Sun Focus Investment

19.The two lines of authorities in Extramoney and in Sun Focus Investment (which followed the approach in Welsh Development Agency v Redpath Dorman Long Ltd [1994] 1 WLR 1409 decided after Extramoney and other English authorities[4]) were referred to by this court (Hartmann JA and Barma J) in Akai Holdings Ltd (in compulsory liquidation) v Everwin Dynasty Ltd & Ors, HCMP 1469/2011[5], in an application for leave to appeal against an order giving leave to amend the points of claim to add new claims. The two different approaches were succinctly described in para 23 by Barma J who gave the judgment of the court:

“The difference between the approaches is this – the English approach is to refuse an amendment where there is an arguable limitation defence, unless the new cause(s) of action arise out of the same or substantially the same facts as those on which existing causes of action are based, whereas the approach apparently taken in Extramoney is to allow the amendment where the limitation defence is arguable.”

20.This court in Akai Holdings Ltd did not find it necessary to grapple with the question which of these approaches is correct, as it was of the view there was no arguable limitation defence because section 20(1) of Cap 347[6] applied in that case and it was satisfied that giving leave to amend would not involve any risk of depriving the defendant of an arguable accrued limitation defence. So it was not necessary to express a view which approach is to be preferred, though Barma J did say in para 32 he was of the provisional view that the approach in Welsh Development Agency is preferable and observed that the court in Extramoney does not appear to have considered the effect of the relation-back rule in section 35(1)(b) and its impact on the question of prejudice being caused to a defendant by allowing an amendment to plead an arguably time barred claim.

21.I respectfully agree with his observations. The approach in Welsh Development Agency and Sun Focus Investment gives effect to and accords with sections 35(1)(b) and (3). Leave to amend should not be given if the effect of this would be to deprive the defendant of an accrued limitation defence, which would be lost as a result of the operation of the relation-back rule in s 35(1)(b). In that situation, the correct approach is to refuse leave to amend, unless the plaintiff can show that the defendant does not have a reasonably arguable case on limitation, or that the new claim arises out of the same or substantially the same facts as a cause of action in respect of which relief has already been claimed in the existing action. “By this means the injustice to the defendant of depriving him of an arguable limitation defence is avoided without denying the plaintiff the right to bring a fresh action to which, if he is correct, there is no limitation defence.”[7]

22.For the above reasons, I am satisfied that the approach in Extramoney, which is to give leave to amend where there is a triable issue on limitation and leaving this issue to be resolved at trial, is incorrect. Section 35(1)(b) was not mentioned in Extramoney, nor was it explained in the judgment why prejudice would not be caused to the defendants who had an accrued limitation defence regarded by the court as triable. The approach in Welsh Development Agency has been followed by the Court of First Instance[8] before and after the decision of this court in Sun Focus Investment.  Mr Ho did not suggest that Sun Focus Investment is plainly wrong. There is no reason to depart from the decision of this court in Sun Focus Investment.

23.Mr Ho submitted that Sun Focus Investment is distinguishable from the present case in that the extension of the limitation period in section 26 is relied on by the plaintiffs here from the start when the original writ was issued, unlike Sun Focus Investment in which the new claims were not statute barred when the writ was first issued but only became barred by the time the application for leave to amend was made. He argued that as the plaintiffs have been relying on the extension of the limitation period in section 26 all along, there should be no difference in the defendant’s position when the original writ was issued in February 2008 and when the application to amend the pleadings was taken out in March 2010 and so no prejudice would be caused to the defendant in its limitation defence by allowing the amendment.

24.I do not regard the distinction drawn by Mr Ho as valid. Whether the limitation period of six years should run from the date on which the cause of action accrued as provided in section 4(1) or from the date of discovery of the fraud or concealment as provided in section 26(1) is immaterial. What matters is whether the plaintiffs here can show that the defendant has no reasonably arguable defence of limitation to the new claim and so would not be prejudiced by the relation-back rule, irrespective of whether the limitation period is to run from the time provided under section 4(1) or section 26(1). See also the reasoning of Barma J in Moulin Global Eyecare Holdings Ltd v Olivia Lee Sin Mei, HCA 167/2008, 27 June 2012, at para 68 in respect of a similar provision in section 31 regarding an extended limitation period for negligence actions. I do not agree with Mr Ho that the plaintiffs have satisfactorily demonstrated that the relation-back rule would have made no difference to the defendant’s limitation defence.

25.Mr Ho also argued that on the wording of section 35(3), the court must not allow a new claim to be made in a pending action only where the court is satisfied that the time limit has expired, and the court cannot be so satisfied at this stage where the plaintiffs have relied on section 26(1) to extend time. As submitted by Mr McCoy, the answer to this is in Fattal v Walbrook Trustees (Jersey) Ltd [2012] Bus LR Digest D7. In that case, the claimant also relied on section 32 of the Limitation Act 1980 (equivalent to our section 26) to overcome limitation difficulties and Lewison J had this to say at para 45:

“Thus he said, where section 32 is relied on the limitation period will not have expired until six years after the claimant had discovered the fraud etc or could with reasonable diligence have discovered it. I do not consider that this is a ‘get out of jail free’ card on the facts of this case. The principle is that permission to amend should not be granted where the defendant has a reasonably arguable limitation defence. In a case in which it is obvious that section 32 will apply so as to postpone the running of time, then I accept that the court must have regard to that. But in a case in which the application of section 32 is itself disputed, in my judgment the right course is to refuse to allow the amendment and to let the question whether section 32 applies be determined in a fresh action. …”.

26.The plaintiffs have not been able to establish that the defendant has no reasonably arguable limitation defence. For the reasons given above, the judge was in error in the exercise of his discretion in granting leave to amend and his order must be set aside. I turn to consider the options open to this court.

The options open to this court

27.In Sun Focus Investment, when the order granting leave to amend was set aside and the appeal court was to exercise the discretion afresh, a number of options were canvassed in para 18 and discussed at length in the subsequent paragraphs of the judgment. The discussion of various options demonstrated that in dealing with a situation in which a limitation defence is raised, this must be managed with great care and flexibility, and the court must always be sensitive to the demands of a particular fact situation. So long as these considerations are borne firmly in mind by the judge in the exercise of case management powers whether to order limitation to be tried as a preliminary issue in the amendment summons or in the main proceedings, the practical difficulties and undesirable consequences envisaged by Mr Ho could be overcome.

28.The appeal court in Sun Focus Investment decided on the alternative of remitting to the court below to be tried as issues in the amendment summons the issues of the plaintiff’s reliance on section 26 and whether the claims in the amendments would come within O 20 r 5(5) so that leave to amend should be granted. In that case, the claims sought to be advanced in the amendments were within time at the date of the original writ but out of time when the application to amend was made. Apart from the primary limitation period, the plaintiff also relied on the extended limitation period by reason of deliberate concealment on the basis that the relevant matters did not come to its knowledge until June 2004. If the plaintiff was right in its contention that the claims in the amendments were within O 20 r 5(5), the amendments would be allowed and the plaintiff would be able to take advantage of the relation-back rule. If the plaintiff should fail on this but was successful on its case of an extended limitation period, its claims in the amended pleading would be within six years of the date of the original writ in March 2007, and within six years of the application for leave to amend in October 2009, but it would be too late for the plaintiff to issue a fresh writ in 2011 for the new claims. For those reasons, leaving the plaintiff to issue a fresh writ was clearly not an option.

29.Mr Ho urged us to take the same course as in Sun Focus Investment, but the circumstances in the present case are very different. In respect of the original claims based on the oral guarantee, collateral contract and warranty, the plaintiffs had alleged that the limitation period should be extended under section 26 on the basis that the defendant had concealed from the plaintiffs it had never obtained written consent from the PRC partner to the transfer of shares and this was only discovered by the 1^st and 2^nd plaintiffs in May 2003, so the writ issued on 29 February 2008 was within time. The original claims were ordered to be struck out by the Court of Appeal in February 2010. In respect of the new claim of fraud put forward in March 2010, the judge had held correctly that this is a new claim based on new facts and does not come within O 20 r 5(5). For this new claim, the plaintiffs again rely on section 26 for extension of the limitation period but on different grounds. It is now alleged that the fraud was discovered and could reasonably have been discovered only in September 2008 when the defence was filed in this action. On this new case, the earlier discovery made in May 2003 is irrelevant and the plaintiffs would be well within time if they are to issue a fresh writ in 2012. No prejudice would be caused to the plaintiffs in that situation. It would be appropriate to refuse leave to amend on the basis that the 1^st and 2^nd plaintiffs are at liberty to issue a fresh writ.

30.Mr McCoy has drawn to our attention that in paras 26(3), 28 and 29 of the draft amended statement of claim, the plaintiffs sought to resurrect the claims on the oral guarantee, collateral contract and warranty, which have been struck out by this court in 2010. As leave to amend is refused and nothing remains in the statement of claim of the claims of the 1^st and 2^nd plaintiffs, I would order that their claims in this action against the defendant be dismissed.

The arguments on appeal: the claim of the 3^rd plaintiff

31.We are here concerned with a claim of the 3^rd plaintiff for damages against the defendant. It is alleged that the 3^rd plaintiff is entitled on its own right to enforce the obligation of the defendant to contribute the outstanding US$3 million to the capital of the JVC, it being a party to the contract for the formation of the JVC and the memorandum of the JVC, as both documents were amended in 1997 when it became a 20% shareholder. It is further alleged that it was within the reasonable contemplation of the defendant that serious damage would be caused to the operation of the power plant or the JVC if the defendant failed to make capital contribution as agreed and that as a result of the defendant’s failure to pay the US$3 million, the power plant was closed down and the business of the JVC terminated, which in turn caused significant loss and damage to the 3^rd plaintiff.

32.Mr McCoy submitted that this claim plainly falls foul of the reflective loss rule. The losses allegedly suffered by the 3^rd plaintiff as a shareholder of the JVC are merely reflective of the losses allegedly suffered by the JVC and are accordingly not recoverable by the 3^rd plaintiff (Johnson v Gore Wood & Co [2002] 2 AC 1; Waddington Ltd v Chan Chun Hoo (2008) 11 HKCFAR 370). This must be correct.

33.Mr Ho sought to emphasise that the 3^rd plaintiff has a personal action against the defendant on its own right to enforce the JVC contract and memorandum as a party to these documents where the defendant was in breach of its obligations under these agreements. That is immaterial, see Johnson v Gore Wood at 63E to F. The principle of reflective loss applies even where the loss is caused by a wrong actionable at the suit of the shareholder personally. What matters is whether the loss suffered by the shareholder was the diminution in the value of his shareholding, which reflected the depreciation or depletion of the assets of the company. In that situation, the shareholder’s loss would be fully remedied by the restitution to the company of the value of the depleted assets and he is not allowed to bring a claim for the reflective loss of the company.

34.Mr Ho contended that the loss suffered by the 3^rd plaintiff is separate and distinct from the loss suffered by the JVC, but he is unable to point to the draft pleading or any of the materials in evidence to make good this submission.

35.The 3^rd plaintiff’s claim for damages is clearly untenable. The judge was in error to allow the amendments to advance this claim. It is unnecessary to consider if this proposed claim is time barred.

The costs below

36.In giving leave to amend, the judge made an order for costs in the defendant’s favour, taking the view that costs were conceded by the plaintiffs in the amendment summons. The plaintiffs lodged an appeal against this costs order on the basis that they were successful in obtaining leave to amend in the contested hearing and that the usual and correct order should be that costs of and occasioned by the amendment be to the defendant in any event but the costs of the contested hearing should be awarded to them.

37.As I am of the view that the judge was in error in granting leave to the plaintiffs to amend the statement of claim, the above arguments are not open to the plaintiffs and the judge’s order awarding costs to the defendant would remain undisturbed.

Conclusion and orders

38.I would allow the appeals brought by the defendant in respect of the claims of the 1^st and 2^nd plaintiffs (in CACV 243/2011) and in respect of the 3^rd plaintiff’s claim (in CACV 275/2011), set aside the order giving leave to the 1^st to 3^rd plaintiffs to amend the statement of claim, and dismiss the action of the 1^st to 3^rd plaintiffs against the defendant. I would dismiss the plaintiffs’ appeal against the costs order below (in CACV 242/2011).

39.Costs in these appeals should follow the event. I would make an order nisi that the plaintiffs should pay the defendant’s costs in these appeals, with a certificate for two counsel.

Hon Fok JA:

40.I respectfully agree with the judgment of Kwan JA, which I have had the benefit of reading in draft, and there is nothing further I wish to add.

Hon Lam J:

41.I agree.

Mr Ambrose Ho, SC and Ms Bonnie Y K Cheng, instructed by Waller Ma Huang & Yeung, for the 1st to 3rd plaintiffs (appellants in CACV 242 of 2011; respondents in CACV 243 and 275 of 2011)

Mr Gerard McCoy, SC and Mr Steven Kwan, instructed by Leland Chu & Co, for the defendant (respondent in CACV 242 of 2011; appellant in CACV 243 and 275 of 2011)