William Thomson v. Roland John Jeans and Another
Read the full judgment text of DCCJ 3388/2005 on BabelCite. This District Court judgment was delivered on 18 July 2013.
1. In these actions, the plaintiffs, Mr Thomson in DCCJ 3388/2005 (“P1”) and Mr Boewe in DCCJ 3389/2005 (“P2”), had agreed with the 1 st defendant (“D1”) to invest in a company called Wanchai Bierkeller Ltd (the “Company”). P1 had agreed to invest $500,000 (the “P1 Investment”) and P2 had agreed to invest $250,000 (the “P2 Investment”).
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DCCJ 3388/2005 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO. 3388 OF 2005 ________________________
________________________ DCCJ 3389/2005 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO. 3389 OF 2005 ________________________
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________________________ DECISION ________________________ Background 1.In these actions, the plaintiffs, Mr Thomson in DCCJ 3388/2005 (“P1”) and Mr Boewe in DCCJ 3389/2005 (“P2”), had agreed with the 1st defendant (“D1”) to invest in a company called Wanchai Bierkeller Ltd (the “Company”). P1 had agreed to invest $500,000 (the “P1 Investment”) and P2 had agreed to invest $250,000 (the “P2 Investment”). 2.The 2nd defendant (“D2”) was and is a firm of solicitors acted for D1 and the Company at the material times. 3.At the request of D1, P1 and P2 paid their investments, ie the P1 Investment and the P2 Investment, to D2 on about 24 January 2004 and 8 December 2003 respectively. There is no dispute that D2 had received the payments. 4.There is also no dispute that D2 had released the P1 Investment and the P2 Investment to D1 or the Company. 5.No shares in the Company had been issued to the plaintiffs. The Company was put into liquidation by a resolution passed in an extraordinary general meeting of the Company held on 4 January 2005. 6.The plaintiffs claim against the defendants for return of their investments on the grounds of total failure of consideration, money had and received, conversion and breach of trust. The central issues in dispute between the plaintiffs and D2 are the purposes for the payments to D2 and the terms upon which the payments were paid to D2. 7.Trials of both actions have been scheduled to commence on 5 August 2013 with 4 days reserved. 8.D2 took out two applications in each action on 7 May 2013 and 5 June 2013. The first set of applications is to seek leave to amend its defences filed in both actions (the “Amendment Applications”). The second set of applications is to seek leave to file and serve further or supplemental witness statements (the “Witness Statement Applications”). The summonses for these applications were all returned before me on 10 July 2013. I dealt with them all together. The plaintiffs opposed to all these applications. Development of the proceedings 9.Before I deal with the aforesaid applications, it will be helpful to briefly set out the development of these actions to put the applications in context. 10.The writs in both actions were issued on 16 July 2005. Both plaintiffs served their statements of claim on 29 July 2005. P1 amended his statement of claim on 13 October 2005 and re-amended the same on 9 July 2012. P2 also amended his statement of claim on 9 July 2012. 11.D2 filed its defences in both actions on 20 September 2005 and provided particulars on its defences on 26 January 2006. On 17 May 2006, the court struck out part of D2’s defences in both actions (the “Striking Out Orders”). 12.The plaintiffs filed their replies to D2’s defences in both actions on 4 October 2005. P2 amended his reply on 5 October 2005. 13.D1 filed his defences in both actions on 10 October 2005. 14.On 12 March 2012, D2 applied to strike out the plaintiffs’ statements of claim in both actions. The applications were dismissed on 28 November 2012. 15.The plaintiffs filed their witness statements on 21 March 2012. D2 filed statements of its witnesses on 26 March 2012. 16.On 26 February 2013, the court set down both actions for trial to commence on 5 August 2013 with pre-trial reviews to be held on 10 June 2013. 17.On 7 May 2013, D2 took out the Amendment Applications. 18.On 16 May 2013, D2 took out summonses in both actions to adjourn the pre-trial reviews and to vacate the scheduled trial dates. D2 also took out summonses in both actions on the same day for specific discovery. On 29 May 2013, the court re-fixed the pre-trial reviews to 18 July 2013 and adjourned D2’s aforesaid summonses to a date to be fixed for argument. 19.On 5 June 2013, D2 took out the Witness Statement Applications. The Amendment Applications 20.The summonses for the Amendment Applications were taken out more than two months after the actions had been set down for trial. By the summonses, D2 sought leave to file and serve its amended defences in both actions. 21.The plaintiffs did not oppose to all proposed amendments. The plaintiffs only opposed to the following proposed amendments:
22.I shall refer to the above proposed amendments as Amendments (1) to (9) as numbered above in this decision. Amendments (3), (7) and (8) are only consequential amendments to Amendments (2) and (4). 23.Amendment (1) propose to plead that the plaintiffs had acquired beneficial interest in the shareholdings of the Company. 24.Amendment (2) propose to plead that there was an understanding that the Company would have immediate use of the plaintiffs’ investments (the “Investment Money Arrangement”) and that D2 received the plaintiffs’ investments as agent of the Company. 25.Amendment (4) are part of the proposed plea of the Investment Money Arrangement. 26.Amendment (5) are to elaborate D2’s defences relying on the Law Society Rules of Professional Conduct. 27.Amendment (6) are to plead further to the plaintiffs’ restitution claims. 28.Amendment (9) propose to plead to the plaintiffs’ breach of trust claim. Mr Yu, representing D2, confirmed at the hearing that D2 would not pursue the proposed insertions of para 14D(a) in DCCJ 3388/2005 and para 16D(a) in DCCJ 3389/2005. I shall hereafter refer to the latest proposed Amendment (9) as Revised Amendment (9). 29.The plaintiffs opposed to the Amendment Applications on three grounds:
The Striking Out Orders 30.Before I go into the parties’ submissions on the effects of the Striking Out Orders on the proposed amendments, I shall set out the procedural history leading to the Striking Out Orders. 31.After D2 served its defences to both actions on 20 September 2005, the plaintiffs took out applications in both actions on 28 October 2005 requiring D2 to provide further and better particulars of its defences. 32.On 4 November 2005, the court ordered D2 to answer the plaintiffs’ requests within 21 days. The time was subsequently extended. However, D2 did not answer the plaintiffs’ requests within the specified time. 33.On 6 January 2006, the court ordered that unless D2 answered the plaintiffs’ requests by 26 January 2006, certain parts of D2’s defences in both actions be struck out (the “Unless Orders”). On 26 January 2006, D2 filed and served its answers to the plaintiffs’ requests (the “Answers”). The plaintiffs took the view that the Answers failed to answer their requests. They took out summonses on 27 January 2006 to strike out various parts of D2’s defences in both actions. Deputy District Judge A Kot found that D2 was in breach of the Unless Orders by furnishing illusory answers to the plaintiffs’ requests. She made the Striking Out Orders on 17 May 2006. 34.After the Striking Out Orders, P1 re-amended his statement of claim and P2 amended his statement of claim on 9 July 2012 to add a claim for breach of Quistclose trust. 35.Mr Chan, representing the plaintiffs, submitted that the proposed amendments of D2 to plead the Investment Money Arrangement and the plaintiffs’ alleged beneficial ownership in shares of the Company as well as the matters relating to the Law Society Rules of Professional Conduct were direct repetition / resurrection of those averments which had already been struck out by the Striking Out Orders and D2 was barred by the Striking Out Orders from relying on the same factual allegations in the present proceedings. 36.Mr Chan submitted that if D2 was dissatisfied with the Striking Out Orders, it should have appealed against the orders. However, D2 had taken no actions for seven years after the Striking Out Orders to challenge the said decisions. To allow the proposed amendments was to allow D2 to resurrect the struck out parts in circumvention of the Striking Out Orders. It would be a back-door appeal against the Striking Out Orders seven years after the orders were made and was an abuse of court process. 37.Mr Yu relied on Total Lubricants Hong Kong Limited v Christophe De La Cropte de Chanterac (unrep., CACV 37/2012, 15 March 2013) to submit that the Striking Out Orders struck out part of D2’s defences on pleading point and did not give rise to either cause of action estoppel or issue estoppel. The principles of res judicata or abuse of process did not apply. In Total Lubricants, the plaintiffs’ original plea of conspiracy against the 5th and 6th defendants was struck out by Poon J for failure to disclose any reasonable cause of action and being an abuse of process. The plaintiffs did not appeal against the said decision of Poon J but applied to amend their statement of claim to advance a properly pleaded claim of unlawful means conspiracy against all defendants including the 5th and 6th defendants. The amendments if allowed would bring the 5th and 6th defendants back into that action. Poon J allowed the amendment application. He explained in para 17 of his decision as follows (unrep., HCA 1694/2008, 7 February 2012):
38.The defendants appealed against the said decision of Poon J in allowing the amendments. The Court of Appeal dismissed the appeal and affirmed the aforesaid reasoning of Poon J. (See para 21 of the Court of Appeal judgment) 39.Mr Chan submitted that this case was different from Total Lubricants as the Striking Out Orders were made because of non-compliance of the Unless Orders. The court was exercising its case management power and it was not opened for D2 to say after seven years that it had now complied with the Unless Orders to resurrect the struck out parts. 40.Mr Yu submitted that the plea of res judicata did not apply to the Striking Out Orders which were interlocutory orders. He referred to the discussion on the principle of re-litigation and res judicata in 18/19/11 of the Hong Kong Civil Procedure 2013 vol 1 at pp 423 to 422 which stated as follows:
41.Mr Yu submitted that the Striking Out Orders were not based on the merits of the issues but on technical objections and the plaintiffs’ new pleas of Quistclose trust were material changes of circumstances of non-evidentiary nature. He submitted that after the Civil Justice Reform (“the CJR”), bare denials were insufficient to defend the new pleas of the plaintiffs. D2 had to plead its positive cases. The Investment Money Arrangement was D2’s positive cases to defend the plaintiffs’ Quistclose trust claims. Mr Yu submitted that D2 did not seek to re-litigate on the same issues upon which the Striking Out Orders were made by the proposed amendments and there was no abuse of court process. 42.Mr Chan submitted that the pleas of Quistclose trust were based on the same factual allegations in support of the original claims of restitution. It did not give rise to new factual issues. The plaintiffs were merely claiming that based on the same set of facts as pleaded in support of the restitution claims, trust relationship also arose between the plaintiffs and D2. He submitted that there were no material changes of circumstances which would allow D2 to ignore the Striking Out Orders and resurrect the struck out parts. 43.I shall set out below the parts of D2’s defences which had been struck out but are relevant to the plaintiffs’ objection to the Amendment Applications together with the requests for particulars raised by the plaintiffs and the answers of D2. I shall also set out the proposed amendments which are objected by the plaintiffs. Effects of the Striking Out Orders on the plea of Investment Money Arrangement 44.The following are matters related to the alleged Investment Money Arrangement:
45.Mr Yu submitted that the struck out parts of para 3 of D2’s defences in both actions pleaded that D2 was informed by D1 about the payment of the investment moneys and how the investment moneys were to be used. They were struck out because D2 failed to properly answer requests on particulars on the alleged information provided to D2. The proposed amendments pleaded D2’s understanding on the usage of the investment moneys derived from objective circumstances and were D2’s positive cases to the plaintiffs’ Quistclose trust claims. They were not resurrection of the exact pleas which had been struck out. The factual basis was different. He submitted that if D2 was not allowed to put forward its positive cases, D2 would not be able to defend the plaintiffs’ newly added Quistclose trust claims. This would be grossly unfair to D2. 46.Mr Chan submitted that the court should look into the substance of the struck out parts of para 3 of D2’s defences. They pleaded that the investment moneys would be used without restriction by the Company for the purpose of its business. The Investment Money Arrangement pleaded in the proposed amendments raised the same plea in substance. 47.I agree with Mr Yu that part of para 3 of D2’s defences was struck out because D2 failed to provide particulars to substantiate its plea of D2 being informed by D1 on usage of the investment moneys. The proposed amendments pleaded D2’s understanding on the usage of the investment moneys derived from objective circumstances are pleas based on different factual basis. The Striking Out Orders were not made on merits of the pleas but on failure to provide particulars which is a pleading point and on non-compliance of the Unless Orders which is a procedural point. In such circumstances, D2 is not barred by the Striking Out Orders from raising the plea of the Investment Money Arrangement. However, the Striking Out Orders will bar D2 from raising a plea on the use of the investment moneys relying on information from D1. D2 is barred from resurrecting such plea through inserting the last sentence of the proposed para 3A(e) in both actions which pleaded that: “At all material times, the 2nd Defendant’s instructions from the 1st Defendant were that the Investment Moneys were to be put to immediate use by the Company.” Effects of the Striking Out Orders on the plea of alleging the plaintiffs having beneficial interest in the shareholdings of the Company 48.The following are matters related to the alleged beneficial interest of the plaintiffs in the shareholdings of the Company:
49.The aforesaid parts of D2’s defences relating to the alleged beneficial interest of the plaintiffs in the Company were struck out for, inter alia, the following reasons:
50.The proposed amendments pleaded that the plaintiffs acquired beneficial interest in the shares in the Company which were held by D1 on trust for the plaintiffs and the Company treated the plaintiffs as shareholders. These were pleas struck out by the Striking Out Orders. The proposed amendments also resurrect the plea that P2 had participated in the Company’s affairs in the capacity of a shareholder. 51.The proposed amendments to allege the plaintiffs having beneficial interest in the shareholdings of the Company held on trust by D1 are attempts to resurrect the exact pleas which had been struck out by the Striking Out Orders. D2 is barred by the Striking Out Orders to raise such pleas. Effects of the Striking Out Orders on the plea relying on The Law Society Rules 52.The following are matters related to the plea relying on The Law Society Rules of Professional Conduct:
53.The parts of D2’s defences being struck out were D2’s claims that it had sought instructions to finalise the shareholder agreements. They were struck out because D2 failed to provide proper particulars on its alleged seeking of instructions. The proposed amendments are to elaborate the pleas relying on the Law Society Rules which were part of D2’s original defences and which have not been struck out. I do not agree that these amendments are resurrection of the pleas previously struck out by the Striking Out Orders or that such amendments are barred by the Striking Out Orders. Proposed amendments to defences to restitution claims 54.D2 proposed to insert the following paragraphs to its defences to plead further to the plaintiffs’ restitution claims:
55.Mr Chan submitted that the aforesaid proposed amendments were unrelated to the latest amendments made by the plaintiffs on 7 July 2012 to their claims. They were amendments in relation to the plaintiffs’ restitution claims pleaded before the latest amendments. He referred to an order made by the court in both actions on 13 February 2012 to submit that “those amendments which seek to address the original cause of action of restitution should be deemed to be waived by D2 by the effect of the order of Master I Wong dated 13 February 2012”. (para 21 of the skeleton submissions for the plaintiffs) 56.To deal with this contention of the plaintiffs, it is necessary to set out the procedural history of this case after the making of the Striking Out Orders. 57.After the Striking Out Orders were made on 17 May 2006, not much had happened in these proceedings until late 2011. Case management summonses were taken out in both actions on 2 September 2011. Various case management directions were given by the court on 3 October 2011 for both actions. Case management conferences (“CMCs”) for both actions were fixed for 10 January 2012 which were later re-fixed for 13 February 2012. At the CMCs hearing on 13 February 2012, the learned Master made further case management directionsin both actions including the Waiver Ordersin the following terms:
58.D2 did not make any amendment application within the specified time. Instead, it took out striking out applications on 12 March 2012 to strike out the plaintiffs’ statements of claim in both actions (“D2’s Striking Out Applications”). On 30 March 2012, the court ordered that the Waiver Orders be stayed pending determination of D2’s Striking Out Applications. 59.On 9 July 2012, the court granted leave for the plaintiffs to amend their claims in both actions to include claims under Quistclose trust. The court also granted leave for D2 to amend its defences within 14 days thereafter. 60.On 13 July 2012, D2 amended D2’s Striking Out Applications to include an application to postpone the time for D2 to amend its defences pending determination of D2’s Striking Out Applications (the “Postponement Applications”). 61.On 28 November 2012, the court dismissed D2’s Striking Out Applications. However, no directions were given by the court in respect of the Waiver Ordersor the Postponement Applications. 62.Mr Yu submitted that the Waiver Orders had been stayed pending determination of D2’s Striking Out Applications. When the court dealt with D2’s Striking Out Applications, the court made no further directions in respect of the Waiver Orders. Subsequent to the Waiver Orders, the plaintiffs had amended their claims and the court had on 9 July 2012 granted leave for D2 to amend its defences. D2 subsequently made the Postponement Applications which again were not dealt with by the court. Mr Yu submitted that as D2 had to amend its defences to deal with the plaintiffs’ Quistclose trust claims, D2 wished to deal with all amendments together. D2 had informed the court in the CMCs hearing held on 26 February 2013 that it would apply to amend its defences. Mr Yu submitted that although the court would take into consideration the Waiver Orders in considering the Amendment Applications, the Waiver Orders did not bar D2 from seeking leave to amend its defences. 63.The Waiver Orders directed D2 to apply for leave to amend its defences by 27 February 2012. The consequence of failure to do so was that D2 would be “treated to have waived the application”. The court did not make unless orders barring D2 from making amendment applications after 27 February 2012. In fact, the court had, after 27 February 2012, on 30 March 2012 ordered that the Waiver Orders be stayed. It seems that the learned Master, when making the orders to stay the Waiver Orders, took the view that the time for D2 to apply to amend its defences under the Waiver Orders had not expired as at 30 March 2012 which was more than one month after the specified deadline. If the time for D2 to make amendment applications did not expire on 27 February 2012, the Waiver Orders had not specified any other deadlines. It such case, the effect of the Wavier Orders became uncertain. The parties should have sought clarification from the court at the disposal of D2’s Striking Out Applications or by separate applications thereafter. However, no actions were taken by either party. In such circumstances, I do not consider that it is fair to hold that D2 had been barred by the Waiver Orders to apply for leave to amend its defences. However, when I consider theAmendment Applications, I shall bear in mind that the court had previously made the Waiver Orders and D2 had not made its applications within the specified time. Delay 64.The restitution claims were pleaded when the statements of claim were filed on 29 July 2005. D2 filed its defences on 20 September 2005. Applications to amend defences to further deal with the restitution claims were made on 7 May 2013, ie more than seven years after the filing of the defences and less than three months before the trials. 65.The Quistclose trust claims were added in July 2012. The court had on 9 July 2012 granted leave for D2 to amend its defences to deal with the Quistclose trust claims within 14 days, ie by 23 July 2012. D2’s proposed amendments were not ready until early May 2013, ie more than nine months after the time specified by the court for D2 to amend its defences had expired. 66.Mr Chan submitted that these were “last minute” applications before trial in the post-CJR era. He referred to Liu Chen v Chan Poon Wing & Anor (unrep., HCPI 779/2006, Master Marlene Ng, 7 October 2009) when the learned Master stated that:
67.Mr Chan in his skeleton submitted that to allow substantial amendments of the pleading would result in the introduction of substantial amendments and would certainly derail the trial dates. An adjournment of trial per se was a serious prejudice caused to the plaintiffs. As Mr Yu confirmed at the hearing that D2 did not pursue the amendments to insert paragraph 14D(a) in DCCJ 3388/2005 and paragraph 16D(a) in DCCJ 3389/2005 (which alleged waiver, acquiescence or concurrence), Mr Chan confirmed that the only further evidence which the plaintiffs might need to adduce was the evidence from Mr Jurgen Thorwithwho was also present when the plaintiffs’ discussed their investments with D1. He said that Mr Thorwith’s evidence would support the plaintiffs’ versions of the agreed arrangements between the plaintiffs and D1. Mr Chan confirmed that the plaintiffs would not seek adjournment of the trials to obtain evidence from Mr Thorwith. 68.Ms Tai Ho Tung in her 4th affidavits filed on 31 May 2013 in both actions supporting the Amendment Applications explained that after D2’s Striking Out Applications failed in late November 2012, D2 started to consider amending its defences. At first, D2 attempted to amend its defences by itself but later realised that defence to Quistclose trust raised complex legal issues. D2 decided to instruct counsel to amend its defences. D2 only managed to obtain fee quote from counsel in mid-February 2013 because of the intervening holidays. She said that D2 did not expect that the trial dates would be fixed at the CMCs hearing of 26 February 2013. After the said CMCs hearing, D2 took immediate actions to engage counsel to settle the amendments to its defences. However, the counsel used to represent D2 in these proceedings was not free to appear at the scheduled trial dates and suggested D2 to instruct another counsel to represent it at the trials and to attend to the amendments of D2’s defences. D2 then took actions to find another suitable counsel and to obtain fee quotes. D2 eventually found another counsel in mid-March 2013. As counsel was not previously involved in these proceedings, he needed times to review papers related to these proceedings. Due to the legal complexity of the cases, counsel took time to consider the amendments required and managed to finalise the proposed amendments at the end of April 2013. Draft amended defences were sent to the plaintiffs’ solicitors on 30 April 2013 and the Amendment Applications were subsequently taken out. 69.Mr Yu submitted that the proposed amendments were either defence in law which did not require further factual evidence or covered by evidence already disclosed. They would not call for further factual evidence and the trial dates would not be affected. 70.Mr Chan said that D2 was a firm of solicitors. Its alleged difficulties in instructing counsel were far from professional and acceptable. He submitted that the casual attitude adopted by D2 in instructing counsel was far below the acceptable standard and akin to bad faith. 71.D2’s Amendment Applications are no doubt late applications. 72.In Ketteman v Hansel Properties Ltd [1987] 1 AC 189 at 212Lord Brandon summarised the principles on which discretion to allow or refuse applications to amend should be exercised as follows:
73.The above principles remain good law after the CJR. (See Topwell Corporate Ltd v 關錦泉 & Anor (unrep., CACV 88/2013, 21 May 2013). Of course, in the post-CJR era, the court must have regard to the underlying objectives stated in Order 1A of the Rules of the District Court (the “Rules”). The court would need to balance all relevant factors to decide how its discretion should be exercised if the application is made in circumstances offending one or more of the underlying objectives. 74.As stated by Lam J (as he then was) in para 14 of his judgment in Guangzhou Green-Enhan Bio-Engineering Co Ltd & anr v Green Power Health Products International Co Limited & Ors (unrep., HCA 4651/2002, 22 July 2004):
75.The plaintiffs had added claims for Quistclose trust by their latest amendments to their statements of claim. If D2 is not allowed to amend its defences, D2 will have no positive cases in answering the plaintiffs’ Quistclose trust claims. Order 18 rule 13(4) of the Rules provides that:
76.The underlying objectives of the CJR as set out in Order 1A rule 1 of the Rules include, inter alia, to ensure fairness between the parties. (Order 1A rule 1(d)) 77.I agree that D2’s explanation for delay in making the Amendment Applications is not most satisfactory. However, I do not agree that the Amendment Applications were made in bad faith. The cases pleaded in the proposed amendments to D2’s defences are not distinct defences raised for the first time on the other. The relevant facts had already been disclosed and the trial dates would not be affected by the proposed amendments. No prejudice will be caused to the plaintiffs as there would not be any delay in the proceedings because of the amendments. 78.I note that D2’s Striking Out Applications were not determined until 28 November 2012 which was about eight months before the scheduled trials. The Amendment Applications were not made at trial as in the case of Liu Chen but at about five months after disposal of D2’s Striking Out Applications and about three months before the scheduled trials. Although there was delay, I accept that it was not substantial after taking into account the intervening holidays and the problems encountered by D2 in engaging counsel to settle the amendments. 79.As Bowen LJ stated in Cropper v Smith [1884] 26 Ch. D. 700 at 710-711 that:
80.Order 1A rule 2(2) of the Rules provides that:
81.If a defendant denies part of a plaintiff’s claim, he is not entitled thereby to call evidence of fact contrary to the plaintiff’s contention without first setting out his positive case in his defence. To disallow D2 to plead its positive cases to the Quistclose trust claims is to shut out D2’s defences to such claims. 82.Other proposed amendments are to plead legal defence. Order 18 rule 11 of the Rules provides that: “A party may by his pleading raise any point of law.” The learned editors of the Hong Kong Civil Procedure 2013 vol 1 stated in para 18/11/1 at p 392 that:
83.Although Mr Chan said that the plaintiffs might seek to adduce evidence from Mr Jurgen Thorwith on discussions between the plaintiffs and D1 to deal with the Investment Money Arrangement plea, I do not see that this is necessitated by D2’s proposed amendments. As the plaintiffs were present on all occasions when they discussed their investments with D1, the plaintiffs could give direct evidence on what had happened in those meetings. Mr Thorwith’s evidence on those meetings between the plaintiffs and D1 attended also by Mr Thorwith will only serve to boost the credibility of the plaintiffs. Whether the proposed amendments to D2’s defences are allowed, the credibility of the plaintiffs is in issue. Furthermore, Mr Chan confirmed that the plaintiff did not require postponement of the trials for obtaining evidence from Mr Thorwith, if required. 84.After balancing all the factors, I am of the view that it is unfair to shut out D2’s defences pleaded in the proposed amendments. For the reasons stated above, I do not see any prejudice causing injustice to the plaintiffs in granting the Amendment Applications. I allow the Amendment Applications save and except those proposed amendments seeking to resurrect the same pleas struck out by the Striking Out Orders as stated in paragraphs 47 and 51 above. As D2 did not pursue the proposed insertions of paragraph 14D(a) in DCCJ 3388/2005 and paragraph 16D(a) in DCCJ 3389/2005, these paragraphs shall not be included in the allowed amendments. I direct D2 to file and serve its amended defences in both actions within 7 days from the date of this decision. 85.I grant leave for P1 to amend his reply and P2 to re-amend his reply within 14 days from the date of this decision. The Witness Statement Applications 86.D2 sought to file and serve witness statements made by D1 and Mr Bruno Arboit (“BA”), one the Liquidators to the Company as well as a supplemental statement of Mr Ian De Witt (“IDW”). 87.The supplemental witness statement of IDW deals with a retainer letter issued by D2 on 17 December 2001 (the “Retainer Letter”). When dealing with D2’s Striking Out Applications, Deputy District Judge Norman Hui found that the Retainer Letter required D2 to provide security to the investors while awaiting the total investment from investors to reach HK$2,000,000 before the investment funds could be used by the Company and D2 had departed from the obligations stated in the Retainer Letter. The supplemental witness statement of IDW seeks to explain that such requirement of security only applied to the fundraising of the Company in 2001 which was failed and funds were returned to the investors. There was no similar security requirement for the fundraising in late 2003 and early 2004 to which the plaintiffs participated. 88.Mr Yu said that IDW’s supplemental witness statement explained some of the documents already disclosed which showed that there were two rounds of fundraising. He submitted that the supplemental witness statement of IDW would fill the lacuna in evidence which caused concern to Deputy Judge Norman Hui when he was asked to determine whether the plaintiffs had reasonable causes of action. 89.Mr Yu submitted that D1 was the one who established the Company and coordinated with the investors. He was the key person in these proceedings. D1 had filed his defences in both actions but had not been participated actively in these proceedings. He did not file any witness statement. IDW contacted D1 after the CMCs hearing on 26 February 2013 which fixed the trial dates and eventually managed to get D1 prepared and signed his witness statement in mid-May 2013. In his witness statement D1 confirmed his pleaded case that it had been made clear to the plaintiffs that the moneys which they would invest by paying to D2’s account would be used straight away. D1 also denied that he had made the misrepresentation claimed by the plaintiffs. Mr Yu submitted that D1’s witness statement also explained the first round fundraising based on disclosed documents. 90.Mr Yu submitted that D1 as a defendant to both actions had the right to be heard at the trials as the court’s judgment would bind him qua defendant in the actions. 91.Mr Yu said that in the decision on D2’s Striking Out Applications, Deputy District Judge Norman Hui referred to a letter from BA to D2 dated 18 October 2011 which stated that the plaintiffs were shareholders of the Company according to the Liquidators’ records. The learned Deputy Judge queried what were the “records” referred to by the Liquidators. BA in his witness statement explained that the “records” were information provided by D1 and D2 in late December 2004 to early January 2005. BA referred to documents already disclosed. 92.Mr Yu submitted that these further and supplemental witness statements were necessary for the fair resolution of the disputes. They were necessitated by the failure of D2’s Striking Out Applications which was not disposed of until 28 November 2012. Mr Yu submitted that there was no intentional delay on the part of D2 and these further and supplemental witness statements had no surprise to the plaintiffs. He submitted that drafts of these further and supplemental witness statements had been provided to the plaintiff for over a month and the plaintiffs had not identified any specific and real prejudice. 93.Mr Yu submitted that although there were two additional witnesses, this would not necessarily derail the trial dates. 94.Mr Chan informed the court that judgment against D1 in both actions had just been sealed and the court needed not concern with the claims against D1 at the trials. 95.Mr Chan submitted in his skeleton submissions that the further and supplemental witness statements dealt with the alleged Investment Money Arrangement and the alleged beneficial interest in the shareholding of the Company which had been struck out by the Striking Out Orders. He further submitted that one could not lead evidence on matters not pleaded and the Witness Statement Applications should not be disallowed. 96.Mr Chan agreed that if the Amendment Applications were allowed, the contents of the further and supplemental witness statements would then become related to D2’s pleaded case. 97.Mr Chan further submitted that there was a delay of about seven months from the decision on D2’s Striking Out Applications to the Witness Statement Applications. The further and supplemental witness statements raised substantive factual matters which would complicate and lengthen the trial. Mr Chan submitted that it was grossly unfair to compel the plaintiffs to respond to the further and supplemental witness statements before the trials. 98.Mr Chan rightly pointed out that the further and supplemental witness statements were related to matters which had been struck out by the Striking Out Orders. The Witness Statement Applications would likely be refused if made before the Amendment Applications. If not because of the imminent trials, the applications would better be made after disposal of the Amendment Applications. I do not consider that there was substantial delay on the part of D2 in making the Witness Statement Applications. 99.D2’s case after the amendments allowed would be that according to D2’s understanding there was the Investment Money Arrangement. D2 reasonably and honestly believed that the investment moneys paid by the plaintiffs to D2 were governed by the Investment Money Arrangement and D2 had been acting in accordance with the Investment Money Arrangement. D2 relied on objective circumstances to justify its said understanding and belief. In such case, evidence from D1 and BA are irrelevant to the issues in dispute between D2 and the plaintiffs. It should also be noted that D2 had been barred by the Striking Out Orders from relying on instructions from D1 to substantiate its pleas of Investment Money Arrangement. The trials are not occasions to clarify queries raised in the decision of Deputy Judge Norman Hui on D2’s Striking Out Applications. I refuse leave for D2 to file and serve witness statements of D1 and BA. 100.The supplemental witness statements of IDW are relevant to the background for D2’s understanding of and belief in the Investment Money Arrangement. Draft of IDW’s supplemental witness statements had been sent to the plaintiffs’ solicitors in early June 2013, ie two months before the trials. In view of the nature of the matters raised, I am of the view that the plaintiffs’ solicitors should have sufficient time to take instructions from the plaintiffs on the matters raised therein. Mr Chan did not specify which matters raised in IDW’s supplemental witness statementswould have to be replied to by the plaintiffs. It seems that IDW’s supplemental witness statements covered matters which the plaintiffs would not have personal knowledge. There is not much that the plaintiffs would have to reply to, if any. 101.IDW’s supplemental witness statements are not lengthy and they are on specific subject. I do not see that such evidence will substantially prolong the trials. As I have allowed the Amendment Applications for D2 to plead the Investment Money Arrangement and IDW’s supplemental witness statements are relevant to this subject, it will not do justice if I do not allow D2 to rely on them at the trials. 102.I grant leave for D2 to file and serve IDW’s supplementalwitness statements. 103.To be fair to the plaintiffs, I grant leave for the plaintiffs to file and serve, within 14 days from the date of this decision, supplemental witness statements to reply to the matters raised in IDW’s supplemental witness statements. I note that the plaintiffs may not be in Hong Kong before the trials, I direct that fax copies of such supplemental witness statements of the plaintiffs will be acceptable for filing and serving provided that the plaintiffs’ solicitors shall undertake to file the original signed copies of the same before commencement of the trials. Other matters 104.Mr Yu had the following to say in his skeleton submission on adducing witness statements dated 8 July 2013:
105.After the CJR, all parties to the court proceedings have the duties to proceed with the proceedings in an expeditious way. If a plaintiff fails to prosecute the action actively, the defendant should have taken out appropriate applications to proceed with the proceedings. The old days’approach of “let sleeping dogs lie” is no longer acceptable. Delay by the other side is not excuse, less to say as reason, for one’s own delay. The aforesaid submissions of Mr Yu have no merits. 106.In his skeleton submission for the Amendment Applications dated 5 July 2013, Mr Yu stated that:
107.In his skeleton submissions on adducing witness statements, Mr Yu stated that:
108.nbsp; . One of the underlying objectives of the CJR is “to ensure that a case is dealt with as expeditiously as is reasonably practicable.” (Order 1A, rule 1(b) of the Rules) 109.Order 1A, rule 2(1) of the Rules provides that:
110.After the CJR, the court is engaged in pro-active case management. Order 1A, rule 4 of the Rules provides that:
111.Parties to legal proceedings are required to proceed expeditiously with the proceedings. Order 1A, rule 3 of the Rules provides that:
112.Legal proceedings are not to proceed at the leisure of the parties. The parties should have obtained all necessary directions at the case management summons stage before the CMC. In these actions, the case management summonses were taken out on 2 September 2011, ie more than one years and five months before the setting down of the trials. The parties should have already complied with all case management directions before the CMCs hearing and should be ready to proceed to trial by the time of the CMCs hearing. It is exception, not usual, to have more than one CMC. The CJR does not expect many CMCs before the trial or else the purposes of the CJR will be frustrated. 113.D2 filed its defencesin these actions on 20 September 2005. If D2 wished to amend its defences, it had plenty of times to do that before the 1stCMCs held on 13 February 2012. The claims for Quistclose trust were added in July 2012. The court had allowed plenty of times for D2 to amend its defences to defend the new claims. D2’s Striking Out Applications had been disposed of three months before the 2nd CMCs held on 26 February 2013. D2 had ample times to make applications to amend its defences and to adduce further witness statements before the 2nd CMCs. No applications were placed before the court at the 2nd CMCs hearing. The court would not be doing justice to the plaintiffs and the learned Master wouldnot be discharging his active case management duties if he accepted a bare claim from D2 that it had further interlocutory applications to make and did not fix the trial dates at the second (not the first) CMCs when there were no pending interlocutory applications. 114.The learned Master in fixing the trial dates for these actions to more than five months after the CMCs had allowed further times for D2 to take out all necessary interlocutory applications. Knowing that the trial dates had been fixed for early August 2013, D2 still did not take out these applications until May 2013. To take out interlocutory applications close to trial, D2 took the risk that its applications might be refused on the ground that they might disturb the trial dates, being milestone dates. Order 25, rule 3(3) of the Rules provides that the court shall not vary a milestone date unless there are exceptional circumstances justifying the variation. If its applications are not allowed for disturbing the trials, D2 only has itself to blame. It was D2’s poor case management which led to applications being made closed to trial. Trying to shift the blame to the court is totally unacceptable. 115.I shall also point out that if a party wishes the trial date to be fixed in consultation with counsel’s diary, the party shall bring counsel’s diary to attend the CMC hearing. It is neither a practice nor a rule in the District Court that trial date will be fixed in consultation with counsel’s diary. Parties can make request to the Listing Master. However, it is at the discretion of the Listing Master after considering all the circumstances including the underlying objectives whether to accede to such request. The comment of Mr Yu on the learned Master fixing trials without consulting counsel’s diary is totally unwarranted. Costs 116.D2 was seeking indulgence from the court to amend its defences and to file further and supplemental witness statements. These are very late applications. Although in the very special circumstances of these cases, I allow part of D2’s applications, I see no reasons why D2 should not bear the costs. I make orders nisi thatD2 to pay the plaintiffs’ costs of and occasioned by these applications with counsel certificate. Such costs orders nisi shall become absolute after 14 days from the date of this decision unless application is received within the said 14 day period from any party to vary the same. Conclusion 117.I grant leave for D2 to file and serve within 7 days from the date of this decision its amended defence in DCCJ 3388/2005 per draft annexed to D2’s summons taken out on 7 May 2013 save and except that paragraphs 3(g), 12A(b), 14D(a) and the last sentence of paragraph 3A(e) are excluded. 118.I grant leave for P1 to amend his reply consequential to D2’s amendments to its defence within 14 days from the date of this decision. 119.I grant leave for D2 to file and serve within 7 days from the date of this decision supplemental witness statement of IDW in DCCJ 3388/2005 as per draft annexed to D2’s summons taken out on 5 June 2013. 120.I grant leave for P1 to file and serve further and/or supplemental witness statements within 14 days from the date of this decision to reply to matters raised in the aforesaid supplemental witness statement of IDW and/or in D2’s amended defence. 121.I make an order nisi that D2 shall pay the costs of and occasioned by P1 for the aforesaid applications of D2 (including all costs previously reserved in relation to these applications) with counsel certificate, to be taxed if not agreed. Such costs order nisi shall become absolute after 14 days from the date of this decision unless application is received within the said 14 day period from any party to vary the same. 122.I grant leave for D2 to file and serve within 7 days from the date of this decision its amended defence in DCCJ 3389/2005 per draft annexed to D2’s summons taken out on 7 May 2013 save and except that paragraphs 4A, 14A(b), 16D(a) and the last sentence of paragraph 3A(e) are excluded. 123.I grant leave for P2 to re-amend his reply consequential to D2’s amendments to its defence within 14 days from the date of this decision. 124.I grant leave for D2 to file and serve within 7 days from the date of this decision supplemental witness statement of IDW in DCCJ 3389/2005 as per draft annexed to D2’s summons taken out on 5 June 2013. 125.I grant leave for P2 to file and serve further and/or supplemental witness statements within 14 days from the date of this decision to reply to matters raised in the aforesaid supplemental witness statement of IDW and/or in D2’s amended defence. 126.I make an order nisi that D2 shall pay the costs of and occasioned by P2 for the aforesaid applications of D2 (including all costs previously reserved in relation to these applications) with counsel certificate, to be taxed if not agreed. Such costs order nisi shall become absolute after 14 days from the date of this decision unless application is received within the said 14 day period from any party to vary the same. 127.The time for the hearings for these applications shall be apportioned equally between the two actions.
Mr Isaac Chan, instructed by John Ip & Co, for the plaintiffs Mr Jason Yu, instructed by the 2nd Defendant acting in person | |||||||||||||||||||||||||||||||||||||
Cases cited in this judgment
Further hearings and rulings under DCCJ 3388/2005