Ma Wai Wah and Another v. Suek Chai Kit Christopher and Others

CACV 283/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 283 OF 2012

(ON APPEAL FROM HCA NO. 508 OF 2011)

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BETWEEN

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Hon Kwan JA (giving the Reasons for Judgment of the Court):

1.The appeal we are concerned with was brought by the 1^st to 3^rd defendants, whose application to strike out the amended statement of claim and the amended reply and defence to counterclaim under Order 18 rule 19 of the Rules of the High Court was dismissed by Deputy High Court Judge Woo on 13 November 2012. This appeal was brought with leave granted by the judge on 28 December 2012.

2.Also listed at the hearing of the appeal were two summonses.  The earlier summons on 15 October 2013 was issued by the 1^st and 2^nd plaintiffs, seeking an “unless order” to set down the defendants’ appeal for hearing.  As the appeal was set down, albeit only after this summons was issued, the only outstanding matter is the costs order on this summons.  The other summons on 18 October 2013 was issued by the defendants, seeking leave to adduce as additional evidence in this appeal six witness statements served on both sides in this action.  Five of these statements were served in December 2012, pursuant to the order made by the judge after he dismissed the defendants’ strike out summons.  One witness statement was dated 30 May 2012.  At the hearing, we were informed by the defendants’ counsel, Mr Isaac Chan, that the defendants would only seek leave to adduce the witness statement of the 1^st plaintiff served in December 2012.

3.At the start of the hearing, we refused leave to adduce additional evidence on appeal, as the first and second conditions in Ladd v Marshall [1954] 1 WLR 1489 were not satisfied.  In respect of the defendants’ strike out summons, directions have been given by the court in June 2012 on the filing of evidence.  Granted that five affirmations made by the 1^st plaintiff were placed before the judge in the strike out hearing, and that the 1^st plaintiff had already deposed to his case and the evidence in support in some detail, the defendants have not been able to indicate specifically what further evidence in the 1^st plaintiff’s witness statement in December 2012 could not have been obtained before the hearing with reasonable diligence, or that the further evidence would or might, if believed, have a very important effect on the outcome of this appeal.

4.At the conclusion of the hearing, we announced the orders we made on the appeal and the costs orders on the two summonses.  We now give reasons for our judgment.

The strike out summons

5.The defendants’ strike out summons was issued on the grounds that the plaintiffs’ claim is scandalous, frivolous or vexatious, or that it may prejudice, embarrass or delay the fair trial of the action, or that it is otherwise an abuse of the process of the court.  Broadly speaking, the contention was that the plaintiffs’ claims are unbelievable and impossible to succeed, and that the factual allegations as pleaded are conflicting and inconsistent.

6.The amended statement of claim has been summarised by the judge in his judgment.  For our discussion of the arguments advanced by counsel, it is convenient to divide up the claims into “the 1^st plaintiff’s claim” and “the 2^nd plaintiff’s claim”.

The 1^st plaintiff’s claim

7.We quote from the relevant parts of the judgment relating to the 1^st plaintiff’s claim as pleaded:

“3. The 1^st plaintiff was until 2008 a registered shareholder of 30,400 ordinary shares (“the Shares”) in Neway Karaoke Box Ltd (“Neway Karaoke”) and was at all material times the registered shareholder of one ordinary share (being the entire issued share capital) in the 2^nd plaintiff company.

4. The 1^st defendant is and was at all times a director of Neway Karaoke, a director of Multichance Holdings Ltd (“Multichance”), the entire issued share capital of which is held by the trustees of the Suek Family 2004 Trust, apparently a trust for the benefit of the family of the 1^st defendant. The 1^st defendant is and was also a director of Betterway Ltd, the 2^nd defendant company.

5. At all times until 16 June 2008, Multichance and the 2^nd defendant together held 330,600 shares (87%) of the 380,000 issued ordinary shares in Neway Karaoke.

6. It is relevant to point out that the Shares of the 1^st plaintiff (30,400 shares) constituted 8% of all the issued share capital of Neway Karaoke, and the remaining 5%, being 19,000 shares, was held by the 1^st defendant’s wife, Ms Ng Wai Yung.

7. The 3^rd defendant was from 15 April 2008 to 6 May 2011 the sole director of the 2^nd plaintiff.

8. By an oral agreement made in or about July/August 2007 (“the 1^st oral agreement”), the 1^st defendant offered to buy and the 1^st plaintiff agreed to sell the Shares at the price of $53.6 million. In purported performance of the 1^st oral agreement, the 1^st defendant procured $53.6 million to be paid to the 1^st plaintiff by 8 cheques, namely,

Date of cheque	Amount (HK$)
6 July 2007	3.6 million
13 August 2007	1.0 million
13 August 2007	17.4 million
13 August 2007	1.6 million
23 August 2007	16.1 million
23 August 2007	2.4 million
23 August 2007	10.0 million
23 August 2007	1.5 million
	-----------------
Total:	$53.6 million

9. Except for the cheque dated 6 July 2007 for $3.6 million which was drawn on the account of Multichance, the remaining 7 cheques were all drawn on the account of Neway Karaoke.

10. In performance of the 1^st oral agreement, the 1^st plaintiff in or about September 2007 duly executed in respect of the Shares an undated instrument of transfer and an undated bought and sold note in favour of Multichance, as directed by the 1^st defendant.  For all intents and purposes, the 1^st oral agreement was performed by the 1^st plaintiff.

11. In or about December 2007, the 1^st defendant expressed concern to the 1^st plaintiff that since a substantial part of the sums paid to the 1^st plaintiff were paid by Neway Karaoke, the 1^st defendant was concerned about the legal implications of financial assistance.

12. The 1^st defendant requested the 1^st plaintiff to treat the sum of $32 million paid by Neway Karaoke to him as dividends to be declared by Neway Karaoke, and the Shares would be returned to the 1^st plaintiff on the condition that the 1^st plaintiff would pay back the sum of $21.6 million to the 1^st defendant or his nominees.

13. As a result, another oral agreement (“the 2^nd oral agreement”) was made between the 1^st plaintiff and the 1^st defendant, in the following terms:

(a) The sum of $32 million that had been paid to the 1^st plaintiff be kept by the 1^st plaintiff but as “advanced dividend” from Neway Karaoke and not as part of the purchase price for the Shares.

(b) The 1^st defendant would procure and take all necessary steps to transfer back to the 1^st plaintiff such interest in the Shares as had passed to the 1^st defendant and/or to Multichance under the 1^st oral agreement and/or the said instrument of transfer and bought and sold note.

(c) The 1^st plaintiff would pay the sum of $21.6 million to the 1^st defendant or his nominees.

14.  In performance of the 2^nd oral agreement, the plaintiff paid sums totalling $21.6 million to three persons according to the 1^st defendant’s directions.

15.  The 1^st defendant has, however, wrongfully refused to procure or take all or any necessary steps to transfer back to the 1^st plaintiff such interest in the Shares as had passed to the 1^st defendant and/or Multichance under the 1^st oral agreement and/or the said instrument of transfer and/or bought and sold note.

16.  In consequence, the consideration for the payment of the $21.6 million by the 1^st plaintiff had wholly failed.

17.  It is pleaded that the 1^st plaintiff is entitled to claim $21.6 million against the 1^st defendant on the ground of total failure of consideration or alternatively, the 1^st plaintiff is entitled to seek specific performance of the 2^nd oral agreement under which the 1^st defendant has to procure the transfer of the Shares back to the 1^st plaintiff.  In the further alternative, the 1^st plaintiff claims the loss of the value of the Shares the quantum of which is to be assessed.”

8.It is accepted by Mr Scott, SC, who appeared with Mr Andy Lam for the plaintiffsin this appeal, that the claim for specific performance of the 2^nd oral agreement, under which the 1^st defendant has to procure the transfer of the Shares back to the 1^st plaintiff, can only be made in the alternative to the monetary claim.  In other words, the 1^st plaintiff cannot claim the return of the $21.6 million, being the consideration he paid for the 1^st defendant to transfer the Shares back to him, as well as the return of the Shares. It must be either the money or the Shares.  The 1^st plaintiff cannot succeed on both.

9.Alternative claims were apparently pleaded in the body of the amended statement of claim in §§16 to 19, as summarised in the judgment at §17.  However, the prayer of relief in respect of the 1^st plaintiff’s claim did not make the claims in the alternative and the relevant paragraphs just read as follows:

“(1) As against the 1^st Defendant, HK$21.6 million; alternatively, damages for breach of contract to be assessed;

(2) As against the 1^st Defendant, an order for specific performance for the delivery up of the Shares to the 1^st Plaintiff; …”

10.The prayer for relief ought to be amended to reflect accurately what was pleaded in the body of the pleading, namely, that the monetary claim and the claim for the return of the Shares are made in the alternative.

The 2^nd plaintiff’s claim

11.We quote from the relevant parts of the judgment relating to the 2^nd plaintiff’s claim as pleaded:

“18. In or around 2007, Neway Karaoke intended to apply for listing on the main board of the Stock Exchange of Hong Kong.  In order to facilitate the intended listing application, a corporate reorganisation was planned whereby the entire share capital in Neway Karaoke would be transferred to Neway Enterprise Holdings Ltd (BVI) (“Neway Enterprise”); the entire issued share capital in Neway Enterprise would be held by Neway Group Holdings Ltd (Cayman) (“Neway Group Holdings”); and the entire issued share capital of Neway Group Holdings would be held by Neway Strategies Investment Ltd (BVI) (“Neway Strategies”).

19.  Accordingly, on 30 October 2007, Neway Strategies was incorporated in the BVI.  Neway Strategies issued a total of 100 shares credited as fully paid and held in the same proportions and by the same persons as at that time the shares in Neway Karaoke were held.  The 100 shares in Neway Strategies were therefore held as follows:

the 2nd defendant	70 shares
Multichance	17 shares
the 1st plaintiff	8 shares (“the 8 NS shares”)
Ms Ng Wai Yung (the 1st defendant’s wife)	5 shares

20.  On 15 April 2008, at the request of the 1^st defendant, the 1^st plaintiff transferred the 8 NS shares then registered under his name to the 2^nd plaintiff for the consideration of US$1.

21.  By a written agreement dated 5 November 2008 (“the November 2008 Agreement”), the 2^nd plaintiff (acting through the control/ management of the 3^rd defendant), without the 1^st plaintiff’s knowledge, agreed to sell and the 2^nd defendant agreed to buy the 8 NS shares at the price of $32 million payable to the 2^nd plaintiff or its nominees.  On 5 November 2008, pursuant to the November 2008 Agreement, the 2^nd plaintiff duly transferred the 8 NS shares to the 2^nd defendant.

22.  In breach of contract, the 2^nd defendant has not paid the said price or any part thereof and therefore owes the 2^nd plaintiff the sum of $32 million.

23.  Until her resignation on 6 May 2011, the 3^rd defendant was the sole director of the 2^nd plaintiff.

24.  By reason of the fact that the 3^rd defendant executed the November 2008 Agreement for and on behalf of the 2^nd plaintiff but without notifying the 1^st plaintiff, she was in breach of fiduciary duty and/or trust.  She also acted under the directions of the 1^st defendant pursuant to a scheme intended to deprive the 2^nd plaintiff of its due payment under the November 2008 Agreement.  Moreover, the 3^rd defendant has ever since not taken any or any sufficient steps to enforce the November 2008 Agreement to receive the $32 million due and payable to the 2^nd plaintiff.

25.  The plaintiffs also claim against the 2^nd defendant for its dishonesty in relation to the 3^rd defendant’s breach of fiduciary duty and/or breach of trust in that, through its directing mind and will in the 1^st defendant, it was dishonest in agreeing and acting in concert with the 3^rd defendant to deprive the 2^nd plaintiff of the payment due to the 2^nd plaintiff under the November 2008 Agreement.”

12.The relevant paragraphs in the prayer for relief in respect of the 2^nd plaintiff’s claim read as follows:

“(1) As against the 2^nd Defendant, the sum of HK$32 million;

(2) A declaration that the 3^rd Defendant is liable to account to the 2^nd Plaintiff for the sum of HK$32 million or such other sum as the Court thinks fit on the ground of her breach of fiduciary duty/breach of trust;

(3) A declaration that the 2^nd Defendant is liable to account to the 2^nd Plaintiff for the sum of HK$32 million or such other sum as the Court thinks fit on the ground of dishonest assistance and/or knowing receipt;

(4) A declaration that the 2^nd Plaintiff is entitled to equitable title to the 8 Neway Strategies Shares, and that the 2^nd Defendant holds the 8 Neway Strategies Shares on trust for the 2^nd Plaintiff; and an order that the 2^nd Defendant deliver up the 8 Neway Strategies Shares to the 2^nd Plaintiff; …”

13.The 2^nd plaintiff’s claim as pleaded comprised a monetary claim for $32 million being the unpaid purchase price of the 8 NS shares payable under the November 2008 Agreement and a claim for the return of the 8 NS shares.  These claims are inconsistent and can only be advanced in the alternative.  As in the 1^st plaintiff’s claim, it must be either the money or the shares.  The amended statement of claim ought to be amended to plead these claims in the alternative, both in the body of the pleading and the prayer for relief.

14.There is yet another inconsistency in the pleading that is objectionable.  This relates to the 1^st plaintiff’s claim in respect of the Shares and the 2^nd plaintiff’s claim in respect of the 8 NS shares.

15.As pleaded in the amended statement of claim, to facilitate the intended listing application of Neway Karaoke, there was a corporate restructuring in 2007 and 2008.  There can be no or no serious dispute that a share swap of the Shares for the 8 NS shares took place as part of the corporate restructuring in this manner:

(1) On 30 October 2007, Neway Enterprise and Neway Strategies were incorporated.  Neway Enterprise issued only one share, which is held by Neway Strategies.

(2) On 5 May 2008, the 1^st plaintiff transferred the Shares to the 2^nd plaintiff, and the 2^nd plaintiff executed a declaration of trust holding the Shares as a bare trustee for the 1^st plaintiff.

(3) On 16 June 2008, all the shareholders of Neway Karaoke (being the 2^nd defendant, Multichance, the 2^nd plaintiff and Ms Ng) as transferors entered into a share transfer agreement in relation to their shares in Neway Karaoke with Neway Enterprise as transferee.  That agreement was also executed by Neway Strategies.  By that agreement, the transferors agreed to sell their shares in Neway Karaoke to Neway Enterprise, the consideration for which was to be settled by way of the issue and allotment of 100 shares to them in Neway Strategies, credited as fully paid.

(4) Pursuant to the share transfer agreement, the 2^nd plaintiff executed a sold note and an instrument of transfer of the Shares in favour of Neway Enterprise dated 16 June 2008.

(5) As pleaded in the amended statement of claim, of the 100 shares issued by Neway Strategies, the 1^st plaintiff received the 8 NS shares, which represented the same proportion of his shareholding of the Shares in Neway Karaoke.  The 1^st plaintiff then transferred the 8 NS shares to the 2^nd plaintiff for the consideration of US$1.

16.As a result of the share swap, the 8 NS shares (being 8% of the 100 shares in Neway Strategies) represented the same interest as the Shares (being 8% of the shareholding in Neway Karaoke) that used to be held by the 1^st plaintiff.

17.In the hearing before the judge, he raised with Mr Andy Lam at some length the fact that the plaintiffs appeared to be making inconsistent claims in respect of the Shares and the 8 NS shares and gave counsel the opportunity to clarify the plaintiffs’ position.  I quote the relevant exchanges in the transcript:

“COURT: You see, if you get -- if P1 gets the money back [i.e. $21.6 million], then there would be no entitlement to the shares, claim 2 [for the return of the Shares] will fail, right, because you can only choose one. If … claim 2 fails, then … P2’s claim for the $32 million would collapse because there was no share to sell [under the November 2008 Agreement]. … if you get the $21.6 million, you don’t get your shares back, then the shares rightfully belong to D1, and therefore, the swap of shares, the … 30,400 shares for the 8 shares in Neway Strategies would belong to D1, not to you, not to P2.

MR LAM: Yes, my Lord. But for the November 5, 2008 agreement … it was the sale and purchase whereby 8 shares of Neway Strategies sold to D2 for 32 million.

COURT: Yes. But that’s a sham, according to you. If you don’t get your shares back, that would be a sham, because P2 would not have the 8 shares, right? … if P1 wins in getting back $21.6 million, he would have no share, and how could there be a swap of his old shares for the new shares held by P2 … You see, the right of P2 holding the shares and therefore entitled to sell the shares to whoever for $32 million would never arise if you get your $21.6 million back. You understand what I mean? That’s why your claims are inconsistent.”[1]

“COURT: … Now, and therefore claim No. 1 [for $21.6 million] …, you want your money back. If you succeed, then you don’t have claim 2 [for return of the Shares]; you can’t have your shares back. It’s one way or the other. It can’t be both. Now, … if … your can’t get your claim 2 and therefore … the whole basis of P2’s claim would fail, because you don’t have the shares yourself, that’s merely a sham; … P2 would not have the shares because the swap would not have benefited P2 or P1, … it should have benefited D1. You understand the point? You see the conflict, the inconsistency? You can succeed on one but not both. You see?

Or are you saying and if you plead in the alternative, you say, “All right, now I accept the repudiation of the rescission agreement [i.e. the 2^nd oral agreement] by D1 because after my payment [of $21.6 million], you still refuse to pay me back the shares. I want specific performance. I want the shares”, and because you succeed on claim No. 2 … you get your shares back and therefore you … would be treated as being entitled to the shares which were swapped for the new 8 shares and therefore your nominee P2 was able to sell the 8 shares to … D2 … for $32 million and therefore … you are entitled to your claim 1 [for $21.6 million] or … P2’s claim 1 [for $32 million], instead of $21.6 million for P1, you get P2 getting $32 million, of course that’s a larger sum. I think you will prefer that.

But still you have to choose, … because … you embarrass the defendants in defending the case…

… They are not supposed to be embarrassed like that. What do you want? Are you claiming money? Or are you claiming the shares? That’s how I see as the main objection, that does not touch upon which side is to be believed at all, you see? It’s just … your own claims which are inconsistent. … You can’t have the money back and the shares back because it’s one way or the other, you can’t have both. And that makes your claim inconsistent and therefore embarrassing. That would certainly lengthen the trial because your position is unclear. …

The first part of the story is that, you see, if you want the money, you don’t have the second part of the story, you don’t have the $32 million for the sale of the shares because you don’t have the shares. How say you? …”[2]

“COURT: Now, they refused to give you back the shares and therefore you want your $21.6 million back, right, right? That’s your first stance, that’s starting from the beginning, right, you want your $21.6 million back. But if you get that, you don’t get your shares, because the shares have gone rightfully … to D1 and D1 or D2 did not need to buy them from P2, because these 30 odd thousand shares are exactly the same as the 8 per cent shares. You understand my point? I -- that's why I don’t follow … why you can have your cake and eat it and then you have a cake again.”[3]

“COURT: The second part of the story is that now you learn P2 had sold the 8 per cent shares for $32 million … And therefore either you accept the agreement, … or you don’t. … You don’t and therefore you ask for shares back. You can ask for the shares back. But in fact you are claiming, ‘No, no, no, I accept the agreement. Now, knowing it I accept it but you pay me the $32 million’. Now this stance conflicts with your stance of wishing to have the shares back because if you are willing to sell the shares at $32 million eventually you could not have the shares back pre-2008.”[4]

18.I have quoted at some length the judge’s remarks to counsel and the questions he raised.  Mr Lam was unable to explain to the judge satisfactorily how it could be argued that the claims advanced by the 1^st plaintiff in respect of the Shares were not inconsistent with the claims advanced by the 2^nd plaintiff in respect of the 8 NS shares.  In the end, Mr Lam resorted to this:

“MR LAM: … it’s my submission that it will not warrant the defendant to strike out … They are asking to strike out both actions [i.e. the claims of the 1^st plaintiff and the 2^nd plaintiff] and not a certain specific part of my lay client’s claim against the defendants. And moreover, there’s no matter [should be “letter”] before application given to those instructing me specifying which parts of duplicity.

Therefore, even if there -- even assuming there is duplicity then it will go to, for example, the issue of amendment which I’m not going to elaborate here. But here we are concerned with striking out a whole action.”[5]

“MR LAM: … what my learned friend says to the highest, what he’s saying is that either one part or the other part of my client [and] only one part of my lay client’s claim will succeed, … but it’s impossible to say that the entire claim must fail.

So, therefore, my Lord, my submission is that … it’s totally impossible to say that my client must fail and therefore … the defendants’ summons must fail.”[6]

19.The judge would appear to have accepted this submission of Mr Lam as stated in §§29 and 37 of his judgment:

“29. When I put to Mr Andy Lam, counsel for the plaintiffs, that the inconsistent and conflicting features of these claims would cause embarrassment to the defendants, he contends that even if the plaintiffs may need to amend to plead a consistent case, it is not a proper case for striking out. He submits that only when the plaintiffs’ case is impossible to succeed that it should be struck out. The inconsistencies in the plaintiffs’ claims, as alleged by the defendants, could only show that part of the plaintiffs’ claims, and not their entirety, would not succeed.”

“37. The defendants’ criticism of the plaintiffs’ claims being overlapping may have some merits. However, I am in no way satisfied that the plaintiffs’ claims are bound to fail or are so unbelievable as beyond any credence. It would be unfruitful, and indeed might render a disservice to justice, for me to express any further opinion on the parties’ cases whether they are credible or unbelievable for particular reasons. In short, I am not satisfied that the plaintiffs’ claims should be struck out at this stage.”

Inconsistent claims

20.In our view, the judge was clearly right that these parts of the plaintiffs’ claims are inconsistent and conflicting:

(1) the 1^st plaintiff’s claim for the return of $21.6 million and his claim for the return of the Shares;

(2) the 2^nd plaintiff’s claim for the purchase price of $32 million payable under the November 2008 Agreement and its claim for the return of the 8 NS shares;

(3) the 1^st plaintiff’s claim for the return of $21.6 million and the 2^nd plaintiff’s claim for the purchase price of $32 million payable under the November 2008 Agreement;

(4) the 1^st plaintiff’s claim for the return of the Shares and the 2^nd plaintiff’s claim for the return of the 8 NS shares.

21.Inconsistent allegations of fact may be made in the alternative, provided the pleader has reasonable grounds for doing so (Rules of the High Court, Order 18 r 12A).  The amended statement of claim as it stands is embarrassing and delays the fair trial of the action.  If it is not amended so that inconsistent claims are made in the alternative, it is liable to be struck out.

22.It is no answer for the plaintiffs to say the defendants could only show that part of the plaintiffs’ claims, and not their entirety, would not succeed.  Nor is it an answer to say that the other side could not specify which of the claims said to be inconsistent should be struck out.  Under an application to strike out a pleading pursuant to Order 18 rule 19, it is within the court’s power to order a pleading to be amended.

23.Having identified inconsistent and conflicting claims in the pleading, and as such claims are embarrassing, the judge should have exercised the power to see to it that the pleading is amended, failing which the pleading would be struck out.  In just dismissing the defendants’ strike out summons, the judge has fallen into error.  It is for this reason that we allowed the appeal, set aside the order of the judge in dismissing the summons, and made the orders in lieu that would be mentioned below.

24.The other grounds for striking out the plaintiffs’ claims may be dealt with shortly.

Incomplete cause of action of the 1^st plaintiff

25.Mr Chan advanced the argument that the 1^st plaintiff’s cause of action is incomplete.  He submitted that according to the pleaded case of the plaintiffs, the 1^st plaintiff had not discharged his obligation under the 2^nd oral agreement to pay $21.6 million, as $5.6 million out of that sum belonged to the 1^st defendant.  This is because the $5.6 million came from the total dividends of $70 million declared by Neway Karaoke in January 2008 and the 1^st plaintiff paid his total dividends received of $5.6 million in February 2008 to the 1^st defendant’s nominee in February 2008.  As the 2^nd oral agreement had not been completed, the 1^st defendant might be regarded as a trustee of the Shares as the vendor, for the limited purpose of specific performance, and was entitled to receive the dividends of $5.6 million from the Shares.

26.Further, as under the 2^nd oral agreement, the $32 million paid to the 1^st plaintiff was to be kept by him as “advanced dividend”, the $5.6 million dividends declared in January 2008, even if payable to the 1^st plaintiff, had already been pre-paid as part of the “advanced dividend”.  Hence, the payment of $5.6 million by the 1^st plaintiff to the 1^st defendant’s nominee should not be regarded as part of the purchase price payable by the 1^st plaintiff under the 2^nd oral agreement.

27.There is a factual dispute on the entitlement to the dividend of $5.6 million.  According to the 1^st plaintiff’s 4^th affirmation, it was a term of the 1^st oral agreement that he would be entitled to dividend declared or to be declared in respect of all profit earned before the completion date which was in September 2007.  He alleged that the $70 million dividends declared by Neway Karaoke in January 2008 must also be related to profit earned before the completion date and as such he was entitled to the dividend of $5.6 million.

28.We do not think it is plain and obvious that the argument advanced by Mr Chan on this would succeed.  It is not appropriate to strike out the 1^st plaintiff’s claim on this basis.

Lack of credence in the plaintiffs’ claims

29.The defendants mounted a wholesale attack on the plaintiffs’ case, contending that the 2^nd oral agreement defied common sense and commercial sense and was contradictory to undisputed or indisputable evidence.

30.These arguments and the evidence on both sides have been considered carefully by the judge in §§30 to 35 of his judgment, with which we agree.  Like the judge, we cannot be satisfied that the plaintiffs’ claims are bound to fail or are unbelievable as beyond credence.  It would not be appropriate for us to give particular reasons at this stage of any view that may be formed of any allegation advanced on affidavit.  Obviously, the case of the plaintiffs would have to be tested at the trial, with the benefit of viva voce evidence.

31.We reject this as a ground for striking out the plaintiffs’ claims.

Orders

32.We have made these orders at the conclusion of the hearing.

33.In respect of the defendants’ application to adduce further evidence on appeal, we see no reason why costs should not follow the event.  We have therefore awarded costs of that application, which we have dismissed, to the plaintiffs.

34.For the plaintiffs’ summons for an unless order to set down the defendants’ appeal for hearing, we are of the view that the defendants’ delay in filing an application to fix a date for hearing the appeal was unjustified.  The defendants delayed the setting down of the appeal to seek discovery of the 1^st plaintiff’s witness statement in May 2012, which they wanted to adduce as further evidence in the appeal.  Further, they wanted to have the application to adduce further evidence on appeal dealt with first before setting down.  For the reasons given earlier, the application to adduce further evidence on appeal was misconceived and was dismissed by us.  We see no reason why the plaintiffs should not have their costs in issuing the summons for an unless order and we awarded the costs of this summons to the plaintiffs.

35.For the reasons mentioned earlier, we allowed the appeal and set aside the order of the judge.  We have made the following orders in lieu:

(1) This action is to be stayed save for the purpose of an application to the Court of First Instance for leave to amend the amended statement of claim.

(2) The stay is to be lifted upon the filing of a re-amended statement of claim.

(3) If a re-amended statement of claim is not filed within three months, or within such further time as the Court of First Instance may allow, the amended statement of claim and the amended reply and defence to counterclaim be struck out, the 1^st and 2^nd plaintiffs’ claims against the 1^st to 3^rd defendants be dismissed with costs, and judgment on the counterclaim be entered against the 1^st and 2^nd plaintiffs with costs.

36.In respect of the costs here and below, as the defendants have succeeded on their strike out application on only one of the grounds advanced, and as much evidence was filed to deal with the allegations that the plaintiffs’ case was totally lacking in credence, we are of the view that the defendants should recover only part of their costs.  In the circumstances, we awarded half of the costs here and below to the defendants.

Mr Isaac Chan, instructed by Tony Au & Partners, for the 1^st to 3^rd Defendants (1^st to 3^rd Appellants)

Mr John Scott SC & Mr Andy Lam, instructed by Ivan Tang & Co., for the 1^st & 2^nd Plaintiffs (1^st & 2^nd Respondents)

[1] Transcript, p 56 line N to p 57 line H

[2] Transcript, p 57 line R to p 59 line G

[3] Transcript, p 87 lines J to O

[4] Transcript, p 73 line K to p 74 line A

[5] Transcript, p 89 lines K to P

[6] Transcript, p 77 lines K to N