Kala Sakhrani Mohan v. Ontrade International Ltd and Another

CACV000019/1983

BETWEEN

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Coram: Sir Alan Huggins, V.-P., Cons & Fuad, JJ.A.

Date of Judgment: 28 JUNE 1983

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REASONS FOR JUDGMENT

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Sir Alan Huggins, V.-P:

1. The Plaintiff - the Appellant before us - brought an action against four defendants. The Writ was endorsed with a claim "for an indemnity arising out of a guarantee executed by the Defendants in September 1976". She subsequently filed a Statement of Claim claiming against the 1st Defendant as principal debtor and the other three defendants as guarantors. Thereafter she took out a summons for summary judgment against the 1st and 2nd Defendants and a few days later those Defendants applied to strike out the Statement of Claim. The Master struck out the Statement of Claim and a judge in chambers upheld his decision, he refusing leave to amend the Writ. It is against the decision to strike out the Statement of Claim as against the 1st Defendant and the refusal of leave to amend the writ that the present appeal was brought. The 2nd, 3rd and 4th Defendants were, therefore, not directly concerned in the appeal.

2. The first issue we had to decide was whether the terms of 0.18 r.15(2) were wide enough to permit the inclusion in a statement of claim of a claim against a defendant as principal debtor where the only claim against him indorsed on the writ was one as a guarantor. That sub-rule is in these terms:

"A statement of claim must not contain any allegation or claim in respect of a cause of action unless that cause of action is mentioned in the writ or arises from facts which are the same as, or include or form part of, facts giving rise to a cause of action so mentioned; but subject to that, a plaintiff may in his statement of claim alter modify or extend any claim made by him in the endorsement of the writ without amending the endorsement."

No claim against the 1st Defendant as principal debtor was mentioned in the writ and therefore the. Appellant has to rely on the argument that such a claim "arises from facts which are the same as, or include or form part of, facts giving rise to" the claim against it as guarantor. Mr. Smith founds his case largely upon Brickfield Properties Ltd. v Newton 1971 1 W.L.R. 862. In that case the original claim against the defendant, an architect, was for negligent supervision of building works. It was held that a claim for negligent design of the building did not come within the words of the equivalent English sub-rule. However, Mr. Smith prays in aid of his argument passages in the judgments and in particular what was said by Sachs, L.J. at p.870A:

"It was contended for the plaintiffs that the number of facts which would have to be proved to establish the cause of action stated in the writ coincided with so many facts which would have to be established to prove the claim that there was negligence in design that their further claim fell within the terms of the sub-rule. I am, however, unable to accept this contention. In order to establish the 'design' claim there would have to be proved additional facts which occurred before the superintending began without wishing to lay down any general formula as to how the sub-rule should be applied, it seems that, in general, it is meant to relate to cases in which some part of the facts necessary to establish the claim made in the writ would suffice to establish some other, perhaps narrower cause of action. It has somewhat the same effect as the rule in criminal cases that one may include in an indictment any count which is supported by evidence disclosed in the depositions but none which requires the proof of additional facts."

Counsel rightly says that there can be no liability under a guarantee unless there is first a principal debt. It follows - so the argument goes - that as the debt which the 2nd, 3rd and 4th Defendants were alleged to have guaranteed would have had to be proved and as that principal debt would in fact have turned out to be a debt of the 1st Defendant to the Plaintiff, no new fact was introduced by suing the 1st Defendant as principal debtor instead of as guarantor. We cannot accept that contention. The 1st Defendant was originally sued as a guarantor only and it was inherent in that claim that someone other than the 1st Defendant was the principal debtor. The Statement of Claim now alleges that the 1st Defendant itself is a principal debtor and that is a new fact not relevant to (and, indeed, inconsistent with) the previously alleged cause of action. This is, therefore, not the alteration, modification or extension of the cause of action contained in the indorsement of the Writ but the substitution of an entirely different cause of action. Whether or not the case is one where leave should have been granted to amend the writ is not relevant to this ground of appeal. We are satisfied that leave to amend was required and that in the absence of amendment the Statement of Claim was properly struck out.

3. The alternative argument advanced by Mr. Smith is that the judge was wrong not to allow the Plaintiff to amend the Writ under 0.20 r.5. Unfortunately we do not have a note of the judge's reasons and we would draw attention to the observations of Cons, J.A. in Ever Finance Limited v Yuen Wai Piu Civil App. 1982 No. 53 concerning the right of parties to know by what the judge was influenced. We are told that the judge did accept that he had a discretion, whether to grant leave or not. We are further told that he said that "in all the circumstances" he did not think it right to exercise that discretion in the Plaintiff's favour. It would have been most helpful if we knew what were the principal considerations which led him to that conclusion. Mr. Smith suggests that he must have considered matters which he ought not to have considered or have failed to consider relevant matters - although counsel cannot specify what they were - because, he says, on the evidence no reasonable judge could have thought it just to refuse an amendment.

4. The correct approach for an appellate court which is called upon to review the exercise of a discretion by a lower court has been set out in many authorities but I am satisfied that it is as stated by Lord Diplock in Hadmor Productions Ltd. v Hamilton 1982 2 W.L.R. 322, 325C, which was relied upon by Mr. Mills-Owens:

"An interlocutory injunction is a discretionary relief and the discretion whether or not to grant it is vested in the High Court judge by whom the application for it is heard. Upon an appeal from the judge's grant or refusal of an interlocutory injunction the function of an appellate court, whether it be the Court of Appeal or your Lordships' House, is not to exercise an independent discretion of its own. It must defer to the judge's exercise of his discretion and must not interfere with it merely upon the ground that the members of the appellate court would have exercised the discretion differently. The function of the appellate court is initially one of review only. It may set aside the judge's exercise of his discretion on the ground that it was based upon a misunderstanding of the law or of the evidence before him or upon an inference that particular facts existed or did not exist, which, although it was one that might legitimately have been drawn upon the evidence that was before the judge, can be demonstrated to be wrong by further evidence that has become available by the time of the appeal; or upon the ground that there has been a change of circumstances after the judge made his order that would have justified his acceding to an application to vary it. Since reasons given by judges for granting or refusing interlocutory injunctions may sometimes be sketchy, there may also be occasional cases where even though no erroneous assumption of law or fact can be identified the judge's decision to grant or refuse the injunction is so aberrant that it must be set aside upon the ground that no reasonable judge regardful of his duty to act judicially could have reached it. It is only if and after the appellate court has reached the conclusion that the judge's exercise of his discretion must be set aside for one or other of these reasons, that it becomes entitled to exercise an original discretion of its own."

Mr. Smith points out that in that case their Lordships were concerned with interlocutory injunctions and not so far-reaching an order as one to strike out a statement of claim or (as here) to refuse an amendment to the writ which was necessary to enable the plaintiff to proceed with a claim. In our view it does not follow that a fundamentally different approach is appropriate in such cases. No doubt in applying the principles laid down this court must bear in mind the effects of any order which has been made, but it will do so not because this affects the principles to be applied by an appellate court but because the judge in chambers was bound to consider the effects of the order he was asked to make.

5. The discretion exercised by the judge was one under 0.20 r.5(2). By a Respondent's notice the 1st Defendant contends that there was no jurisdiction to grant leave to amend and that no question of discretion arose. In the event we were of opinion that, even assuming that there was jurisdiction under 0.20 r.5(5), it was not possible for us to hold that no reasonable judge could have come to the conclusion that it was not just that leave to amend should be granted.

6. Much of the evidence and the argument was concerned with the likelihood that the Plaintiff would be able to make good the case which she wished to set up against the 1st Defendant. The stronger the evidence to support a claim, no doubt the more disinclined a court will be to refuse an amendment necessary for that claim to proceed. However, the court should not, in effect, try the action solely upon such affidavits as have been filed for another purpose. If the action proceeded, we could foresee that the Plaintiff here would be faced with several difficulties in satisfying a court that she lent the money to the 1st Defendant, but that was a factor to which we attached no significant weight in deciding whether leave to amend should have been granted, for there might well be evidence available, of which we were not aware, which would dispel the suspicions inevitably aroused by the circumstances so forcefully relied upon by Mr. Mills-Owens.

7. The matters which doubtless influenced Mayo, J. were these. The Plaintiff had no real explanation for her failure to lodge her claim within the limitation period of six years. The alleged loan was one of $2,000,000.00, which was a sum not even a wealthy woman would be likely to regard as insignificant. She said that, in accordance with the customs of her race, she as a woman left business affairs to the men and therefore relied upon her son to do what was necessary: she had forgotten about the existence of the letter of guarantee dated 11th March 1976, which was in these terms:

It was signed by the son for and on behalf of each of the Defendants. The Plaintiff did not say that she had forgotten lending the money and it would have been difficult for her to do so because she had herself borrowed the money from a third party and in 1976 was compelled to sell her jewellery in order to pay her creditor. Since she admitted that her jewellery and her house were of great importance to her, it was impossible to believe that she had forgotten why she had been forced to sell her jewellery. When one considers the matter solely from her point of view, she had little reason for saying that it would be unreasonable to refuse leave to amend so as to defeat the statute. When one considers it from the point of view of the 1st Defendant, she had even less merit on her side. Mr. Smith argued to the contrary on the basis that the 1st Defendant knew before the expiration of the limitation period the  true nature of the Plaintiff's claim and he relied upon Brickfield Properties Ltd. v Newton (supra), where at p. 872C Sachs, L.J. referred to a case where the writ itself had been served out of time and  continued:

"The instant case, however, falls within a different category. It concerns a writ which was issued and served in due time but which was defective in that it failed to state in technically appropriate terms the nature of a dispute the essence of which was well known to the defendant the latter being in no way prejudiced by that defect as regards the preparation of his defence. There may be distinctions between the way in which in practice the courts may approach these two categories, and, if this is so, the approach will be less rigid with regard to the defective writ category."

In our view that decision was of little assistance to the Plaintiff. The only knowledge the 1st Defendant had of the nature of the Plaintiff's claim - other than the writ which it was desired to amend - was a letter of 15th March 1982 enclosing a copy of the letter of guarantee. That letter was principally concerned to correct the amount of the claim, which had been wrongly stated in the previous correspondence. However, the Plaintiff's solicitors took the opportunity to explain "the background of the affair" and in the course of so doing said,  inter alia,

"On the same day our client drew a cheque on Banque Nationale de Paris No. HK695842 for $2,000,000.00 payable to [the son] as Director and Agent for [the 1st Defendant] but endorsed by him over to [the 1st Defendant]...... this sum was advanced to [the 1st Defendant] and deposited with the Chase Manhattan Bank

What day was referred to did not otherwise appear from the letter. The cheque sought to be sued on was not expressed to be signed by the son as Director and Agent for the 1st Defendant, and it never was indorsed by him over to the 1st Defendant or deposited with the Chase Manhattan Bank. We were told that the Plaintiff had made a last minute change of solicitors and that the Writ had to be taken out in a hurry. That may be relevant to the conduct of the new solicitors but it did not excuse the Plaintiff. Judging by the terms of the letter of guarantee itself it would not have been surprising if the instructions given to the new solicitors lacked something in clarity. Be that as it may, the 1st Defendant and its advisers must have found the letter of 15th September confusing, especially if they checked the company's books and found (as was now said) that there was no entry which could be related to any indebtedness to the Plaintiff. Such a muddled statement of the Plaintiff's claim less than a week before the expiration of the limitation period bore no similarity to the protracted and clear correspondence which existed in Brickfield Properties Ltd. v Newton. If we were wrong as to that, then we thought Mr. Mills-Owens fairly contended that what was sauce for the goose was sauce for the gander: if the 1st Defendant and its advisers should have understood that the claim was being made against the 1st Defendant as a principal debtor, so should the Plaintiff's solicitors, and since they were writing to correct an error in their letter they should have realised that there was an error in the Plaintiff's writ.

8. We did not accept that the Plaintiff and her son should be treated as having acted in concert throughout and that she should be blamed for the son's failure to ensure that the alleged loan was duly entered in the books of the 1st Defendant. Nevertheless, as we have said, we were not persuaded that in all the circumstances the judge could not reasonably have taken the view that the Plaintiff had failed to discharge the onus of showing that the granting of leave to amend in the manner desired would be just.

28 JUN 1983