HUIBERT FRITS VAN DELFT AND ANOTHER v. HORWATH FINANCIAL SERVICES LTD

HCA 898/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 898 OF 2006

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D E C I S I O N

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By two summonses dated 14 March 2007 and 27 April 2007, the 3^rd Party requested for Further and Better Particulars of the Third Party Statement of Claim (“SC”) and of the Third Party Reply (“Reply”) filed by the Defendant on 25 September 2006 and 13 February 2007 respectively.  Originally, the 3^rd Party made 48 requests of SC and 15 requests of the Reply.  The Defendant voluntarily filed its answers on 6 March 2007 and on 10 April 2007 respectively.  The 3^rd Party found some of the answers not satisfactory and it pursued 24 of the answers to the requests in respect of SC and 14 of those in respect of the Reply further.

2. The answers which the Defendant has given and the 3^rd Party considers them to be unsatisfactory, can be broadly summarised into the following types:

(A) The 3^rd Party is seeking for evidence;

(B) The Defendant’s pleadings have sufficiently and clearly set out in the SC;

(C) The requests are misconceived and premature: the parties have not yet proceeded to discovery, interrogatories or the exchange of witness statements;

(D) The 3^rd Party’s requests relate to matters of law and evidence and the Defendant is not, therefore, obliged to answer.

3. I must say Mr. Sheppard’s view on the general concept is correct: the necessity of the requests is much reduced by the practice of exchanging witness statements.  The cases of the parties are clearly set out therein.  I always approach the requests for further and better particulars with some suspicion.  It can easily develop into lengthy unnecessary satellite litigation that the court does not encourage.  I will only order delivery of further and better particulars where such order is necessary for disposing the matter fairly or for saving costs.  With this in mind, I proceed to consider each request made and the answer given.

Statement of Claim filed by the Defendant

Request 3(1)

4. In paragraph 8 of the SC, the Defendant alleged that “the 3^rd Party engaged the Defendant to promote and market its investment products ……”.  The 3^rd Party expressly sets out in what way the 3^rd Party was involved in paragraphs 5 to 10 and also in paragraph 14 of the Defence.  It also denies paragraph 8 of SC.

5. The 3^rd Party requests for particulars as to how the Defendant was engaged, whether it was oral or in writing and the circumstances under which its engagement was made.  The Defendant’s reply is that the 3^rd Party’s request is not appropriate as it is asking for evidence and the matter is sufficiently pleaded in paragraph 8 of the SC.

6. I have considered Paragraph 8 carefully I can hardly decide whether the engagement was oral or in writing and the circumstances the Defendant was engaged.  It is a legitimate request.  I do not consider it to be a search for evidence.  I allow Request 3(1).

Request 4

7. I accept the Defendant’s argument that the 3^rd Party’s request is in effect an interrogatory application.  The Defendant has answered that “enhanced broker commissions/rebates” is a non-exhaustive illustration.  This leads me to think what are the others.  And can the 3^rd Party prepare its case without knowing the others?

8. Once the answer given is that there are others, the answer forms part of the pleading.  The 3^rd Party should be informed of other encouragement to prepare its case.  I consider the 3^rd Party is entitled to a satisfactory answer to Request 4.

Request 10

9. In paragraph 12 of the SC the Defendant alleged it entered into agreement with the 3^rd Party pursuant to the “Terms of Business”.  The 3^rd Party asked whether the agreement was oral or in writing.  The Defendant said that the request is a request for evidence and that the 3^rd Party itself has clearly pleaded to it in paragraph 14 of the Defence.

10. I have considered paragraph 12.  For the same reason as set out in paragraph 6 above I allow the Request 10.

Requests 12, 14(2) and 17

11. In paragraphs 13, 14 and 15 of SC the Defendant pleaded that the 3^rd Party should act in good faith and with reasonable care and skill in the marketing, promotion, administration and management of the investments.  The 3^rd Party asks for particulars of the circumstances and legal basis on which it is contended that such a term is so implied.

12. The answers to these requests are of the standard type given by the Defendant that they are sufficiently set out in the different paragraphs.  I have considered the different paragraphs and agree with Mr. Beresford that the different paragraphs are “bald allegations”.  I do not know how and in what way such duties arose, I can only guess as set out paragraph 12 that the 3^rd Party owes such duties as introducer and broker.  The Third Party can hardly prepare its case to meet the allegations without a clear answer.  I allow the Requests 12, 14(2) and 17.

Request 13

13. In paragraph 13(b) the Defendant claims that the fund should be administered and managed in such a manner not to unduly prejudice the investors over and above that contemplated, highlighted, stated or otherwise cautioned in its marketing and other promotional material.

14. The 3^rd Party asks the Defendant to identify the matters to which the allegation relates.  The Defendant seems to say that the issue can be addressed after discovery.  I wonder how the discovery will help.  I am of the view that the request for particulars is an appropriate way.  I allow Request 13.

Request 15

15. In paragraph 15 of the SC it is stated that there was an agreement between the Third Party and the Plaintiffs with respect to the administration and management of the fund etc.  The 3^rd Party requests the Defendant to identify the agreement.

16. The Defendant’s reply is that the particulars are sufficiently pleaded in paragraph 15.  I do not think that the Defendant has answered the request.  I still do not know whether the agreement is oral or in writing and how the agreement was created.  I allow request 15.

Request 18

17. In Paragraph 16 of the SC, it is pleaded that the Third Party owed both the Defendant and the Plaintiffs a duty in tort to exercise due diligence and with reasonable care and skill.  I am not sure how the non-contractual duties arose.  Was it because the 3^rd Party was the alleged introducer and broker?  It is difficult for the 3^rd Party to prepare its case without knowing the basis.  I allow Request 18.

Requests 21, 24 and 25

18. I agree with Mr. Beresford’s view that the 3^rd Party is entitled to know which were marketing and promotional materials, information, statements and representations provided and relied upon by the Defendant.  Without the identification of the facts, statistics, statements and representation that had been relied on by the Defendant and/or might have been relied on by the Plaintiff, the 3^rd Party hardly knows what wrong was committed.  I accept that the Plaintiffs seem to have suffered loss.  The 3^rd Party is only liable if it can be demonstrated that some wrong was committed by the 3^rd Party.

19. The Defendant’s general answer is that upon complete discovery the Defendant shall provide further particulars.  I do not know how the discovery will assist.

20. In respect to Request 25, the Defendant gave a positive averment in its answer that the Plaintiffs relied upon all the Third Party’s positive assertions and illustrations contained in the documents.  I still find it too vague to serve the purpose of setting out the Defendant’s case.  I allow Requests 21, 24 and 25.

Requests 26, 27, 28 and 32

21. I accept Mr. Beresford’s submission that the allegations of negligence have been rolled up in paragraph 27.  However, I think that the allegations are not beyond comprehension and one knows what the Defendant’s case is.  I refuse Requests 26, 27, 28 and 32.

Request 29

22. I do not think the Defendant’s answer is evasive and that is what the Defendant knows about the matter.  Is it contradictory?  It is not something I will comment on at this stage.  I refuse Request 29.

Request 35

23. In paragraph 28 of the SC, the Defendant alleged negligent representation by the Third Party that the CMI Geared with Profits Fund was guaranteed.  The 3^rd Party asks what was the negligent representation.  The Defendant answered that the particulars are sufficiently set out and particularized in paragraph 27.  I have read paragraph 27 several times but I cannot find anything related to the negligent representation.  I allow Request 35.

Request 36

24. It consists of 2 requests: (a) to identify to which pleaded cause of action the avertment of knowledge is relevant, and explain its relevance and (b) the facts, documents or overt acts on which the Defendant intends to rely in support of the allegation that the Third Party had the knowledge.

25. I find that the averment is relevant to the 3^rd Party’s alleged breach of contract and tortuous duties, if any.  I find that request 36(a) is satisfactorily answered.  I do not allow Request 36(a).

26. I do not think the Defendant has adequately answered Request 36(b): I do not know what facts, documents or overt acts the Defendant relies on to make the Defendant think the 3^rd Party had knowledge or ought to have knowledge.  I allow Request 36(b).

Request 38

27. This request is linked with requests 15, 17 and 18.  If they are satisfactorily answered, this request is not necessary.  I do not go further into it.  As I have allowed 15, 17 and 18, I also allow Request 38.

Request 39

28. I note the 3^rd Party’s point in the request that if it was a deliberate and intentional act of the 3^rd Party to harm the interests of the Plaintiff and others, it could not be negligent.  But, I think it could also be lack of good faith or without reasonable care for the interest for the Plaintiff or others.  I agree that the request is misconceived.  I do not allow 39.

Requests 42 and 43

29. These requests are the same as request 39.  Similarly, I do not allow 42 and 43.

Request 48

30. I agree that the 3^rd Party is entitled to know the basis of the plea of indemnity.  If it is a contractual indemnity, which clause does the Defendant rely on?  If it is a statutory one how is it invoked?  I allow Request 48.

Reply filed by the Defendant

Requests 2 and 3

31. In paragraph 6(a) and (b) of its reply, the Defendant states that it is unable to plead to paragraph 8(3), (4) and (5) of the 3^rd Party Defence.  The reasons of its inability to plead or to “admit, not admit or deny any of the matters set out in the Fund Guide pleaded in paragraph 5 (or 8) of the Third Party Defence” are that “paragraph 5 (or 8) neither pleads nor refers to any such Fund Guide” and that “such facts are beyond its sphere of knowledge”.

32. All the brackets in the above quotations are my insertions to make them more intelligible.  Both paragraphs 5 and 8 refer to the Fund Guide with particulars and it is not right that the Defendant cannot plead to it.

33. Mr. Sheppard in his written submission concedes that “this is an issue that can be clarified, in due course, when the pleadings are amended, as will be the case after discovery and/or interrogatories”.

34. As the Defendant has conceded that it can plead and the pleading requires amendment I do not think it is necessary to pursue the request further.

Request 4

35. The request is made in respect of paragraph 7 of the Reply.  That paragraph 7 is a reply to paragraph 12 of the 3^rd Party Defence.  In turn, that paragraph 12 can be regarded as a defence to paragraph 6 as well as indirectly to paragraph 12 of the Defendant Statement of Claim.  The 3^rd Party has made Requests 1 and 22 on the two paragraphs of the Statement of Claim.  The 3^rd Party does not follow up those two requests after answers given.  I am sure that the discovery by exchange of lists of documents and exchange of witness statements will help to define the Defendant’s case in that respect.  I do not allow the request.

Requests 5 and 6

36. For request 5, for the same reason as paragraph 35 above, I do not allow the request.

37. I allow Request 6 as the particulars are something which the 3^rd Party must know before it can prepare its case.  I allow Request 6.

Requests 7 and 8

38. I do not allow Request 7 as the discovery by exchange of documents and witness statements will define the Defendant’s case.

39. I allow Request 8 as the 3^rd Party wants to know clearly what is the express term or how it is implied.

Requests 9 and 10

40. In paragraph 11 of the Reply, the Defendant pleads that the 3^rd Party owed the tortuous duties to individual investors as particularized therein.  The word “therein” refers to the Terms of Business.  I am puzzled how the tortuous duties arose and what they were.  I allow Requests 9 and 10.

Requests 11, 12, 13 and 14

41. I refuse Request 11 as I consider that the discovery process and the exchange of witness statements will clearly set out the Defendant’s case.

42. I do not allow Request 12: the Defendant has stated the reason why it considers that the 3^rd Party had such knowledge and intention i.e. by actively promoting etc.

43. I consider that the Defendant will set out his case by referring to the seminars, brochures, literature, circulars etc. in the course of discovery and exchange of witness statements.  I do not allow Request 13.

44. For the same reason as set out in paragraph 43, I refuse Request 14.

Request 15

45. For the same reason as set out in paragraph 35, I do not allow Request 15.

Conclusion

46. I allow the Requests Nos. 3(1), 4, 10, 12, 13, 14(2), 15, 17, 18, 21, 24, 25, 35, 36(b), 38 and 48 for further and better particulars of the Defendant’s Statement of Claim, such requests having been set out in the Request served on the Defendant on 10 November 2006.

47. I allow the Requests Nos. 2, 3, 6, 9 and 10 for further and better particulars of the Defendant’s Reply, such requests having been set out in the Request served on the Defendant on 28 February 2007.

48. I direct the Answers to the above Particulars to be filed and served within 21 days after handing down of this decision.

49.  I extend the time for exchange of lists of documents within 14 days after the answers referred to are provided.

50. Consequential to it, the inspection of documents will take place within 14 days thereafter.

51. Pursuant to Order 42 rule 5B(6), I make an order nisi that the costs of these two applications be costs in the cause with certificate for counsel.