CHENG HUNG KIT v. JIM YIU MING

HCA 2037/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 2037 OF 2011

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D E C I S I O N

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The Application

1.  This is an application taken out by the defendant pursuant to O.18, r.19(1)(a) RHC to strike out the plaintiff’s Statement of Claim filed on 31 January 2012 and the further and better particulars given thereunder on the ground that it discloses no reasonable cause of action.

2.  Under O.18, r.19(2), no evidence shall be admissible.

3.  The application is contested and the parties are legally represented.[1]

The Factual Background

4.  Briefly stated, the plaintiff claimed against the defendant as his former solicitor, to whom he had confided confidential information relating to Hang Heung Cake Shop Company Limited (“Hang Heung”) and Hang Heung Hop Kee Investment Company Limited (“Hang Heung Hop Kee”) for breach of fiduciary duty[2]. The plaintiff further says that the defendant had unreasonably and unjustifiably misused/exploited his private and confidential information without his consent, rendering detriment to him in terms of loss and damages, being, inter alia, his shares in Hang Heung and Hang Heung Hop Kee.[3]

The Defendant’s Grounds

5.  The defendant says that “the Statement of Claim contains multiple unnecessary averments of alleged breaches of duty which are irrelevant to the claim for breach of confidence.  Those are separate causes of action with different constituent elements.  There is no relief sought, or any loss pleaded, in relation to any possible cause of action for breach of duty.  In the premises, it is clear that these averments do not disclose any reasonable cause of action and ought to be struck out.”  The defendant has set out the objectionable paragraphs of the Statement of Claim.[4]

6.  It will be noticed that those objectionable clauses set out in counsel’s written submissions refer to the incidents of the plaintiff’s claims of breach of confidentiality and fiduciary duties as his former solicitor.  The causes of action, as I see, are breach of confidentiality and breach of fiduciary duties as a solicitor to his client.

7.  The meaning of “cause of action” as according to Lord Diplock in Letang v Cooper [1961 L. No. 296] [1965] 1 Q.B. 232 is “simply a factual situation the existence of which entitles one person to obtain from the court a remedy against another person”.

8.  As submitted by the defendant, according to Bullen, Leake & Jacobs, Precedents of Pleading, Vol. 2, (17th ed., 2012) at §74-01, the essential requirements for a cause of action in breach of confidence are as follows: -

(1) there must be a clear identification of the information which is alleged to be confidential.

(2) the information itself must have the necessary quality of confidence.

(3) the information must have been imparted in circumstances importing an obligation of confidence.

(4) there must have been an unauthorized use of that information to the detriment of the party communicating it. [5]

The Relevant Legal Principles

9.  Recorder L. Wong SC in C Y Foundation Group Ltd & Another v Best Max Holdings Ltd & Others (unrep., HCA 787/2011, 3 June 2013 §2) had set out the relevant legal principles which can be briefly stated as follows:

(1) First, this being an application under rule 19(1)(a) only, no evidence is admissible under rule 19(2).  The Court will simply assume the facts as pleaded in the statement of claim to be proved and determine, on that basis, whether the pleading discloses a reasonable cause of action.

(2) Second, the question for the Court is whether the allegations as pleaded in the statement of claim disclose some cause of action or raises some question that ought to be tried.  It is not concerned with an assessment of the strength or weakness of the case.  The mere fact that the case is weak, and not likely to succeed, is no ground for striking it out.  The Court would only strike out when it is impossible, and not just improbable, for the case to succeed.

(3) Third, where a pleading is defective only for want of particulars to which the other side is entitled, particulars (and not an order to strike out the pleading) should have been sought under Order 18, rule 12.  The Court can properly refuse to strike out even a pleading seriously lacking in particularity if the defect is not the result of a blatant disregard of Court orders and can be remedied.

(4) Fourth, where a statement of claim does not disclose the cause of action relied upon but there is reason to believe that the case can be improved by amendment, the Court may give an opportunity to amend, even though the formulation of the amendment is not before the Court.

See Hong Kong Civil Procedure 2013, Volume 1, paragraph 18/19/3 (sub-paragraph (4)), 18/19/4 (sub-paragraph (2)) and 18/19/7.

10.  The court does not insist on perfect pleadings and the defendant should be reasonable in treating the pleadings as a whole.  The defendant does not say that it is scandalous, frivolous or vexatious, may prejudice, embarrass or delay the fair trial of the action, or is otherwise an abuse of the process of the court and therefore the court should not strike out.  See Ma Toi Ling & Another v Lam Man Kwong (unrep., HCA2208/2014, A. Chow J., 5 January 2016 at §25).

Discussion

11.  Applying the legal principles above to the present application, it is quite obvious that the defendant’s complaints can be remedied either by way of amendments to the pleadings or by way of supplying particulars by the plaintiff.  What follow are the complained averments as seen from the defendant’s written submissions[6]:

a. §§9-19: they relate to the three loan agreements with Minehead between August 2001 and February 2003. The plaintiff has pleaded that he was led into signing the agreements by the defendant, who was in fact acting for Minehead.[7] Although the plaintiff has not pleaded the particulars of the confidential information divulged by the defendant to Minehead, the situation, if true, cries out for explanation from the defendant.

b. §20(2): similar situation was raised by the plaintiff that whereas the defendant was acting as his solicitor, he also represented the potential purchasers of the plaintiff’s shares in Hang Heung Hop Kee.

c. §22: misapplication of the fund given by the plaintiff to the defendant. It can be seen that this paragraph does not relate to the divulgement of confidential information, but it is a clear case that the plaintiff is claiming against the defendant for breach of fiduciary duties.

d. §§24, 27 and 29: the plaintiff claims the defendant for breach of fiduciary duties.

The above averments may not be perfect.  But the principle of Ma Toi Ling applies.

12.  The defendant further argues that even if the facts as pleaded in the Statement of Claim in respect of the above paragraphs are true, the plaintiff is not claiming for damages or for any relief.  It should be noted that in the prayers, the plaintiff is asking for an inquiry as to damages for the defendant’s breach of confidence.

13.  On this legal issue, the plaintiff is unable to render any assistance to me this morning.  Mr. Szeto acting for the plaintiff, simply says that he can add the claim for damages to salvage the situation.  But he has not prepared the draft for my consideration.

14.  However, Mr. Szeto argues that the facts of this matter have been subsumed in another consolidated action HCA 1130/2011 and HCA 1137/2011 where the plaintiff had joined the defendant, who had also filed his defence to the Counterclaim.  This related action was not mentioned in the defendant’s written submissions.

15.  The defendant further argues that the fact that the plaintiff admits that the facts in the consolidated action have subsumed the facts of this action supports his application to strike out this action because of duplicity.

16.  However, this Court must bear in mind that today, the application is striking out under O.18, r.19 RHC, ie the Statement of Claim discloses no reasonable cause of action only.  This Court has to apply the above legal principles for this application.

17.  The defendant complains lack of particulars in support of the plaintiff’s claim as to the confidential information, its nature, the persons to whom it was given and loss and damages.  The defendant had made requests for further and better particulars from the plaintiff, who had answered the requests.  But the defendant is not satisfied with the answers.  Yet, the defendant did not apply to the court for unless order for the particulars.  When asked for the reasons, the defendant says that he elects to take out this application to deal with them.

18.  I consider that it is not appropriate to pursue O.18, r.19 to remedy the deficiency of particulars, which are under O.18, r.12 because for this application, the court cannot rely upon any affidavit evidence.  Nor can I consider the sufficiency of the particulars in this application.  The fact that the defendant has not pursued the particulars further only indicates to me that he is satisfied with those particulars.

19.  Applying the legal principles to this application, I refuse to exercise my judicial discretion to strike out the plaintiff’s claim.  The plaintiff can simply remedy the situation by claiming for damages in the prayer.  As for the particulars, the defendant can pursue it by asking for unless order against the plaintiff.

20.  There has been argument between the parties as to whether the facts in the consolidated action have covered all the facts in this action.  The defendant argues that in the consolidated action, the plaintiff in this case had not set out the particular facts on the confidential information, to whom the confidential information had been departed etc.  However, the defendant admits that the general factual background of this matter is similar to that in the consolidated action save that the factual scope is wider in the consolidated action.  This will give rise to whether this action should proceed separately or should be, as proposed by the plaintiff, proceed in parallel with the consolidated action or be stayed pending the outcome of the consolidated action.  This will be covered in the Case Management Conference below.

21.  The defendant’s application is therefore dismissed.

Costs and Order

22.  As to the costs of this application, the defendant asks for costs of this application on the ground that he has reasons to take out this application, drawing analogy with Yung Yui Kwai v Yung Woon Kwai & Ors [2015] HKCU 676.  I do not consider that this case assists the defendant in that in that case, there was an application for amendment, which is absent here.  However, the plaintiff has, in his written submissions, asked for the costs to be in the cause and Mr. Szeto has maintained his client’s stance for this application.  I so order.

23.  This Court shall now make an order in terms as follows:

a.     The defendant’s application is dismissed;

b.     The costs of this application, including the costs reserved and for this hearing be in the cause.

Case Management Conference

24.  The matter is adjourned to 18  May 2016 at 11:30 am before the Registrar for the 6^th Case Management Conference with the following directions:

a. The plaintiff shall, within 28 days from the date hereof, take out an application for leave to amend his Statement of Claim, if so advised;

b. The parties shall seek Counsel's advice to decide the issue in paragraph 20 above and whether an application should be taken out under Practice Direction 5.7 to have it docketed to a judge, and if so advised, such application should be taken out as soon as practicable and the returned date above may be vacated;

c. The costs of this Case Management Conference hearing be in the cause.