XCHRX TONG NAI KAN v. CHEUNG KING FUNG FRANCIS AND ANOTHER

HCA8587/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 8587 OF 1998

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J U D G M E N T

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The appeal

1. The defendants appeal against the Master's decision to allow the plaintiff to amend the Writ and the Statement of Claim by adding the 2nd defendant as a party to the action.

Facts

2. The plaintiff is the beneficial owner of a limited company called First Link Investment Limited ("First Link"). The 1st defendant is the director and the shareholder of the 2nd defendant.

3. The plaintiff's case against the 1st defendant is that it had lent $10 million to the 1st defendant. "To evidence the loan", First Link and the 2nd defendant entered into a Joint Venture Agreement ("JV Agreement"). The cheques for the loan was issued by the plaintiff in favour of the 2nd defendant. The 1st defendant repaid the loan by a cashier order of $1 million and two personal cheques of $5 million and $4 million each. The cashier order was honoured while the two cheques for $9 million were dishonoured. The 1st defendant had since partially repaid $2.4 million, leaving a balance of $6.6 million. The plaintiff claims against the 1st defendant for the $6.6 million.

The amendment

4. The case against the 2nd defendant is in the alternative. The plaintiff is seeking to recover the same $6.6 million from the 2nd defendant. Paragraphs 9(1)(a) and (c) of the amendment reads :

"(a) The 1st defendant had in his defence and affirmation filed in the action herein alleged that the said loan was lent by First Link to Fodon in pursuance of the JV Agreement.

(b) ...

(c) If which is not admitted, the plaintiff did by his agent, First Link, advance the sum of $10 million to the 2nd defendant without prejudice to the plaintiff's claim against the 1st defendant."

The defendants' argument

5. The gist of the defendants' argument is that what the plaintiff alleged is factually wrong because the 1st defendant's stand has always been that there was an investment agreement between First Link and the 2nd defendant and it was not a loan agreement.

Alternative claim

6. In my view, the nature of the $10 million is a matter that has to be resolved at the trial. But clearly the plaintiff is entitled to join the 2nd defendant on the alternative basis that the money was advanced by him to the 2nd defendant instead of the 1st Defendant. The fact that the plaintiff maintains that the money was lent to the 1st defendant does not preclude him from pursuing the alternative claim against the 2nd defendant. Either party may include two or more inconsistent sets of material facts and claim relief thereunder in the alternative : Note 18/7/18, Supreme Court Practice 1999 ("SCP").

7. In my view, the alternative plea is not so embarrassing that amendment should not even be allowed. The reference in para.9(1)(a) that the 1st defendant alleged that the loan was lent by First Link to the 2nd defendant is, I think, merely a shorthand form of pleading what the 1st defendant had said. In essence, I think there cannot be any surprise that the plaintiff is referring to the 1st defendant's case that the legal relationship was between First Link and the 2nd defendant.

8. Whether the plaintiff can ultimately recover the money from the 2nd defendant remains to be seen. The fact that the agreement was made between First Link and the 2nd defendant is not conclusive if in fact the plaintiff was the beneficial owner of First Link which had merely acted as the plaintiff's agent or trustee in conducting its affairs.

9. This is not a case of the plaintiff bringing a case against the 2nd defendant not knowing of the facts or inventing facts, but rather, on the facts, whether the plaintiff can establish an alternative claim against the 2nd defendant. The general rule is that leave to amend is readily granted before trial unless the opponent is placed in a worse position than he would have been if the amended pleadings had been served in the first place, or some injury caused to him for which he cannot be compensated by the payment of costs : Note 20/8/10, SCP.

Appeal dismissed

10. In the circumstances, I would dismiss the appeal.