GURDAS S. CHOITHRAMANI v. MAYER BROWN (FORMERLY KNOWN AS MAYER BROWN JSM FORMERLY KNOWN AS JOHNSON STOKES & MASTER AND OTHERS

HCA 507/2019

[2021] HKCFI 380

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 507 OF 2019

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D E C I S I O N

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INTRODUCTION

Introduction

1.  This is the Plaintiff’s appeal against the decision of Master SP Yip dated 12 May 2020 striking out the Plaintiff’s writ of summons and statement of claim on the grounds that they disclose no reasonable cause of action, are scandalous, frivolous and vexatious or are otherwise an abuse of process, pursuant to Order 18 rule 19 of the Rules of the High Court or the court’s inherent jurisdiction.  The Master was of the view that the Plaintiff had no locus standi to sue; the action was time barred and fell foul of the principles of res judicata.

2.  The Plaintiff and his brother founded Esquire (Electronics) Ltd (“Esquire”) in 1965 and the associated group of companies (collectively, the “Esquire Group”).  To resolve Esquire’s financial difficulties, the Plaintiff and his brother entered into a restructuring agreement with creditor banks in 1984 (the “1984 RSA”).  The 1984 RSA was prepared by the 1^st Defendant, a firm of solicitors formerly known as Johnson Stokes & Master (“JSM”), retained by The Hongkong and Shanghai Banking Corporation Limited (“HSBC”).  The 2^nd Defendant was an associate of JSM working under the supervision of the 3^rd Defendant who was a partner of JSM.  Central to the Plaintiff’s pleaded case is the Defendants’ repeated and continuous use of inaccurate figures and misrepresentation of the true amount of indebtedness owed to HSBC in the 1984 RSA.

The background

3.  The following is a summary of facts of the Plaintiff’s case arising from the same factual matrix as set out in the judgment of the Court of Appeal in CACV 312/2005 which are relevant to this matter; otherwise, the facts stated hereunder are undisputed.

4.  Esquire acquired a commercial property in September 1981 known as Li Fung House, Kowloon (“Li Fung House”) for $182 million.  The purchase was fully funded by a loan from HSBC secured by a mortgage of Li Fung House to HSBC.

5.  Esquire encountered financial difficulties and sought further facilities and subsequently a restructuring arrangement with five banks it was indebted to, including HSBC, Bank of America National Trust and Savings Association, BCCI Finance International Limited, Banque Nationale de Paris (“BNP”) and Indian Overseas Bank. 

6.  The amount owed to HSBC was by far the largest, amounting to over $309 million, divided notionally into HSBC’s “non-property” portion of around $127 million and the “property” portion of over $182 million.  HSBC’s non-property portion represented around 62% of Esquire’s total indebtedness to the banks.

7.  Against this background of outstanding indebtedness, Esquire, the Plaintiff, his brother and the banks entered into the 1984 RSA, the effect of which was to freeze the debts owing to the banks. The total indebtedness at the material time is set out at Clause 3.01 and Schedule II of the 1984 RSA.

8.  At the time of preparation of the 1984 RSA, the 2^nd Defendant was an associate at JSM and had the overall conduct of the matter under the supervision of the 3^rd Defendant, a partner of JSM.  At no time was JSM or the 2^nd Defendant acting either for the Plaintiff personally or any of his companies in the negotiation or drafting of the 1984 RSA.  At paragraph 10 of his statement of claim in this action, the Plaintiff alleges that JSM was “also acting on his behalf”.

9.  Notwithstanding the 1984 RSA, the Esquire Group did not get back good to financial health.  Thus, there were continued negotiations with the banks for further restructuring of debts. 

10.  Heads of Agreement were signed between HSBC, the Esquire Group, the Plaintiff and his brother on 26 April 1987 pursuant to which it was decided that Li Fung House would be sold at the best reasonable price and upon HSBC’s receipt of the net proceeds of sale, a portion of HSBC’s non-property portion of the debt would be deemed waived and released.  Pursuant to that arrangement, Li Fung House was sold to Bethlehem Management Ltd (“Bethlehem”) on 21 May 1987. 

11.  In October 1987, the 1984 RSA was extended and a further restructuring agreement dated 1 January 1988 was entered into. 

12.  Ultimately, in 1994, HSBC withdrew all facilities extended to the Esquire Group and demanded repayment of all sums due. Then, Esquire commenced action in HCA 11077/1994 against HSBC and some other parties in respect of essentially the same subject matter as in this action. The action was eventually dismissed.  Esquire’s appeal to the Court of Appeal in CACV 312/2005 was also dismissed.  HCA 11077/1994 and the appeal in CACV 312/2005 are collectively referred to as the “1994 Action”.

13.  Esquire was wound up in 1996 upon the petition of two of its employees.

14.  On 30 December 1996, the Plaintiff was declared bankrupt upon the petition of BNP in HCB 221/1996 in respect of a judgment debt in the sum of approximately HK$22 million (“1996 Bankruptcy”).  He was discharged from bankruptcy on 30 December 2000. 

15.  After his discharge, the Plaintiff commenced action in HCA 2073/2011 against HSBC in respect of the same underlying subject matter.  His action was dismissed.  His appeal in CACV 117/2014 was also dismissed.  HCA 2073/2011 and the appeal in CACV 117/2014 are collectively referred to as the “2011 Action”.

16.  On 9 March 2015, the Plaintiff was declared bankrupt a second time on a petition of HSBC in respect of his failure to pay HSBC’s costs in the 2011 Action (“2015 Bankruptcy”).  He was discharged from that bankruptcy on 9 March 2020.

17.  Then, the Plaintiff commenced these proceedings against the Defendants in respect of the same underlying subject matter.

HCA 11077/1994, CACV 312/2005 (the “1994 Action”)

18.  Esquire commenced this action against HSBC; Wayfoong Property Limited, the agent appointed by Esquire responsible for the sale of Li Fung House (“Wayfoong”); Martin Oliner, a US attorney retained by Esquire to negotiate the restructuring with the banks; and Bethlehem.  The claims against Oliner and Bethlehem were discontinued and struck out respectively soon after the commencement of the proceedings.

19.  The Official Receiver, as the liquidator of Esquire, obtained Court sanction to assign the causes of action to Magic Score Ltd (“Magic Score”) which then obtained court leave to carry on the proceedings in place of Esquire.

20.  Esquire claimed that HSBC had pressured it to sell Li Fung House, amounting to economic duress and/or undue influence and that HSBC had acted in breach of alleged fiduciary duty.

21.  Esquire succeeded on first instance.  But on appeal, the Court of Appeal in CACV 312/2005, unanimously reversed the first instance decision and dismissed the action against HSBC.  The Court of Appeal expressly rejected all allegations of wrongdoing levelled against HSBC.  It is pertinent that the Court of Appeal considered various matters and accusations raised by Esquire which overlapped with the facts of the present case.  In particular, the Court of Appeal adjudicated upon the presently repeated complaint as to the “correct amount” of indebtedness owing by the Esquire Group as being irrelevant and in any event academic because it was all ultimately written off by HSBC. 

22.  Magic Score sought leave to appeal the Court of Appeal judgment from both the Court of Appeal and the Court of Final Appeal.  On both occasions, leave was refused.  The Court of Appeal judgment represents a final adjudication on the merits of the facts and matters in the 1994 Action and is binding on the parties to that action and their privies.

HCA 2073/2011, CACV 117/2014 (“2011 Action”)

23.  On 7 December 2011, the Plaintiff personally commenced HCA 2073/2011 against HSBC based on the same factual matrix as the 1994 Action.  He advanced some eight or so causes of action, including misrepresentation by HSBC to Esquire and/or the Plaintiff as to the correct amount of the total property indebtedness owed by the Esquire Group to HSBC; HSBC’s right to liquidate Esquire and bankrupt the Plaintiff and causing loss of business reputation; wrongful procurement of Plaintiff’s bankruptcy; and wrongful procurement of judgment against Esquire in the 1994 Action.  This is strikingly similar to the allegations now being made against the Defendants. 

24.  HSBC made an application to strike out the action in HCA 2073/2011 on the grounds that the action disclosed no reasonable cause of action, was scandalous, frivolous or vexatious and constituted an abuse of process.  HSBC argued that the Plaintiff had no locus standi to sue in respect of alleged misrepresentations relating to the sale of Li Fung House and the wrongful procurement of judgment because those alleged causes of action would have vested in Esquire not the Plaintiff.  As for the other causes of action, these would have vested in the Official Receiver as trustee in bankruptcy and the Official Receiver had neither assigned them to the Plaintiff nor consented to him bringing the action.  Deputy High Court Judge Whitehead SC struck out the claim.  He found that the Plaintiff had no locus standi to bring or maintain the proceedings as the alleged causes of action pleaded in the statement of claim accrued before or upon the 1996 Bankruptcy and accordingly, if they existed, would have vested in the trustee in bankruptcy. 

25.  The Plaintiff appealed against this decision and by the time of the hearing, his case boiled down to two arguments, namely (a) his claim for wrongful procurement of the 1996 Bankruptcy causing him loss of business reputation, which he said was a matter personal to him and not vested in the trustee, and (b) his claim for wrongful procurement of judgment against Esquire in 2006 which was after his discharge from the 1996 Bankruptcy.

26.  The Court of Appeal in CACV 117/2014 dismissed the appeal.  In respect of the wrongful procurement of bankruptcy argument, the Court of Appeal held that it could not see any obligation owed by HSBC to the Plaintiff’s “person” and as such the alleged breach did not give rise to a cause of action which did not vest in the trustee in bankruptcy.  As for the claim for wrongful procurement of judgment, the Court found that the judgment was in the course of a cause of action by Esquire against HSBC, and the Plaintiff, not being a party to that action, had no locus standi to sue.  The party entitled to sue would be Esquire and any loss allegedly suffered by the Plaintiff would be merely reflective loss for which no action would lie: see Johnson v Gore Wood & Co[1].  These two decisions are relevant to the current action brought by the Plaintiff.

27.  The Plaintiff’s application for leave to appeal to the Court of Final Appeal was dismissed by the Court of Appeal on 19 August 2019.  Leave was refused because the Court of Appeal was of the view that the grounds advanced by the Plaintiff were not even reasonably arguable and there were no questions of great, general or public importance.  The Plaintiff’s renewed application before the Court of Final Appeal was also dismissed.  The Court of Appeal judgment is therefore final.

The Plaintiff’s claims in the present action

28.  The Plaintiff commenced the present action on 25 March 2019 based on the same underlying subject matter already traversed in the 1994 Action and 2011 Action.  According to the Writ, the Plaintiff’s complaints may be summarised as follows:

(1)  the 2^nd Defendant’s failure to consider whether the 1^st Defendant was acting in conflict when drafting the 1984 RSA on the sole instructions of and/or in the interests of HSBC (“Conflict of Interest Claim”): paragraphs 8(a) – (b) of the statement of claim;

(2)  failure to advise the Plaintiff to seek independent legal advice in relation to the 1984 RSA: paragraph 8(c) of the statement of claim (“Negligence Claim”);

(3)  knowing and/or negligent breaches of fiduciary duties and/or duties of care by the 1^st and the 2^nd Defendants in including false information in the 1984 RSA, namely the inclusion of HSBC’s debt in relation to the property portion as to approximately HK$182 million without reference to any supporting bank statements, with the knowledge of or in collusion with HSBC: paragraphs 11-13 of the statement of claim (together with item (4), the “Misrepresentation Claim”);

(4)  the 3^rd Defendant’s failure to take steps to correct the false figure in the 1984 RSA: paragraph 14 of the statement of claim (together with item (3), the “Misrepresentation Claim”);

(5)  the 3^rd Defendant’s failure to bring the true facts and figures to the attention of the Plaintiff and the subsequent actions to cover up the actual position and to mislead the court amounts to deceit and/or perjury on the part of the 3^rd Defendant: paragraph 15 of the statement of claim (together with item (6), the “Misleading the Court Claim”);

(6)  the 1^st and 3^rd Defendants, whether in collusion with HSBC or for HSBC’s benefit, are responsible for concealing the true facts from the courts which amounted to misleading the court by deliberate design: paragraph 15(8) of the statement of claim (together with item (5), the “Misleading the Court Claim”); and

(7)  the Defendants’ suppression and concealment of the false figure in relation to the debt under the property portion in the 1984 RSA resulting in the liquidation of Esquire and the 1996 Bankruptcy of the Plaintiff by BNP: paragraph 16 of the statement of claim (“Concealment/ Bankruptcy Claim”). 

The Plaintiff asks for damages to be assessed, however, no particulars of alleged loss has been given. 

29.  In paragraph 16 of the statement of claim, the Plaintiff explained the significance of Esquire’s debt relating to “the Property Portion” as follows:

“The Property Portion figure was fundamental in achieving the purpose of the 1984 RSA, and the actions taken by the [Defendants] as referred to above in respect of the false figure provided by the Defendant in Schedule II of the 1984 RSA … resulted in the failure of that purpose and to the subsequent liquidation of Esquire and bankruptcy of the Plaintiff. In the premises, the 1984 RSA was rendered null and void, and the Plaintiff claims damages from the [Defendants] for the substantial losses caused to him…”

30.  In his submission by way of letter to Master J Wong dated 17 May 2019[2], the Plaintiff’s characterized his action as consisting of “two major allegations”:

(1)  “Falsification of facts and figures in a vital document (the 1984 RSA) for the benefit of HSBC and for themselves, i.e. monetary gains”; and

(2)  “Submission of false evidence (including by affidavit) in the courts in order to secure a favourable judgement and win the litigation”. 

31.  Summing up from the above facts and the statement of claim, there are five major heads of claim against the Defendants.  The real thrust of the Plaintiff’s action is on the Misrepresentation Claim, Misleading the Court Claim and Concealment/Bankruptcy Claim.  At the heart of these claims is the valuation of the debt relating to the property portion in the 1984 RSA.  The cause of action relating to the other two heads of claim, namely the Conflict of Interest Claim and the Negligence Claim were indisputably vested in the Official Receiver as trustee of the Plaintiff’s bankruptcy.

32.  Since the Defendants’ striking out summons was issued, it appears that the Plaintiff has commenced at least two further sets of proceedings: one against HSBC (HCA 143/2020), and one against the Official Receiver (HCA 1548/2020).

The Defendants’ grounds for the striking out application

33.  The broad grounds relied upon by the Defendants in the striking out application are:

(1)  The Plaintiff has no locus standi to pursue this action: the alleged wrongs occurred prior to his two bankruptcies; the causes of action were thus vested in the trustee in bankruptcy, who has not assigned the actions to the Plaintiff.

(2)  The alleged claims fall foul of the rule against reflective loss as the loss does not belong to the Plaintiff but to other companies.

(3)  The alleged causes of action have long been time-barred.

(4)  The present claim amounts to a collateral attack against previous final decisions of the court and/or infringes the principles of res judicta.

(5)  Even on the basis of the Plaintiff’s allegations, there is no causation between the alleged acts of the Defendants and the Plaintiff’s bankruptcy which arose from his failure to satisfy debts owed to BNP.

NO  LOCUS  STANDI

Arising from the Plaintiff’s bankruptcies

34.  The Plaintiff was declared bankrupt on 30 December 1996 (ie the 1996 Bankruptcy) upon the petition of BNP and then again on 9 March 2015 (ie the 2015 Bankruptcy) upon the petition of HSBC.  There is no dispute that the alleged wrongs complained of in this action all occurred before either the 1996 Bankruptcy or between then and the 2015 Bankruptcy.  The Plaintiff accepted that all, except one, of the pleaded causes of action arose prior to the 1996 Bankruptcy and it is not contended that somehow the causes of action survived his bankruptcies or that his discharge from the bankruptcies are somehow irrelevant. The excepted cause of action is based on the allegations regarding the insertion of an allegedly false figure in an affidavit filed by the 3^rd Defendant dated 25 October 2012 in the 2011 Action (i.e. the Misleading the Court Claim).  However, that alleged wrong in the Misleading the Court Claim occurred before the 2015 Bankruptcy. 

35.  It is trite that by the operation of sections 12 and 58 of the Bankruptcy Ordinance (Cap. 6), on the making of a bankruptcy order, all properties and powers of the bankrupt become vested in the Official Receiver, or the provisional trustee as the case may be, and then the trustee in bankruptcy as appropriate.  Under sections 2, 30A and 43(1), “property” includes the right to sue in respect of causes of actions which have already accrued at the commencement of the bankruptcy.  The exception to this general rule is where the cause of action involves “personal claims” relating to the bankrupt’s body, mind or character without immediate reference to his rights or property, such as for personal injury or defamation: Chung Kau v Hong Kong Housing Authority[3].   Thus, all the causes of action in the present action are vested in the Plaintiff’s trustee in bankruptcy.

36.  This exception does not apply in this case.  All that has been pleaded is that the Defendants’ alleged acts “resulted” in the Plaintiff’s bankruptcy.  Even if there was such a causal connection, this does not help the Plaintiff because the same factual matrix had been considered by the Court of Appeal in the 2011 Action and ruled against him.  The Court of Appeal in CACV 117/2014 held at §23:-

“By contrast, I cannot see any obligation to [the Plaintiff]’s “person” (as distinguished from any obligation to his property) which was owed to [the Plaintiff] by HSBC, the breach of which gave rise to a cause of action. There is no pleading of an agreement whereby HSBC undertook an obligation to “maintain credit and reputation”, of the peculiar nature found in Wilson. There is no pleading of a personal tort such as defamation. [the Plaintiff] has only pleaded causes of action against HSBC affecting his property, such as conversion (Headings 6 and 11), breach of implied terms of the Restructuring Agreement to which he was a party (Heading 12), and breach of fiduciary duty (Heading 13), but these are causes of action which are vested in the OR. It is insufficient simply to plead that the bankruptcy has caused the alleged loss of business reputation, for there is no pleading of any obligation owed to his “person”, the breach of which caused the bankruptcy.”

37.  The Plaintiff relies on an annulment application in respect of the 1996 Bankruptcy in HCB 221/1996 and the Plaintiff’s 8^th Affirmation dated 7 September 2018 filed in that action.  But, just four days after lodging his skeleton submission, the parties filed a consent summons seeking to dismiss the Plaintiff’s annulment application.  The annulment application was dismissed on 10 November 2020.  It is no longer be a live issue in the present striking out application.  Hence, as a matter of the law, in respect of all the claims brought under the present action, insofar as they, on their face, involve alleged wrongs done to the Plaintiff (as opposed to Esquire), all right of action is vested in his trustee in bankruptcy and the Plaintiff has no standing to mount an action based on those matters. 

38.  Even when a bankruptcy order is discharged, the right to sue in respect of the causes of action accruing on or before the day of the bankruptcy order does not revert to the bankrupt upon his discharge but remains vested in the trustee: Dr Paul Ki Ping Ki v Next Magazine Publishing Limited[4].

39.  In paragraph 14 of his skeleton submission, the Plaintiff suggests that there are existing proceedings against the Official Receiver as the trustee in bankruptcy.  He made some assertions in relation to un-adjudicated “claims and allegations” against the Official Receiver.  None of these matters have any bearing on the fact that all causes of action pre-dated the Plaintiff’s bankruptcies.  These are irrelevant red herrings that only serve to confuse. 

40.  The Plaintiff suggests in paragraph 16 of his skeleton submission that this is a “technical hurdle [that] can be cured by a subsequent joinder of the trustee in bankruptcy” under Order 15 Rule 6 (misjoinder or non-joinder of parties not to defeat a cause or matter). The Defendants argue that this is misconceived because if an action is improperly constituted from the start for lack of standing, that is the end of the matter.  The immediate vesting of a bankrupt’s property (including causes of action) in the trustee in bankruptcy is not a mere technical rule of procedure but one of substance and is codified in the Bankruptcy Ordinance. The operation of the bankruptcy regime generally and vesting of the bankrupt’s property in particular goes to the root of proper locus standi to sue.

41.  The present case is on all fours with the Plaintiff’s case against HSBC in HCA 2073/2011 which was struck out by the Court of First Instance for lack of locus standi to sue on the grounds that the Plaintiff’s purported causes of action all pre-dated his bankruptcy.  His appeal in CACV 117/2014 was dismissed and leave to appeal to the Court of Final Appeal was refused.  The Plaintiff’s causes of action arose before his 1996 Bankruptcy or 2015 Bankruptcy. Thus for the same reasons, any possible causes of action in respect of the matters pre-dating these bankruptcies were vested in the Official Receiver as the trustee in bankruptcy of the Plaintiff.  The right to commence an action was vested in the Official Receiver.  The Plaintiff has no locus standi to commence an action.

Actions vested in Esquire alone

42.  The alternative basis for striking out under the no locus standi ground is that the present action offends against the rule prohibiting claims for reflective loss.  A basic principle of company law based on the notion of separate corporate personality is that where a company suffers loss based on an actionable wrong done to it, the cause of action is vested in the name of the company and the company is the proper claimant.  A shareholder does not have standing to sue in the name of the company and/or to recover damages suffered by the company: Johnson v Gore Wood & Co[5].  This ground applies particularly to the Conflict of Interest Claim, the Negligence Claim and the Misrepresentation Claim.

43.  Insofar as allegations of the Defendants’ conduct pertaining to, inter alia, the Misrepresentation Claim resulting in Esquire’s liquidation are concerned, this would have caused alleged loss to Esquire and not the Plaintiff.  Thus, Esquire would be the proper plaintiff but plainly not the Plaintiff.  That was what the Court of Appeal held in CACV 117/2014.  It held at paragraph 27, quoting Johnson v Gore Wood & Co, that “[A]ny loss allegedly suffered by [the Plaintiff] would be merely reflective loss for which generally no action would lie”. 

44.  In respect of the Conflict of Interest Claim and the Negligence Claim, even on the Plaintiff’s own pleading, it was Esquire which had a retainer with, and paid professional fees to, the 1^st Defendant.  It is not his pleaded case that he had a retainer with the Plaintiff.  As such, any alleged loss, if incurred, arising from these alleged claims would be vested in Esquire or Magic Score by assignment.  These two entities have already been wound up and dissolved respectively. 

45.  To avoid the principles against reflective loss, the Plaintiff argued that the Misrepresentation Claim and the Concealment/Bankruptcy Claim had an impact on the Plaintiff’s interest and liability as a guarantor which resulted in his bankruptcy.  The Plaintiff had run this argument in the appeal in CACV 117/2014 under his claim for wrongful procurement of bankruptcy and causing loss of business reputation.  While accepting that because of the character of the bank’s obligation, its breach gave rise to a cause of action which did not vest in the trustee in bankruptcy, the Court of Appeal was unable to find any obligation owed to the Plaintiff’s “person” by HSBC, as distinguished from any obligation owed to his property.  After analysing the Plaintiff’s pleaded case and arguments, Yuen JA concluded as follows[6]:

“(a)  “Wrongful procurement of bankruptcy, causing loss of business reputation”

21.1.  In respect of (a), it is submitted on behalf of [the Plaintiff] that the cause of action is “wrongful procurement of bankruptcy, causing loss of business reputation”.  It is submitted that this has been pleaded in paras. 209 and 211 - 214 of the statement of claim. 

21.2.  Para. 209 pleaded that by reason of HSBC’s wrongdoing, Esquire was unable to pay its debts and went into liquidation.  Para. 211 pleaded BNP’s proceedings against [the Plaintiff] as guarantor of Esquire’s debts to BNP, para. 212 pleaded BNP’s petition for his bankruptcy, para. 213 pleaded the bankruptcy order and para. 214 pleaded that by reason of the bankruptcy, [the Plaintiff]’s business reputation was irrevocably harmed, whereby he lost the opportunity to derive any substantial income. 

21.3.  Reliance was placed on Wilson v United Counties Bank Ltd.  In that case, a bank had an agreement with a customer who was going abroad on military service.  The agreed questions put before the jury included the following question:

Did the bank agree with the customer that

(a)  the manager would generally supervise the customer’s business and see it carried on, and in particular the financial side thereof?

(b)  the bank would take all reasonable steps to maintain the customer’s credit and reputation and that the customer could rely on the bank to look after his financial affairs?   

21.4.  The jury found that there was such an agreement and that due to the bank’s negligent management, the customer became bankrupt. 

21.5.  The customer and his trustee in bankruptcy sued the bank.  Their causes of action were for breach of contract.  The jury awarded a sum of money to the customer’s estate in bankruptcy, and a separate sum to him personally for his loss of credit and reputation.  

21.6.  The jury’s award was upheld by the Privy Council.  Lord Birkenhead LC held that as a result of the “peculiar language of the agreement”, “the express obligation of the [bank] to maintain the credit of [the customer] as a trader”, that the breach was actionable and the customer had a right of action separate from that of his trustee in bankruptcy.

21.7.  Viscount Finlay held:

‘It is clear that the fact of bankruptcy must injure the credit of the person made bankrupt apart from damage to the estate. In an action for negligence against a solicitor leading to the bankruptcy of his client, even if owing to fortuitous circumstances, the estate had not been damaged, it seems on principle that the jury might give substantial damages for injury to the credit of the person made bankrupt. For a libel falsely imputing bankruptcy to the plaintiff, damages might be recovered in respect of injury to his credit. It is difficult to see on what principle such damages might not be given if there had been an actual bankruptcy as the result of breach of contract on the part of the defendant to take steps to prevent it. If the imputation of bankruptcy would give a right to such damages in an action for libel, why should not the fact of the bankruptcy owing to the defendants’ breach of duty confer a similar right upon the plaintiff?’ (Emphasis added).

21.8.  Lord Atkinson held:

‘The difficulty involved in this question arises from the fact that the same breach of contract, the neglect of the [bank] to take reasonable steps to maintain [the customer]’s credit and reputation, caused loss to his estate, and at the same time, inflicted upon him as a trader (for it was in reference to his trade and business the contract was entered into) pain and humiliation and loss of credit and repute.’ (Emphasis added)

22.  In my view it is clear from the judgment in Wilson that the customer’s cause of action was for breach of contract, viz. part (b) of the agreement.  In making that agreement to “maintain his credit and reputation”, the bank undertook an obligation to his “person”, not his property.  Because of the character of that obligation, its breach gave rise to a cause of action which did not vest in the trustee in bankruptcy.

23.  By contrast, I cannot see any obligation to [the Plaintiff]’s “person” (as distinguished from any obligation to his property) which was owed to [the Plaintiff] by HSBC, the breach of which gave rise to a cause of action.  There is no pleading of an agreement whereby HSBC undertook an obligation to “maintain credit and reputation”, of the peculiar nature found in Wilson.  There is no pleading of a personal tort such as defamation.  [The Plaintiff] has only pleaded causes of action against HSBC affecting his property, such as conversion (Headings 6 and 11), breach of implied terms of the Restructuring Agreement to which he was a party (Heading 12), and breach of fiduciary duty (Heading 13), but these are causes of action which are vested in the OR.  It is insufficient simply to plead that the bankruptcy has caused the alleged loss of business reputation, for there is no pleading of any obligation owed to his “person”, the breach of which caused the bankruptcy. 

24.  Miss Ng submitted that “causation would be readily apparent”, but the primary difficulty lies in the identification of an obligation which bears the character of being owed to his “person”.  None has been advanced in the submissions and no draft amendments to the Statement of Claim have been proffered.  Accordingly there is no ground for acceding to the request that leave be granted to amend the statement of claim to correct defects in it.

25.  Accordingly, I take the view that the judge would have struck out this cause of action had he adjudicated upon it.” 

46.  Even if this narrow distinction is to be drawn and even assuming that JSM acted for the Plaintiff in drafting the 1984 RSA as he pleaded, for the same reasons as given by the Court of Appeal quoted above, this claim still fails on the grounds that no obligation to the Plaintiff’s person, as distinguished from any obligation to his property, was owed to the Plaintiff by the Defendants, the breach of which gave rise to the pleaded cause of action.  The Plaintiff has only pleaded causes of action against the Defendants affecting his property but these causes of action were vested in the Official Receiver as trustee of bankruptcy. 

47.  In conclusion, the Plaintiff has no locus standi to institute these actions due to his bankruptcy.  This conclusion is sufficient to dispose of the appeal.

LIMITATION

The factual background and overall view

48.  The 1984 RSA was drafted over 36 years ago; the Plaintiff’s alleged damage arising from the 1996 Bankruptcy took place over 23 years ago; and the Court of Appeal judgment in respect of the 2011 Action was handed down over 6 years ago.  Any causes of action based on these matters were already well and truly time-barred at the date of issuance of the Writ in the present action.

49.  Actions based on simple contract or tort are time-barred after expiry of six years from the date on which the cause of action accrued: section 4(1) of the Limitation Ordinance (Cap 347).  An action founded on contract accrues when the contract is breached; or in tort on the date on which loss is suffered.  All the causes of action in the present action are founded in either contract or tort and the alleged breaches and losses took place or occurred prior to six years before the issue of the Writ, ie 25 March 2019. They are thus, time-barred. 

Section 20(1) Argument – breach of fiduciary duty

50.  The Misrepresentation Claim contains a complaint of breach of fiduciary duty.  Under section 20(2) of the Limitation Ordinance, the period of limitation in respect of claims arising from breach of fiduciary duty is also six years, because breach of fiduciary duty is treated as breach of trust: see Snell’s Equity[7]. 

51.  The Plaintiff submitted that the question of limitation is fact sensitive, particularly as regards the exact time as to when any cause of action arose in the present case which is interwoven with allegations of fraud and dishonesty against the Defendants.  He relied on section 20(1) which provides that no period of limitation shall apply to an action by a beneficiary under a trust, being an action in respect of any fraud or fraudulent breach of trust to which the trustee was a party or privy.

52.  On the pleading, the Plaintiff pleaded an alleged breach of fiduciary duty, but made no allegation of a fraudulent breach of fiduciary duty and gave no particulars of fraud.  It is trite that fraud must be clearly pleaded with sufficient particulars.  In Cyberworks Audio Video Technology Ltd v Mei Ah (HK) Co Ltd & Ors[8], Coleman J held that for section 20(1)(a) to apply, a fraudulent breach of fiduciary duties needs to be established and must be distinctly alleged and proved. 

53.  Clearly, the Plaintiff’s statement of claim falls far short of that standard.  It is equally consistent with negligence etc and it is trite that fraud is not to be inferred.  The Plaintiff’s attempt to introduce a fraud element in his submission by throwing around vague and un-particularised allegations of “fraud and dishonesty” is not sufficient when no fraud has been pleaded.  There was also no application to amend his statement of claim to plead fraud.

Section 26 argument – postponing the limitation period

54.  In paragraph 24 of his skeleton submission, the Plaintiff sought to rely on section 26 of the Limitation Ordinance to postpone the limitation period because he only came in possession of the relevant bank statements in 2014.  He obviously overlooked or deliberately did not mention he had pleaded in paragraph 11(2) of the statement of claim that the relevant bank statements were “available for the first time in early 2006” and then “officially came into the Plaintiff’s possession only in April 2014”.

55.  Quite apart from the statement of claim in this action, his statement of claim in the 2011 Action also betrayed him.  In paragraph 53 of that statement of claim, the Plaintiff pleaded that “the property debt representation was false in that as at 13 September 1983 Esquire’s actual property indebtedness to HSBC was HK$152 million” and “the true property debt is disclosed in a bank statement produced to [Esquire] and [the Plaintiff] in or about early 2006 in the account name of [Esquire]”.  There are various other references by the Plaintiff to production of documents in 2006[9].  This plea may be taken as an admission that in 2011, the Plaintiff had the requisite knowledge of the alleged fraud by 2006 at the latest.  Furthermore, no allegations or particulars of alleged “deliberate concealment” on the part of the Defendants have been given.  The Plaintiff has not explained how he allegedly lacked knowledge of any fact essential to his claims to invoke section 26(1) of the Limitation Ordinance. 

56.  In paragraph 25 of his skeleton submission, the Plaintiff argued that there are factual issues that cannot be resolved in a strike out action but should be left to trial.  On the basis of the evidence coming from the Plaintiff, this cannot be right.  The fact that he was able to sue HSBC in 2011 speaks to the fact that he was in possession of the relevant information and thus there was no concealment.  The fact that he has been able to sue the Defendants here, even when on his own case his attempt at discovery has been “blocked” also speaks for itself.  Furthermore, as shall be demonstrated in the following section, allegations relating to an alleged misrepresentation of the value of the debt in property portion were first raised in the Plaintiff’s supplemental statement in the 1994 Action.

57.  The Plaintiff has failed to demonstrate that he was not in possession of the knowledge essential to his complaints.  There was simply no concealment to justify postponing the limitation period.

RES JUDICATA / ABUSE OF COURT’S PROCESS

The parties’ case on res judicata or abuse of process

58.  The Defendants advanced three grounds in support of their case of the Plaintiff’s abuse of process of the court.  First, the Plaintiff’s claim should have been raised in the earlier 1994 Action, if it was to be raised at all.  Second, the Plaintiff should have in any event joined the Defendants into the 2011 Action, but he chose not to.  Third, the present action is tantamount to a collateral attack against the Court of Appeal judgment, constituting an abuse of the court’s process.  If the present action is allowed to proceed, there is a risk of inconsistent judgments, especially insofar as the court has already adjudicated on the merits of the allegation that the property portion of the outstanding indebtedness was wrongly stated in the 1984 RSA and dismissed the same.

59.  The Plaintiff disputed that inaccuracy in the property portion of the outstanding indebtedness to HSBC had been raised, argued or determined in the 1994 Action or the 2011 Action.  He also placed reliance on the fact that he was not even a party to the 1994 Action.

The applicable legal principles

60.  The application of the principle of estoppel to prevent this form of abuse of process of the court had its genesis in the following time-honoured dicta of Wigram V-C in Henderson v Henderson[10]:

“In trying this question I believe I state the rule of the Court correctly, when I say that, where a given matter becomes the subject of litigation in, and of adjudication by, a Court of competent jurisdiction, the Court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case. The plea of res judicata applies, except in special cases, not only to points upon which the Court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties exercising reasonable diligence, might have brought forward at the time.”

This plea applies where the parties to the previous litigation and the subsequent litigation are the same parties.  It applies not only to points upon which the Court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties exercising reasonable diligence, might have brought forward at the time.

61.  The latest re-statement of this principle is to be found in the judgment of Lord Bingham in Johnson v Gore Wood & Co[11] as follows:-

“... Henderson v Henderson abuse of process, as now understood, although separate and distinct from cause of action estoppel and issue estoppel, has much in common with them. The underlying public interest is the same: that there should be finality in litigation and that a party should not be twice vexed in the same matter. This public interest is reinforced by the current emphasis on efficiency and economy in the conduct of litigation, in the interests of the parties and the public as a whole. The bringing of a claim or the raising of a defence in later proceedings may, without more, amount to abuse if the court is satisfied (the onus being on the party alleging abuse) that the claim or defence should have been raised in the earlier proceedings if it was to be raised at all. I would not accept that it is necessary, before abuse may be found, to identify any additional element such as a collateral attack on a previous decision or some dishonesty, but where those elements are present the later proceedings will be much more obviously abusive, and there will rarely be a finding of abuse unless the later proceeding involves what the court regards as unjust harassment of a party. It is, however, wrong to hold that because a matter could have been raised in earlier proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive. That is to adopt too dogmatic an approach to what should in my opinion be a broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before. As one cannot comprehensively list all possible forms of abuse, so one cannot formulate any hard and fast rule to determine whether, on given facts, abuse is to be found or not. Thus while I would accept that lack of funds would not ordinarily excuse a failure to raise in earlier proceedings an issue which could and should have been raised then, I would not regard it as necessarily irrelevant, particularly if it appears that the lack of funds has been caused by the party against whom it is sought to claim. While the result may often be the same, it is in my view preferable to ask whether in all the circumstances a party’s conduct is an abuse than to ask whether the conduct is an abuse and then, if it is, to ask whether the abuse is excused or justified by special circumstances.”

In considering res judicata in the wider sense, the Court’s approach is to look at the matter on a broad level, making a merit-based judgment which takes into account all the facts of the case focusing on the crucial question of whether a party is abusing the process of the court by seeking to raise issues which could have been raised before: Bradford and Bingley Building Society v Seddon[12]; Chiang Lily v Secretary for Justice[13]; and Ko Hon Yue v Chiu Pik Yuk[14].

62.  In China North Industries Investments Ltd v Chum[15]Stock JA explained Lord Diplock’s dicta in Hunter v Chief Constable of the West Midlands Police as follows:

“57. … in Hunter v Chief Constable of the West Midlands Police Lord Diplock said that:

‘The abuse of process which the instant case exemplifies is the initiation of proceedings in a court of justice for the purpose of mounting a collateral attack upon a final decision against the intending plaintiff which has been made by another court of competent jurisdiction in previous proceedings in which the intending plaintiff had a full opportunity of contesting the decision in the court by which it was made.’

58. To view that statement as one that treats all collateral challenges as abusive of the court’s process is to view it in isolation and to disregard the earlier passage to which I have referred in which Lord Diplock expressly referred to the two conditions precedent to the exercise of the power. As Lord Hoffmann explained in Arthur JS Hall & Co v Simons:

‘I do not think that [Lord Diplock] meant that every case falling within this description was an abuse of process or even that there was a presumption to this effect which required the plaintiff to bring himself within some exception. That would be to adopt a scheme of categorisation which Lord Diplock deplored.’

The same interpretation of their Lordships’ intent in Hunter v Chief Constable of the West Midlands Police is to be found in Walpole v Partridge & Wilson. For the propositions that a collateral challenge may be but is not necessarily an abuse of process; and that where the parties to the later proceedings were not parties or privies of those who were parties to the earlier proceedings, a collateral attack will only be an abuse if one of the two conditions (manifest unfairness or the bringing of justice into disrepute) is demonstrated, see also Secretary of State for Trade and Industry v Bairstow.”

It should be noted that the principle applies not just between the same parties to the previous litigation, but has been extended to the privies of the parties.

63.  The Henderson v Henderson principle as distilled from these cases may be summarised as follows:

(1)  The principle is to serve public interest in that there should be finality in litigation so that a party will not be twice vexed in the same matter.

(2)  This is reinforced by the current emphasis on efficiency and economy on the conduct of litigation, in the interests of the parties and the public as a whole.

(3)  The onus is on the party alleging abuse.

(4)  The court’s approach is to look at the matter on a broad level, making a merit-based judgment which takes into account all the facts of the case.

(5)  The crucial question is whether a party is abusing the process of the court by seeking to raise issues which could have been raised before and which (i) would result in manifest unfairness to a party to the later litigation or (ii) would otherwise bring the administration of justice into disrepute amongst right-thinking people. 

(6)  It is not necessary to identify any additional elements such as a collateral attack on a previous decision or some dishonesty to establish abuse.  But where those elements are present, the later proceedings will be much more obviously abusive.

(7)  The bringing of a claim or the raising of the defence in later proceedings is prima facie an abuse, if the court is satisfied that the claim or defence should have been raised in the earlier proceedings if it was to be raised at all.

(8)  The plea is available not just as between the parties to the previous and later proceedings, but also to their privies.

The present claims could and should have been raised in the 1994 Action

64.  The Defendants were never parties to the 1994 Action or the 2011 Action.  The parties to the 1994 Action were Esquire or Magic Score by assignment as plaintiff; and HSBC, Wayfoong, Martin Oliner and Bethlehem as defendants.  The parties to the 2011 Action were the Plaintiff herein and HSBC only. 

65.  The Defendants argued that there is privity of interest between the Plaintiff and Esquire or Magic Score.  The Plaintiff had taken an active part in the 1994 Action.  He could have included his personal claims therein and added the Defendants as additional defendants if he wished to, because:

(1)  he was the founder, 50% shareholder and managing director of Esquire;

(2)  he had control over Esquire;

(3)  according to the Plaintiff’s pleading in the 2011 Action, he described himself in paragraph 1(c) of the statement of claim in that action as “the founder and driving force behind Esquire”; 

(4)  he said in paragraph 5.2(d)(ii) of his 3^rd Affirmation in the 2011 Action dated 3 January 2013 that he initiated the 1994 Action as the Managing Director of Esquire; and

(5)  he acted as one of two witnesses in the 1994 Action, despite the action had been assigned to Magic Score. 

In the face of the evidence coming from the Plaintiff, the Defendants’ argument is compelling.  It can hardly be argued that it was inconvenient to include the present claim in the 1994 Action and join the Defendants in that action.

66.  The Plaintiff’s factual case in this action arose from the very same factual matrix as the 1994 Action, the focus being the 1984 RSA and the alleged inaccuracy in the property portion of the outstanding indebtedness to HSBC.  The Plaintiff has alleged time and again that HSBC, and here that the Defendants, wrongfully inserted an inflated figure of approximately HK$182 million as the property portion of the outstanding debt, whereas the true figure, according to him, should be about HK$152 million, an excess of $30 million. 

67.  In paragraphs 22 to 24 of his supplementary witness statement dated 14 April 2003 filed on behalf of Esquire in the 1994 Action[16], the Plaintiff complained that the HK$182 million figure was inflated.  The defendants therein objected to the inclusion of these paragraphs both before and during the trial.  On the third day of trial, Magic Score agreed to expunge those paragraphs from the statement.  In the Plaintiff’s examination in chief, he did not seek to revive those expunged paragraphs.  During cross-examination, he sought to introduce the issue about the alleged inflation of Esquire’s property indebtedness in the 1984 RSA. He was reminded that this had been deleted from his statement, which he accepted.  There was no re-examination on this point by Magic Score’s leading counsel.  It is therefore beyond dispute that at the time of the 1994 Action, the Plaintiff had knowledge of the inaccuracy relating to the property portion of indebtedness.  He consciously decided not to raise that issue or make a claim in the 1994 Action. 

68.  The Plaintiff gave no explanation why he did not raise the present claims and join the Defendants into the 1994 Action.  The only argument advanced by the Plaintiff in this regards is that the issue as to the inflated property portion indebtedness has not been determined in either the 1994 Action or the 2011 Action.  He quoted the following remarks of Deputy High Court Judge Leung in his bankruptcy proceedings in HCB 221/1996[17]  in support of his argument:

“I should perhaps specifically address the argument on behalf of HSBC that [the Plaintiff]’s references to the assertions pleaded in the statement of claim in HCA 2073/2011 in his affirmations, including the proposed further affirmation, was nothing but an attempt to re-litigate the issues in that case. As mentioned, the statement of claim in that case was struck out and the action dismissed on [other grounds]. There was no adjudication in respect of the assertions made in respect of those pleaded causes.”

69.  He also referred to the Defendants’ following submission before Master Yip in the striking out application:

“The CA Judgment represents a final adjudication on the merits of the fact and matters in the 1994 Matter” and that “the Court of Appeal has already adjudicated upon the presently repeated complaint as to the “correct amount” of indebtedness owing by the Esquire Group as being irrelevant and in any event academic because it was all ultimately written off by HSBC.”

He submitted that the above submission is an admission that the issue of the inflated property portion indebtedness by HK$30.1 million had not been considered by the courts in the 1994 Action.

70.  Reading paragraphs 51, 56, 65, 81, 159 and 160 of the Court of Appeal judgment in CACV 312/2005, it appears that what was considered by the Court of Appeal therein was termed the $30 million overcharge.  It comprised (a) “the interest overcharge in September to December 1983” and (b) “the transfer out of escrow”, “which two sums had come to be known collectively as the $30 million overcharge.”  This overcharge had nothing to do with the property portion of indebtedness, the subject matter of the present action. 

71.  Be that as it may, the present claims are based on the same underlying factual matrix, the 1984 RSA and overcharge contained therein.  There is privity of interest between the Plaintiff and the plaintiff in the 1994 Action.  These claims or issues could and should have been raised in the earlier proceedings if they were to be raised at all.  The fact that the inaccuracy relating to the property portion of indebtedness had not been raised in the 1994 Action is no answer to the question why those claims or issues, which could and should have conveniently been raised, were not raised in the previous action.  In the absence of an explanation, it is prima facie abuse of process.

The present claims could and should have been raised in the 2011 Action

72.  The Plaintiff again tried to revive the allegations of misrepresentation of Esquire’s property debt in the 2011 Action as well as the wrongful procurement of the Court of Appeal’s judgment in the 1994 Action against HSBC, and indirectly against the Defendants.  In his affirmation dated 7 September 2012 filed in the 2011 Action, he made direct reference to the 1^st Defendant’s alleged failure to take any steps to bring the alleged misrepresentation of the property portion of the debt to the Court’s attention.  Notwithstanding this allegation, the Plaintiff did not join the Defendants in the 2011 Action.  If the Plaintiff genuinely believed that the Defendants had colluded with HSBC to defraud him, one would expect him to have joined the Defendants into that action and/or objected to the Defendants’ representation of HSBC in the 2011 Action.  He did neither of these things.  The Defendants could and should have been joined in the earlier proceedings if these claims were to be raised at all.  In the absence of an explanation why they were not joined, the Plaintiff’s attempt to institute this action against them is prima facie abuse of process.

Manifest unfairness and bringing administration of justice into disrepute

73.  The Plaintiff was not a party to the 1994 Action when he should and could have joined as a party.  He did not join the Defendants as a party to the 2011 Action when he should have so joined the Defendants.  He gave no explanation why he did not and now seek to prosecute his claims against them by this separate action.  That is prima facie abuse of process.

74.  The Plaintiff’s claims against the Defendants in this action arose out of the same factual matrix as that in the 1994 Action.  All the evidence and all the witnesses were before the court then.  HSBC’s staff at the material time were the most important witnesses against the Plaintiff’s claims based on misrepresentation and concealment.  The Plaintiff chose not to join the Defendants in 1994, but chose to institute proceedings against them now 26 to 30 years after the event.  That is an exceptionally long time.  Though not so suggested by the Defendants, witnesses from HSBC may not be available through retirement, resignation or change of employment, the cooperation from HSBC may now be less forthcoming as it is not a party, and not to mention the obvious that memory may have faded through lapse of time.  Though the Defendants had not been vexed in the 1994 Action, to commence action against them under the present circumstances 26 years later will result in obvious and manifest unfairness to the Defendants.

75.  For the same reason, judicial resources are being unnecessarily wasted by the Plaintiff commencing a separate action now when he could have done so 26 years ago.  He gave no explanation why he had not done so.  Having regard to the course the 1994 Action took, the judicial resources going to be wasted is not insubstantial if the action is allowed to go ahead.  To allow the Plaintiff to litigate his present claims which indisputably are based on the same underlying factual matrix would duplicate the use of judicial time, thereby depriving other court users of valuable resources.  This is contrary to public interest.

76.  Even though the alleged inaccuracy relating to the property portion indebtedness had not been specifically determined in the 1994 Action, it arose out of the same factual matrix.  The property portion indebtedness along with the non-property portion indebtedness and other disputed issues were before the courts in the 1994 Action.  A final judgment was made by the Court of Appeal in CACV 312/2005.  From that judgment, it is clear that the Court of Appeal had given extensive consideration to, and thoroughly analysed, the facts leading up to the signing of the 1984 RSA and events thereafter culminating in the sale of Li Fung House.  These are the same facts and matters that would need to be considered and examined by the court in the present action if it were allowed to proceed.  Thus, this action is tantamount to a collateral attack on the final judgment of the Court of Appeal in CACV 312/2005.  It may give rise to inconsistent judgments and thereby bring the administration of justice to disrepute.  The same argument applies in respect of the Court of Appeal judgment in CACV 117/2014 in the 2011 Action.  This action is therefore an abuse of the court’s process. 

77.  Viewed in the round and looking at the matter on a broad level and making a merit-based judgment, this action is clearly an attempt by the Plaintiff to re-litigate the same principal allegations determined against Esquire or himself as Esquire’s privy in the previous proceedings.  It had been open to Esquire or the Plaintiff to join the Defendants in or join them into the previous proceedings but the Plaintiff chose not to. This action is tantamount to a collateral attack on a final judgment of the Court of Appeal, particularly that under CACV 312/2005.  To allow the Plaintiff to litigate his present claims, there is a risk of inconsistent judgments in respect of the very same subject matter, namely the 1984 RSA.  For the Plaintiff to even have a chance of succeeding, he would need to persuade the court to reach a decision fundamentally different from that reached by the Court of Appeal in the 1994 Action and 2011 Action, particularly CACV 312/2005.  Apart from being manifestly unfair to the Defendants, this will bring the administration of justice into disrepute amongst right-thinking members of the public.

SUPPLEMENTAL GROUND

78.  The Plaintiff has not alleged prior to late 2018 that JSM owed him any duties in connection with the 1984 RSA, a matter not denied by the Plaintiff in his reply affirmation.  Hence, if elements of the Misleading the Court Claim and the Concealment/Bankruptcy Claim occurred after 1994, strictly speaking, the plea of res judicata may not be available by relying on the 1994 Action.  Out of caution, the Defendants argued that even under such scenario, it is still plain and obvious that these claims should be struck out for other reasons.

79.  Firstly, these two claims are fundamentally rooted in the 1984 RSA.  If there was no substance to the complaints about the 1984 RSA and the allegations that there was a misstatement or concealment therein, the alleged Misleading the Court Claim and the Concealment/Bankruptcy Claim would not have a leg to stand on.  In this regard, it should be noted that the Court of Appeal in the CACV 312/2005 overturned all the finding of fact by the Court of First Instance.  It had left no stone unturned, particularly in relation to allegations of overstatement of Esquire’s indebtedness.  In relation to Esquire’s case of duress based on an alleged overcharge of $30 million in the non-property portion indebtedness, Rogers VP observed that Esquire’s case was a reconstruction five years after the event based on a letter which the Plaintiff wished to turn to his advantage.  His Lordship said at paragraph 120 of the Court of Appeal Judgement:

“120. … I would only add that it would seem that Esquire’s case in this regard was constructed five years after the event based upon the letter of 29 December 1987 which [the Plaintiff] wished to turn to his own advantage. It cannot escape observation that prior to that there had been no complaint about the matter. The complaints had been that the Bank had required a sale of the property.”

If there was misrepresentation or concealment about the property portion indebtedness, Rogers VP would not have failed to notice.  Furthermore, the accuracy of the property portion figure was confirmed by Esquire Group’s general manager, Mr Ramasundura Naga Ratnam in his witness statement in that same action.  It now seems that having failed in the 1994 Action by alleging duress based on the $30 million overcharge in the non-property indebtedness, the Plaintiff is now spinning his case to over valuation of Esquire’s property portion indebtedness.

80.  Second, and more importantly, where a party seeks to set aside a judgment based on “fraud” it is incumbent on him to give particulars of the fraud; show that it has a reasonable prospect of success; that the “fraud” was discovered since the judgment; and to demonstrate how the “fraud” relates to material issues such that it would provide a reason for setting aside the judgment: Lau Kak v Cheung Mo-Kit[18].  In the present case, the Plaintiff has wholly failed to properly plead the alleged fraud, let alone particularise the same, and failed to show how the matter was discovered after the Court of Appeal judgment in CACV 312/2005.

81.  For these reasons, the Plaintiff’s claim should be struck out as being embarrassing, scandalous, and disclosing no reasonable cause of action.  

NO CAUSATION

82.  The Defendants argued that even taking the Plaintiff’s claims on their face value, there is no causation between the causes of action and any alleged loss suffered by the Plaintiff.  The Plaintiff’s case of causation is that HSBC used its position as the “Lead Bank” to manipulate the accounts of the Esquire Group for its own benefit and to conceal its wrongful actions from the other parties to the 1984 RSA, including the Plaintiff.  By acting wrongfully in breach of the terms of the 1984 RSA, HSBC was responsible for causing the Esquire Group’s failure to meet their financial obligations under the 1984 RSA.  That resulted in BNP calling on the Plaintiff’s guarantee which led directly to his bankruptcy. 

83.  The Plaintiff’s assertions are unspecific and unsupported by any documentary evidence.  But, even assuming that HSBC had inflated the property portion of the indebtedness and orchestrated the arrangement as the “Lead Bank” as alleged, the Plaintiff could not even produce the most rudimentary evidence that but for the inflated indebtedness of $30 million, Esquire would have been spared of liquidation so that he in turn would not have been called upon to perform his obligation under his guarantee which resulted in his bankruptcy.  Furthermore, there is no dispute that the 1996 Bankruptcy was caused by, and brought about as a result of, the Plaintiff’s failure to satisfy debts owed to BNP, who was the petitioner in the 1996 Bankruptcy.  That petition had nothing to do with the Defendants.  In my view, the Plaintiff’s suggestion that his bankruptcy resulted from the alleged breach of duty, misrepresentation or suppression or concealment by the Defendants of the “real” property portion is plainly unsubstantiated.  

CONCLUSION

84.  For the above reasons, I concur with the Master’s view that the Plaintiff has no locus standi to sue in respect of the causes of action vested in the Official Receiver as trustee in his two bankruptcies; that his action is time-barred in respect of the other causes of action; and in any event, the present action falls foul of the principles of res judicata. The first ground will probably close all the doors to the Plaintiff’s non-personal claims.  Any alleged residual personal claims not vested in the Official Receiver are also time-barred under the second ground.  The third ground of res judiciata provides a double lock to those doors.  Accordingly, I uphold the decision of the Master and dismiss this appeal with costs to the Defendants to be assessed by summary assessment, the Plaintiff shall lodge his objections to the Defendants’ bill of costs within fourteen days hereof (if any) and the Defendants shall lodge their reply within seven days thereafter (if any).