RIGHTBEST INTERNATIONAL LTD v. DBS BANK (HONG KONG) LTD

HCA 1099/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1099 OF 2011

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REASONS FOR DECISION

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1.  In this case the plaintiff complains against the defendant bank for mis-selling four types of investments that it entered into from August 2006 to January 2008. The plaintiff’s complaints are succinctly summarised in the written skeleton submissions by Mr Jat SC (with him Mr Man), counsel for the defendant, as follows:

“4. In a nutshell, P complains that the investments were unsuitable and risky; bad advice was given; and that various misrepresentations concerning the risks and prospects were made. It is also said that D did not ensure that Ms Zhou [who is the sole director and shareholder of P] fully understand the investments; and that it had wrongly categorized the risk of share accumulators in their internal risk assessment system ……

5. P says that D’s conduct amounted to breaches of “Professional Duties”, essentially duties to ensure that representations are accurate, recommendations are suitable, and that P fully understand the products …… It is said that the Professional Duties arose by reason of (i) clause I(1) of D’s Master’s Agreement; (ii) voluntary assumption of responsibility; or (iii) implied terms of the contract ……

6. For the various alleged misrepresentations on the advisability of the various investments, P claims damages at common law and under s.108 of the Securities and Futures Ordinance ……”

2.  It is the defendant’s position that the above claims disclose no reasonable cause of action and are unsustainable, and therefore liable to be struck out. In the circumstances, the defendant applies by summons dated 29 April 2013 (“Strike Out Summons”) to strike out the Statement of Claim save and except for the plaintiff’s pleaded complaint that seven equity accumulator contracts were unauthorised.

3.  On 9 May 2013, Master Hui ordered the Strike Out Summons be adjourned for argument before a judge in chambers. On 15 May 2013, the adjourned hearing was scheduled to be heard before a judge in chambers on 27 August 2013 (“Hearing”).

4.  On 21 August 2013, Notice of Change of Solicitors was filed on behalf of the plaintiff. Mr Jat SC’s written skeleton submissions and list of authorities were lodged on 22 August 2013 (Thursday). After 1pm on 24 August 2013 (Saturday), the plaintiff’s solicitors sent through to the other side a copy summons for leave to amend the plaintiff’s Statement of Claim and Reply as per the drafts annexed thereto (“Drafts”). Such summons was filed on 26 August 2013 (Monday), ie the day before the Hearing (“Amendment Summons”).

5.  The written skeleton submissions by Mr Mok SC (and with him Mr Wong), counsel for the plaintiff, were sent through to the other side after 2pm on 24 August 2013 (Saturday). I note that voluntary particulars of the Statement of Claim (“Particulars”) were annexed to Mr Mok SC’s written skeleton submissions. I did not receive the Amendment Summons, the Particulars and/or Mr Mok SC’s skeleton submissions and list of authorities until well past mid-day on 26 August 2013.

6.  In the afternoon on 26 August 2013, Mr Jat SC lodged supplemental written submissions complaining of the new turn of events that left the defendant without proper time to consider the new allegations. He forewarns that should an adjournment be necessitated, the defendant will seek an appropriate costs order (on an appropriate scale) against the plaintiff.

7.  As Mr Jat SC submitts, there is no doubt that the Amendment Summons and the Particulars (which are introduced only after Mr Jat SC lodged his written skeleton submissions and which have been sent to the other side over the weekend before the Hearing) are extremely late and well beyond the eleventh hour. Indeed, the Amendment Summons is so late that it has necessitated an application for abridgement of time for service of such summons.

8.  It is also plain from the written skeleton submissions of Mr Mok SC that he relies on the Particulars and the proposed amendments in the Drafts under the Amendment Summons to resist the Strike Out Summons. I agree with Mr Jat SC there is significant shifting of the goalposts in respect of the defendant’s opposition of the Strike Out Summons in that a number of new allegations have been added, including an entirely new allegation of dishonesty. The Drafts also introduce new factual allegations in respect of which the defendant’s legal team will need to take proper instructions and to give careful consideration to the consequent legal and forensic implications. None of these matters can properly, effectively and fairly be done in the limited time given to the defendant before the Hearing.

9.  Whilst there is no need for me to make any observation in respect of Mr Jat SC’s submissions that such flurry of activity on the part of the plaintiff at the last minute reflects a tacit acceptance of the deficiencies of its current pleadings, I agree that the late foisting of these new matters on the defendant is unfair.

10.  Given the obvious lateness of the Amendment Summons and the need to seek abridgment of time for service of such summons in the context of the upcoming Hearing, the plaintiff must have anticipated the defendant’s objection to the shifting of goalposts so close to the Hearing. It therefore behoves the plaintiff to provide the court and the defendant with full information of the lateness. However, there has been no forewarning of the Particulars and the Amendment Summons, and worse still, there is not even an attempt to explain the delay by affidavit or otherwise.

11.  In my view, a litigant who makes a last minute application that obviously has material impact on existing process or imminent court hearing should provide the court and the other side, preferably on affidavit, a full and accurate account of the reasons why the application has not been made  earlier and full justification as to why the application should be entertained at all to enable the court to exercise its discretion properly in dealing with possible (or even likely) objections from the other side.

12.  Especially under the Civil Justice Reform, the court is generally unhappy with last minute applications that fly in the face of the underlying objectives of reasonable expedition, procedural economy, cost effectiveness and ultimately fairness between the parties as enshrined in Order 1A of the Rules of the High Court.

13.  The explanatory affidavit on the issue of lateness has not been forthcoming until after Mr Jat SC’s complaint of the lack of explanation as to the delay. The affidavit of the plaintiff’s solicitor Richard Michael Healy was served at 9:15am and filed at 9:40am on the morning just before the Hearing. A copy was handed up to the court in the course of Mr Mok SC’s oral submissions at the Hearing.

14.  Mr Healy explains that he has been instructed by the plaintiff that it has for some time been requiring amendments to be made to the Statement of Claim, but the changes it sought have not been made, and accordingly the plaintiff considers in the circumstances that it has no alternative but to seek alternative solicitors. Mr Healy’s firm was retained by the plaintiff only on 21 August 2013, and since then they have engaged counsel and busied themselves with gathering files from the plaintiff’s former solicitors and preparing for the Hearing. It transpires from Mr Healy’s affidavit that brief has already been delivered to counsel by the plaintiff’s former solicitors, which brief has then been withdrawn due to the change of solicitors. Mr Healy says that after delivering the replacement brief, his firm and counsel have worked diligently to deal with the matter as expeditiously as possible.

15.  Whilst there is no reason to doubt that Mr Healy’s firm has attended to the matter expeditiously in the time available to them, his affidavit still raises concern. Plainly, the plaintiff has all along been aware of (a) the upcoming Hearing which has been scheduled since mid-May 2013 (ie 3½ months ago) and (b) the need to amend its pleadings. Counsel has also been briefed for the Hearing before the change of solicitors. It is not a case of lack of appreciation of the need to revamp the pleadings or lack of opportunity to do. Whatever may have passed between the plaintiff and its legal representatives, the plaintiff is bound to keep a timely eye on the progress of preparations for resisting the Strike Out Summons be it by way of amendment of pleadings, briefing counsel, serving voluntary particulars, and/or indeed, timely change of solicitors to implement these matters. In my view, the reasons put forward do not amount to justifiable excuse vis-à-vis the defendant, and certainly the defendant is not to be blamed (and Mr Mok SC does not seek to say so) for the present unfortunate state of affairs.

16.  In the course of his submissions, Mr Mok SC assures the court that he will not seek abridgment of time for service of the Amendment Summons for the purpose of the Hearing. It therefore follows that he does not ask the court to substantively deal with the Amendment Summons at the Hearing. Rather, he suggests that the court can proceed to deal with the Strike Out Summons which he says turns on legal arguments, and should this court after hearing submissions be inclined towards the view that the impugned parts of the Statement of Claim are liable to be struck out, then this court should take a pause and at an adjourned occasion hear the Amendment Summons to determine whether such impugned parts should in fact be struck out or whether they may be salvageable by the proposed amendments in the Drafts. Mr Mok SC submits that such proposal finds support in a similar approach adopted by Mr Recorder Paul Shieh SC in Sun Focus Investment Limited v Tang Shing Bor & anor,[1] and is to be recommended in the present context because both he and Mr Jat SC are ready to argue the Strike Out Summons at the Hearing.

17.  On the other hand, Mr Jat SC considers the more sensible and practically efficient way forward is to allow the defendant proper time to consider the new developments, to decide whether to oppose all or part of the proposed amendments to the plaintiff’s pleadings, and (where appropriate) to revisit the Strike Out Summons to see whether or not it ought to be pursued further in view of the shifted goalposts, and pending such exercise the Amendment and Strike Out Summonses should be adjourned.

18.  I have no quarrel with the general principles discussed by the learned Recorder in Sun Focus Investment Limited which Mr Mok SC relies:

“8. …… upon striking out a pleading, it does not necessarily follow that an action should be dismissed. There are occasions when the court, if it sees that a viable cause of action could conceivably be pleaded, for the court to strike out a pleading and yet allow the offending party, usually the Plaintiff, a chance to revamp its pleadings. If precedent is required for this well-known course of action, I had referred the parties to the Court of Appeal decisions of Empire Engineering Company Limited v John Lok & Partners Limited, CACV128/1989, dated 16 February 1990, as well as the more recent one in Guang Xin Enterprises Limited v Kwan Wong Tan & Fong, CACV263 and 292/2002, judgment date 13 March 2003, where the Court of Appeal adopted and/or sanctioned a course of action to this effect.”

19.  But as Mr Jat SC has rightly reminded, Sun Focus Investment Limited was concerned with an application to strike out the entirety of the amended statement of claim. The learned Recorder acceded to that application but did not dismiss the action. He gave the plaintiff liberty to issue an application to file a fresh statement of claim within 14 days, failing which, the action shall stand dismissed. The learned Recorder explained such approach as follows:

“9. By definition, if a court accedes to an application to strike out but refuses to dismiss and give a chance for the offending party to recast the pleading, the amendments would necessarily not be before the court at the striking-out stage. But the court is not deciding anything at that time. The court is not granting blanket leave for the offending party. The court is only giving a timetable for the offending party to get on with issuing any summons to amend. If the proposed new pleading still offends the rules of pleading, then it would be refused and the matter is as simple as that.”

20.  Here, the defendant does not seek to strike out the entirety of the plaintiff’s Statement of Claim nor ask for dismissal of the plaintiff’s action. In short, the Strike Out Summons is limited to an application to strike out certain impugned parts of the Statement of Claim. [2] This is a situation that is wholly different to the one under consideration in Sun Focus Investment Limited in which the learned Recorder actually struck out the amended statement of claim but declined to dismiss the action. What Mr Mok SC would have this court do under his proposal is to hear the Strike Out Summons but not make any order even if the court considers that the impugned parts of the Statement of Claim are liable to be struck out, and then adjourn the matter pending the hearing of the Amendment Summons before ultimately deciding whether or not to grant any order to strike out. In my view, it is a wholly unsatisfactory way of proceeding with the Strike Out Summons.

21.  On any view, an adjournment is inevitably required to deal with the Amendment Summons. I bear in mind that unlike Sun Focus Investment Limited the plaintiff’s pleadings have already been recast in that the Drafts are available. That being the case, it does not bring about procedural economy and/or efficiency to proceed with the Strike Out Summons at the Hearing. On the contrary, it adds unnecessary complexity (and of course additional efforts and costs as well) if the parties’ advocates and the adjudicating tribunal have to refresh and revisit arguments after an adjournment.

22.  More importantly, notwithstanding the beguiling simplicity of Mr Mok SC’s proposition that the Strike Out Summons is premised  on a point of law (ie the doctrine of contractual estoppel), even a cursory reading of the Drafts (and as exemplified by Mr Mok SC’s written skeleton submissions) shows that the new allegations are not stand-alone and/or discrete contentions separate and distinct from the material facts already pleaded in the Statement of Claim, which pleaded material facts lay the factual foundation for Mr Jat SC’s legal arguments on the Strike Out Summons. Indeed, Mr Mok SC’s written submissions clearly proceed on the basis that the Particulars to the plaintiff’s existing pleadings and the new allegations in the Drafts under the Amended Summons are very much part and parcel of the plaintiff’s overall armoury against the Strike Out Summons, which approach is quite different from the proposal he puts forward at the Hearing.[3] In my view, and bearing in mind the lateness of Mr Mok SC’s written skeleton submissions, Mr Jat SC should not be further disadvantaged by the added difficulty of untangling the threads of Mr Mok SC’s arguments in his written skeleton in relation to the Amendment Summons for the purpose of the Strike Out Summons at the Hearing if the proposal on the way forward as suggested by Mr Mok SC is to be adopted.

23.  But apart from the problem with skeleton submissions, the commonality of some underlying material facts for the plaintiff’s current pleadings and for the new allegations in the Drafts also suggest that the most practically efficient way forward is not as suggested by Mr Mok SC. Although some of the amendments in the Drafts do raise new factual allegations, these are other changes that merely lend different legal colour to material facts already pleaded in the plaintiff’s current pleading. For the court (if so minded) to consider striking out the impugned parts of the Statement of Claim only to have to later re-consider reinstating such factual averments in respect of the proposed amendments to the pleadings is, in my view, an inefficient and unhelpful approach.

24.  In all the circumstances, I do not consider it is appropriate to deal with the Strike Out and Amendment Summonses separately. The virtues of proper, efficient and effective case management bolstered by Mr Mok SC’s confirmation that the defendant does not ask for abridgment of time for service of the Amendment Summons for the Hearing, lead inexorably to the conclusion that the Strike Out and Amendment Summonses should be adjourned to be dealt with together.

25.  On such basis, Mr Jat SC argues that the adjournment has resulted in wasted costs, and he asks for costs thrown away by the adjournment on indemnity basis to be taxed and paid forthwith.

26.  Mr Mok SC makes no submissions on the scale of costs but asks for such costs to be reserved. He reminds that Mr Jat SC has alluded to the possibility that upon further consideration the Strike Out Summons may or may not be pursued or if pursued it may be pursued in a different fashion.  He proffers the possibility that the defendant may in future drop the Strike Out Summons upon realisation of the lack of cogency of its legal arguments.

27.  In my view, Mr Jat SC has fairly given advance notice of the possible need to revise the Strike Out Summons, but that is only in the context of it being a consequence of the plaintiff’s shifting of goalposts at the eve of the Hearing. The fact that the defendant has to reassemble its forces as part of the fallout of the plaintiff’s belated Particulars and Amendment Summons does not in any way legitimatise the plaintiff’s delay. Rather, it highlights the need to recognise the unenviable situation of the defendant having to incur additional costs and effort to regroup and to fight the battle on an altered front. I see no escape for the plaintiff from having to pay the costs thrown away by the adjournment, and in my view that necessarily includes the costs of the Hearing which have been wasted.

28.  Consequently at the Hearing, I have granted the following order:

(a) time for service of the Amendment Summons be abridged for the purpose of the granting of the order herein;

(b) leave to the plaintiff to file and serve affidavit in support of the Amendment Summons within 14 days from the Hearing;

(c) leave to the defendant to file and serve affidavit in opposition within 28 days thereafter;

(d) leave to the plaintiff to file and serve affidavit in reply within 28 days thereafter;

(e) no further affidavit be filed or served without leave of the court;

(f) any application for leave to file and serve further affidavit shall be made no later than 21 days before the adjourned hearing for argument with reasons on affidavit;

(g) the Amendment Summons and the Strike Out Summons be adjourned for argument before a judge in chambers on a date to be fixed in consultation with counsel’s diaries with two days reserved;

(h) no later than seven days before the adjourned hearing for argument (excluding Saturdays, Sundays and general holidays), the defendant shall lodge with the court and serve on the plaintiff skeleton submissions, list of authorities and hearing bundle;

(i) no later than three days before the adjourned hearing for argument (excluding Saturdays, Sundays and general holidays), the plaintiff shall lodge with the court and serve on the defendant skeleton submissions and list of authorities;

(j) costs thrown away by the adjournment of the Strike Out Summons, including costs of the Hearing, be to the defendant on indemnity basis to be taxed if not agreed and paid forthwith;

(k) save and except for costs of the Hearing as ordered in (j) above, costs of the Amendment Summons be reserved;

(l) there be certificate for two counsel.

29.  To save costs, the court will retain for record purpose (a) the index to the hearing bundle placed before me, (b) respective counsel’s written skeleton submissions and list of authorities, and (c) the Particulars. Save as aforesaid, the body of the hearing bundle and the bundles of authorities will be returned to the parties for re-use. The respective solicitors for the parties shall liaise with my clerk within seven days from today for collection of the relevant documents.