LAM YEE HUNG v. CHINACHEM CHARITABLE FOUNDATION LTD

HCA 764/2015

HIGH COURT ACTION NO 764 OF 2015

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DECISION

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Application

1.  This is an application by the defendant for further and better particulars of the statement of claim herein.

Statement of claim

2.  On 13 April 2015, the plaintiff commenced the present proceedings.  The plaintiff said that, in 2007 to 2009, the defendant had a bitter litigation on the estate of the late Madam Nina Wang. It needed funds to continue the litigation. In or about January or February 2009, through the introduction of the late Mr. Tsui Chin Tong, the plaintiff meet several times Dr. Kung of the defendant to discuss about the possibility of arranging a loan to the defendant to enable it to fund the litigation.

3.  Later, the plaintiff agreed to lend and the defendant agreed to borrow a sum in the region of 40 million with maximum interest permissible by the laws of Hong Kong. It was to be repaid after the conclusion of the litigation or upon written demand thereafter, whichever was the later.

4.  From March to June 2009, the plaintiff advanced or caused to have advanced a total sum of $42,350,000 to the defendant.  Out of them, $20,000,000 was from the plaintiff’s own resource and the remaining, loans he borrowed from his business associates in Hong Kong and China.

5.  Despite demand letter and statutory demand, the defendant failed and refused to repay the plaintiff the said loan together with interest at the rate of 48% per annum.  The plaintiff therefore sued the defendant for the same with costs.

Defence

6.  The defendant contested the proceedings.

7.  The defendant said that it was a charitable corporation.  Sums transferred to or received by the defendant were and should be treated as charitable donations unless there was contrary express agreement.

8.  It was admitted that the defendant was involved in the said probate litigation and required money to fund legal costs.  However, the defendant did manage to fund them through a combination of inter alia donations and loans (all of which were properly documented and recorded and none of which involved the plaintiff).

9.  Dr. Kung of the defendant did know the plaintiff but it was through the introduction of the then chief executive officer of Chinachem Group in or about 2008 during a causal meeting in Shenzhen.  Further, neither Dr. Kung nor any of the other governors of the defendant had ever discussed with the plaintiff nor contacted with him for any alleged loan financial assistance or donation.  There was no loan agreement, verbal or written, between the parties.

10.  The plaintiff further averred that:

(a) On 10 March 2009, it did receive an unconditional donation of $20,000,000 from a donor bearing the same name of the plaintiff, which was duly recorded as such.

(b) As to the rest of the alleged sums of $22,350,000, they represented unconditional donations from companies and individuals other than the plaintiff.  The defendant also duly recorded them as such.

(c) Further or alternatively, the defendant relied on limitation to bar the plaintiff to claim some of the “loans” (which were denied).

11.  Although the defendant did receive the demand letter and statutory demand, the alleged loans were denied.  Further, the statutory demand did not mention “loan” and/or “interest” and the same was only a subsequent fabrication. The defendant also relied upon evidence in HCMP 2056/2014, including that the plaintiff only claimed the sum of $42,850,000 in the statutory demand without mentioning the interest of $122,068,734.25 or $164,418,734.25 in the statement of claim herein.

12.  Regarding the claim of interest of 48% per annum, the defendant said that, as a charitable institution, it would not and could not accept and agree to such a high interest rate.  The defendant also said that it had obtained an injunction to restrain the plaintiff from presenting a winding petition against it in HCMP 2056/2014.

13.  The defendant averred that it had always been its standing practice to treat every single borrowing of loan with utmost seriousness.  All loans and donations would be clearly and properly recorded in its audited governors’ reports and financial statements (which were publicly available documents) and the alleged loan transactions by the plaintiff had never appeared in these records.

Request for further and better particulars

14.  On 22 May 2015, the defendant filed its request for further and better particulars of the statement of claim.  It targeted at 3 paragraphs, namely 5, 6 and 8.

“Under Paragraph 5

1. Of “In or about January, or February, 2009, through the introduction of the late Mr. Tsui Chin Tong (徐展堂), the Plaintiff met Dr. Kung Yan Sum (龔仁心 ) (“Dr. Kung”) who was and still is the chairman and one of the governors of the Defendant. The purpose of the meeting was to discuss about the possibility of arranging a loan to the Defendant to enable it to fund the Litigation.”

Request

Please state with full particulars:-

(1) the date or approximate date in January or February 2009 on which the meeting is alleged to have taken place (the “Alleged Meeting”);

(2) who was / were allegedly present in the Alleged Meeting;

(3) the venue where the Alleged Meeting took place;

(4) the circumstances leading to the Alleged Meeting and the alleged ‘purpose’;

(5) how and when Mr. Tsui had allegedly ‘introduced’ the Plaintiff and Dr. Kung;

(6) the details of what was said at the Alleged Meeting and by whom.

Under paragraph 6

2. Of “After several meetings with Dr. Kung, the Plaintiff agreed to lend and the Defendant agreed to borrow a sum in the region of HK$40 million with maximum interest permissible by the laws of Hong Kong (meaning not to violate the provision under the Money Lenders Ordinance) and to be repaid after the conclusion of the Litigation or upon written demand thereafter, which ever was the later.”

Request

(1) Please state with particularity:-

(i) the number and date(s) or approximate date(s) of each of the alleged ‘several meetings’ (the “Alleged Meetings”);

(ii) who was / were allegedly present in each of the Alleged Meetings;

(iii) the venue(s) where each of the Alleged Meetings took place;

(iv) the circumstances leading to each of the Alleged Meetings;

(v) the details of what was said at each of the Alleged Meetings and by whom.

(2) Please state whether the alleged ‘agreement’ referred to in paragraph 6 is made in writing or contained in any document, and if so please identify the document(s); or if it was allegedly made orally, please state when, where, between whom, and the circumstances under which the alleged agreement was made.

Under paragraph 8

3.  Of “The Defendant avers that of the said sum of HK$42,350,000, HK$20,000,000 was from his own resource and the remaining amounts were loan he borrowed from his business associates in Hong Kong and China.”

Request

(1) Please state all the facts and matters relied upon in support of the allegation that “the remaining amounts were loan he borrowed from his business associates in Hong Kong and China.”

(2) Please identify each of the “business associates in Hong Kong and China”

(3) Give full particulars of the alleged relationship or connection of the Plaintiff with each such alleged ‘business associates’.

(4) When and how was each alleged ‘loan’ agreed upon and borrowed, and between whom and whom.

(5) When and how did the Plaintiff receive each alleged ‘loan’ advancement.

(6) What were the terms of each alleged ‘loan’, including as to repayment time, terms and conditions, and interest rate if any.”

15.  On 5 June 2015, the plaintiff filed his answers.

“Under paragraph 5

…..

Answer

…...

1.(1) to (6) The requests are evidence which will be canvassed in witness statements.

……

Under paragraph 6

……

2.(1)(i) to (v) The requests are evidence which will be canvassed in witness statements.

2.(2)             The agreement was made orally. As for the remaining of the request, they are evidence which will be canvassed in witness statements.

Under paragraph 8

……

3.(1) to (6) The requests are evidence which will be canvassed in witness statements.

……”

16.  On 29 June 2015, the defendant took out the present summons.

Reply

17.  In the meantime, the plaintiff filed his Reply on 18 June 2015. Briefly, he set out the objects of the defendant as per its memorandum and articles of association. He reiterated that the sum of $42,350,000 was loans, and not donations, otherwise, they could only be used towards the promotion of the objects of the defendant.  

18.  Parties appeared before me on 30 November 2015 for the substantive arguments. They were both represented by counsel.  Mr Jeremy Chan for the defendant and Mr Minju Kim, for the plaintiff. Upon hearing from them, I adjourned the matter for a written decision to be handed down.  I now do so.

Rulings and reasons

19.  Both counsel referred me to a number of basic principles relating to whether further or better particulars of pleadings were to be ordered or not.  As a starting point, I remind myself of the following extracts from paragraph 18/12/1 of the HKCP 2016 at page 421.

“Effect of rule – The requirement to give particulars reflects the overriding principle that the litigation between the parties, and particularly the trial, should be conducted fairly, openly, without suprises and, as far as possible, so as to minimize costs. In Aktieselskabet Dansk Skibsfinansiering v Wheelock Marden & Co. Ltd [1994] 2 H.K.C. 264 Bokhary J.A. said at 269E-270E that the functions of properly particularized pleadings are as follows:

(1) to inform the other side of the nature of the case that they have to meet as distinguished from the mode in which that case is to be proved;

(2) to prevent the other side from being taken by surprise at the trial ;

(3) to enable the other side to know with what evidence they ought to be prepared and to prepare for trial;

(4) to limit the generality of the pleadings, the claim and the evidence;

(5) to limit and define the issues to be tried, and as to which discovery is required;

(6) to tie the hands of the party so that he cannot without leave go into any matters not included (although if the opponent omits to ask for particulars, evidence may be given which supports any material allegation in the pleadings).

     It is not the function of particulars to take the place of necessary averments in the pleading, nor “to state the material facts omitted … in order by filling the gaps, to make good an inherently bad pleading” (per Scot L.J. in Pinson v Lloyds, etc., Bank [1941] 2 K.B. 72 at 75).

     The purpose of pleadings is not to play a game at the expense of the litigants but to enable the opposing party to know the case against him. There is a tendency to forget this basic purpose and to seek particulars which are not necessary when in truth each party knows the others’ case (Trust Securities Holdings v Sir Robert McAlpine & Sons Ltd, The Times, December 21, 1994, CA).

     …..”

20.  With the above in mind, one immediately notices that some of the arguments of Mr. Kim might not be as persuasive as they should have been. He said that the case of the plaintiff had been made known to the defendant. It could plead the defence. There was no surprise and so forth. Mr. Kim might be correct, but further and better particulars of pleadings serve a number of different functions. As long as the defendant could persuade this court to accept at least one, it might justify an order for the same.

21.  Upon considering the arguments from both counsel, I have come to the view that the plaintiff should provide the particulars sought.

22.  As pointed out by Mr. Chan, the plaintiff is not saying that he could not remember and/or did not know the particulars sought. He only argues that it is evidence to be disclosed in his witness statement (to be exchanged at a later stage of the proceedings).

23.  Should the plaintiff be allowed to do it later then?

24.  I take the view that those further and better particulars of the alleged loans should forthwith be given to the defendant.

(a) It is the case of the plaintiff that parties came to an “agreement” of loans. It is trite law that particulars of the agreement should be provided within the pleadings.  Paragraph 18/12/3 of the HKCP at P.421 states that:

“(2) Agreement – The pleading should state the date of the alleged agreement, the names of all parties to it, and whether it was made orally or in writing, in the former case stating by whom it was made and in the latter case identifying the document, and in all cases setting out the relevant terms relied on (Turquand v Fearon (1879) 48 L.J.Q.B. 703. If the agreement is not under seal, the consideration also must be stated. ….”

(b) It is also the case of the plaintiff parties came to such agreement after several meetings.  By the same or similar rationale as particulars of agreement, details as to “when”, “who”, “where” and “how” regarding the meetings should be given.

(c) One of course does not forget (the plaintiff’s case) that it is Mr. Tsui who introduced him to Dr. Kung of the defendant to discuss about the loans.  When a key witness has passed away, details of the meeting will become particularly important so that parties could prepare their cases.

(d) Given that the usual practice of this court is to order discovery and exchange of witness statements after close of pleadings, I also agree with the submission by Mr. Chan that the provision of such particulars at the present stage is necessary because it would help the defendant to seek discovery (from the plaintiff or other third parties), prepare witness statement(s) and get ready its case for trial. The delaying of the provision of those particulars to the stage of exchange of witness statements is likely to lead to late application(s) for discovery and supplemental witness statements. 

(e) Discovery against third parties is also particularly true in the present case because the plaintiff said that he had to borrow from others in order to make loans to the defendant.  Details of these loans, including repayment term(s) and interests (if any) payable, borrowed by the plaintiff are relevant to the issues in dispute between the parties and should be disclosed so that the matter could be followed up, if necessary.

(f)  All in all, the provision of the further and particulars sought by the defendant is necessary for disposing fairly of the cause or matter and for saving costs.

Conclusion

25.  To conclude, I will make the following orders.

(a) The plaintiff do within 14 days serve upon the defendant further answers to the Request for Further and Better Particulars of the Statement of Claim filed and served by the defendant on 22 May 2015 herein.

(b) There be an order nisi (which is to be made absolute after 14 days) that the plaintiff do pay the defendant costs of the application, including costs reserved and certificate for counsel for hearing on 30 November 2015, to be summarily assessed by the court.

(c) Subject to (b) above, for the purpose of the summary assessment, the defendant do lodge and serve its costs statement within 3 days after the order nisi having been made absolute.  The plaintiff also lodges and serves his reply within 3 days thereafter.