LIBERTARIAN INVESTMENTS LTD v. THOMAS ALEXEJ HALL

HCA2533/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2533 OF 2006

---------------------

----------------------

-------------------------

J U D G M E N T

------------------------

1.  There are two appeals before this court.  Firstly, an appeal from the Order of Master Kwang dated 20 January 2009 dismissing the defendant’s application for further and better particulars of the Amended Statement of Claim save for two of the Requests set out in the Request for Further and Better Particulars (“the Requests”) of the Amended Statement of Claim dated 14 November 2008 (references to “Requests” herein are references to the Requests set out in this document).

2.  Secondly, an appeal from the Order of Master Lung dated 18 March 2009 dismissing the defendant’s Summons dated 11 March 2009 seeking to prohibit the plaintiff from adducing any evidence at trial which is privileged and to expunge any reference to the same in the plaintiff’s pleadings.  (The Unless Order for the filing of the defendant’s witness statement made by the learned master on that same day is no longer in issue as the statement has been filed.)

Request for Further and Better Particulars

3.  Due to the re-amendment of the Statement of Claim, Requests 49 to 81 are no longer in issue (the reference to “outstanding requests” in paragraph 5 of the said Order of Master Kwang is a reference to these Requests).

4.  Further, some of the Requests are no longer pursued by Mr Wright, who appears for the defendant, namely, Requests 1, 5 to 7, 12, 13, 17 to 20, 25 to 27 and 30 to 36. 

5.  Furthermore, as mentioned above, Requests 29 and 39 have been ordered by the learned master.  Pursuant to that Order, an Answer dated 6 February 2009 has been filed by the plaintiff. 

6.  I have considered with some care the contents of the Re-Amended Statement of Claim.  The plaintiff’s case is not complicated.  In a nutshell, it is alleged that in May 2003 the plaintiff, acting via Mr Alan Woods, gave the defendant a very large sum of money for the purpose of acquiring the shares in a company which engaged in the business of on-line gaming.  It is alleged that the defendant has wholly failed to account to the plaintiff for the money entrusted to him or the assets, if any, acquired with the same.

7.  One of the features of the plaintiff’s case is that it is in the dark as to what precisely the defendant has done with its money and has to rely upon various information given to it by the defendant on that subject over the years. 

8.  However, I have not seen any noticeable deficiency in the Re-Amended Statement of Claim save in respect of paragraph 19.  I am unable to see the basis whereby the defendant became the trustee of the beneficial interest in respect of the 1.7m shares on the assumption that he had done what he reported to the plaintiff.  I have raised my concern with Mr Barlow SC, who appears for the plaintiff.  My concern is not an issue raised by the defendant and I shall leave the matter to the parties. 

9.  Before I deal with the remaining Requests, I should raise two matters.  Firstly, this action was started in 2006.  Witness statements have been exchanged and this case is due for a Case Management Conference.  It is lamentable that the parties are still battling with request for particulars given the stage of the proceedings. 

10.  Secondly, notwithstanding the submissions of Mr Barlow I am not satisfied that the Answer to Request 29 is adequate.  The Answer identifies the nature of the trust alleged, but it fails to address the issue as to what are the terms of that trust.  However, this inadequacy is not raised by Mr Wright and I am content to accept an undertaking by Mr Barlow to resolve this point in the following terms :

“The Plaintiff undertakes to supplement the Answer dated 6 February 2009 in respect of Request 29 to address the issue of the terms of the trust.”

11.  I shall set out below the Requests which are in issue (I am grateful to Mr Wright for supplying me with a soft copy of the Request.) and my ruling on each of them :

(a)     Under paragraph 10

“Of:‘With the consent of the Plaintiff In accordance with the purpose for which the Plaintiff’s aforementioned funds had been transferred into the BLP trust account, the initial payment for the TSE shares which were acquired through that offer was made by Axdale using the Plaintiff’s funds in the BLP trust account.’

2.  Please confirm that the Plaintiff’s case is that the purpose for which the funds were transferred into the BLP trust account was the attempted acquisition of shares in TSE.”

Ruling

The plaintiff’s case, as pleaded in the last sentence of paragraph 7 of the Re-Amended Statement of Claim, is perfectly plain.  The Request is unnecessary.

(b)     Under paragraph 11

“Of:  ‘In or about August or September 2003, in conversations with Mr. Woods, the Defendant offered to try to acquire for the Plaintiff the beneficial entitlement to further TSE shares in order to try to bring its entitlements up to about 10 per cent of the shares of TSE.’

3.  State the dates on which the offer was allegedly made.

4.  State the words allegedly used by the Defendant when making the offer.”

Ruling

On a proper understanding of the pleaded case of the parties, the precise dates and words used are not important.  Hence, Mr Woods’ instruction to the defendant to acquire more shares is admitted in paragraph 13 of the Re-Amended Defence.  Further, paragraph 11 is adequately pleaded.  I reject these Requests.

(c)     Under paragraph 12

“Of:‘By In or about December 2003, in conversations and in emails sent by the Defendant between 22 December and 30 December 2003, the Defendant informed the Plaintiff’s Mr. Woods that (a) he was negotiating with Mr. Mark Davies …’

8.  State the words allegedly used by the Defendant in the conversations with Mr. Woods.

Of:‘In the same conversations, Tthe Plaintiff’s Mr. Woods asked the Defendant to proceed.’

9.  State the words allegedly used by Mr. Woods in communicating his request that the Defendant proceed.”

Ruling

The pleading is adequate and the Requests are unnecessary.

(d)     Under paragraph 14

“Of:‘In early about January 2004, the Defendant orally reported to the Plaintiff’s Mr. Woods that he had acquired on behalf of the Plaintiff beneficial entitlements to 1,777,700 TSE shares through arrangements with the beneficial owner of two registered shareholders of TSE shares.’

10.State the date(s) on which it is alleged the Defendant reported to Mr. Woods that he had acquired on behalf of the Plaintiff beneficial entitlements to 1,777,700 shares in TSE.

11.State the words allegedly used by the Defendant when reporting to Mr. Woods that he had acquired on behalf of the Plaintiff beneficial entitlements to 1,777,700 TSE shares.”

Ruling

The pleading is adequate and the Requests are unnecessary.

“Of:‘…and at that time, the Defendant handed to the Plaintiff’s Mr. Woods a brief typed note…’

14.State the meaning the Plaintiff gives to the expression ‘beneficial entitlements’.  In particular, state whether this expression is intended to mean rights which the Court, exercising its equitable jurisdiction, would enforce in favour of a party (the beneficiary) against the legal owner of property by requiring the legal owner of the property to hold that property for the benefit of the beneficiary.  If the Plaintiff contends that ‘beneficial entitlements’ has some other meaning, state fully that other meaning.”

Ruling

I do not see how this can be a proper Request.  If there is any legal argument to be made by the defendant along the line of this Request, no doubt it will be ventilated at the trial.

“15.State whether it is the Plaintiff’s case that the Plaintiff had in about early January 2004 in fact acquired ‘beneficial entitlements’ to the 1,777,700 shares in TSE. 

16.If so, state the date on which the ‘beneficial entitlements’ were allegedly acquired and give full particulars of the manner in which the ‘beneficial entitlements’ were allegedly acquired.”

Ruling

The plaintiff’s case is pleaded with sufficient clarity.  It was and is in the dark as to what the defendant did with its money and is relying upon various pieces of information given to it by the defendant.  These Requests seek to take advantage of the plaintiff’s lack of knowledge.  They are unmeritorious and I reject them.  

(e)     Under paragraph 19

“Of:‘In the premises, if the Defendant’s reports (namely those pleaded in paragraphs 14 to 18 above were true then in or about January 2004, the Defendant became the trustee for the Plaintiff for the beneficial entitlements to the 1,777,700 TSE shares which, using trust funds of the Plaintiff, he had acquired or caused to be acquired for the Plaintiff, through the Davies Family Settlement, in the manner pleaded above (“the TSE Trust Shares”).’

21.State whether it is the Plaintiff’s case that the Defendant in fact acquired or caused to be acquired ‘beneficial entitlements’ to 1,777,700 shares in TSE.

22.In so far as the Plaintiff’s case is that the Defendant acquired for the Plaintiff ‘beneficial entitlements’ to the 1,777,700 TSE shares, give full and proper particulars of the manner in which it is alleged such beneficial entitlements were acquired. 

23.In so far as the Plaintiff’s case is that the Defendant caused ‘beneficial entitlements’ to the 1,777,700 TSE shares to be acquired for the Plaintiff, provide full and proper particulars of the manner in which it is alleged the Defendant is alleged to have caused such beneficial entitlements to be acquired.

24.Identify with precision the property of which the Defendant is alleged to have been the trustee.  In particular, state whether the Plaintiff alleges that the property of which the Defendant was a trustee consisted of the personal rights represented by the alleged ‘beneficial entitlements’ to the 1,777,700 shares in TSE.”

Ruling

For the same reasons which I have articulated in respect of Requests 15 and 16, these Requests are also rejected. 

(f)     Under paragraph 26

“Of:‘the duty to safeguard and to preserve the trust property, in particular namely … any other property now representing the present form of the Plaintiff’s funds from the BLP trust account’

28.Identify fully the ‘other property now representing the present form of the Plaintiff’s funds from the BLP trust account’.”

Ruling

It is self-evident that the plaintiff is not in a position to provide such particulars.  This is a naked attempt to embarrass the plaintiff.  The Request is rejected.

(g)     Under Paragraph 31

“Of:‘In the premises the property now representing … the TSE Trust Shares on the date of the issue of the Writ herein should have comprised … £9,855,942.11 …’

37.State whether it is the Plaintiff’s case that the registered owners of the TSE shares in fact paid the sum of GB£9,855,942.11 to the Defendant. 

38.If so, state the date on which it is alleged the registered owners of the TSE shares paid this sum to the Defendant.”

Ruling

The plaintiff’s case is adequately pleaded and the Requests are unnecessary.

(h)     Under paragraph 34

“Of:‘Since early 2005 (in the manner pleaded above) the Plaintiff has been pressing the Defendant to honour his obligations as trustee for the Plaintiff for the TSE Trust Shares.’

40.State the precise date or dates on which the Plaintiff alleges that it pressed the Defendant.

41.State whether it is alleged that the Plaintiff’s demands were communicated to the Defendant orally or in writing.

42.If orally:-

(i)State by whom on the part of the Plaintiff the demands were made.

(ii)State the words allegedly used by such person(s) when making the demands.

43.If in writing, identify the document(s).”

Ruling

The pleading is sufficient.  The Requests concern matters of evidence and are unnecessary.

“Of:‘… arranging for the Plaintiff to have direct control over the TSE Trust Shares.’

44.In view of the definition of ‘TSE Trust Shares’ in paragraph 19 of the Amended Statement of Claim, please confirm that the Plaintiff’s case is that the Defendant was obliged to arrange for the Plaintiff to have direct control of the ‘beneficial entitlements’ to the 1,777,700 TSE shares.

45.State the precise action it is alleged the Defendant was obliged to take in order to ‘honour his obligations as trustee for the Plaintiff of the TSE Trust Shares’.  In particular:

(i)State the action the Plaintiff alleges the Defendant was obliged to take in ‘arranging for the Plaintiff to have direct control of the TSE Trust Shares’ indicating the manner in which such action would have given the Plaintiff direct control of the TSE Trust Shares.

(ii)State the information and documents the Plaintiff alleges the Defendant was obliged to provide.

(iii)State the amount of the proceeds of sale of the TSE Trust Shares which the Plaintiff alleges the Defendant was obliged to render an account to the Plaintiff.

(iv)  Identify the property which the Plaintiff alleges the Defendant was obliged to render accounts and records.”

Ruling

The pleading is sufficient and the Requests are unnecessary.

(i)     Under paragraph 35

“Of:‘The Defendant has refused or failed to comply with any of those demands.’

46.Provide full and proper particulars of the alleged refusal or failure on the part of the Defendant to comply with the Plaintiff’s demands.”

Ruling

I have not come across such a Request before.  Unless something turns upon the precise manner of refusal, it is difficult to see why the pleading should be so burdened.  The Request is wholly unnecessary and rejected.

(j)     Under paragraph 36

Of:‘In the premises, the Defendant has breached each of his duties as trustee.’

47.Provide full and proper particulars of each of the alleged breaches of duty on the part of the Defendant.”

Ruling

The plaintiff’s case is adequately pleaded and the Request is rejected.

(k)     Under paragraph 40

“Of:‘…the Defendant is accountable to the Plaintiff for any breaches of trust which have been committed by the Defendant whilst acting as trustee for the Plaintiff, including the obligation to restore the trust to the position that it would have been in had the Defendant not acted in breach of trust, namely the position pleaded in paragraph 31 above.’

48.In respect of each breach of trust alleged by the Plaintiff:-

(i)Identify with precision the trust property which the Plaintiff alleges the Defendant is obliged to restore;

(ii)Identify the precise manner in which the alleged breach is said to have deprived the trust of that property.”

Ruling

The plaintiff’s case is adequately pleaded and the Request is rejected.

12.  After considering these Requests, I regret to say that the defendant has completely ignored the well-known dicta of Saville LJ in British Airways Pension Trustees Ltd v Sir Robert McAlpine & Sons Ltd & Ors (1994) 72 BLR 26 at p.33I-34C :

“The basic purpose of pleadings is to enable the opposing party to know what case is being made in sufficient detail to enable that party properly to prepare to answer it.  To my mind it seems that in recent years there has been a tendency to forget this basis purpose and to seek particularisation even when it is not really required.  This is not only costly in itself, but is calculated to lead to delay and to interlocutory battles in which the parties and the court pore over endless pages of pleadings to see whether or not some particular point has or has not been raised or answered, when in truth each party knows perfectly well what case is made by the other and is able properly to prepare to deal with it.  Pleadings are not a game to be played at the expense of the litigants, nor an end in themselves, but a means to the end, and that end is to give each party a fair hearing.”

13.  In conclusion, this appeal is dismissed.

Prohibition from adducing privileged evidence

14.  There is a blanket challenge by the defendant that all the e-mails which were exchanged between the solicitors of the parties over a period of some 3½ months cannot be used as evidence in this case by reason of the fact that these documents were generated in the course of without prejudice negotiations conducted with a view to settling the disputes between the plaintiff and the defendant.  One of such disputes concerned the subject matters of these proceedings.

15.  There are altogether 53 e-mails and only 8 of them were marked “without prejudice”. 

16.  There are a number of answers advanced by Mr Barlow to meet this challenge.  However, his primary case is that these matters should be left to the trial judge to determine.  In response, Mr Wright submitted that the defendant may be prejudiced if the trial judge is to read the contested material and then rejected the same.  Further, he said that if the material were admitted in evidence, the defendant would like to adduce additional evidence to explain the instructions given to his solicitors at the time of the negotiations and that may adversely impact upon the progress of the trial. 

17.  I must say that I find Mr Barlow’s primary case a compelling one.  Firstly, one of the issues raised by Mr Barlow is the “fraud exception”.  He submitted that the factual assertions in the defendant’s correspondence were steps taken by the defendant to conceal and/or render irrecoverable the property in respect of which the plaintiff has asserted proprietary claims and/or that the representations themselves were dishonest and therefore not privileged (paragraph 24 of the plaintiff’s Skeleton Argument).

18.  It is quite plain that the fraud exception involves matters which can only be properly assessed by the trial judge with all the evidence before him.  Mr Wright did not seek to argue otherwise.  However, he suggested that it is possible for me to indicate in my decision that it is not intended to fetter the discretion of the trial judge so that in the event that the fraud exception is upheld by the trial judge the material in question can be admitted in evidence.  In other words, I am invited to leave the fraud exception consideration to the trial judge.  With respect, I find this proposition an unattractive one.  I see no good reason why the determination of these matters should be truncated. 

19.  Secondly, with respect, it appears to me that the parties are ill-prepared to argue these matters fully (with or without covering the fraud exception).  The Skeleton Arguments (of both sides) are in generalised terms.  There is no focus or proper analysis to assist me to determine if all or any particular e-mails should be excluded from evidence.

20.  In respect of Mr Wright’s concern of prejudice to his lay client, with respect, I think that too little credit has been given to the ability of a judge trained in a common law system to disregard in his mind irrelevant matters.  Further, the e-mails which Mr Wright has drawn to my attention do not contain any admission of dishonesty or anything of that nature.  I am not convinced that the trial judge will be prejudiced against the defendant in the event that he rejects the material in question.

21.  As regards Mr Wright’s point on the need for further evidence.  I see no reason why a supplemental witness statement of the defendant should not be prepared now.  It needs not be filed or served so as to avoid any argument of waiver of privilege.  Mr Barlow has given this court the assurance that the trial will not be delayed in the event that such a statement has to be deployed.

22.  For these reasons, I also dismiss this appeal.  I make an order nisi that the costs of both appeals be to the plaintiff with certificate for two counsel.