YONG WENG CHYE ( 楊榮財) v. HO YU KUEN (何汝權) AND OTHERS

HCA 1303/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1303 OF 2009

_________________________

_______________

D E C I S I O N

_______________

I.  Summonses

1.  By a summons dated 20 July 2009 (“1^st Summons”), the 1^st, 2^nd, 3^rd, 6^th and 7^th Defendants (“D1, D2, D3, D6 and D7” and collectively, “Ds”) applied for the following orders:

(a)  the Plaintiff (“P”) do within 14 days provide further and better particulars (“FBP”) of the Statement of Claim (“SOC”) as per the request annexed to the 1^st Summons;

(b)  §§121-124 of the SOC be struck out on the ground that the matters pleaded therein were scandalous, vexatious or that they might prejudice, embarrass or delay the fair trial of the action, or otherwise amount to an abuse of process of the court;

(c)  §111 (and consequently the first part of §148), §119 (and consequently §120(a)-(e)), §142, §147, and consequential to all of the above, reliefs 3(a)-(d) of the SOC insofar as the same related to D1, D2 and D3, and further and accordingly, P’s claim against D1 and D3 in this action be struck out on the ground that the necessary particulars of the claims therein had not been fully, sufficiently or clearly pleaded such that they might prejudice, embarrass or delay the fair trial of the action or otherwise amounted to an abuse of process of the court.

2.  By a summons dated 5 August 2009 (“2^nd Summons”), Ds sought to strike out §148 of the SOC under Order 18 rule 19(1)(a) of the Rules of the High Court insofar as it related to D1, D2 and D3 on the ground that it disclosed no reasonable cause of action against D1 and D3.

3.  The 1^st and 2^nd Summonses were scheduled to come before me for argument on 19 October 2009.  On 15 October 2009, P filed Notice to Act in Person and applied for legal aid. At the hearing on 19 October 2009, I declined to lift the legal aid stay and further adjourned the 1^st and 2^nd Summonses to a date to be fixed for substantive argument.  On 4 December 2009, P’s former solicitors once again filed Notice to Act for P in these proceedings.

4.  On 23 February 2010, pending the hearing for substantive argument in respect of the 1^st and 2^nd Summonses, P amended his pleadings without leave and filed/served inter alia (a) his Amended Writ of Summons indorsed with the Amended SOC (“ASOC”), (b) his Answer to Ds’ request for FBP of the SOC and (c) his Voluntary Particulars of the ASOC (“VP”).

5.  On 26 February 2010, the 1^st and 2^nd Summonses came before me again for substantive argument.  Although Ds merely objected to a few paragraphs in the ASOC, the alleged offending paragraphs must be understood in the context of the whole pleading that spread over 97 pages. I therefore directed the parties to first proceed with the hearing of the striking out application.  Eventually the hearing ran out of time, and I adjourned Ds’ application for FBP of the ASOC for future disposal.

6.  In respect of Ds’ striking out application, Mr Lam leading Ms Ho, counsel for the P, conceded that (a) §§121-124 of the ASOC (1^st Summons) and (b) P’s claim against D1 and D3 under the Misrepresentation Ordinance Cap.284 in §148 of the SOC (2^nd Summons) should be deleted from the pleading.  In fact, the plea in (b) above has been deleted in the ASOC.

7.  By amendment of the SOC without leave, Plaintiff added further prayers of relief against D1 and D3 in the ASOC.  Mr Chang, counsel for Ds, therefore conceded that notwithstanding suggestion to contrary in the 1^st Summons, P’s claim against D1 and D3 in this action could not be struck out in their entirety even if the alleged offending paragraphs in the ASOC as identified in the 1^st Summons were struck out.

8.  Ds filed the affidavit of their solicitor Sousa Richard Alvaro dated 20July 2009 in support of the 1^st Summons.  He asserted that §111 (and first part of §148), §119 (and consequentially §120), §142 and §147, and consequentially relief 3(a)-(d) of the SOC (now ASOC)failed to contain the necessary particulars for a claim based on fraud, deceit or conspiracy,and such failure offended the fundamental rule that the fullest particulars must be given in the body of the pleading (rather than by way of FBP) for such serious matters. Ds’ solicitors wrote to P’s solicitors on 15 July 2009 to intimate possible issuance of a striking out application unless P voluntarily amended the SOC to delete the offending paragraphs.  There was no reply, so Ds issued the 1^st and 2^nd Summonses.

II.  Overview of ASOC

9.  In order to appreciate the parties’ respective stance over the alleged offending paragraphs as identified in the 1^st and 2^nd Summonses, it is necessary to give an overview of the pleaded averments in the ASOC, which are very wide-ranging and which I shall attempt to summarise below.

10.  D1 and D2 were husband and wife and together with D3 operated businesses through limited companies owned, controlled and/or managed by them including Lead Asia Pacific Limited (“Lead Asia”) and D7.

11.  By 2 Memoranda of Sale both dated 15 April 2007, Mancas Investment Limited (“Mancas”) sold House 65 and House 84 of The Giverny in Sai Kung (“House 65” and “House 84”) to Lead Asia and D7 for HK$35,500,000.00 and HK$23,480,000.00 respectively.  The Memorandum of Sale for House 84 set out the payment terms as follows:

“Purchase Price	HK$	23,480,000.00
Initial Deposit	HK$	1,174,000.00
Further Deposit	HK$	N/A	Upon signing of the formal Agreement for the Sale and Purchase
3rd Deposit	HK$	1,174,000.00	on or before 31 May 2007
4th Deposit	HK$	1,174,000.00	on or before 11 Sep 2007
Balance	HK$	19,958,000.00	on or before 1 Dec 2007(the “Completion Date”)”

12.  According to 2 formal agreements for sale and purchase (“FASPs”) both dated 18 April 2007, the date of completion for the sale and purchase of House 65 and House 84 were 30 November and 1 December 2007 respectively, and the schedule for payment of the price was as follows:

House 65		House 84
Date	HK$	Date	HK$
15 April 2007	1,775,000.00	15 April 2007	1,174,000.00
31 May 2007	1,775,000.00	31 May 2007	1,174,000.00
10 September 2007	1,775,000.00	10 September 2007	1,174,000.00
30 November 2007	30,175,000.00	30 November 2007	19,958,000.00
	35,500,000.00		23,480,000.00

13.  In/about September 2007, D1, D2 and D3 informed P about the purchase of House 65 and House 84 and that D1 and D2 could only raise a bank loan for 1 and not both houses. If D1 and D2 failed to raise a bank loan for the purchase of the other house, the deposits paid for such house would be forfeited. D1 and D2 preferred to keep House 65 and to invite an investor for House 84, and for such purpose D2 was prepared to sell and P was in principle prepared to purchase D2’s share capital and loan capital in D7. P negotiated with D2 though D1 and D3 as her agents.

14.  As regards the share capital of D7, D1, D2 and D3 informed P during negotiations that Mancas had agreed to extend the deadline for the completion of the sale and purchase of House 84 to 31 January 2008.  D1 and D2 accompanied P to inspect House 65 and House 84.  Each of D1, D2 and D3 represented to P that the market value of House 84 had increased by HK$3,000,000.00, so the notional profit should be fixed at such sum.  Induced by and in reliance of such representation, P agreed to pay D2 a sum of HK$3,000,000.00 for the purchase of the share capital of D7.

15.  As regards the loan capital of D7, D1, D2 and D3 gave P a copy of the Memorandum of Sale for House 84 which set out the payment terms, and each of them verbally represented to P that D2 had advanced and D7 had paid the 1^st 3 instalments of HK$1,174,000.00 each (totalling HK$3,522,000.00) to Mancas as deposits (“D1, D2 and D3 Deposit Payment Representation”).  Induced by and in reliance of such representation, P agreed in principle to pay D2 a sum of HK$3,522,000.00 for the purchase of the loan capital of D7.

16.  D2 then engaged D4 to prepare the necessary legal documents. On 5 October 2007, D1, D2, D3 and P attended a meeting at D4’s offices.  During the meeting, D5 (a) confirmed he would be the solicitor in charge of the matter on their behalf, (b) gave a copy of the FASP for House 84 to P, (c) referred P to the provisions in Schedule 4 thereof (which set out the payment terms), and (d) verbally represented that D2 had advanced and D7 had in turn paid 3 sums of HK$1,174,000.00 each (totalling HK$3,522,000.00) to Mancas as deposits (“D5 Deposit Payment Representation”).  D5 also showed P a draft agreement to be entered between P and D2 for the sale and purchase of the share capital and loan capital of D7, which agreement D2 executed (“Principal Agreement”). Induced by and in reliance of (a) the D1, D2 and D3 Deposit Payment Representation, (b) the D5 Deposit Payment Representation, and (c) the D2 “No Material Liability” Representation referred to in paragraph 18 below, P also executed the Principal Agreement.

17.  P claimed that the D1, D2 and D3 Deposit Payment Representation was evidenced by Recital (3) and the First Schedule of the Principal Agreement which stated in effect that D2 had advanced to D7 a loan of HK$3,522,000.00 being the entire loan capital of D7.

18.  Paragraph 13.1 of the Third Schedule of the Principal Agreement also provided that   “[there] are no material outstanding contracts, engagements or liabilities whether ascertained or contingent and whether quantified or disputed by [D7]” (“D2 “No Material Liability” Representation”).

19.  Under the Principal Agreement, the total consideration payable by P was HK$6,522,000.00 comprising (a) the share capital of D7 in the sum of HK$3,000,000.00 payable by 2 promissory notes (“PNs”) to D1 in the sums of HK$1,000,000.00 and HK$2,000,000.00 and maturing on 1 December 2007 and 30 March 2008 respectively (“PN1” and “PN2”), and (b) the loan capital of D7 in the sum of HK$3,522,000.00 payable by cashier order or solicitor firm’s cheque upon completion.

20.  On 5 October 2007, P gave PN1 and PN2 to D1 pursuant to the Principal Agreement.  About 2 weeks later, P decided to reduce his risk exposure and sent a letter backdated to 5 October 2007 to D2. Such letter was intended to be a shareholders’ agreement between P and D2 for treating the transaction as a 50/50 joint venture between them and for proposing that P would only be entitled to a pro rata share of the profit if House 84 were sold before cash participation from him (ie his profit share would be calculated according to the ratio between the respective actual cash contributions by P and D2).

21.  Upon receipt of such letter, D2 instructed D4 to prepare a supplemental agreement. In mid-October 2007, P and D2 attended D4’s offices to execute such supplemental agreement amongst P, D2 and D7, which was backdated to 5 October 2007 and supplemental to the Principal Agreement (“Supplemental Agreement”).

22.  Clause 1 of the Supplemental Agreement provided inter alia that P and D7 agreed that if within 365 days from the completion of the sale and purchase of the share capital and loan capital of D7, House 84 was sold for more than HK$23,480,000.00, P and/or D7 shall pay 50% of the excess sum over and above HK$23,480,000.00 as ex gratia payment to D2 within 3 days of the completion of such sale.

23.  However, the Supplemental Agreement did not deal with any necessary changes to the rights and obligations of P and D2.  After negotiations, P and D2 executed a shareholders’ agreement and a profit-sharing agreement (“Shareholders’ Agreement” and “Profit Sharing Agreement”) which were prepared by D3.  Under such agreements, P and D2 agreed to share the profit (if any) on the intended sub-sale of House 84 in accordance with the ratio of their respective actual cash contributions made before the completion of such sub-sale.

24.  The Shareholders’ Agreement provided that (a) in addition to PN1 and PN2 P shall on the date of completion have the right to issue 2 further PNs for the respective sums of HK$3,261,000.00 and HK$261,000.00 (“PN3” and “PN4”) as settlement for the purchase of the loan capital of D7, (b) both P and D2 shall use their best endeavours to sell House 84 but at a resale price to be agreed between them if any of the 4 PNs were outstanding, (c) if the resale price exceeded HK$23,480,000.00 both parties would share the profit as separately agreed, and (d) if P did not redeem PN3 D2 would have the right to convert the value of PN3 into new shares to be issued by D7 so that D2 would become a shareholder of D7 once again and P and D2 shall jointly own D7 on 50/50 basis.

25.  By entering into the above agreements with P, D2 by conduct impliedly represented that she intended to fully perform such agreements (ie to transfer the share capital and loan capital in D7 to P and to allow P to have a share in the profit to be made on the sub-sale of House 84) (“Performance Intention Representation”).

26.  P and D2 agreed to postpone the completion under the Principal Agreement which eventually took place on 2 November 2007.  Pursuant to the Principal and Supplemental Agreements, P gave PN3 and PN4 (which PNs were prepared by D3) to D2 and completed his part under such agreements.

27.  Since 2 November 2007, each of D1, D2 and D3 repeatedly represented to P that the share transaction had been completed on that day and P had become the owner of the shareholdings in D7 (“Share/Loan Ownership Representation”), and P was under the belief that (a) D4 would deal with all necessary steps to complete the transfer of the share capital and loan capital of D7 to P, (b) he had become the sole owner of the shareholdings in D7, and (c) the only outstanding matter was for him to redeem the 4 PNs.

28.  On 22 and 23 November 2007, D1 though a third party reminded P to redeem PN1 on time if he wanted to have a share in the profit to be made on the sub-sale of House 84. By such conduct, D1 and D2 repeated the Performance Intention Representation.

29.  On/about 23 November 2007, D3 requested P to remit HK$1,000,000.00 to D6’s bank account.  On 29 November 2007, induced by and in reliance of (a) the D1, D2, D3 Deposit Payment Representation, (b) the D5 Deposit Payment Representation, (c) the Performance Intention Representation, and (d) the Share/Loan Ownership Representation, and at the requests of D1 and D3, P remitted the sums of HK$930,000.00 and HK$66,000.00 (totalling HK$996,000.00) (“Sum”) to D6’s bank account in order to redeem PN1.

30.  At a meeting amongst D1, D2 and P on 3 December 2007, D1 and D2 represented to P that given his frequent absence from Hong Kong (which made it inconvenient for D4 to arrange for him to execute legal documents for the sub-sale of House 84) and D2’s inability to execute such legal documents (in view of the agreements between P and D2), D5 advised that P and D2 should cancel the transaction so that the shareholdings in D7 would revert back from P to D2 who could then execute such legal documents (“Cancellation Need Representation”), and in return D1 and D2 promised P they would pay him the Sum together with his profit share upon completion of the sub-sale of House 84.

31.  P agreed to the suggestion, and on the same day P and D2 attended D4’s offices to execute a written cancellation agreement. D5 showed them an engrossment copy of such agreement between P and D2 which provided inter alia as follows:

“NOW IT IS HEREBY AGREED AS FOLLOWS:-

1.       The Vendor and the Purchaser hereby cancel [the Principal Agreement] and the Supplemental Agreement to the intent that [the Principal Agreement] and the Supplemental Agreement shall hereafter in all aspects be null and void and the Vendor hereby releases the Purchaser and the Purchaser hereby releases the Vendor from the respective obligation contained in the [Principal] Agreement and the Supplemental Agreement.

2.       The Vendor shall on the signing hereof repay to the Purchaser the sum of [HK$3,000,000.00] paid by the Purchaser under the said Agreement by way of return of promissory notes.

3.       Upon signing this Cancellation Agreement, the parties shall have no further claims or actions whatsoever against each other.

4.       Each party shall bear its own costs for and incidental to the preparation, completion and registration of this Cancellation Agreement.”

32.  P wanted to amend Clause 3 above, but D2 said D5 would require time to revise the agreement if P insisted on the amendment, and in any event there was truly no need to worry or to amend.  She promised to refund the Sum to P and pay him his profit share upon completion of the sub-sale of House 84 on 15 January 2008.  Notwithstanding any cancellation agreement, D2 would give P a PN (“Sum PN”) in the amount of the Sum with maturity date on 15 January 2008 after the meeting (“1^st Payment Promise”).  But upon enquiry from P, D2 refused to disclose the details of whether there was a sub-sale of House 84 and if so what the sub-sale price was.

33.  Induced by and in reliance of the 1^st Payment Promise, P executed the cancellation agreement (“Cancellation Agreement”) which he would not have done so but for such promise by D2.  Notwithstanding Clause 3 of the Cancellation Agreement, P never intended to forfeit any part of the Sum. In any event, D2’s failure or refusal to tell P about the sub-sale price of House 84 amounted to a breach of the Shareholders’ Agreement.

34.  After the meeting on 3 December 2007, P asked D2 for the Sum PN, but D2 asked him to return the following week to collect the same.  D2 still failed to give P the Sum PN when he returned the following week. P doubted whether D2 would honour the 1^st Payment Promise, so on 28 December 2007 and 14 January 2008 respectively he demanded D2 to refund the Sum and instructed D4 to earmark the Sum for remittance to his bank account, but D4 replied they had no instructions to deduct the Sum from the sub-sale proceeds payable to D7 and asked P to settle the issue of the Sum with D2 directly.

35.  On 15 January 2008, the sub-sale of House 84 was completed, but D2 failed to fulfill the 1^st Payment Promise by not paying P the Sum or any profit share.  In late March 2008, D2 told P his profit share was between HK$200,000.00 and HK$300,000.00.  On 3 April 2008, P demanded D2 to refund the Sum and to pay his profit share in the sum of about HK$200,000.00 together with other expenses by 9 April 2008.  On 21 April and 19 August 2008, P’s solicitors wrote to D2 to demand refund of the Sum, but D2 still failed or refused to do so.

36.  On 2 September 2008, during a meeting with P at the new offices of D1’s group of companies in Sheung Wan (“Hang Fat Office”), D1 and D2 represented to P that (a) P was a shareholder of D7 (thereby repeating the Share/Loan Ownership Representation) and (b) they could not repay the Sum to P because it was necessary for P to sign and execute some documents for transferring his shareholdings in D7 back to D2 (“1^st Non-Payment Reason (Transfer) Representation”).  They also promised P that they would refund the Sum in 2 instalments by 30 September 2008 upon signing and executing such documents (“2^nd Payment Promise”).

37.  On 3 September 2008, P demanded D2 to pay HK$500,000.00 (“Part Sum”) in the following week to fulfill the 2^nd Payment Promise.  At another meeting at the Hang Fat Office attended by P, D1, D2 and D3, D1 and D2 told P that D2 could not refund the Sum to him by 30 September 2008 because it was necessary for P as shareholder of D7 to sign and execute some documents in order to transfer his shareholdings in D7 back to D2 (ie repeating the Share/Loan Ownership Representation and the 1^st Non-Payment Reason (Transfer) Representation).  D1 and D2 further represented to P that also because of the need to resolve the profit tax issue in respect of D7’s sub-sale of House 84 (“Tax Issue”), they could not refund the Sum to P (“2^nd Non-Payment Reason (Tax) Representation”).  Each of D1, D2 and D3 represented to P that they would require 3 months to settle the Tax Issue and to transfer P’s shareholdings in D7 back to D2 before refunding the Sum to P, but they promised to pay P his profit share and as much as possible of the remaining balance of the Sum within the 3 months.

38.  At the same meeting, D1 offered to pay P a sum of HK$200,000.00 as “non-repayable loan” in return for P’s promise to withhold legal action for a period of 6 months from 16 September 2008 to 16 March 2009 (“Non-Repayable Loan”).  Since it was better than nothing and there was no viable alternative, P accepted D1’s cheque for HK$200,000.00 and agreed to withhold legal action for 6 months as requested in the belief that D1 and D2 would be able to resolve the outstanding issue of the transfer of the share capital and loan capital of D7 back to D2 as well as the Tax Issue.

39.  D1 gave P a cheque for HK$200,000.00 at the same meeting and requested P to write some words on the photocopy of the cheque (“1^st Note”).  In fact, D1 dictated the following words to P who wrote them down on the 1^st Note: “This is to confirm [D1] lend me the above sum and will be repaid from the resolution of [D7], owner of [House 84] & after transfer company back to [D2]”. At the request of D1, D2 and D3, P signed the 1^st Note to acknowledge the matters stated therein. By using the words “after transfer company back to [D2]” in the 1^st Note, D1, D2 and D3 in effect repeated the Share/Loan Ownership Representation and tried to reinforce P’s belief that he and not D2 still owned the shareholdings in D7.

40.  At a lunch meeting on 17 September 2008 attended by P, D1, D2, D3 and 2 other persons, D1 dictated some words to D3 who wrote them down on a piece of paper (“2^nd Note”) and P wrote the words “within 6 months” at the end of the 2^nd paragraph:

“I, [P] has received HK$200,000.00 from [D1] as a loan and that serves as the initial settlement of my planned investment in [D7].

I hereby declare that I shall not take any legal action in respect of my shareholding in the company until the tax issues of that company has been resolved within 6 months.

At the time when settlement arises in respect of my planned investment in [D7], the HK$200,000.00 loan extended by [D1] shall be applied towards the settlement proceeds without being required to be repaid.”

D1, D2, D3 and P agreed that the contents of the 2^nd Note represented the terms of their agreement to resolve the problem of the failure by D1, D2 and D3 to refund money to P and to pay him his profit share.  At the request of D1, D2 and D3, P signed the 2^nd Note to acknowledge the matters stated therein.

41.  By using the words “my shareholding in the company”, “until the tax issues of that company has been resolved” and “I shall not take any action …… within 6 months” in the 2^nd Note, D1, D2 and D3 in effect repeated the Share/Loan Ownership Representation and the 2^nd Non-Payment Reason (Tax) Representation, and acknowledged that P had a right to take legal action against them which he promised to withhold for 6 months from 16 September 2008 to 16 March 2009 as the condition for D1’s offer to pay P the Non-Repayable Loan.  They tried to reinforce P’s belief that he and not D2 still owned the shareholdings in D7 and that the Tax Issue was a genuine issue that had to be resolved before D1, D2 and D3 could refund money to P and pay him his profit share.

42.  On 5 November and 4 and 16 December 2008, P demanded D2 to repay HK$300,000.00 (being the Part Sum less the Non-Repayable Loan received on 16 September 2008) before 21 December 2008. On 22 and 25 December 2008 and 17 January 2009, P demanded D1, D2 and D3 for full repayment of the sum of HK$796,000.00 (being the Sum less the Non-Repayable Loan) and his profit share. D1 and D2 admitted the debt of HK$800,000.00, but D1, D2 and D3 refused to pay any further sum to P.

43.  P did withhold legal action for a period of 6 months from 16 September 2008 to 16 March 2009, but upon expiry of such period D1, D2 and D3 still failed to fulfill the 3^rd Payment Promise.  They did not (a) request P to sign or execute any documents for the transfer of P’s shareholdings in D7 back to D2 or (b) give P any further update on the current status of the Tax Issue or any explanation for non-payment.

44.  P has since about 15 January 2008 chased D1, D2 and D3 for the return of the 4 PNs, but they failed or refused to do so.

45.  Since 30 March 2009, P discovered the following facts and matters:

(a)  On 14 December 2007, Lead Asia completed the purchase of House 65 for use as the residence of D1, D2 and their family. House 65 was charged in favour of a bank.

(b)  By a preliminary agreement for sale and purchase (“PASP”) dated 20 November 2007 signed by D1 on behalf of D7 but without P’s knowledge, D3 agreed to sub-sell House 84 for the price of HK$25,000,000.00. The sub-sale was completed on 15 January 2008.

(c)  Save that D2 told P the intended sub-sale would be on 15 January 2008, D1, D2, D3, D4 and D5 did not tell P about any particulars of the sub-sale of House 84, and P only discovered the above through his solicitors on 3 March 2009.

(d)  D7 made a profit of about HK$639,500.00 on the sub-sale, and since P paid the Sum before the completion of the sub-sale of House 84, his profit share under the Shareholders’ Agreement and the Profit Sharing Agreement was HK$179,319.00.

(e)  After receipt of the Sum from P on 29 November 2007, D6 purchased the Hang Fat Office and used the Sum as part payment of the purchase price, and the FASPs, Assignments and Mortgage in respect of the purchase of the Hang Fat Office were signed by D3 as director of D6.

(f)  D4 acted for D6 in the purchase of Hang Fat Office and D5 was the solicitor in charge of the matter.

(g)  Some time after D6’s purchase of the Hang Fat Office on 30 April 2008, various companies controlled by D1, D2 and D3 (including D6, Lead Asia and D7) started to use such office as their registered offices and business addresses.

46.  D3 had a practice of acting as agent or attorney for D1 as evident from inter alia (a) D1 authorising D3 as his lawful attorney for executing conveyancing documents for selling his property in Yuen Long, and (b) D3 as lawful attorney of D1 signing the FASP and the Assignment of 9 November and 23 December 2007 respectively for the sale of such property.

47.  The representations of D1, D2 and D3 were false and untrue:

(a)  the D1, D2 and D3 Deposit Payment Representation and the D5 Deposit Payment Representation were false in that as at 5 October 2007, D2 had not advanced and D7 had not paid as much as HK$3,552,000.00 to Mancas as deposits under the FASPs dated 18 April 2007 for the purchase of House 84;

(b)  the D2 “No Material Liability” Representation was false in that as at 5 October 2007, D7 was in breach of the FASP for House 84 dated 18 April 2007 for failing to pay the 3^rd instalment of HK$1,174,000.00, which amounted to a material outstanding liability of D7;

(c)  D2 and D5 had never informed P in any way that the D2 “No Material Liability” Representation was untrue;

(d)  notwithstanding that P gave 4 PNs to D1 and/or D2, D2 failed to transfer the share capital and/or loan capital of D7 to P, and according to the annual returns of D7 signed by D3 and D2 on 12 April 2008 and 24 March 2009 respectively, D2 had been the sole owner of all shareholdings in D7 at least until 15 March 2009;

(e)  the Share/Loan Ownership Representation, the Cancellation Need Representation and the 1^st Non-Payment Reason (Transfer) Representation were false in that P was never the registered owner of any shareholdings in D7 and there was no need to transfer the shareholdings in D7 from P back to D2, which alleged requirement was not a legitimate reason for D2 not to repay to P the Sum or pay him his profit share, but was merely an excuse invented by D2 to evade payment;

(f)  the Cancellation Need Representation was false in that D2 as the sole director of D7 was entitled to execute all documents on behalf of D7 for the sub-sale of House 84, and by the time D1 and D2 requested P to cancel the Principal Agreement D7 had already entered into the PASP dated 20 November 2007 for the sub-sale of House 84;

(g)  the 2^nd Non-Payment Reason (Tax) Representation was false in that there was in fact no outstanding Tax Issue which had to be resolved before D2 could repay money or pay P’s profit share to him, which issue was not a legitimate reason for D2 not to repay to P the Sum or pay him his profit share, but was merely an excuse invented by D2 to evade payment;

(h)  the Performance Intention Representation was false in that at all material times D2 had no intention and knew she had no intention to perform any of her agreements with P or to honour any of her promises to P, which could be inferred from (i) the above facts and matters, (ii) the falsity of the D1, D2 and D3 Deposit Payment Representation, the D2 “No Material Liability” Representation and the Share/Loan Ownership Representation, (iii) the failure to transfer the share capital and loan capital of D7, and (iv) the non-fulfilment of the 1^st, 2^nd and 3^rd Payment Promises.

48.  The events of 16 and 17 September 2008 confirmed that at that time D1, D2 and D3 were still taking steps to conceal their fraud and conspiracy. D1 by offering the Non-Repayable Loan and dictating the 1^st and 2^nd Notes was the mastermind of such fraud and conspiracy, and D2 and D3 who were present at the meetings on 16 and 17 September 2008 assisted D1 to perpetrate such fraud and conspiracy.

49.  There was no reason for P to enter into the Cancellation Agreement on 3 December 2007 on terms that he would forfeit the Sum which he had paid to D6 4 days ago.  The words “null and void” in Clause 1 of the Cancellation Agreement meant that the Principal and Supplemental Agreements were to be cancelled ab initio and P should be restored to the position before he entered into such agreements and before he paid the Sum to D6.  Clause 3 of the Cancellation Agreement was extremely unfair to P, absurd in all the circumstances, and inexplicable other than fraud having been practised on P by D2.  Hence, the Cancellation Agreement was not binding on P. Further, there was no mention of P’s payment of the Sum to D6 or how the Sum received by D6 should be accounted for by D2 or D6.  Still further, D1, D2 and D3 never relied on Clause 3 of the Cancellation Agreement to deny P’s claims for repayment of the Sum and for payment of his profit share.

50.  In fact, prior to and as late as 17 September 2008, D1, D2 and D3 by conduct accepted that P had a legitimate right to claim for the refund of money, namely, (a) D2’s failure to reply to the demand letters by P’s solicitors of 21 July and 19 August 2008, (b) acknowledgment by D1, D2 and D3 by way of the 1^st, 2^nd and 3^rd Payment Promises to refund the Sum to P, and (c) acknowledgment by D1, D2 and D3 that P could have taken legal action to claim for appropriate reliefs as seen from D1’s offer of the Non-Repayable Loan in return for P’s promise to withhold legal action for 6 months.

51.  Further, D1, D2 and D3 by their conduct after 3 December 2007 (as evidenced by the contents of the 1^st and 2^nd Notes) accepted that they could not rely on Clause 3 of the Cancellation Agreement to deny P’s claim for refund of money.

52.  In any event, even if P failed in his claim for rescission of the Cancellation Agreement made between P and D2, he would still contend that nothing in the Cancellation Agreement prevented P from claiming against D1, D3, D4, D5, D6 and D7 (or any party other than D2) for appropriate reliefs.

53.  P also claimed inter alia (a) against D2 and D7 for rescission of all the agreements between P and them in relation to the intended purchase of the share capital and loan capital of D7 and the sharing of profit on the sub-sale of House 84, and for the return of the 4 PNs for cancellation, (b) against D2 and/or D6 for repayment of the Sum, (c) against D6 for restitution or tracing of the Sum paid to D6 and D6 was holding the Hang Fat Office on trust for P, and (d) against D1, D2, D3, D4 and D5 for damages on the grounds of fraudulent misrepresentation, deceit and/or conspiracy.

III.  Legal principles

54.  The principles governing a striking out application are well established. Para.18/19/4 of Hong Kong Civil Procedure 2010 Vol.1 at pp.394-396 provides inter alia as follows:

“…... It is only in plain and obvious cases that the court should exercise its summary powers to strike out …… any pleading under this rule. …… Disputed facts were to be taken in favour of the party sought to be struck out. Nor should the court decide difficult points of law in striking out proceedings.  The claim must be obviously unsustainable, the pleadings unarguably bad and it must be impossible, not just improbable, for the claim to succeed before the court will strike it out. ……  The mere fact that the case is weak and not likely to succeed is no ground for striking it out ……

It is for the party seeking to strike out …… pleading to demonstrate that the case is a plain and obvious one in which the other party’s claim is bound to fail. ……

…… This rule also empowers the court to amend …… any pleading.  If a statement of claim does not disclose the cause of action relied on, an opportunity to amend may be given, …… even though the formulation of the amendment is not before the court ……  However, unless there is reason to believe that the case can be improved by amendment, leave will not be given.  Or where the amendments would be far-reaching and so radical as to amount to a totally new pleading which would probably provoke a fresh application to strike out, the correct course is to strike out. ……” (my emphasis)

55.  In Total Lubricants Hong Kong Limited & ors v Christophe de la Cropte de Chanterac & ors HCA1694/2008, (unreported, 15 December 2009), Poon J said as follows:

“ 14.    First, if a pleading is capable of being cured by amendments, it should not be struck out.  An opportunity to amend should be given instead. However, if the pleading is so defective that no amendment can cure it or if the proposed amendment is incapable of improving the defects, the pleading is liable to be struck out and the proposed amendment should be refused.

  15.    Second, when a party seeking to amend his pleadings in order to save it from being struck out, the proposed amendment should be properly and exactly formulated, includes all necessary averments or mandatory particulars and constitutes a full and complete plea of a reasonable cause of action.”

IV.  P’s stance on the striking out application

56.  P’s answer to the striking out application is two-fold. First, P’s primary stance is that even though the facts and particulars of all the necessary elements of the causes of action on fraudulent misrepresentation and/or conspiracy have not been organised or presented in the manner as set out in Mr Lam’s written skeleton arguments or oral submissions (see Parts V and VI below), such averments can all be found in the ASOC and the VP, which are sufficient to resist the striking out application.  Secondly, P’s fall-back contention is that the ASOC is capable of being cured by re-amendments, and thus the alleged offending paragraphs should not be struck out even though the exact formulation of the proposed re-amendments of the ASOC has not been placed before the court.

V.  Fraudulent misrepresentation: §111 of ASOC

57.  D1, D2 and D3 sought to strike out §111 of the ASOC which provides as follows:

“The various representations made by [D1, D2 and D3] (i.e. the [D1, D2 and D3] Deposit Payment Representation, the [D2] “No Material Liability Representation, the Share/Loan Ownership Representation, the Performance Intention Representation) were made by them fraudulently knowing them to be false and untrue or recklessly not caring whether the same were true or false.”

58.  Paragraph 5 of the VP provides as follows:

“[D1’s, D2’s and D3’s] knowledge and/or recklessness as to the falsity of the said representations are self-evident or alternatively can be inferred from the whole circumstances as pleaded in the [ASOC] which include (but are not limited to) the following facts and matters: -

(a)   [D1, D2 and D3] (by reason of their positions in [D7], their involvement in the affairs of [D7] and their close relationship amongst one another):-

(i)    well knew whether in fact the said representations were true or not; and

(ii)   ought to know whether in fact the said representations were true or not.

(b)   [D1, D2 and D3] had no reason at all to believe that the said representations were true.”

59.  Mr Chang complained that the allegations of fraud and knowledge on the part of D1, D2 and D3 were made without particulars.  §111 of the ASOC did not refer to any other paragraphs in the pleading in support of the plea therein that D1, D2 and D3 made the D1, D2 and D3 Deposit Payment Representation, the D2 “No Material Liability Representation, the Share/Loan Ownership Representation and the Performance Intention Representation(collectively, “4 Reps”) fraudulently knowing them to be false and untrue or recklessly not caring whether they were true or false. Mr Chang submitted that D1, D2 and D3 should not be left to second-guess which averments in what other paragraphs in the ASOC P would rely to establish knowledge of falsity or recklessness.  He argued that unless such material facts were properly pleaded, §111 of the ASOC was liable to be struck out.

60.  Mr Lam submitted that although not repeated in §111 of the ASOC, the particulars of knowledge of falsity and/or recklessness on the part of D1, D2 and D3 pleaded in the following paragraphs of the ASOC made it blatantly obvious that they had knowledge of falsity of the 4 Reps at the material times, but (as submitted by Mr Chang) there is still no altering the fact that such particulars as drawn from paragraph 14(1)-(4) of Mr Lam’s written skeleton arguments and his oral submissions have not been expressly pleaded and relied on in §111 of the ASOC:

(a)  D1, D2 and D3 Deposit Payment Representation (§20 of the ASOC):

      Mr Lam argued that during the negotiations D1 and D3 acted as agent of D2 (§17(c) of the ASOC) and D2 was the sole shareholder and sole director of D7 (§9 of the ASOC), so “[it] must be” within the knowledge of D1, D2 and D3 as to whether D2 had advanced the total sum of HK$3,522,000.00 to D7 which D7 on paid to Mancas.

      In response, Mr Chang submitted that none of the matters pleaded in §§9, 17(c) and 20 of the ASOC was remotely connected to any plea of knowledge of falsity or recklessness.  The mere assertion that D1 and D3 acted as agents for D2 during negotiations did not form any valid basis for inferring knowledge of falsity or recklessness in respect of the D1, D2 and D3 Deposit Payment Representation. Further, Mr Chang argued that no sufficient basis was put forward as to why “[it] must be” within the knowledge of D1 and D3 as to whether D2 had advanced the total sum of HK$3,522,000.00 to D7 which D7 on paid to Mancas.  Hence, the purported particulars as suggested by Mr Lam were still insufficient.

(b)  D2 “No Material Liability” Representation (§29(6) of the ASOC):

      Mr Lam argued that D2 must know that such representation was false in that D7 had not paid to Mancas the 3^rd instalment of HK$1,174,000.00 (which was therefore an outstanding liability).  After all, D2 as the sole shareholder and sole director of D7 must know and be deemed to know of such matter (§9 of the ASOC).

      Mr Chang reminded that it was P’s pleaded case that D2 acted through the purported agency of D1 and D3. In view of such plea, Mr Chang submitted that it was unclear whether P’s case was that the alleged knowledge of falsity or recklessness of such representation on the part of D2 was within her own knowledge or from knowledge acquired through the purported agency.  Hence, it was argued that the averment suggested by Mr Lam was still unclear and insufficient.

(c)  Share/Loan Ownership Representation (§51 of the ASOC):

      Mr Lam argued that since (i) during the negotiations D1 and D3 acted as agent of D2 (§17(c) of the ASOC), (ii) D7 was controlled by D1, D2 and/or D3 (§5 of the ASOC), (iii) at all material times D2 was the sole shareholder and sole director of D7 whilst D3 was the secretary (§9(a)-(d) of the ASOC), and (iv) the annual returns of D7 for 2008 and 2009 showed that D2 was at all material times the sole shareholder and sole director of D7 (§104A-105 of the ASOC), it must be within the knowledge of D1, D2 and D3 that such representation was false.

      Mr Chang submitted that (i) and (ii) above said nothing about knowledge of falsity or recklessness, and one could not gather from the facts in (iii) and (iv) above any overt act of knowledge of falsity or recklessness.

(d)  Performance Intention Representation (§44 of the ASOC):

      Mr Lam argued that D2 “must also know” that such representation was false because she knew that the representations in (a)-(c) above were false.

      Mr Chang argued that Mr Lam’s submissions raised no new averments of knowledge of falsity or recklessness, and since P failed to establish any viable plea of knowledge of falsity or recklessness in (a)-(c) above, the contention in (d) herein was also insufficient.

(e)  Mr Lam further submitted that in addition the VP provided that knowledge of falsity of the 4 Reps on the part of D1, D2 and D3 arose from their involvement in the affairs of D7. In his written skeleton arguments, Mr Lam suggested that such involvement in the affairs of D7 include, say, D2’s status as the sole shareholder and sole director of D7, and the roleof D1 and D3 as D2’s agents.

      Mr Chang submitted that the VP were still deficient because (i) they took the form of particulars when they should have been pleaded in the body of the claim, (ii) use of the phrase “include (but not limited to)” left open the possibility of further supporting underlying facts or matters yet to be pleaded, and (iii) the particulars were still defective, eg D1 had no position in D7 and it was unclear what P meant by D1’s, D2’s and D3’s “involvement in D7’s affairs”.  Mr Chang further submitted that these particulars were also defective because they were not specific to the 4 Reps in §111 of the ASOC, and were not particulars of knowledge of falsity or recklessness.

61.  To consider whether §111 of the ASOC ought to be struck out, one must first return to the basic purpose of pleadings. In ADS v Wheelock Marden & Co Ltd & ors [1994] 2 HKC 264, 269, a case not cited by either counsel, Bokhary JA (as he then was) referred to an earlier edition of The Supreme Court Practice and reiterated the functions of properly particularised pleadings as follows:

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

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

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

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

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

62.  It is trite that allegations of fraud must be pleaded distinctly and with utmost particularity, and it is not allowed to leave fraud to be inferred from the facts (Hong Kong Civil Procedure 2010 Vol.1 para.18/12/16 at p.374).  A party needs to plead all the necessary averments of his cause of action or defence, and it is not the function of particulars to take place of such necessary averments in order to fill in the gaps to make good an inherently bad pleading (Hong Kong Civil Procedure 2010 Vol.1 at para.18/12/1 at p.372).

63.  Here, in respect of P’s claim of fraudulent misrepresentation, the averment of knowledge of falsity of the 4 Reps or recklessness in not caring whether they were true or false is material, so it must be and has been pleaded as a fact.

64.  But must particulars of knowledge of falsity or recklessness be specifically pleaded?  In Hong Kong Civil Procedure 2010 Vol.1 para.18/12/21 at p.376, it is said that:

“Where knowledge is pleaded as a fact, particulars of the facts on which a party relies in support of such allegation may, but need not, be contained in the pleading itself, but such particulars should be given on request or the court may order them to be given.  The usual form would be, particulars of specific facts, documents or overt acts on which a party intends to rely in support of the allegation that the other party had knowledge of some fact, matter or thing.”

(see also Bullen & Leake & Jacob’s Precedents of Pleadings 14^th ed (2001) Vol.2 para.49-10 at p.816).  Consequently, I am not persuaded by Mr Chang’s submissions that knowledge must be pleaded in the primary pleading with “utmost particularity”. In Rigby v Decorating Den Systems Ltd, unreported, March 15, 1999, CA, a case referred to in Bullen & Leake & Jacob’s Precedents of Pleadings but not cited by either counsel, Peter Gibson LJ said as follows:

“But that is not to say that it is a requirement of the rules that they must be pleaded, provided that actual knowledge is unequivocally pleaded, nor is it suggested that the pleading can be struck out if it does not contain such particulars of knowledge.  Of course, if there is a pleading that a person “knew or ought to have known” particular matters, then that rolled-up plea should be particularised even though Evans-Lombe J in the Continental Assurance case did not think that it did require particulars to be given.  There is clear authority, at any rate in relation to a case where dishonesty is alleged, that particulars of that rolled-up plea must be given - see Belmont Finance Corporation Limited v Williams Furniture Limited [1979] Ch 250, [1979] 1 All ER 118 at 268 of the former report.” (my emphasis)

Indeed, in ADS v Wheelock Marden & Company Limited & ors CACV88/1992 (unreported, 15 March 1993), which has been cited by Mr Lam, Mortimer J said as follows:

“ 20.    In summary, particulars of misrepresentation, fraud or any condition of mind except knowledge must be given in the original pleading.  If not given this does not usually render the pleading liable to be struck out but the necessary particulars will be ordered so that the pleading complies with the rules.  Such orders are not made in the exercise of discretion but in compliance with the rules.  Particulars relied upon to establish knowledge are not always given in the original pleading but will usually be ordered in the exercise of the judge's discretion specifically provided for in Order 18 rule 12(4)(a).

  21.    Similarly, particulars of facts relied upon to establish a duty of knowledge will usually be ordered in the exercise of the judge's general discretion under Order 18 rule 12(3).”

With the above principles in mind, I now turn to §111 of the ASOC.

65.  Here, P does not just stand on the averments in the ASOC to resist the application to strike out §111 therein, but has chosen to supply voluntary particulars by way of paragraph 5 of the VP.  The court therefore has to scrutinise such voluntary particulars to see whether they sufficiently support the pleaded averment that D1, D2 and D3 had knowledge of falsity of the 4 Reps or were reckless in not caring whether they were true or false.

66.  Paragraph 5 of the VP first asserts that the state of knowledge of falsity and/or recklessness on the part of D1, D2 and D3 is self-evident.  In my view, such assertion is unhelpful and insufficient. D1, D2 and D3 are entitled to require P to provide particulars of the specific facts and/or overt acts that show knowledge of falsity or recklessness on their part.  To say that such facts and matters are self-evident is no answer, especially when §111 of the ASOC does not refer to or incorporate any other paragraphs in the pleading.

67.  Paragraph 5 of the VP then goes on to aver that alternatively the state of knowledge of falsity and/or recklessness on the part of D1, D2 and D3 can be inferred from the whole circumstances as pleaded in the ASOC.  This is again unhelpful and insufficient.  General references to all matters pleaded elsewhere in the ASOC do not suffice for the burden falls on the pleader to specify his case and it is not for the other party to work out (or worse still, to infer) what his case may be.

68.  P then goes on in paragraph 5 of the VP to refer to certain facts and matters but makes clear that his reliance on them is inclusive and not exhaustive.  This opens the possibility that P will call evidence or rely upon other matters not specifically identified.  In such circumstances, such particulars do not suffice for they fail to let D1, D2 and D3 know the precise case they have to meet or the precise scope of the matters upon which they must prepare their evidence.

69.  What then are the facts or matters referred to in paragraph 5 of the VP?  They cover 2 aspects. On the first aspect, P asserts that D1, D2 and D3 well knew and ought to know whether in fact the 4 Reps were true or not.  It is unclear from such averment whether P is alleging actual and direct knowledge on the part of each of D1, D2 and D3 in respect of each of the 4 Reps or whether he is claiming that some or all of D1, D2 and D3 merely ought to know the falsity of the 4 Reps.

70.  In ADS v Wheelock Marden & Company Limited & ors CACV88/1992 (unreported, 15 March 1993), Mortimer J said as follows:

“ 19.    Where a party alleges a duty of knowledge by the words “ought to know” or similar, particulars of the facts upon which the party will rely as giving rise to the duty of knowledge will usually be ordered. Fox v. H. Wood (Harrow) Ltd. [1963] 2 Q.B. 601.”

(see also paragraph 64 above).  In light of the above, I am of the view that the roll-up allegation that D1, D2 and D3 well knew and ought to know if made without particulars are defective, confusing and cannot be allowed.  In the course of the hearing before me, Mr Lam submitted that P mainly relied on actual and direct knowledge of falsity on the part of D1, D2 and D3, and P “would not insist” on reliance of any duty of knowledge by the words “ought to know”.  However, such submission is extraneous to and does not reflect the state of P’s particularised pleading which relies on both aspects, and which pleading is therefore confusing and impossible for D1, D2 and D3 to plead.

71.  But in paragraph 5 of the VP P goes further to say that D1, D2 and D3 well knew and ought to know the falsity of the 4 Reps “by reason of their positions in [D7], their involvement in the affairs of [D7] and their close relationship with one another”.  Does this amount to sufficient particularity to save §111 of the ASOC from being struck out?  In my view, the language of such averment is general and imprecise, and such general particulars neither limit P’s case nor inform D1, D2 and D3 clearly the case they have to meet.  For example, what precisely are “their positions” in D7 when the whole ASOC does not refer to any position in D7 held by D1? As further example, paragraph 5 of the VP does not spell out the overt acts of the alleged “involvement” by each of D1, D2 and D3 in D7 even though it is trite that the pleader has to specify his case. As regards the alleged close relationship amongst D1, D2 and D3, it is unclear from paragraph 5 of the VP what the nature of the alleged close relationship is.  After all, Mr Lam confirmed that P would not rely on D1’s marriage relationship with D2 to establish any knowledge or duty of knowledge as to the falsity of the 4 Reps on the part of D1.

72.  In short, paragraph 5 of the VP fails to lend sufficient particularity to P’s primary pleaded case as to knowledge of falsity or recklessness. In a further attempt to make good §111 of the ASOC, Mr Lam put forward certain particulars in paragraph 14(1)-(4) of his written skeleton arguments (see paragraph 60 above) drawn from various specific paragraphs in the ASOC.  Mr Lam has been careful in not relying on any fact or matter that is extraneous to the ASOC and/or the VP in mounting resistance to the striking out application.  After all, the VP that purports to give particulars of knowledge of falsity and recklessness in §111 of the ASOC was filed only 3 days prior to the substantive hearing before me, and P did not issue any summons for leave to re-amend the ASOC or present any draft re-amendment of the ASOC for consideration by the court.

73.  As an initial observation, whilst the facts stated in the specific paragraphs of the ASOC cited in paragraph 14(1)-(4) of Mr Lam’s written skeleton arguments are part of P’s pleadings, neither §111 of the ASOC nor paragraph 5 of the VP makes specific reference to these particular facts and/or matters apart from a general reference to the positions held by D1, D2 and D3 in D7, their involvement in the affairs of D7 and their close relationship with one another.  Thus, I find it impossible for D1, D2 and D3 to work out from the ASOC which exceeds 150 paragraphs and comprises 97 pages that these specific paragraphs are the relevant particulars which P relies.  In my view, it is impermissible for a proper pleading to require D1, D2 and D3 to speculate what facts P relies for alleging or drawing inference of knowledge of falsity and/or recklessness, or tohave them appreciate such facts onlywith the aid of extraneous guidance by way of counsel’s written submissions which are neither pleading nor particulars.

74.  Even so, I still turn to the facts and matters mentioned in paragraph 14(1)-(4) of Mr Lam’s written skeleton arguments to see if §111 of the ASOC can be salvaged by re-amendment of the pleading.  Having considered Mr Lam’s and Mr Chang’s submissions described in paragraph 60 above in respect of D2’s alleged knowledge of falsity or recklessness, it appears that P relies on the fact that D2 was the sole shareholder and sole director of D7 to say that it must be well within her knowledge that the 4 Reps are false and untrue.  In my view, given the nature of the 4 Reps (which relate to payments for a property transaction by D7 and transfer of shares of D7 from D2 to P), an averment that D2 was the sole shareholder and sole director of D7 at all material times (which fact is specifically raised only in paragraph 14 of Mr Lam’s written skeleton arguments and not in §111 of the ASOC or paragraph 5 of the VP) may well be sufficient to survive an application to strike out §111 of the ASOC vis-à-vis D2. I therefore consider it proper to afford P the opportunity to re-amend, and to order that §111 of the ASOC insofar as the same relates to D2 be struck out only in default of proper re-amendment by pleading such averment in support of D2’s knowledge of falsity or recklessness.

75.  In respect of D1 and D3, the matters specified in paragraph 14 of Mr Lam’s written skeleton arguments on which P intends to rely in support of the averment of knowledge of falsity or recklessness on the part of D1 and D3 are essentially: (a) D1 and D3 acted as agents of D2 during negotiations, (b) D1 and D3 inter alia owned, controlled and/or managed inter alia D7 (which end conclusion in the pleading is unsupported by any overt act or fact, especially when it is emphasised that D2 was the sole shareholder and sole director of D7 at the material time), and (c) D3 was secretary of D7.  At the hearing before me, Mr Lam relied on further facts or matters pleaded in §92(b) and §104A of the ASOC, ie that D1 signed the PASP for the sub-sale of House 84 on behalf of D7 without P’s knowledge, and that D3 signed the 2008 annual return of D7.  It has been argued that the necessary inference to be drawn from these facts and matters is that D1 and D3 were intimately involved in the management of D7 and in related transactions arising from various agreements between P and D2, and it therefore follows that D1 and D3 had knowledge of falsity or recklessness at the time when the 4 Reps were made.

76.  I agree with Mr Lam that the position of D1 and D3 is different from that of D2.  But in respect of D1 and D3, I am not persuaded that it can be reasonably or arguably inferred from the assertions of primary facts and matters described in the above paragraph that D1 and D3 were involved in the overall management of D7 from which it can be further inferred that they had knowledge of falsity of the 4 Reps or that D1 and D3 were reckless in not caring whether they were true or false at the time when the 4 Reps were made. Such piling of one layer of inference upon another in order to obtain the end conclusion must be viewed with caution. Upon careful consideration, I am not persuaded that the above two-tiered inference reasonably flows from any or all of the following acts by D1 and/or D3, ie signing annual return of D7, acting as company secretary of D7, signing documents in a related transaction and/or acting as agents for D2 during negotiations. Rather, I find such alleged inference speculative.  Conjecture has no place in a proper pleading, so the plea in §111 of the ASOC insofar as it relates to D1 and D3 is accordingly struck out. 

VI.  Conspiracy : §§119 and 120(a)-(e)

77.  Ds sought to strike out §119 of the ASOC which provides as follows:

“[D1, D2, D3 and D5] (or any two or more together) wrongfully and within intent to injure [P] and/or to cause loss to [P] by unlawful means conspired and combined together to defraud [P] and to conceal such fraud and the proceeds of such fraud from [P].  The conspiracy can be inferred from the facts and maters pleaded in the foregoing paragraphs.”

78.  Following from the above, Ds also sought to strike out §120(a)-(e) of the ASOC which provide that pursuant to and in furtherance of the alleged conspiracy D1, D2, D3 and D5 carried out the following unlawful acts and means by which P was defrauded and injured:

(a)  D1 on behalf of D2 (i) negotiated the terms of the various agreements to be entered into between P and D2, (ii) made the D1, D2 and D3 Deposit Payment Representation, the Share/Loan Ownership Representation, the Cancellation Need Representation, the 1^st Non-Payment Reason (Transfer) Representation, the 2^ndPayment Promise, the 2^nd Non-Payment Reason (Tax) Representation, and the 3^rdPayment Promise, (iii) requested P to pay money to D6 (a company controlled and/or managed by D1) through a third party, (iv) allowed D6 to receive money from P, (v) issued a cheque to P for the Non-Repayable Loan in return for P’s promise not to take legal action for 6 months, (vi) requested P and D3 to write and sign the 1^st Note, and (vii) requested D3 to write and P to sign the 2^nd Note.

(b)  D2 (i) negotiated the terms of the various agreements to be entered into between P and D2, (ii) made the D1, D2 and D3 Deposit Payment Representation and the D2 “No Material Liability” Representation without correcting them in writing, (iii) signed the Principal and Supplemental Agreements and the Shareholders’ and Profit Sharing Agreements, (iv) made the Performance Intention Representation, the Share/Loan Ownership Representation and the Cancellation Need Representation, (v) signed the Cancellation Agreement, (vi) made the 1^st Payment Promise, the 1^st Non-Payment Reason (Transfer) Representation, the 2^nd Payment Promise, the 2^nd Non-Payment Reason (Tax) Representation and 3^rd Payment Promise, and (vii) requested P to sign the 2^nd Note.

(c)  D3 on behalf of D2 (i) negotiated the terms of the agreements to be entered into between P and D2, (ii) made the D1, D2 and D3 Deposit Payment Representation and the Share/Loan Ownership Representation, the 2^nd Non-Payment Reason (Tax) Representation and the 3^rd Payment Promise, (iii) prepared legal documents that included the Shareholders’ and Profit Sharing Agreements and the 4 PNs, (iv) requested P to pay money to D6 (a company controlled and/or managed by D3), (v) allowed D6 to receive money from P, (vi) on behalf of D1 and D2 negotiated the terms of the Non-Repayable Loan, (vii) corresponded with P when P chased for return of money, (viii) assisted D1 and D2 in all matters, (ix) signed legal documents on behalf of D6 for the purchase of the Hang Fat Office, (x) wrote the 2^nd Note, and (xi) requested P to sign the 2^nd Note.

(d)  D5 prepared legal documents (including, but not limited to the Principal Agreement, the Supplemental Agreement and the Cancellation Agreement), made the D5 Deposit Payment Representation, presented the said legal documents to P for signature, and acted for D6 for the purchase of the Hang Fat Office.

P claimed that throughout D1, D2, D3 and D5 concealed and continued to conceal the true situation from him.

79.  Paragraph 6 of the VP averred that the conspiracy pleaded in §119 of the ASOC had been fully pleaded and was self-evident from (or alternatively could be inferred from) the whole circumstances as pleaded in the ASOC which included (but not limited to) the following facts and matters:

(a)  the falsity of the D1, D2 and D3 Deposit Payment Representation, the D5 Deposit Payment Representation, the D2 “No Material Liability” Representation, the Share/Loan Ownership Representation, the Performance Intention Representation, the 1^st Non-Payment Reason (Transfer) Representation, the Cancellation Need Representation, and the 2^nd Non-Payment Reason (Tax) Representation;

(b)  D2’s failure to transfer the share capital and loan capital of D7 and to respond to the demand letters of P’s solicitors dated 21 July and 19 August 2008;

(c)  D2’s request to P to sign the Cancellation Agreement;

(d)  the non-fulfilment of the 1^st, 2^nd and 3^rd Payment Promises;

(e)  D1’s offer to pay P the Non-Repayable Loan in return for P’s promise to withhold legal action for 6 months;

(f)  the reiteration of the Share/Loan Ownership Representation by D1, D2 and D3 up to and including 17 September 2008 when D1 offered to P the Non-Repayable Loan;

(g)  the creation and the contents of the 1^st and 2^nd Notes;

(h)  without prejudice to the generality of the above facts and matters, the overt acts of each of D1, D2, D3 and D5 as pleaded in §120 of the ASOC.

80.  In paragraph 15 of his written skeleton arguments, Mr Lam submitted that the facts and matters that gave rise to P’s claim for conspiracy and/or deceit “includes” the following:

(a)  D1 and D3 at all material times acted as agent of D2 (§17(c) of the ASOC);

(b)  D1 and D3 were actively involved in D2’s purported sale of the shareholdings in D7 to P, and such involvement were pleaded in “inter alia” §17(e) (D1 and D2 accompanied P to inspect House 65 and House 84), §54 (D1 through a third party reminded P to make payment under the Principal Agreement), §55 (D3 requested P to remit HK$1,000,000.00 into D6’s bank account), §58 (D1 and D2 had meeting with P on 3 December 2007), §76(b) (D1 and D2 had a meeting with P on 2 August 2008), §78(a) (D1, D2 and D3 had a meeting with P on 16 September 2008), §80 (D1’s payment of the Non-Repayable Loan to P), §80A and §80B (D1 dictated the 1^st Note), §80C and §80D (D1 dictated the 2^nd Note), §84 (D1, D2 and D3 had a meeting with P on 22 December 2008), §86 (D1, D2 and D3 had a meeting with P on 17 January 2009) of the ASOC, and paragraph 6 of the VP.

81.  There are two types of actionable conspiracy, ie conspiracy to injure by lawful means and conspiracy to injure by unlawful means.  There is no dispute that by §119 of the ASOC P purports to raise a case of conspiracy to injure by unlawful means in which the participants combine together to perform acts which were by themselves unlawful.  According to Total Lubricants Hong Kong Limited, the claimant must plead and prove the following necessary elements: (a) a combination or agreement between two or more individuals, (b) an intent to injure, (c) pursuant to which combination or agreement and with that intention certain acts were carried out, and (d) resulting loss and damage (see paragraph 81 of the judgment).  For the purpose of the present striking out application, Mr Chang was prepared to concede that the elements in (b), (c) and (d) above had been sufficiently pleaded.

82.  It is apparent from the above that the essence of the tort of conspiracy to injure by unlawful means is injury to the claimant as a result of unlawful act or acts where 2 or more people have combined to cause the injury.  It is not necessary for all the conspirators to join the conspiracy at the same time or for every overt act to be done by every conspirator, but the conspirators must be sufficiently aware of the relevant circumstances and share the same common purpose at the time when they acted in concert pursuant to the conspiracy, and the relevant overt act(s) must be done pursuant to the conspiracy, scheme or combination. Acting in concert requires agreement but not necessarily an express agreement (see element (a) in the paragraph 81 above).  It is sufficient if 2 or more persons deliberately combine with a common intention whether expressly or tacitly to achieve a common end.  

83.  Conspiracies by their nature are often concealed, and hence the conspiratorial combination or agreement can be inferred from overt acts if it is proved that the conspirators knew what was going on.  So in most cases where conspiracy is averred, it will be necessary to look at the overt acts as pleaded to see what inferences can be drawn as to the existence or otherwise of the alleged conspiratorial combination or agreement.

84.  Barker JA in Marquis Trading Co & ors v Associated Bankers Insurance Co Ltd & ors [1982] HKLR 434, 440 cited with approval the earlier edition of Bullen & Leake & Jacobs on Precedents of Pleadings in which it was stated that a statement of claim on conspiracy to defraud should describe the parties to such conspiracy and their relationship with each other, and also allege the agreement between the defendants to conspire as well as state precisely what was the purpose/object of the alleged conspiracy. It must set out with clarity and precision the overt acts that were alleged to have been carried out in pursuance and in furtherance of the conspiracy.

85.  Further, in ADS v Wheelock Marden & Co Ltd & ors [1994] 2 HKC 264, 271, Bokhary JA (as he then was) cited the well-known statement of Buckley LJ in Belmont Finance Corporation Ltd v Williams Furniture Ltd & ors [1979] 1 Ch 250, 263, that “an overt act establishing the existence of a conspiracy is an overt act which shows that the agreement which is alleged to be conspiratorial has already been made”.  He then went on to say at p.272 as follows:

“…… When it comes to a claim in the tort of conspiracy, what the pleader has to do in regard to pleading an overt act or overt acts is this. He has to plead at least one overt act which is the act of all the alleged conspirators or, failing that, a number of overt acts which include at least one act on the part of each conspirator.  And the overt act or overt acts pleaded must be such as to show: (i) that the conspiratorial agreement alleged against the defendants had been entered into by each and every one of them; (ii) that the agreement, and not merely the intention of one person alone, was implemented; and (iii) that such implementation caused the damage complained of.

If the pleader fails to do that, then, depending on whether the failure is in respect of all the defendants or only some or one of them, then either the plea is liable to be struck out altogether or it is liable to be struck out as against some or one of the defendants.

Reverting to what ADS pleads as overt acts, one sees that the only acts pleaded are the alleged express misrepresentations and, if such a thing is an act, the fact that none of them were corrected.  The other things alleged, being knowledge, common purpose and intention, are not acts. ……

Also, it might be added, they have, in any event, to be viewed with some caution: because, when the mass of particulars pertaining to them are examined, it can be seen that they involve piling one layer of inferences upon another in order to obtain the end product. ……

To maintain its plea that all the defendants conspired together - in other words to maintain its conspiracy plea in its entirety - ADS has to plead at least one overt act of all the defendants or, failing that, a number of overt acts which include at least one on the part of each defendant.  And the overt act or overt acts must show that each and every defendant had conspired together.

To maintain its plea that any of the defendants conspired together - in other words, to maintain any conspiracy plea at all - ADS has to plead an overt act or overt acts on the part of at least two individual defendants showing that they had conspired together.”

(see also Hong Kong Civil Procedure 2010 Vol.1 para.18/12/8 at p.373).

86.  Mr Chang submitted that the gravamen of Ds’ complaint was P’s failure to plead the material facts of the conspiratorial agreement.  He argued that the only relevant averment was “[D1, D2, D3 and D5] (or any two or more together) wrongfully …… conspired and combined together” in §119 of the ASOC, but such averment was unclear as to whether there was 1 conspiratorial combination or agreement amongst all of D1, D2, D3 and D5 or a number of combinations or agreements between 2 or more of them.  Mr Chang asked rhetorically who exactly were the participants of the conspiratorial combination(s) or agreement(s), when did such combination(s) or agreement(s) come into existence, and what the combination(s) or agreement(s) were about.  He also suggested that the overt acts pleaded in §120 of the ASOC and specified in paragraph 6 of the VP at most constituted the unlawful acts and means allegedly carried out pursuant to the conspiracy and are not the material facts in respect of the conspiratorial combination(s) or agreement(s).  Mr Chang argued that P should not hope to muddy the waters by requiring Ds to combine §1 to §119 of the ASOC, paragraph 6 of the VP and paragraph 15 of Mr Lam’s written skeleton arguments in order to second-guess the underlying facts and matters that identify the conspiratorial combination(s) or agreement(s).  He claimed that this would be an onerous and impossible task, and hence §119 and §120(a)-(e) of the ASOC ought to be struck out.

87.  Mr Lam in his oral submissions conceded that §119 of the ASOC could have been made clearer by spelling out the precise facts and matters that went to show D1, D2, D3, D3 and D5 could not have acted independently but must have acted in a concerted manner that involved conspiratorial combination(s) or agreement(s).  But he argued that the essence of P’s plea of such conspiratorial combination(s), agreement(s) or scheme(s) could be gleaned from §119 and §120 of the ASOC, so there would be no difficulty for Ds to give instructions on P’s averments in the ASOC in respect of the conspiracy claim and/or to plead to such claim. In short, Mr Lam submitted that Ds must know what was alleged against them so they could not have been embarrassed in meeting the relevant plea in the ASOC.

88.  It is trite that fraud and/or conspiracy must be distinctly pleaded with utmost particularity and distinctly proved, and it is not allowable to leave such pleas to be inferred from the facts (see Davy v Garratt [1877] 7 Ch D 473, 489).  But one must also consider the practical reality of modern commercial life.  As submitted by Mr Lam, fraud and/or conspiracy by their very nature are clandestine and difficult to uncover, so quite often proof is not readily obtained.  Hence, the averments of fraud and/or conspiracy cannot be too precise. In an application to strike out a fraud and/or conspiracy claim, the court will look upon such application with care to the above considerations, but at the same time will bear in mind that loose allegations that are not properly particularised will be oppressive as regards the defendants when the action goes to trial. The broad question for the court is whether from the facts as pleaded it can be argued that Ds sufficiently know P’s case on the conspiratorial combination(s) or agreement(s) that they have to meet.

89.  Looking at §119 of the ASOC, it is in my view plainly undesirable and insufficient for P to ask Ds to infer the conspiratorial combination or agreement from “the facts and matters pleaded in the foregoing paragraphs” when there are 118 paragraphs that preceded the end product or conclusion averred in §119 of the ASOC.  I am also mindful of Poon J’s observation in paragraphs 18-19 of his judgment in Total Lubricants Hong Kong Limited that inferences are pleas of evidence (not of material facts) and liable to be struck out.

90.  The same observation applies to the averment in paragraph 6 of the VP that the alleged conspiracy in §119 of the ASOC has been fully pleaded and is self-evident or alternatively it can be inferred from the whole circumstances as pleaded in the ASOC.  Ds should not be left to the impossible task of second guessing which particular averments in the whole ASOC that P relies to establish the conspiratorial combination(s) or agreement(s).

91.  But Mr Lam submitted that it could be inferred from Ds’ overt conduct in carrying out certain acts as particularised in §120(a)-(e) of the ASOC (see paragraph 78 above) that they have acted in concert under overall conspiratorial scheme(s), combination(s) or agreement(s). In my view, what one sees in §120(a)-(e) of the ASOC are the alleged overt acts carried out by each of D1, D2, D3 and D5 “pursuant to and in furtherance of the conspiracy” as pleaded in §119 of the ASOC (ie after the conspiratorial combination(s) or agreement(s) have been made) without any clear and cogent averment that establishes how these acts must have been carried out by D1, D2, D3 and D5 in concert.

92.  Paragraph 6 of the VP in saying that the conspiracy pleaded in §119 of the ASOC can be inferred from the whole circumstances as pleaded in the ASOC which “included (but not limited to)” the facts and matters set out therein is embarrassing in that it suffers from the defects as discussed in paragraphs 67-68 above. In making general references to all matters pleaded elsewhere in the ASOC, P has failed to specify his case with particularity and has left Ds to speculate what his case may be. Further, by adopting an inclusive approach to his pleading, it opens the possibility for P to call evidence or rely upon other matters not specifically identified.  In short, the facts and matters given by P fail to let Ds know the case they have to meet or the scope of the matters upon which they must prepare their evidence.

93.  Turning to paragraph 15 of Mr Lam’s written skeleton arguments, it again suffers from the same problem in that the facts and matters specified therein said to give rise to P’s claim for conspiracy and/or deceit are merely “inclusive” and not exhaustive. Ds are left to wonder what other underlying facts and matters P will rely on to raise a claim for conspiracy.  Mr Chang is right in pointing out that paragraph 15 of Mr Lam’s written arguments makes no mention of D5, and hence Ds are left to wonder whether P is maintaining the allegation that D5 was a co-conspirator, and if so when and with whom D5 participated in any alleged conspiracy.

94.  Thus, the so-called plea of conspiratorial combination(s) or agreement(s) in §119 and §120(a)-(e) of the ASOC and in paragraph 6 of the VP are insufficient to support the serious claim of conspiracy which requires utmost particularity.  Even so, I must go further to ask myself whether the defects in respect of §119 and §120(a)-(e) of the ASOC and paragraph 6 of the VP identified above when viewed in the context of the extraordinarily complex web of pleading in the ASOC and of the facts and matters identified in paragraph 15 of Mr Lam’s written skeleton arguments are likely to be curable by re-amendment.

95.  As explained above, in resisting the striking out application on behalf of P Mr Lam does not rely on any facts or matters extraneous to those pleaded in the ASOC. Indeed, no summons to re-amend the ASOC and no draft re-amendments have been placed before me for consideration.  Even so, I am unable to say that distinct inference of participation by D1, D2, D3 and D5 in various parts of the alleged conspiratorial scheme(s), combination(s) or agreement(s) cannot be spelled out by drawing from the alleged conduct and acts of D1, D2 and D3 (other than the plea of fraudulent misrepresentation against D1 and D3 in respect of the 4 Reps which has been struck out – see paragraph 76 above)in respect of the transactions concerning House 84, which P claims is fraudulent, and D5’s involvement in advising on and drafting documents for such transactions, especially when some of the overt acts as pleaded in §120(a)-(e) of the ASOC have been carried out by 2 or more of D1, D2, D3 and D5.

96.  I therefore consider it proper to afford P the opportunity to re-amend and to order §119 and §120(a)-(e) of the ASOC be struck out only in default of proper re-amendment that avers (a) the overt act(s) and fact(s)/particular(s) drawn from those acts, facts and/or matters already pleaded in the ASOC and in paragraph 6 of the VP (other than the plea of fraudulent misrepresentation by D1 and D3 which has been struck out) which constitute the act(s) by all identified conspirators or alternatively the act(s) on behalf of each identified conspirator that necessarily show that they have been carried out by each and every one of them in concert pursuant to the conspiracy, and (b) the object of the alleged conspiracy or intention to injure.  In respect of (b), if the essence of the overall conspiratorial scheme was to cause injury to P by making him part with the Sum or by failing to pay him his profit share or for some other purpose, it should be expressly pleaded.

VII.  Fraud : §142 of ASOC

97.  Ds sought to strike out §142 of the ASOC which provides as follows:

“As [P] paid [the Sum] to [D6] by reason of fraud practised on him by [D1, D2, D3, D4 and D5], [D6] is not entitled to retain [the Sum] received from [P].”

98.  Paragraph 7 of the VP avers as follows:

“The frauds practised on [P] by [D1, D2, D3, D4 and D5] have been full pleaded in the [ASOC] and are self-evident or alternatively can be inferred from the whole circumstances as pleaded in the [ASOC] which include (but are not limited to) the facts and matters stated in paragraph 6 (a) to (s) above.”

99.  Mr Chang complained that without any cross-reference to other paragraph(s) in the ASOC, the alleged fraud pleaded in §142 of the ASOC remained a bare allegation unsupported by any material facts and particulars.  In response, Mr Lam’s written skeleton arguments relied on the matters set out in paragraph 14 therein.  But I agree with Mr Chang that the issue here does not concern the sufficiency of the plea of knowledge of falsity or recklessness addressed in paragraph 14 of Mr Lam’s written skeleton arguments, but rather with the factual particulars of the fraud itself.

100.  However, since the plea of fraudulent misrepresentation by D2 in §111 of the ASOCand the plea of conspiracy in respect of D1, D2, D3 and D5 in §119 and §120(a)-(e) of the ASOC are struck out only in default of proper re-amendment (see paragraphs 74 and 96 above), consequentially §142 of the ASOC insofar as the same relates to D2 is struck out only in default of proper re-amendment of §111 of the ASOC and of §119 and §120(a)-(e) of the ASOC as aforesaid, and §142 of the ASOC insofar as the same relates to D1, D3, D4 and D5 is to be struck outonly in default of proper re-amendment of §119 and §120(a)-(e) of the ASOC as aforesaid.

VIII.  Deceit and/or conspiracy : §147 and relief 3(a)-(d) of ASOC

101.  Ds sought to strike out §147 of the ASOC which provides as follows:

“By reason of the facts and matters pleaded in the foregoing paragraphs, [P] is entitled to and does claim against [D1, D2, D3, D4 and D5] for damages for deceit, and/or conspiracy.”

and relief 3(a)-(d) against D1, D2, D3, D4 and D5 jointly and severally for damages for deceit and/or conspiracy (insofar as the same relates to D1, D2 and D3), interest, costs and further and/or other relief.

102.  Paragraph 8 of the VP avers as follows:

“The frauds practised on [P] by [D1, D2, D3, D4 and D5] have been full pleaded in the [ASOC] and are self-evident or alternatively can be inferred from the whole circumstances as pleaded in the [ASOC] which include (but are not limited to) the facts and matters stated in paragraph 6 (a) to (s) above.”

103.  There were 2 limbs to §147 of ASOC, namely, deceit and conspiracy.  Mr Chang argued that the claims for deceit and conspiracy were not properly pleaded, so that the relief based on deceit and conspiracy (insofar as the same relates to D1, D2 and D3) must therefore be struck out.

104.  However, in respect of the plea relating to conspiracy in §147 of the ASOC, Mr Chang conceded that if I am not prepared to strike out the conspiracy claim in §119 and §120(a)-(e) of the ASOC, then §147 of the ASOC insofar as it relates to conspiracy should stand.  On the other hand, I agree that if §119 of the ASOC is to be struck out, the foundation in support of the claim for damages for conspiracy in §147 of the ASOC falls away and must also be struck out.  Hence, it consequentially follows that the claim for damages for conspiracy in §147 and in relief 3(a) of the ASOCinsofar as the same relates to D1, D2 and D3 be struck out only in default of proper re-amendment of §119 and §120(a)-(e) of the ASOC as aforesaid.

105.  In respect of the claim for damages for deceit in §147 of ASOC, Mr Lam confirmed that such “deceit” referred to the plea of fraudulent misrepresentations in §111 of the ASOC. So for the purpose of the striking out application, §147 of the ASOC insofar as it refers to “deceit” stands and falls together with §111 of the ASOC.  Thus, the claim for damages for deceit in §147 and in relief 3(a) of the ASOC insofar as the same relates to D1 and D3 are to be struck out, and insofar as the same relates to D2 are to be struck out only in default of proper re-amendment of §111 of the ASOC as aforesaid.

IX.  Order and consequential directions

106.  In light of the above rulings on the striking out application,

(a)  the cause of action on fraudulent misrepresentation by D1 and D3 in §111 of the ASOC be struck out;

(b)  the cause of action on fraudulent misrepresentation by D2 in §111 of the ASOC be struck out only in default of proper re-amendment as aforesaid;

(c)  the cause of action on conspiracy in §119 and §120(a)-(e) of the ASOC be struck out only in default of proper re-amendment as aforesaid;

(d)  the whole of §§121-124 of the ASOC be struck out;

(e)  §142 of the ASOC insofar as the same relates to D2 be struck out only in default of proper re-amendment of §111 of the ASOC and of §119 and §120(a)-(e) of the ASOC as aforesaid;

(f)  §142 of the ASOC insofar as the same relates to D1, D3, D4 and D5 be struck outonly in default of proper re-amendment of §119 and §120(a)-(e) of the ASOC as aforesaid;

(g)  the claim for damages for conspiracy as pleaded in §147 and in relief 3(a) of the ASOC insofar as the same relates to D1, D2 and D3 be struck out only in default of proper re-amendment of §119 and §120(a)-(e) of the ASOC as aforesaid;

(h)  the claim for damages for deceit in §147 and in relief 3(a) of the ASOC insofar as the same relates to D1 and D3 be struck out,and insofar as the same relates to D2 be struck out only in default of proper re-amendment of §111 of the ASOC as aforesaid;

(i)   the striking out application in respect of relief 3(c)-(d) of the ASOC is dismissed.

107.  In respect of the re-amendment of §111, §119 and §120(a)-(e) of the ASOC to save the same from being struck out, the proposed re-amendment should be properly and exactly formulated (see paragraph 55 above).  I therefore direct P to take out an inter partes summons for such purpose (with draft re-amended SOC annexed thereto) (“New Summons”) within 21 days from the date hereof to be heard before me in chambers (open to the public) on a date not before 35 days from the date hereof with 1 hour reserved.  For the avoidance of doubt, notwithstanding Mr Lam’s intimation at the substantive hearing that P may in due course apply to substantially overhaul the ASOC and seek leave to further amend his pleading generally, no leave is granted for general re-amendments at this stage.  The draft re-amendments to the ASOC to be annexed to the New Summons are restricted to the matters outlined above.  Unless the court grants leave otherwise, any application by P for leave to further amend his pleading generally shall be deferred for consideration until after the disposal of the New Summons. It goes without saying that since P has not yet formulated the proposed re-amendments to his pleading on the matters outlined above, Ds are obviously not precluded from taking proper objection in respect of any draft re-amended SOC to be annexed to the New Summons.

108.  However, in light of Mr Lam’s intimation that P may in due course apply for leave to substantially overhaul and further amend his pleading generally, which in turn may obviate the need for FBP of the SOC, I direct that paragraph 1 of the 1^st Summons (ie the application for FBP of the SOC) be adjourned, but within 63 days from the date hereof P and Ds are to jointly submit in writing to the court a set of agreed proposed directions on the future conduct of such application, or failing which P and Ds do submit their respective proposals in writing on the above matter.

109.  Ds have substantially succeeded in the striking out application. There is no reason why costs should not follow event.  I therefore grant a costs order nisi that (a) P do pay to Ds costs of the striking out application under the 1^st and 2^nd Summonses (including all costs reserved if any) with certificate for counsel to be summarily assessed, and (b) costs of and occasioned by the hearing on 26 February 2010 in respect of the application for FBP of the SOC under paragraph 1 of the 1^st Summons be reserved.

110.  As regards the summary assessment of the costs in paragraph 109(a) above, I hereby grant the following directions:

(a)  If no application is made to vary the costs order nisi in the above paragraph within 14 days from the date hereof or if application is made to vary such costs order nisi within 14 days from the date hereof but P does not challenge liability for costs, Ds do within 21 days from the date hereof lodge and serve revised statement of costs limited to the costs covered in paragraph 109(a) above pursuant to Practice Direction 14.3, and P do within 7 days thereafter lodge and serve succinct summary of objections in bullet-point form of not more than half page in respect of the P’s revised statement of costs (“Objection Summary”);

(b)  if application is made to vary the costs order nisi in the above paragraph within 14 days from the date hereof and P challenges liability for costs, P and Ds do within 21 days from the date hereof respectively lodge and serve his/their statement of costs or revised statement of costs limited to the costs covered by paragraph 109(a) above pursuant to Practice Direction 14.3, and within 7 days thereafter respectively lodge and serve his/their respective Objection Summary to the other party’s statement of costs or revised statement of costs;

(c)  the hearing of the summary assessment of costs before me shall be heard at the same time as the hearing of the New Summons as provided in paragraph 107 above.

111.  The order on the striking out application and on the consequential directions needs to be carefully drafted to accurately incorporate all my rulings.  I direct (a) Ds to prepare a draft order and serve the same on P for his comments within 7 days from the date hereof, (b) P to give his comments within 7 days thereafter, and (c) Ds to submit the draft order to the court (together with P’s comments if any) for approval within 7 days thereafter.