FONG CHUNG MAU v. WONG CHUNG TAK RICHARD AND ANOTHER

                 HCA 1096/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1096 OF 2005

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D E C I S I O N

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1.  This is a claim by the Plaintiff for the return of HK$4,400,000.00 against the Defendants.  This decision deals with two applications made by the parties after the Plaintiff closed his case at the trial.

The Relevant Background

2.  The Amended Statement of Claim pleaded three causes of action, namely, fraudulent misrepresentation, payment under mistake of fact and money had and received.  Mr. B.K. Ho, counsel for the Plaintiff, informed this Court during his opening submissions on the first date of the trial that the Plaintiff will only rely on the cause of action of money had and received and will not rely on the causes of action of fraudulent misrepresentation and payment under mistake of fact.

3.  After the Plaintiff called his witnesses and closed his case, the 1^st Defendant, through his Leading Counsel Mr. Jason Pow S.C. made a submission of no case to answer.  Although Mr. Pow S.C. also represented the 2^nd Defendant, no such submission was made on behalf of the 2^nd Defendant.

4.  The 1^st Defendant’s submission of no case to answer consisted of two limbs.  First, it is submitted that by abandoning the causes of action of fraudulent misrepresentation and payment under mistake of fact, the Plaintiff has abandoned his claim against the 1^st Defendant.  This is because, Mr. Pow, S.C. submitted, the cause of action of money had and received is only pleaded against the 2^nd Defendant but not the 1^st Defendant.  Second and alternatively, it is submitted that on the pleaded case as set out in the Amended Statement of Claim, the Plaintiff has no cause of action against the 1^st Defendant.  This is, likewise, on the ground that the cause of action of money had and received is only pleaded against the 2^nd Defendant.

5.  Apart from opposing the 1^st Defendant’s submission of no case to answer, Mr. Ho on behalf of the Plaintiff applied to re-amend the Amended Statement of Claim as per a draft handed up to this Court in the course of his application.  The proposed re-amendments seek to plead an oral agreement between the Plaintiff and the 1^st Defendant and total failure of consideration.  The 1^st Defendant opposed the Plaintiff’s application to re-amend the Amended Statement of Claim.

6.  These two applications are to a certain extent inter-related.  The issues raised can be summarized as follows:

(1)       whether the Plaintiff has abandoned his claim against the 1^st Defendant;

(2)       if answer to (1) is in the negative, whether the Amended Statement of Claim contains any reasonable cause of action against the 1^st Defendant (after the Plaintiff has abandoned the cause of action of fraudulent misrepresentation);

(3)       if both or either of the above is answered in the 1^st Defendant’s favour, whether the Plaintiff should be allowed to re-amend his claim against the 1^st Defendant.

Claim Against D1 Abandoned?

7.  Unless the position is clear and unambiguous, I do not think it will be right to hold that the Plaintiff has abandoned his claim against the 1^st Defendant.  It is true that Mr. Ho, on behalf of the Plaintiff, did confirm at the beginning of this trial that the Plaintiff abandoned his claim in respect of fraudulent misrepresentation and payment under mistake of fact.  However, I do not think I can thereby conclude that the Plaintiff has abandoned his claim against the 1^st Defendant.

8.  When Mr. Ho made his opening submission, he only informed this Court that the Plaintiff abandoned the causes of action of fraudulent misrepresentation and payment under mistake of fact.  Mr. Ho did not in any way say that the Plaintiff abandoned the claim against the 1^st Defendant.  I accept Mr. Ho’s submission that had it been the Plaintiff’s intention to abandon the claim against the 1^st Defendant, he would have said so.  However, there is no suggestion, whether in Mr. Ho’s oral opening submission or in the written opening submissions lodged on behalf of the Plaintiff, that the Plaintiff abandoned his claim against the 1^st Defendant.  Further, the Plaintiff has not made any application for leave to discontinue the claim against the 1^st Defendant under Order 21, rule 3, R.H.C.

9.  Putting aside the absence of an express statement that that the Plaintiff abandoned his claim against the 1^st Defendant, the written opening submission dated 20 November 2006 lodged by Mr. Ho on behalf of the Plaintiff in fact pointed to the opposite direction.  Amongst others, the following paragraphs in the Plaintiff’s written opening submissions are relevant.  First, paragraph 12 stated that the Defendants have not returned the sum of HK$4.4 million to the Plaintiff.  Second, paragraphs 23 to 25 sought to summarize the Plaintiff’s case on money had and received against the Defendants and contended that if the Plaintiff’s case is to be accepted, “he would have made out a clear case of money had and received against the Defendants”.  Third, paragraph 30 contended that “the Defendants’ case” should not be lightly accepted.  Since these paragraphs made repeated references to “the Defendants” as opposed to either “the Defendant” or “the 2^nd Defendant”, it is clear that the Plaintiff did not abandon his claim against the 1^st Defendant.

10.  For these reasons, I rule that the Plaintiff has not abandoned his claim against the 1^st Defendant.

The Pleaded Case Against D1

11.  The next question is whether the Amended Statement of Claim shows any reasonable cause of action against the 1^st Defendant, after the Plaintiff has abandoned the causes of action of fraudulent misrepresentation and payment under mistake of fact.

12.  In the course of his persuasive submissions, Mr. Pow S.C. had taken me through the Re-Amended Statement of Claim.  It was pointed out that the cause of action of money had and received as is pleaded in the Amended Statement of Claim (see paragraphs 12 and 13 thereof) is only pleaded against the 2^nd Defendant.  In this regard, I agree with Mr. Pow S.C.’s submission.  The cause of action of money had and received, as it is now pleaded in the Amended Statement of Claim, is only pleaded against the 2^nd Defendant.

13.  Had the matter stopped here, the 1^st Defendant would have been entitled to judgment. However, given the application to re-amend the Amended Statement of Claim, it is necessary to consider whether the Plaintiff should be allowed to proceed with his claim against the 1^st Defendant on the basis as set out in the proposed Re-Amended Statement of Claim.

The Plaintiff’s Application To Re-Amend

14.  The proposed re-amendment seeks to add a plea of oral agreement.  It is pleaded that by reason of an alleged meeting between the Plaintiff and the 1^st Defendant in July 2002, there was an oral agreement whereby the 1^st Defendant agreed or undertook to open or cause to be opened an account with Thing On Securities Limited for the Plaintiff to invest in shares with money to be deposited by the Plaintiff into the 2^nd Defendant’s account.

15.  In making this application to re-amend, Mr. Ho indicated that the Plaintiff is willing to bear all the costs occasioned by this intended re-amendment.  Mr. Ho reserved his position as to whether he would apply to recall the Plaintiff to testify on the alleged oral agreement, although he maintained that the evidence so far adduced is sufficient to support the proposed plea.

16.  Mr. Pow S.C. opposed the application on various grounds.  It is first pointed out that the case now put forward by the Plaintiff is a new claim.  This is, to a certain extent, correct.  The pleas of oral agreement and total failure of consideration have never been made before.  However, the underlying events relied on by the Plaintiff remain essentially the same.  The alleged meeting in July 2002, which is now relied on in support of the alleged oral agreement, has always been pleaded and relied on by the Plaintiff.  Similarly, the events relied on in support of the plea of total failure of consideration are the same as before.  In other words, the so-called new case put forward in the proposed Re-Amended Statement of Claim is more a matter of legal categorization of the pleaded events rather than an introduction of new facts.

17.  Besides, the Court will not refuse to allow an amendment simply because it introduces a new case, although it will do so if the amendment would change the action into one of a substantially different character which would more conveniently be the subject of a fresh action.  See: Hong Kong Civil Procedure 2007, Vol. I, para. 20/8/28 (p. 375).  In the present case and for the reasons given in the preceding paragraph, I do not think the proposed amendment has such an effect.

18.  The 1^st Defendant submitted that the proposed plea of oral agreement is defective.  These submissions can be summarized and dealt with as follows.

19.  First, it is submitted that the Plaintiff’s evidence did not support the existence of the alleged oral agreement or any breach thereof even if it existed.  In this regard, Mr. Pow S.C.’s submissions touched on the quality of the Plaintiff’s evidence as well as what inference can legitimately be drawn from the Plaintiff’s evidence.  The question of whether the Plaintiff’s evidence is credible or reliable is also involved.  In the circumstances, I am of the view that it will be more appropriate to deal with these submissions after the end of the trial.  For this reason also, I do not think I should say anything more on the 1^st Defendant’s criticisms of the Plaintiff’s evidence.  For the avoidance of doubt, I am not saying that I accept the Plaintiff’s evidence or the evidence of the other witnesses who testified for the Plaintiff.  I am only taking the view that the question of what can be made out of the Plaintiff’s evidence should be considered after the trial, especially Mr. Ho may apply to recall the Plaintiff.

20.  Second, it is submitted that no consideration is pleaded in support of the alleged oral agreement.  Whilst the way in which the alleged oral agreement is pleaded in the proposed Re-Amended Statement of Claim can be improved, it is arguable that the promise by the Plaintiff to deposit money into the 2^nd Defendant’s account is the consideration or part of the consideration.

21.  Third, the 1^st Defendant submits that there is no plea that the 1^st Defendant received the sum of HK$4.4 million.  I accept that the word “received” cannot be found in the proposed re-amendments.  However, paragraph 11 of the proposed Re-Amended Statement of Claim does plead that the 1^st Defendant used the money for his own purposes and it is debatable (at least for the purpose of whether leave to amend should be granted) whether in such circumstances the cause of action of money had and received can be maintained.  See: Goff & Jones, The Law of Restitution, 6^th edn., para. 2-026 (pp. 98-99) (especially scenario number (6) in footnote 44 at p. 99).

22.  In addition to the matters dealt with above, I bear in mind that this is very late application.  The Plaintiff had called his witnesses and closed his case.  As pointed out by Mr. Pow S.C. on the 1^st Defendant’s behalf, the observations by Lord Griffiths in Ketteman v Hansel Properties Ltd. [1987] 2 WLR 312, at pp. 339E-340C are relevant. However, at the end of the day, the key consideration is the question of prejudice and whether such prejudice can be compensated by an appropriate costs order.  The prejudice relevant in this context is something which places the other party in a worse position from the point of view of presentation of his case than he would have been in if his opponent had pleaded the subject-matter of the proposed amendment at the proper time.  It is not a relevant type of prejudice that allowance of the amendment will or may deprive him of a success which he would achieve if the amendment were not to be allowed.  See Ketteman v Hansel Properties Ltd. [1987] 2 WLR 312, per Lord Keith at pp. 323H-324C.

23.  In this regard, I accept the submissions of Mr. Ho that the prejudice that might be caused to the Plaintiff would be greater if the application for leave to re-amend was refused.  Further, I think the prejudice to the 1^st Defendant can be compensated by an appropriate costs order.

24.  If leave to re-amend is refused, the Plaintiff may be deprived of the chance to claim against the 1^st Defendant. Although limitation period has not expired, the wider doctrine of res judicata as laid down in cases like Yat Tung Co. v Dao Heng Bank [1975] AC 581 may be invoked.  On the other hand, if leave to re-amend is allowed, the 1^st Defendant can still defend the Plaintiff’s claim and demonstrate to this Court why the Plaintiff’s claim against him is groundless.  Besides, if the 1^st Defendant is successful in defending the Plaintiff’s claim, he will be (in the absence of good reasons to the contrary) awarded the costs of the trial.

25.  It is submitted on the 1^st Defendant’s behalf that the 1^st Defendant will be deprived of the chance to have judgment entered on the basis of no case to answer if leave to re-amend is allowed.  Apart from bearing in mind the observation of Lord Keith in Ketteman’s case mentioned above, I think the situation is not dissimilar to cases where a defendant applies to strike out a statement of claim and the plaintiff applies to amend so as to rectify the defects.  The Court, in such circumstances, has a wide discretion to deal with the matter in such way as may be appropriate, including the discretion to allow the claim to proceed by granting leave to the plaintiff to amend and award costs to the defendant.

26.  In the course of Mr. Pow S.C.’s submissions on prejudice, he referred to a certain application by the 1^st Defendant to the Securities and Futures Commission (“SFC”).  However, the Defendants had subsequently clarified that the 1^st Defendant no longer wanted to rely on that argument and that the 1^st Defendant’s application to the SFC is no longer relevant to the issue of prejudice.

27.  For these reasons, I allow the Plaintiff’s application to re-amend the Amended Statement of Claim as per the draft handed up to this Court.

28.  In the circumstances, I do not think it is necessary to make any Order in respect of the 1^st Defendant’s submission of no case to answer since it is in effect overtaken by the Plaintiff’s application and my decision to allow the Plaintiff to re-amend his claim.  Besides, we have yet to know whether Mr. Ho will apply to recall the Plaintiff to testify further on the alleged oral agreement.  Insofar as may be necessary, I should add this.  Although the 1^st Defendant has made a submission of no case to answer, that submission was made on the basis of the Amended Statement of Claim where no plea of oral agreement is made.  Given my ruling on the Plaintiff’s application to re-amend the Amended Statement of Claim, I think it is only fair that the 1^st Defendant should be allowed to give evidence to defend the plea of oral agreement if he wants to.

Costs

29.  As stated above, Mr. Ho has indicated that the Plaintiff is willing to bear all the costs occasioned by the amendment.  Indeed, I see no reason why the Plaintiff should not bear the costs in respect of the re-amendments.  However, I do not think it is appropriate to order the Plaintiff to bear all the costs incurred by the 1^st Defendant from the commencement of this Action.  As stated above, although the alleged oral agreement and total failure of consideration were not pleaded before, they are essentially based on the same events previously relied on.  In other words, the groundwork previously done by the parties remain relevant and useful.  In the circumstances, I make an Order nisi that the Plaintiff is to pay to the 1^st Defendant all the costs of and occasioned by the re-amendments to the Amended Statement of Claim.

30.  As regards the 1^st Defendant’s submission of no case to answer, I have rejected the 1^st Defendant’s first limb of submission but accepted the second limb.  However, had the Plaintiff put his house in order before abandoning the causes of action of fraudulent misrepresentation and money had and received, it is unlikely that the submission of no case would have been made.  For this reason, I make an Order nisi that the Plaintiff do pay to the 1^st Defendant the costs of and occasioned by the 1^st Defendant’s submission of no case to answer.