ASHER MODEL MANAGEMENT LTD v. FRANCIS CARROLL

DCCJ 4058 / 2007

 IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 4058 OF 2007

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Decision

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1.  The Plaintiff Asher Model claims against the Defendant Mr Carroll in the tort of misfeasance in public office.  At the material times, Asher Model was a management consultant to a private club called “Hei Hei” situated in Central with a liquor licence.   Mr Carroll was the senior inspector police commanding the Miscellaneous Enquiry sub-unit (the ME unit) of the Central Division of the Hong Kong Police, which conducted licence checks in the area.

2.  Mr Carroll now applies to strike out Asher Model’s claim for being frivolous and vexatious, and being an abuse of process.  The application is premised on the following principal grounds:

(1) In light of the evidence presented now, Asher Model’s claim is bound to fail, as it could never establish at trial the various material pleas of misfeasance.

 2) For the same reasons, the claim is brought without bona fides and with an ulterior motive only to put pressure on Mr Carroll and the ME unit.

(3) In any event, the claim is also bound to fail, as there could not be effective causation between Asher Model’s alleged loss and the alleged misfeasance.

(4) The claim is similarly bound to fail, as Mr Carroll has a complete defence based on the doctrine of ex turpi causa.

It is pertinent to note that it is not Mr Carroll’s case that the Statement of Claim discloses no reasonable cause of action.

3.  In order to understand these grounds of striking out in proper context, it is necessary for me to set out the essential background facts and Asher Model’s pleaded claim as follows.

Background

4.  Hei Hei was the trading name of a company known as Junart Ltd, and was a music club and restaurant situated at 3rd Floor, On Hing Building near Lan Kwai Fong, Central.

5.  Asher Model was the contracted management company of Hei Hei for a term of one year from 15 December 2006 to 14 December 2007.  Under the contract, Asher Model was paid a monthly management fee of $50,000.00, but Hei Hei was entitled to terminate the contract if they could not maintain the liquor licence.

6.  At the material time, the liquor licence granted to Hei Hei carried a condition that at any time, its premises should not have more than 172 persons, staff and customers included.

7.  It is Asher Model’s case that, between June 2006 and June 2007, the ME unit had carried out 45 times licence checks at Hei Hei.  Hei Hei was found to be in breach of the special condition on a number of occasions.

8.  On 12 June 2007, the liquor licensing board heard Hei Hei’s application for renewal of the liquor licence.  The police opposed the application.   The licensing board eventually refused the application, apparently on the basis that Hei Hei had been in repeated breaches of the special condition. 

9.  As a result of the non-renewal of the liquor licence, Hei Hei closed down its operation in June 2007.  At the same time, Junart terminated the management contract with Asher Model.

10.  Asher Model now says its damage in the form of the loss of management fees for the remainder of the management contract (in the sum of $322,580.65) was caused by Mr Carroll’s misfeasance in public office.  The complaint is that, motivated by a malice against Hei Hei and Asher Model, Mr Carroll had exercised his power in commanding the ME unit to conduct licence checks with such frequency and in such a manner to target at Hei Hei to ensure its closure.

11.  The alleged misfeasance and malice are materially pleaded at paragraphs 15 to 18 of the Statement of Claim, as follows:

“15.	The Plaintiff’s aforesaid loss of profit is caused and/ or contributed to by the Defendant who maliciously exercised its power as a public officer that caused damage to the Plaintiff.  It is pleaded that the mode and/ or way of conducting the Licence Checks, that were organized and/ or commanded by the Defendant, was biased or unfair or calculated to cause Hei Hei closing down and to thereby cause damage to, inter alia, the Plaintiff.  The particulars are as follows:-
	Particulars
	(a)	The number of times of conducting licence checks at Hei Hei was far more than that of clubs and bars and restaurants that were situated at the same Central district (“Other clubs”).
	(b)	On all or most of the occasions of the Licence Checks, they were conducted in the absence of any complaints or reports being made by citizens.
	(c)	On all or most of the occasions of the Licence Checks, Hei Hei was the first one which was checked by the Police and/ or ME Unit.  By reasons of aforesaid, Other Clubs were all alerted of ME Unit’s operation and before which they had dismissed all or part of their customers.
	(d)	At the same building which Hei Hei was situated, there were two other clubs carrying similar business and they were frequently overcrowded.  During the Licence Checks, Hei Hei was again always the first club at which licence checks and/ or operations were conducted.
	(e)	As a result of the mode or way of conducting the Licence Checks pleaded hereinabove, Other Clubs which were in breach of or in frequent breach of their liquor licensing conditions regarding limitation on number of persons could successfully escaped from being prosecuted and consequently their liquor licenses, could be successfully renewed by LLB [the Liquor Licensing Board] because there were no or much fewer police records showing their breach of licensing conditions.
	(f)	The Plaintiff hereby reserves its right to plead further particulars pending discovery.
16.	The misfeasance of the Defendant pleaded in paragraph 15 hereinabove is further evidenced by the following facts:-
	(a)	After the closing of Hei Hei on 12 June 2007, ME Unit, which was and is still commanded by the Defendant, has suspended or substantially reduced the number of conducting licence checks and/ or operations in Central district.
	(b)	After the closing down of Hei Hei on 12 June 2007, Other Clubs or part of Other Clubs were and still are frequently overcrowded and in breach of their liquor licensing condition regarding limitation on number of persons.
	(c)	The Plaintiff hereby reserves its right to plead further particulars pending discovery.
17.	The intention and/ or malice of the Defence causing Hei Hei closing and thereby causing damage to, inter alia, the Plaintiff was evidenced by the matters pleaded in paragraphs 15 and 16 hereinabove and further evidenced by the fact that on several occasions of the Licence Checks, the Defendant explicitly and/ or implicitly stated to the licensees and/ or the staff of Hei Hei, inter alia, as follows or with wordings of similar meanings: -
	(a)	He would conduct tremendous licence checks at Hei Hei in order to obtain sufficient evidence in making LLB refuse the licence applications of Hei Hei.
	(b)	He would, on behalf of the Police, strongly oppose Hei Hei’s licence applications on LLB meetings.
	(c)	He would carry out the aforesaid actions until Hei Hei disappeared from the Central district.
	(d)	The investors and management company of Hei Hei had earned a lot and it was about the time to end.
	(e)	He would by all means make Hei Hei disappear from the Central District.
18.	In view of:-
	(a)	the mode and/ or way of conducting the Licence Checks by the Defendant pleaded in paragraph 15 hereinabove;
	(b)	the subsequent conduct of ME Unit, which was and still is commanded by the Defendant, after Hei Hei’s closing down pleaded in paragraph 16 hereinabove;
	(c)	the Defendant’s biased, disgraceful and outrageous wordings pleaded in paragraph 17 hereinabove,
	it is pleaded that the Licence Checks, which were organized and/ or commanded by the Defendant, were a wrongful exercise of the Defendant’s power as a public officer for the malicious purpose of causing Hei Hei closing down and thereby causing damage to, inter alia, the Plaintiff.”

12.  D denies any misfeasance or malice in relation to those licence checks operations carried out at Hei Hei.  D further denies the particulars set out at paragraph 11 above.  D also says that even if there were the misfeasance as alleged, P’s loss was not caused by it.

The applicable principles

Striking out

13.  The Court will only strike out any pleading or claims in plain and obvious cases.  There should be no trial on affidavit, and disputed facts are to be taken in favour of the party sought to be struck out.  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.  Where the legal viability of a cause of action is sensitive to the facts, an order to strike out should not be made:  Hong Kong Civil Procedure 2008, para 18/19/4.

14.  The expression “frivolous or vexatious” includes proceedings which are an abuse of process, and a proceeding is frivolous when it is bound to fail or incapable of reasoned argument.  It is also vexatious when it is oppressive or when it lacks bona fides:  Hong Kong Civil Procedure 2008, paras 18/19/8.

15.  Abuse of process connotes that the process of the court must be used bona fide and properly and must not be abused.  The court will prevent the improper use of its machinery, and will, in a proper case summarily prevent its machinery from being used as a means of vexatious and oppression in the process of litigation.  The categories of abuse of process are not closed but depend on all the relevant circumstances, and for this purpose consideration of public policy and interests of justice may be very material:  Hong Kong Civil Procedure 2008, para 18/19/10 and the cases cited therein.

Misfeasance in public office

16.  Both parties through counsel accept that the law governing the special tort of misfeasance in public office has been authoritatively laid down by the House of Lords in Three Rivers District Council v Bank of England (No. 3) [2003] 2 AC 1.  

17.  In Three Rivers, it is decided that the necessary ingredients of the tort are as follows:

(1) The defendant must be a public officer;

(2) The exercise of power complained of is made in the capacity as a public officer;

(3) There is either a targeted malice or an untargeted malice on the part of the defendant in the exercise of his power as a public officer.  Targeted malice refers to conducts specifically intended by the public officer to injure the plaintiff or a class of persons in the position of the plaintiff.  Untargeted malice refers to the situation where public officer acts knowing that he has no power to do the act complained of and that the act will probably injure the plaintiff.  It also involves bad faith inasmuch as the public officer does not have an honest belief that his act is lawful;

(4) Duty to the plaintiff;

(5) Causation;

(6) Damages and Remoteness.  The defendant must act in the knowledge that his act will probably injure the plaintiff or person fo a class of which the plaintiff was a member.  This was clarified in Akenzua v SSHD [2003] 1 WLR 741, that it is not necessary that the victim be known to the defendant at the time of the commission of the tort. 

See:  Three Rivers, supra, at pp 191B-196E per Lord Steyn; the summary made in Ashley v The Chief Constable of Sussex Polic [2005] EWHC 415 (QB), transcript, at para 46 per Dobbs J.

Principles of causation

18.  On the question of determining causation, when there are more than one state of fact but for which have led to the occasion met by a plaintiff in resulting in his loss, it does not necessarily make all these facts the cause of the loss as recognized by the law.  The Court has to apply “common sense” to decide which one or ones of these facts constitute the effective or dominant cause of the loss, and which one or ones merely provide the opportunity for the loss to occur.    As said by Glidewell LJ in Galoo Ltd v Bright Grahame Murray[1994] 1 WLR1360 at 1374 H-1375A as follows:

“… ‘How does the court decide whether the breach of duty was the cause of the loss or merely the occasion for the loss?’

The answer in my judgment is supplied by the Australian decisions which I have referred, which I hold to represent the law of England as well as of Australia, in relation to a breach of duty imposed on a defendant whether by contract or in tort in a situation analogous to breach of contract.  The answer in the end ‘By the application of the court’s common sense’.”

See also:  Clerk and Lindsell on Torts (19^th ed), paras 2-69 – 2-71.

19.  One of the Australian cases referred to by GlidewellLJis March v E & MH Stramare Pty Ltd (1991) 171 CLR 506.  On the question of the proper test of causation, Mason CJ said at 515 as follows:

“The common law tradition is that what was the cause of a particular occurrence is a question of fact which ‘must be determined by applying common sense to the facts of each particular case,’ in the words of Lord Reid:  Stapley v Gypsum Mines Ltd [1953] AC 663, 681 … It is beyond question that in many situations the question whether Y is a consequence of X is a question of fact.  And, prior to the introduction of the legislation providing for apportionment of liability, the need to identify what was the ‘effective cause’ of the relevant damage reinforced the notion that a question of causation was one of fact and, as such, to be resolved by the application of common sense.  Commentators subdivide the issue of causation in a given case into two questions:  the question of causation in fact – to be determined by the ‘but for’ test – and the further question whether a defendant is in law responsible for damage which his or her negligence has played some part in producing … It is said that, in determining this second question, considerations of policy have a prominent part to play, as do accepted value judgments: see Fleming, p. 173.  However, this approach to the question of causation (a) places too much weight on the ‘but for’ test to the exclusion of the ‘common sense’ approach which the common law has always favoured, and (b) implies, or seems to imply, that value judgment has, or should have, no part to play in resolving causation as an issue of fact.  As Dixon CJ, Fullagar and Kitto JJ. remarked in Fitzgerald v Penn (1954) 91 CLR 268, 277 ‘it is all ultimately a matter of common sense’ and ‘in truth the conception in question (i.e., causation) is not susceptible to reduction of a satisfactory formula.”

20.  In the premises, the question of causation is generally a question of facts, which requires the Court to apply largely common sense to determine.

Discussion

Ground 1: It is impossible for Asher to prove their allegations of misfeasance at trial in light of the evidence presently produced

21.  Mr Eric Ko, Government Counsel acting for Mr Carroll, submits that with the evidence now provided by Mr Carroll through his four affidavits filed, it is clear and obvious that:

(1) In relation to the allegations pleaded at paragraph 15(a) of the Statement of Claim, there were good and well justified grounds for the ME unit to make more frequent licence checks at Hei Hei than at the other clubs.

(2) Asher Model cannot prove the allegation set out at paragraph 15(b) of the Statement of Claim, that all or most of the checks were conducted in the absence of any complaints made by the public.

(3) Asher Model cannot prove the allegations set out at paragraphs 15(c) and/or (d) of the Statement of Claim, that Hei Hei was usually the first club to be visited for the licence checks carried out in the district or at On Hing Terrace.  Alternatively, the first visits made were justified with good reasons.

(4) Asher Model cannot prove the allegations pleaded at paragraph 16(a) of the Statement of Claim, that after the closing down of Hei Hei, the ME unit has suspended or substantially reduced the number of licence checks carried out in the Central district.

22.  Mr Ko further submits that, even if the subject malice pleaded against Mr Carroll[1] is at this stage triable, in light of the above, Asher Model’s claim is bound to fail since it could not prove those material underlying facts in support of the case  of misfeasance.

23.  Striking out is a summary procedure for a clear and obvious case.  Mr Carroll has assumed a very ambitious task in seeking to strike out the entire claim based on the limited evidence now produced before the court by way of affidavits.  Effectively, he is asking to Court to rule summarily that the evidence now relied on by him is not capable of any challenge at trial.

24.  Given these submissions, I will examine below such evidence to see if it makes the pleaded claims beyond proof at trial as submitted.

Paragraph 15(a) of the Statement of Claim

25.  The essence of the plea is that, during the material period between June 2006 and June 2007, the ME unit commanded by Mr Carroll had carried out far more licence checks at Hei Hei than that at the other clubs in the same district. Implied in this allegation must be that such higher number of checks were made without good reasons or justifications in the circumstances.

26.  However, Mr Ko for Mr Carroll submits that, the various letters issued by the police’s Divisional Commander of the Central Division show that these increased visits were necessary and justified: they were prompted to a large extent by public complaints made against Hei Hei, and the fact that the club was found to be in breach of the special condition in previous checks.  As such, Asher Model’s claim of misfeasance based on the higher number of checks made at Hei Hei is unarguable, and therefore bound to fail.

27.  Given Mr Ko’s submissions that these letters provide clear and obvious evidence to render Asher Model’s pleaded allegations beyond proof, for a proper discussion, I believe it is necessary for me to set out the relevant parts of the letters as follows:

(1) In a letter dated 7 March 2008 signed by Divisional Commander, it says:

“This further certifies that the number of licence checks led by the ME Unit at Hei Hei between 9^th June 2006 and 5^th May 2007 was justified in view of the nature and the extent of adverse cases reported by the public and Hei Hei Club’s licence breaches disclosed during licence checks led by the ME Unit.”

(2) In relation to the public complaints, in the letter dated 18 May 2007 issued by the police to Hei Hei’s former solicitors, it says as follows:

“I refer to your letter dated 9^th May 2007 and take this opportunity to advise you that in the period between 1^st January 2005 and 14^th April 2007 a total of 73 incidents involving the Hei Hei Club (both of a criminal and miscellaneous nature) have been recorded by the Police.  This figure far surpasses the number of reports involving other problematic premises in the vicinity and for this reason the Hei Hei Club has, and will continue to be, closely monitored by the Police.  You should also note that more recent checks of the Club have disclosed a number of cases of overcrowding which tends to suggest that, notwithstanding the recent imposition of a 3-month liquor licence, your clients are intent on continuing to flaunt the conditions of the licence.”

(3) In the police’s follow-up letter dated 25 May 2007 to Hei Hei’s former solicitor, it also says as follows:

“With respect to your comments concerning the number of reported incidents involving the Hei Hei Club please be advised that, with only a very few exceptions, these reports involve crime and other miscellaneous complaints that have been made by individual members of the public, and not reports that have been generated as a result of the enforcement action carried out by the police during the course of their licencing checks.  In other words, the frequency with which a premise’s [sic] is checked has little bearing on the number of reports that we may receive from the members of the public and, as such, does not explain the large differential that exits when reports involving your client’s club are compared with reports involving other clubs in the vicinity.   That said, in order to avoid any possibility of a misunderstanding, you are also advised that the total number of reports received will be a determining factor in deciding whether or not there is a need for a particular premises to be closely monitored by the police; and if it is felt that there is such a need (as is the case with the Hei Hei Club) we will increase the frequency of our inspections accordingly.”

28.  Mr Ko submits that these letters as evidence are effectively conclusive on the reasons for the increased licence checks made at Hei Hei, as there is nothing to show that they are not reliable and correct.  Further, it is difficult, as submitted by Mr Ko, to imagine that the writers of these letters would not be telling the truth, as they would be subject to disciplinary proceedings and the risk of losing their pensions if they do not do so.

29.  With respect to Mr Ko, I do not accept that these letters constitute at this early and interlocutory stage such clear and obvious evidence to show that Asher Model would not be able to prove its allegation at trial. My reasons are as follows:

(1) These are letters that set out only the broad summary of certain underlying information or documents (i.e, the public reports and complaints of Hei Hei).  It also sets out the views of the writers on the comparison between the number of reports made against Hei Hei and that against the other clubs in the same district. 

(2) As such, they are not primary documents giving the information, and I do not think the Court is in a position at this stage to say summarily that Asher Model should be shut out from making any attempt to challenge the letters at trial.  

(3) I fully note Mr Ko’s submissions that there are apparently no or no good reasons for the writers not to have set out the correct facts on these letters.  However, the contents of the letters may well be subject to challenge, which has nothing to do with the writers’ credibility.  

(4) Given this is only at the early and interlocutory stage of the proceedings, where discovery has not even started, I do not think it is appropriate for me to set out in detail what I regard as the potential aspects of the evidence that could be subject to challenge or cross-examination at trial.  Suffice for me to say that I am not satisfied that these letters constitute conclusive evidence for the present purpose as submitted by Mr Ko.  I would cite two examples of what I see as the non-conclusive nature of these letters at this stage. 

(5) First, as pointed by Mr Danny Ng (counsel for Asher Model), which I accept, the public reports referred to in the two letters made in May 2007 does not relate squarely with the relevant 12 moths’ period complained by Asher Model (ie., June 2006 to June 2007).  Those public reports fall within a 27 months’ period between January 2005 and April 2007.  There is however nothing to show the distribution of the public reports incident over these 27 months’ period.  In the circumstances, it cannot be said at this stage that this constitutes clear and obvious evidence to show that the increased licence checks over the relevant complaint period must be related to the large number public reports made.

(6) Further, Asher Model’s case is premised on comparing the higher number of licence checks carried out at Hei Hei against those made at the other clubs.  As such, and without seeing the primary evidence of the number of visits and the public reports made against the other clubs, the Court cannot in my view at this stage say that these letters clearly and obviously show that Asher Model does not have an arguable to prove at trial. 

30.  I therefore do not accept that for the present purpose, it is clear and obvious that Asher Model would not be able to establish at trial the allegation pleaded at paragraph 15(a) of the Statement of Claim.

Paragraph 15(b) of the Statement of Claim

31.  This plea alleges that all or most of the licence checks were conducted in the absence of any public complaints or reports.

32.  Mr Ko for Mr Carroll relies on the same letters discussed above, and submits that Asher Model would not be able to establish the plea at trial.

33.  For the same reasons I have given above, I again do not accept that at this stage, the letters constitute such evidence that makes it so clear and obvious that Asher Model would not be able to establish its pleaded allegation even if there is a trial. 

Paragraphs 15(c) and (d) of the Statement of Claim

34.  Asher Model’s case under this plea is that, whenever there was a licence check carried out at the clubs at the Central District and at On Hing Terrace by the ME unit, Hei Hei was the first one to be visited in all or most of these occasions.  As a result, while the other clubs similarly overcrowded could be alerted by the visits to warn their customers away, Hei Hei was usually caught by the checks.

35.  Mr Ko submits that Asher Model could not prove its case even if there is a trial.  This is so because (a) the following evidence shows conclusively that the circumstances justified Hei Hei should be monitored more closely by licence checks, and (b) in any event, Mr Carroll did not have the power to decide which club to be checked first at the various operations:

(1) In a letter dated 2 January 2008 issued by the Divisional Commander of the Central Division to Mr Carroll, it is stated as follows:

“With specific regard to On Hing Building (‘the Building’), Hei Hei Club was normally, but not always, the first club/restaurant to be visited of the 4 liquor licenced premises situated therein.  On occasions, other liquor licenced premises in the Building were visited during Police operations which did not include visits to Hei Hei Club.  It is noteworthy that unlike Hei Hei Club whose liquor licence was never on full term (i.e. 1 year) since its opening in 2004 and which was further shortened from 6-month term to 3-month term since 14^th December 2006, all other liquor licenced premises in the Building were on full-term liquor licence prior to your appointment as the commander of [the ME Unit].  A liquor licenced premises on less than full-term may generally require closer monitoring by the Liquor Licensing Board and the Police than those on full-term.  It should further be noted that of the violence-related cases recorded by Police with respect to the liquor licensed premises in the Building during the Relevant Period, 50% were attributable to Hei Hei Club.  It is clear that it is the frequency of violence-related activities and the frequency and seriousness of the breaching of licensing condition that, inter alia, dictate the manner of the liquor licence operations in the Building.”  (emphasis added)

(2) In a letter dated 15 April 2008 from the Division Commander to Mr Carroll, it is stated as follows:

“This also serves to certify that in the 7 licence check operations led by the ME Unit under your command during the Relevant Period, Hei Hei Club was the first liquor licensed premises to be inspected in Lan Kwai Fong on only 2 occasions.  The suggestion that Hei Hei Club was on most occasions the first stop of ME Unit operations in Lan Kwai Fong is without basis.”

(3) Mr Carroll deposes at paragraph 3 of his 4th Affidavit to the effect that, given the structure of the police force (of which he gives a summary account), he was not generally the one who decided if Hei Hei should be visited or the order that it would be visited in operations involving Hei Hei. This is especially so for those checks that were carried out by the other Police units, of which the ME unit provided support.

36.  I cannot at this stage summarily accept the above evidence as conclusive and not capable of being challenged at trial:

(1) I repeat my observations set out at paragraphs 29(1) to (5) above.

(2) The language used in the letter dated 2 January 2008 is in itself not as conclusive as suggested by Mr Ko.

(3) As a matter of fairness and justice, the Court cannot simply accept (as invited by Mr Ko to do so) Mr Carroll’s affidavit evidence on the structure of the police operation and his role in the operations, without first giving Asher Model the opportunity to cross-examine him.

37.  For these reasons, I do not accept that the evidence presented show conclusively that it would be impossible for Asher Model to prove its case as pleaded at paragraphs 15(c) and (d) of the Statement of Claim.

Paragraph 16(a) of the Statement of Claim

38.  Under this plea, it is Asher Model’s case that after the closing down of Hei Hei, the ME unit has suspended or substantially reduced the number of licence checks in the Central District clubs and bars.

39.  Mr Ko for Mr Carroll relies principally on the following two letters to rebut this allegation:

(1) The letter from the Divisional Commander dated 2 January 2008 to Mr Carroll stating:

“The suggestion that [the ME Unit] has suspended conducting licence checks after the closure of Hei Hei is plainly not true.  The Hei Hei Club closed from 13^th June 2007.  A comparison of the number of licence checks led by the [ME Unit] between 1^st June 2007 and 31^st August 2007 and those between 1st March 2007 and 31st May 2007 would be representative of the change in the number of licence checks led by you, if any.  The number of liquor licence checks led by the ME Unit between June 2007 and August 2007 decreased by approximately 20% compared with the figure between March 2007 and May 2007.  This decrease of approximately 20% is insignificant and may be due to a number of facts, not least due to other Policing priorities.  Of note, however, is the increase of checks carried out between June 2007 and August 2007 which saw an increase by over 80% compared with the period between June 2006 and August 2006.  Therefore, contrary to the claim in the Statement of Claim, there is no substantial decrease in the number of licence checks conducted by the ME Unit since the closure of Hei Hei Club.” (emphasis added)

(2) In the letter dated 7^th March 2008 from the Divisional Commander to Mr Carroll, which states the following:

“This letter serves to confirm that there is no substantial decrease in the number of licence checks led by [the ME Unit] since the closure of Hei Hei Club on 13th June 2007.  The number of liquor licence checks led by the ME Unit between 13^th June 2007 and 13^th October 2007 decreased by approximately 11.7% compared with the figure between 13th February 2007 and 12^th June 2007.  This decrease of approximately 11.7% is insignificant and may be due to a number of factors, not least due to other Policing priorities.” (emphasis added)

40.  I do not accept that these letters for the present purpose constitute conclusive evidence to rebut Asher Model’s plea:

(1) The letters are not primary documents themselves supporting the matters stated therein.

(2) The language used in the letters does not present a case to conclusively rebut the allegations.  For example, the letters themselves suggest that there are a number of factors which could have led to the reduction in the licence checks, but without setting out all these factors. 

(3) Without any comparative figures provided or an appraisal of the relevant circumstances, the court cannot at this stage simply accept that the percentage reduction in the licence checks set out in the letters is an insignificant one as suggested.

41.  In the premises, I also do not accept that there is at this stage conclusive evidence to show that Asher Model would not be able to prove this plea at trial.

42.  For all the reasons set out above, I will not strike out the Statement of Claim on the submitted ground that it is clear and obvious that Asher Model is bound to be unable to prove its pleaded material allegations at trial.

Ground 2: The claim is brought without bona fides and with an ulterior motive to put pressure on Mr Carroll and the ME unit

43.  Mr Ko for Mr Carroll submits that as the claim is premised upon allegations that are bound to fail, and given that Asher Model was aware of the unmeritorious nature of the claim before the action by reason of the police letters previously sent to Hei Hei’s former solicitors, it is clear that the claim was brought without bona fides but with an ulterior motive only.

44.  Mr Ko however fairly accepts that this ground stands and falls together with my ruling on whether Asher Model is bound to fail to prove its case.

45.  Given my above decision that it cannot be said at this stage that Asher Model must fail in proving its case, I also do not accept that the claim should be struck out on the basis that it clearly lacks bona fides or is brought with an ulterior motive only.

Ground 3: No causation

46.  Mr Ko submits that the effective causation of Hei Hei’s loss of the liquor licence is it breaches of the special condition of the licence, which resulted in the early termination of Asher Model’s management contract.   If Hei Hei were not in repeated breaches of the special condition, the liquor licence would not have been lost no matter how many times and in which way the club was visited with the licence checks.  Mr Ko therefore submits that the complained licence checks only provided the opportunity for Asher Model’s loss to occur, but did not cause it.  Thus, Asher Model could never prove causation even if it could prove at trial the underlying allegations concerning the licence checks.

47.  On the other hand, Mr Danny Ng for Asher Model submits that the complained misfeasance prima facie satisfies the “but for” test for the purpose of causation.  He says, but for the increased numbers and manner in which the complained licence checks were carried out by the ME unit, Hei Hei would not have been repeatedly caught in breach of the special condition.  

48.  In the circumstances, Mr Ng further submits, either or both  of the alleged misfeasance and the breach of special conditions could well be regarded as the effective cause of Asher Model’s loss.  This however is ultimately a question of fact, which the Court should and could only decide after the trial, but not at the present interlocutory stage.  For example, as contended by Mr Ng, if it is found after trial that the number of licence checks levelled at Hei Hei is significantly more than that at the other clubs in the area, and that was done without justification and good reasons but only with the malice targeted at Hei Hei and Asher Model, the Court cannot rule out at this stage the possibility that the misfeasance would be found by the trial judge as one of the effective causes to Asher Model’s loss.

49.  In support of his submissions, Mr Ng also draws my attention to the case of Three Rivers where both the Court of Appeal and the House of Lords were of the view that, as the question of causation is a question of fact, even if one were to assume all the facts pleaded in the statement of claim were established, the question was still not fit to be decided as a preliminary issue but should be left to be canvassed after trial.  See:  Three Rivers, supra, pp 60H-61A per Hirst LJ, 166D-F per Auld LJ, 194B-C, per Lord Steyn, 247A-B per Lord Hope.

50.  Given the principles in causation set out in paragraphs 18 to 20 above, and that the pleaded case is targeted malice, I accept Mr Ng’s submissions that it is inappropriate for the Court to decide summarily at this stage that causation cannot be proved.  This is a question of facts, which depends on the extent and the manner in which the facts concerning the allegations are eventually proved, if so proved, at trial.

51.  I therefore refuse to strike out the claim on this ground also.

Ground 4: The doctrine of ex turpi causa

52.  The effective principle behind this doctrine is that no one is entitled to ground a claim on his own illegality or illegal conducts. See: Clerk & Lindsell on Torts, supra, paras 3-04 – 3-07.

53.  Mr Ko submits that as Asher Model has to plead and rely on the breach of the special condition of the liquor licence (which eventually led to the termination of its management contract), it has to rely on an illegality to complete and succeed in its claim.  The doctrine of ex turpi causa therefore applies and Asher Model is bound to fail in its claim.

54.  However, the “illegality” that Asher Model has to rely on in this case was committed by Junart (the liquor licence holder) but not Asher Model (which was the management consultant).  It is thus at least arguable that Asher Model therefore is not relying on its own illegality or illegal conduct to advance its claim.

55.  Mr Ko contends that as Asher Model and Junart share the same directorship and shareholdership (as demonstrated by the company search records), they should be regarded as the same personality for this purpose. 

56.  I cannot accept this submission in light of the well established doctrine of separate legal personality and the established exceptions to the rule against piercing the corporate veil.  It is not even Mr Ko’s present submissions that this case falls within any of these established exceptions.

57.  Mr Ko also submits that as Asher Model was the management consultant of Hei Hei, it had control over the number of customers who could enter and stay within the club.  As such, it can be said that Junart’s illegality is so closely connected with Asher Model that the doctrine of ex turpi causa still applies. 

58.  Whether Asher Model is so closely connected to the “illegality” is in my view a question of facts.  However, the management contract is not before the court, and the pleaded services rendered by Asher Model to Hei Hei as set out in the Statement of Claim do not include the day to day running and operation of club or the control of the number of customers entering the club.  As such, I have difficulty to accept Mr Ko’s submissions that, at the present stage, it is clear that the breaching of the special condition is one of Asher Model’s own creation or is so closely connected to it.

59.  For these reasons, I do not accept it is established now that summarily, the defence of ex turpi causa must apply.  I would not strike out the claim on this basis also.

Conclusion

60.  I am not satisfied that the claim should be struck out at this stage on the grounds submitted.   I therefore order that Mr Carroll’s application be dismissed.

61.  I further grant an order nisi that costs of the application be to Asher Model, to be taxed if not agreed, with certificate for counsel.  The order will be made absolute 14 days from the date of this judgment, unless any of the parties apply to vary it in writing.