TERKILD JOHAN TERKILDSEN AND ANOTHER v. BARBER ASIA LTD AND OTHERS

HCA 1963/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1963 OF 2003

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DECISION

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Background:

1.  In a reserved decision handed down on 8 March 2007, I gave leave to the plaintiffs to amend the Statement of Claim in these proceedings, and at the same time struck out certain causes of action.  That decision was subject to an appeal, in which judgment was delivered on 8 May 2008.  The terms of that judgment were ultimately embodied in an order dated 5 February 2009, which order was sealed on 5 March 2009.

2.  The end result was that the plaintiffs were granted leave to plead the following causes of action against certain defendants, still parties to the action:

(a) International Strategies Group Ltd, (ISG), (D2);

(i)    negligence;

(ii)    the statutory tort created by the Protection of Investors Ordinance,  Cap 335, s 8(2)(a)(iii) and (b)(iii) (POIO);

(iii)   breach of trust;

(b)    Christopher Mark Barber, (D3);

(i)    negligence;

(ii)    the statutory tort created by s 8(2)(a)(iii) and (b)(iii) POIO;

(iii)   breach of trust;

(c) Andrew Nicholas Barber, (D4);

(i)    negligence;

(ii)    the statutory tort created by s 8(2)(a)(iii) and (b)(iii) POIO ;

(iii)   breach of trust;

(d)    Philip Clark, (D5); the statutory tort created by s 8(2)(a)(iii) and (b)(iii) POIO;

(e) Charles Frederick Dunford, (D7); the statutory tort created by s 8(2)(a)(iii) and (b)(iii) POIO.

For completeness I record that the Barber Asia Ltd, (D1) is in liquidation and the plaintiffs no longer proceed against that company.  Jaynie Barber, (D6), Colin Scott-Laws, (D8), have not been served with the proceedings.  The proceedings have been discontinued against Peter Elliot, (D9).  Consequently those four parties take no further part in the matter.

The application:

3.  Now, by summons dated 6 May 2009, the plaintiffs have put before the court a draft Amended Statement of Claim, (ASOC), and seek leave to file that document.  That summons was amended on 22 September 2009, in which the following further orders were sought:

(a) that upon the filing of the ASOC, the action be transferred to the Commercial List;

(b)    that leave be granted to the defendants to file and serve an Amended Defence within 28 days from the date of the order to be made;

(c) that leave be granted to the plaintiffs to file and serve any Reply within 14 days thereafter;

(d)    that costs be reserved, except that the 4^th Defendant’s costs be taxed in accordance with Legal Aid Regulations.

4.  In relation to a number of the different causes of action, some paragraphs have been added to the draft amended statement of claim, and in some existing paragraphs, references to defendants, not previously referred to in that paragraph, have also been added.  In various places paragraphs have been amended by the addition of further words or sentences.

The time point:

5.  A complaint was made that the plaintiffs had failed to comply with the provisions of O 20 r 9, which provides that if amendment is not made within 14 days, (if no period as specified as here), of the order giving leave to amend, the order will cease to have effect.  I accept Mr McCoy’s submission that the relevant rule in this matter is O 20 r 5, pursuant to which, at any stage of the proceedings, the court may give leave to any party to amend his pleadings.

6.  It may well be that any leave given by me to amend, as that leave was varied by the Court of Appeal, might now have expired, consequent upon the operation of O 20 r 9.  But now the plaintiffs put an entirely new ASOC before the court and seek a new leave for amendment.  I am satisfied that no issue as to time arises.

The objections to the ASOC:

ISG:

7.  Mr Firmin, for ISG offered no objection to the terms of the ASOC, in so far as ISG was concerned.  He aligned himself with the submissions to be made by Mr Pirie and Mr Ling, on the basis that, as against other defendants, the ASOC was not in accordance with the judgment of the Court of Appeal.  Notwithstanding that he had no objection as far as his client was concerned, Mr Firmin remained present throughout the hearing, having confirmed to me that he did not propose to charge his client for the appearance.

Christopher Barber and Philip Clark:

8.  Both Christopher Barber and Philip Clark were unrepresented and appeared in person to argue the matter themselves.  Each had filed detailed skeletons setting out their complaints in respect of the ASOC.  The complaints that they were made were made in common.  The essence of their objections was that many of the allegations contained in the ASOC constituted allegations of fact that were simply false or were matters which the plaintiffs would not be able to establish.

9.  I explained to both Mr Barber and Mr Clark that factual disputes were matters that were resolved at trial, and that at this stage of the proceedings the court proceeds on the assumption that the plaintiffs can prove all the facts that are pleaded in the ASOC.  If a defendant disputes the facts as pleaded by the plaintiff, he must deal with that in his statement of defence and go to trial. 

10.  Mr Barber and Mr Clark complained that it was unfair to them they should be put to a trial on allegations that were false.  They were concerned that sanctions should follow consequent upon the Statements of Truth that are now required to be endorsed upon a statement of claim by a plaintiff.

11.  Again, that is a matter for trial.  The skeleton arguments they have filed clearly set out for the plaintiffs the factual challenges that are made.  If the defendants succeed at trial the fact that this complaint has been raised at this stage is a fact that a judge may wish to take into account the respect of both costs and sanctions should there be findings that untruthful statements had been made.  As I understood their position in the course of the hearing, both Mr Barber and Mr Clark understood and, albeit reluctantly, accepted the situation.

12.  I should remind both Mr Barber and Mr Clark that although their skeleton arguments set out the factual challenges that are made, it will be necessary for both of them, once the ASOC is filed, to prepare and file formal defences.  They will have seen from the defences already filed the nature of a document is required.  It will be necessary for them to deal with each paragraph in the ASOC, stating whether the allegation is admitted or denied, and stating concisely the facts, but not the evidence, upon which they relied to answer the various allegations.

Andrew Barber and Charles Dunford:

13.  The essence of the complaint by both Mr Pirie for Mr Andrew Barber and Mr Ling for Mr Dunford was that the ASOC as drawn sought to reintroduce, effectively by stealth, causes of action that had been struck out.  Specifically, they asserted that the effect of the ASOC was that a claim based upon negligent misrepresentation, which had been struck out against their clients, was reintroduced.

14.  I accept Mr McCoy’s submission that there is no basis in that complaint.  First, Mr McCoy specifically disavowed any causes of action other than those set out in paragraph 2 above.  In order to ensure that the plaintiffs could not renege upon that position I have directed that a transcript of the hearing be prepared and maintained so that precisely what was said could not later be questioned.

15.  Second, in any event, it is quite unthinkable that, a cause of action having been specifically struck out, a plaintiff could say at a late or any stage of the trial, that subsequent amendments to the statement of claim had effectively reintroduced a cause of action that had previously been struck out.  Once a cause of action is struck out that is the end of that cause of action.  A plaintiff simply cannot say that notwithstanding the order of the court, he has managed to plead sufficient matters so as to keep the cause of action.

16.  The ground of objection was, quite simply, entirely misconceived.

17.  Both Mr Pirie and Mr Ling were concerned as to the terms of paragraph 9 of the ASOC.  The first sentence is a simple statement of fact.  The second sentence is an uncontroversial statement of law as to the fiduciary and common law duties of persons in the position of Mr Christopher Barber and Mr Dunford.  I accept Mr McCoy’s submission the pleading is relevant in determining the scope and width of the liability under s 8 POIO.  The pleading is relevant, it does not purport to reintroduce any cause of action that has been struck out, and may remain.

18.  Mr Pirie objected to the inclusion of his client in paragraph 10 of the ASOC.  This is an uncontroversial statement of law of duties under the Code of Conduct of Persons Registered with the SFC.  Mr Andrew Barber was so registered.  The pleading is relevant, does not purport to reintroduce any cause of action that has been struck out, and may remain.

19.  Paragraph 11 of the ASOC pleads duties upon persons giving financial advice.  It does not in any way pretend to be a claim for negligence against Mr Ling’s client.  In so far as it sets out duties which Mr Andrew Barber is said to have negligently breached it is entirely relevant.  The clause remains.

20.  A discussion took place in the course of the argument as to the appropriateness of the words “in Misrepresentation” in a title to paragraph 59 of the ASOC.  Although I was of the view in the course of the argument that it was appropriate those words should be removed, upon further examination and reflection I have concluded that that is not necessary.

21.  It needs to be remembered that paragraph 59 and the following paragraphs contain allegations against all defendants, and that causes of action involving misrepresentation remain against certain of the defendants.  It cannot sensibly be argued that the inclusion of a descriptive term in a title to a paragraph in an ASOC will, when read with other unobjectionable allegations in the ASOC, entitled the plaintiffs to say that they have managed to restore an action in misrepresentation against a defendant, in respect of whom that cause of action has been struck out by order of the court.

22.  I am satisfied that the title is appropriate and may remain.

23.  In the course of the hearing Mr McCoy agreed to make certain amendments to the draft ASOC.  These are:

(i)  the expression: “4^th and 7^th defendants as directors of the 1^st defendant”, in paragraph 66 to be deleted;

(ii) amendment of the prayer for relief (1) to read as follows:

“against the 1^st, 2^nd, 3^rd, 4^th, 5^th, and 7^th Defendants damages pursuant to s 8 Protection of Investors Ordnance in the sums of US$500,000 and US$750,000 respectively together with interest;”

24.  Subject to the amendments referred to above, leave is granted to file the ASOC.

Costs:

25.  Mr Bedford argued the question of costs.  He made the following submissions:

(i)  the 2^nd, 3^rd and 5^th defendants should have consented to the application, that nothing said today have any merit, consequently against them, plaintiffs costs in the cause;

(ii) although the 4^th defendant had succeeded in minor amendments to the ASOC, the substantive objection had failed, consequently in respect of those defendants, no order for costs;

(iii)    the argument of the 7^th defendant had succeeded to a greater extent than that of the 4^th defendant, consequently the order for costs should be 4^th defendant’s costs in the cause;

26.  Mr Pirie said that a significant concession had been made by Mr McCoy and that paragraphs of significance had been rewritten.  Mr Pirie and Mr Ling sought costs consequential to the amendment and costs thrown away.

27.  The amendments by the ASOC made are substantial and I am satisfied that it is appropriate that the defendants should have their costs thrown away consequent upon the amendment.  But that said, the primary objection raised by Mr Pirie and Mr Ling, that a claim of misrepresentation was being reintroduced by stealth, has failed.  For the reasons set out in paragraphs 14-16 above, I reject the proposition that a significant concession was made by Mr McCoy.  The amendments that were achieved to the ASOC are essentially cosmetic.

28.  There will be an order nisi that the defendants are to have their costs thrown away consequent upon the amendment, with the costs on the summons for the amendment to be defendants costs in the cause.  The 4^th defendant’s cost will be taxed in accordance with Legal Aid Regulations

Orders and Directions:

29.  An application was made for a direction to transfer the proceedings to the Commercial List.  Order 72 establishes the various lists.  Order 72 r 2(2) provides that all references in that Order to “the judge” shall be construed as references to the judge for the time being in charge of a particular list.  Order 72 r 5 provides for the transfer of an action to a particular list.  It is an order which must be made by “the judge”.  It is clear that by reason of the definition of the expression “the judge” in O 72 r 2(2), the application must be made to the judge in charge of the Commercial List.

30.  I am satisfied that I have no jurisdiction to make the order sought.  If any party wishes to transfer the matter to the Commercial List they must apply to the judge in charge of that list.

31.  The plaintiffs must prepare a revised draft ASOC, incorporating the amendments dealt with in this decision, which is to be submitted to the unrepresented parties and the solicitors for the represented parties.  They are to notify the solicitors for the plaintiffs within seven days of the receipt of the revised draft ASOC, whether they accept that document is in accordance with the provisions of this decision.  A failure to respond within seven days will be taken as acceptance of the revised draft ASOC.  The ASOC must be filed seven days thereafter. 

32.  The consequential orders set out in paragraph 3 (b) &(c) above are appropriate to deal with the procedure to follow, following the filing of the ASOC.

33.  Leave is reserved to apply.