NEWPIS HONG KONG LTD v. GGS HONG KONG CO LTD AND ANOTHER

1988, No. A5307

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. The plaintiff commenced this action with a prayer against both defendants. A statement of Claim was duly filed on the 28th July. As it was entitled to, amendments were effected to the Statement of Claim by the plaintiff on the 25th October. The Amended Statement of Claim was filed on the following day, the 26th October.

2. By a summons filed on the 21st October, the defendant seeks to strike out the Statement of Claim in its original version under 0.18 r.19 of the Rules of Supreme Court and the Inherent Jurisdiction of the Court. The grounds in support of the defendant's application are as full as those provided for in 0.18 r.19 of the Rules of Supreme Court. I do not find it necessary to have them repeated in my decision.

3. Attack was mounted by Counsel for the defendants at various portions of the pleading. The main grievance of the defendants lies not so much in the absence of any alleged good cause or causes of action but on the fact that as the Amended Statement of Claim now stands, both defendants find it prejudicial and embarrassing to plead to it. It is a cardinal rule that a defendant must know what case he is to meet and that it is essential therefore for a plaintiff in his Statement of Claim to keep the defendants reasonably informed.

4. Perhaps it is more convenient for me to repeat what I now understand to be the plaintiff's claims against the 1st defendant or the 2nd defendant. The plaintiff relies on an oral agreement entered into some time in June 1986 with the 1st defendant either for itself or as agent of the 2nd defendant, whereby some four million shares in a company which I shall call "Katakura", were sold to either the 1st defendant or the 2nd defendant at a price of ¥1,300 each. In that 1986 oral agreement between the plaintiff and the 1st or the 2nd defendant, arrangement had been made for certain actions in the High Court instituted by the plaintiff and one Mr Wang to be discontinued. The net result of the June agreement was that the 1st or the 2nd defendant agreed to pay the plaintiff ¥600,000,000 (approximately US$4,000,000) if the 1st or the 2nd defendant should sell all the shares at a profit in the future.

5. It is not very certain even up to now whether all the shares, 4,000,000 in all, had been sold. Counsel for the plaintiff categorically stated that he could not positively aver as to whether all the 4,000,000 shares had been disposed of by the 1st or the 2nd defendant.

6. It is the plaintiff's case that the 1st or the 2nd defendant was in beach of the June agreement. The plaintiff's allegation is, at least at one time, that the 1st or the 2nd defendant was liable to pay the plaintiff ¥600,000,000 or approximately US$4,000,000 or alternatively damages for breach of that June agreement.

7. At the end of May, there was another agreement, so the plaintiff alleges, between the plaintiff and this time the 2nd defendant, whereby the 2nd defendant agreed to pay the plaintiff by instalments ¥600,000,000 or US$4,000,000, the liability under the June agreement : ¥100,000,000 to be paid forthwith and the balance of ¥500,000,000 to be paid by the 2nd defendant out of any profits in future commercial transactions with the plaintiff, and in any case the balance was to be wholly paid to the plaintiff by the 2nd defendant, with or without any future business profits from such transactions, if any, before the expiration of three years.

8. The plaintiff maintains, so I understand, that in June 1988, this end of May agreement by the 2nd defendant was finally confirmed. The bargain was thus struck between the plaintiff and the 2nd defendant. Thereafter, as it is now conceded, the plaintiff's claim in these proceedings was reduced to one against the 2nd defendant alone although that does not appear to be clearly pleaded in the Amended Statement of Claim. However, what is being suggested by Counsel for the plaintiff is that in the Amended Statement of Claim, both the June 1986 agreement and the end of May 1988 agreement as confirmed in June 1988 have in fact been pleaded in the alternative : the earlier one is, no doubt, against the 1st or the 2nd defendant and the latter is against the 2nd defendant alone. The alternatives are being put forward as such that if the plaintiff should fail against the 2nd defendant in the latter agreement the plaintiff would hold either the lst or the 2nd defendant responsible under the June 1986 agreement.

9. That represents,in totality, the plaintiff's claim against the1st or the 2nd defendant as I now understand.

10. Next I turn to examine Mr Ching's criticisms and to see  whether his submission that the defendants are wholly embarrassed in seeking to answer the plaintiff's allegations in their defence is justified.

11. I would concentrate on the main greviances as outlined by Counsel. It is quite unnecessary for me to comment on the peripheral matters.

12. I would therefore begin, right away, with paragraph 7. The oral agreement before the semi-colon in that paragraph, stands as one agreement. It would appear to be ambiguous whether those matters following the semi-colon in paragraph 7 would introduce a further agreement, but it is reasonably clear by the ultimated description of the transaction in that paragraph that indeed one single oral agreement is pleaded and sought to be relied upon. That has now been confirmed by Counsel for the plaintiff. But that does not bring the matter to a close. On the face of it, what comes after the semi-colon in paragraph 7 refers to an agreement on the part of one, Mr Wang, with either the 1st or the 2nd defendant. In whatever proper way those words after the semi-colon in paragraph 7 should be read and understood, Mr Litton now confirms that Mr Wang was not a party to the oral agreement relied upon by the plaintiff against the 1st or the 2nd defendant as pleaded in paragraph 7. Even with Counsel's confirmation, the plaintiff, as far as paragraph 7 is concerned, should put its house in order. I fully appreciate Mr Ching's predicament, even with the ultimate confirmation of Mr Litton, that Mr Wang explicitly appears to have been pleaded as a party to the oral agreement made in June 1986.

13. Paragraph 7 refers to an oral agreement made between the plaintiff and the 1st defendant "acting for and on behalf of itself or as agent of the 2nd defendant". The defendants are both limited companies. We know not how these limited companies orally agreed. The particulars volunteered in paragraph 7 do not resolve the generality. It remains unclear who acted for the 1st defendant in entering into the alleged oral agreement with apparantly Mr Wang for the plaintiff. After the semi-colon in paragraph 7, instead of putting the lst or 2nd defendant on the basis of an alternative defendant, it is pleaded "the 1st defendant and/or the 2nd defendant agreed to pay the plaintiff the amount of ¥600,000,000". It is now confirmed that that meant the 1st or the 2nd defendant. Obviously it is desirable, so that the defendants can properly plead to it, for this portion of paragraph 7 to be suitably remedied.

14. The liability of the 1st or the 2nd defendant to pay ¥600,000,000 or US$4,000,000 was conditional upon the sale of all the shares at a profit. Paragraph 15 of the Amended Statement of Claim was referred to and some capital was sought to be made of it. But as I have said before, Counsel categorically stated that even now he is not in a position to say positively whether all the 4,000,000 shares had been sold.

                (Mr Litton interjecting)       

15. I am reminded that what in fact Counsel for the plaintiff observed in the course of his reply was hot that it is a matter of instructions that the plaintiff knows not whether all the 4,000,000 shares had been sold, but that as paragraph 15 stands together with the rest of the Amended Statement of Claim, there is no clear intimation as to whether that is in fact the state of affairs. I accept, no doubt, Mr Litton's explanation but that does not detract from the conclusion that the defendants ought to be told precisely what the plaintiff's claim against them is. If in fact, all the shares had been sold such matter should be pleaded specifically without ambiguity. Moreover, profit, if any made in the sale, should be likewise pleaded.

16. Mr Ching criticised paragraph 10, 12 to 17 of the Amended Statement of Claim as containing purely evidence. In substance, the criticism of Mr Ching seems to be justified. Also, Mr Ching feels aggreived that a condition president is pleaded, though unnecessarily, in a way so that confusion has been caused to the meaning of one or the other paragraphs. Those are matters not too significant. In reality, they are, as Mr Litton rightly puts it, not embarrassing the defendants.

17. Paragraphs 19 to 21 are paragraphs in relation to the end of May 1988 agreement with the 2nd defendant. Nowhere in the Amended Statement of Claim, has it been expressly pleaded that the June 1986 agreement was thus superseded. It is fair to say at it could be understood as being implicit. However, it ought to be so expressly pleaded.

18. Turing to the prayer, there is no intimation in the slightest that these are alternative claims against the 1st or the 2nd defendant. On the face of the prayer, when it is fairly read, it could only mean that all the claims in the alternatives are against both defendants including those arising from the latter 1988 agreement.

19. It would be futile for me to descend to the terms of one or the other prayer as analysed in the very full submissions of Mr Ching. Suffice it for me to say that evidently the whole prayer must likewise be amended so as to ensure that both defendants would know precisely what claim each of them has to meet.

20. In the circumstances, I would accede to Mr Ching's request that an "Unless Order" be made so as to enable the plaintiff to put its house in order as far as the Amended Statement of Claim is concerned. I would now invite Counsel to address me on the form of the order to be made and subject to what Counsel have to say, costs of the application should in all fairness be given to the defendants against the plaintiff.

                (Form of order suggested by parties)

21. I order (1) that unless a further Amended Statement of Claim be filed and served on the defendants within 28 days of today, this action do stand dismissed with costs; (2) that the defendants' summons be accordingly disposed of. Costs of this aplication be costs to the defendants in any event.

22. There is no imminent fear that this action will be protracted. Hearing has taken only one day and the resources of the defendants cannot be said to have been unduly taxed. Taxation of costs forthwith will incur extra expenses and make unjustifiable demand on public service. Costs awarded should best be left to the end of the case.