SIBERIAN MINING GROUP CO LTD (formerly known as Rontex International Holdings Ltd) v. CHEUNG KENG CHING AND OTHERS

HCMP 762/2017

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 762 OF 2017

(ON AN INTENDED APPEAL FROM HCA NO 706 of 2010)

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JUDGMENT

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Hon Lam VP (giving the Judgment of the Court):

1.  On 10 February 2017, Deputy High Court Judge Alex Lee granted leave to the Plaintiff to amend the Statement of Claim. The 1^st and 2^nd Defendant sought leave to appeal against that decision. Leave was refused by the judge on 17 March 2017. The 1^st and 2^nd Defendants renewed the application for leave before us by a summons of 30 March 2017.

2.  Written submissions were filed in accordance with the directions of the Registrar of Civil Appeals.  We have considered the same and directed an oral hearing.  We have heard oral submissions at this hearing. 

3.  Having considered the submissions, we have decided not to grant leave to appeal in this case because we are of the view that the intended appeal has no reasonable prospect of success and there is no other reason warranting leave to be granted in the interest of justice.

4.  The amendments concerning Transaction 1 do not have any Limitation Ordinance implications in the present context.  On the face of it, the transaction took place more than 6 years prior to the issue of the Writ.  Hence, unlike the situation in Sun Focus Investment v Tang Shing Bor [2012] 1 HKLRD 738 the doctrine of relation back would not have any significance. 

5.  Concealment of fraud is not per se a cause of action.  Based on the existing pleadings, assuming a case of fraud has been pleaded, the Plaintiff can rely on the concealment of fraud to overcome the prima facie time bar and such concealment can be pleaded in a Reply to the plea of limitation in the Defence (as per para 41 of the Defence of the 1^st and 2^nd Defendants). 

6.  Thus, even if concealment had not been pleaded in the original Statement of Claim, permitting this to be pleaded in the amended Statement of Claim would not prejudice the defendant, since it would not have the effect of depriving the defendant of an accrued defence of limitation due to the absence of such a plea in the original Statement of Claim.  Thus, the reasoning in Global Bridge Assets Ltd v Sun Hung Kai Financial Ltd [2012] 4 HKLRD 474 is not applicable.

7.  There are two different questions: (1) whether the amendments add anything to the claims of the Plaintiff which by reason of the relation back principle has the effect of depriving the defendants of an accrued defence of limitation; and (2) whether the pleadings in the amended Statement of Claim support an arguable claim for fraudulent breach of fiduciary duties or fraudulent breach of trust.

8.  On question (1), as explained above, the amendment regarding pleas of concealment does not have such effect.  Nor can we see how the other amendments could have said to have such effect.

9.  The primary facts relied upon by the Plaintiff to assert the case of fraudulent breach on the parts of the defendants were pleaded in the original Statement of Claim.  Essentially, the Plaintiff relied on the discrepancy between the prevailing market price of the Grandtop Shares ($2.00) and the actual purchase price ($2.90) in December 2003, the documentation of the sale at the price of $2.00 in the minutes of 22 December 2003 (signed by the 1^st and 2^nd Defendants) and the bought and sold notes (signed by the 3^rd Defendant) when the actual price was $2.90, the explanations given by the defendants in the interviews by the SFC (which failed to account for the discrepancy and the documenting of the sale at $2.00 as aforesaid). 

10.  We do not think the additional matters pleaded in the amendments add anything substantial to the primary factual matrix to support the allegation of fraudulent breach.

11.  The crucial question is therefore question (2). Whilst at the trial the court will have to take account of the defence case and defence evidence in assessing whether these primary facts support an inference of fraud or dishonest intent on the part of each of these defendants, we are of the view that these primary facts, taken on their own as allegations in a Statement of Claim, could properly support an arguable case for the same.  The signatures by these defendants of the minutes and the bought and sold notes respectively recording a false sale price of $2.00 are sufficient to support the plea that these defendants knew that the market price was $2.00.  As directors involved in the transaction (as evidenced by their signing of the relevant documents), in the absence of other evidence it must be taken that they were aware of the actual price being $2.90.  Whether the court will accept the explanations offered by the defendants for such signatures and the discrepancy in price is a matter for trial. 

12.  We reject the submissions of Mr Hui that there were insufficient particulars of fraudulent intent in the original Statement of Claim.

13.  In respect of the other intended grounds of appeal, whether the amendments put forward a new cause of action is to be considered by reference to the indorsement on the writ and such indorsement alone, see Moulin Global Eyecare Holdings Ltd v Olivia Lee Sin Mei (2014) 17 HKCFAR 466.

14.  For present purposes, we assume the plea of fraudulent breach was a new claim (not in the original indorsement of claim, though pleaded in the original statement of claim) though breach of fiduciary duties and breach of trust had been pleaded.  Notwithstanding this, we agree with the judge that they arose out of the same or substantially the same facts as the original causes of action. 

15.  We therefore dismiss the Defendants’ application with costs.