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HCA 1260/2019
[2023] HKCFI 245
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
ACTION NO 1260 OF 2019
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BETWEEN
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Hon Fung |
Plaintiff |
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and |
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Frank Dominick |
1st Defendant |
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CS Asia Opportunities Master Fund |
2nd Defendant |
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China Silver Asset Management Limited |
3rd Defendant |
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China Silver Asset Management |
4th Defendant |
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(Hong Kong) Limited |
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Before: Hon Ng J in Chambers (Open to public)
Date of Hearing: 20 September 2022
Date of Judgment: 31 January 2023
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J U D G M E N T
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Introduction
1. This is the hearing of the Plaintiff’s appeal by Notice of Appeal dated 5 May 2022. In the Notice of Appeal, this court is asked to set aside Master Anthony Chan’s Decision of 22 April 2022 (“Decision”) whereby the Master struck out parts of the Plaintiff’s claims against the 1st Defendant ie:
a. paragraphs 32 to 35 of the Amended Statement of Claim (“ASOC”) to the extent they concern the Plaintiff’s claim that the 1st Defendant had procured the 2nd Defendant to commit a breach of contract (“Procuring Breach of Contract Claim”);
b. paragraph 39 of the ASOC to the extent it concerns the Plaintiff’s claim of knowing receipt (“Knowing Receipt Claim”).
2. Essentially, the 1st Defendant’s position is that the Procuring Breach of Contract Claim and the Knowing Receipt Claim do not reveal any reasonable cause of action against the 1st Defendant. Alternatively, the Procuring Breach of Contract Claim and the Knowing Receipt Claim against the 1st Defendant are bound to fail and thus are frivolous, vexatious and/or amount to abuse of process of the Court.
The Plaintiff’s Case
3. At all material times,
a. the 1st Defendant was a director of the 2nd, 3rd and the 4th Defendants;
b. the 2nd Defendant was a company incorporated in the Cayman Islands and provided an investment fund called CS Asia Opportunities Dragon Feeder Fund (“Fund”) to investors; for investors who invested in the Fund, they subscribed to shares in it and the 2nd Defendant held these shares in the Fund for the investors;
c. the 3rd Defendant was also incorporated in the Cayman Islands and acted as the manager of the 2nd Defendant.
4. By a written agreement dated 18 April 2018 signed by the Plaintiff and accepted by the 2nd Defendant (by the 1st Defendant acting on its behalf), the Plaintiff subscribed for shares in the Fund (“CS Asia Shares”) in the amount of US$3.8m. On 3 September 2018, the Plaintiff duly paid the US$3.8m to the Fund.
5. On 18 April 2018, the Plaintiff and the 2nd Defendant (by the 1st Defendant acting on its behalf) contemplated that a margin buying arrangement would be entered into by them by a composite agreement (“Composite Agreement”) consisting of a term sheet (“Term Sheet”), a side letter (“Side Letter”) and a confirmation agreement (“Confirmation”).
6. On 18 April 2018, the Plaintiff and the 2nd Defendant (by the 1st Defendant acting on its behalf) signed the Term Sheet. It was contemplated in the Term Sheet inter alia that:
a. the Plaintiff and the 2nd Defendant would execute the Confirmation;
b. the 2nd Defendant would use the CS Asia Shares as back-to-back collateral to buy 221,800,000 shares of Group Sense International Limited (“Group Sense Shares”), a public company listed in Hong Kong (“Equity swap transaction”);
c. if the value of the Group Sense Shares fell to or below 70% of the initial equity value of the Group Sense Shares, the Plaintiff shall top up additional investment in the Fund to bring the amount of investment back to the initial equity value (“Collateral Top Up Mechanism”); and
d. the terms in the Term Sheet were subject to final agreement and documentation being drafted to satisfaction of the Plaintiff and the 2nd Defendant.
7. On 18 April 2018, the Plaintiff, the Fund and the 3rd Defendant (by the 1st Defendant acting on their behalf), executed the Side Letter regarding the rights of the Plaintiff against the Fund and/or the 3rd Defendant.
8. The Plaintiff’s case is that, in order for the Composite Agreement to become binding on the parties, all 3 documents ie the Term Sheet, the Side Letter and the Confirmation must be signed. His case is that he has never signed the Confirmation to complete the Composite Agreement.
9. Unknown to the Plaintiff,
a. the 1st Defendant had forged his signature on the Confirmation;
b. contrary to what has been agreed in the Term Sheet which required the 2nd Defendant to buy 221,800,000 Group Sense Shares, it only purchased 125,850,000 Group Sense Shares in reliance upon the forged Confirmation - it stopped acquiring more from 11 October 2018 onwards;
c. the 2nd Defendant sold 27,000,000 Group Sense Shares which caused the share price to drop below 70% of its initial price;
d. with the drop of the Group Sense Shares price, the 2nd Defendant cited the Plaintiff’s failure to top up his investment as an excuse and misappropriated the Plaintiff’s CS Asia Shares.
10. The crucial paragraphs, including 32 to 35 and 39 of the ASOC, are pleaded in these terms:
“32. Even if, which is denied, that the Term Sheet per se, or the Term Sheet together with the Side Letter, constituted a legally binding and enforceable contract, the 2nd Defendant has breached the Term Sheet and/or Side Letter, and by reason of the 2nd Defendant’s breach, the 2nd Defendant has prevented the Plaintiff from performing the terms of the Term Sheet and/or Side Letter in any event.
PARTICULARS OF BREACH
(1) Throughout April 2018 and October 2018, unbeknownst to the Plaintiff, the 2nd Defendant had only acquired 125,850,000 Group Sense Shares.
(2) From 11 October 2018 onwards, unbeknownst to the Plaintiff, the 2nd Defendant stopped acquiring Group Sense Shares.
(3) In or about late October 2018, unbeknownst to the Plaintiff, the 2nd Defendant sold approximately 27,000,000 Group Sense Shares.
The 2nd Defendant’s breach, as pleaded in paragraph 33 [sic] above was induced, procured and/or carried out by the 1st Defendant as director of the 2nd Defendant, and/or by the 1st Defendant through the 4th Defendant and/or the 3rd Defendant as manager of the Fund.
33. At all material times, the 1st Defendant, 3rd Defendant and/or the 4th Defendant knew the contractual obligations of the 2nd Defendant under the Term Sheet.
PARTICULARS OF KNOWLEDGE
(1) The 1st Defendant signed the Term Sheet on behalf of the 2nd Defendant.
(2) The 1st Defendant was a director of the 2nd Defendant who was at all material times responsible for the business activities of the 2nd Defendant.
(3) The 1st Defendant also acted through the 4th Defendant in advising the investment activities of the 2nd Defendant
(4) The 3rd Defendant had imputed knowledge from the 1st Defendant, who was at all material times a director of the 3rd Defendant.
(5) The 4th Defendant had imputed knowledge from the 1st Defendant, who was at all material times a director of the 4th Defendant.
34. At the disregard [sic] of the 2nd Defendant’s obligations under the Term Sheet, of which the 1st Defendant, 3rd Defendant and 4th Defendant had full knowledge as pleaded in paragraph 34 [sic] above, the 1st Defendant and/or the 3rd Defendant and/or 4th Defendant caused or permitted the 2nd Defendant to breach the Term Sheet as pleaded in paragraph 33 [sic] above.
35. As a result of the 2nd Defendant’s breach of the Term Sheet, as pleaded in paragraph 33 [sic] above and the 1st Defendant’s and/or the 3rd Defendant’s and/or the 4th Defendant’s deliberate procurement of the 2nd Defendant’s breach of the Term Sheet, as pleaded in paragraphs 33 to 34 [sic] above:-
(1) from about 29 October 2018 to about 7 November 2018, the equity value of the Group Sense Shares dropped below 70% of its initial equity value; and
(2) the Defendants created a situation of the Group Sense Shares dropped below 70% of its initial equity value, whereby the Plaintiff was purportedly required to top up the additional investment in the 2nd Defendant to bring the amount of investment back to the initial equity value pursuant to the Collateral Top Up Mechanism.
36. As a result of the matters pleaded in paragraph 5 [sic] above, the Plaintiff suffered losses and damages:
PARTICULARS OF LOSS AND DAMAGE
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(1) |
Final Settlement Amount pay |
US$1,263,667.17 |
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(2) |
Loss of the CS Asia Shares |
US$4,111,862.52 |
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Total |
US$5,375,529.69 |
37. Further or in the alternative, by reason of the matters pleaded in the above especially at paragraphs 31 to 36, the 2nd Defendant is in breach of its fiduciary duties pleaded in paragraph 4 as a constructive trustee in unlawfully disposing the CS Asia Shares which belongs to the Plaintiff and/or acting contrary to and/or without the Plaintiff’s instructions.
38. The 1st Defendant and/or the 3rd Defendant and/or the 4th Defendant have also dishonestly assisted the 2nd Defendant in the unlawful disposal of CS Asia Shares and/or acted contrary to and/or without the Plaintiff’s instructions and without his consent.
PARTICULARS OF DISHONESTY
(1) The 1st Defendant was a director of the 2nd Defendant who was at all material times responsible for the business activities of the 2nd Defendant.
(2) The 1st Defendant knew the fiduciary duties owed by the 2nd Defendant to the Plaintiff.
(3) The 3rd Defendant had imputed knowledge from the 1st Defendant as to the 2nd Defendants’ fiduciary duties, by reason that the 1st Defendant was at all material times a director of the 3rd Defendant.
(4) The 4th Defendant had imputed knowledge from the 1st Defendant as to the 2nd Defendants’ fiduciary duties, by reason that the 1st Defendant was at all material times a director of the 4th Defendant.
(5) With the knowledge pleaded in paragraphs 1(1) to 39(4) above, the 1st, 3rd Defendant and/or 4th Defendant permitted, assisted or procured the 2nd Defendant to unlawfully dispose of the CS Asia Shares and/or acted contrary to and/or without the Plaintiff’s instructions or consent.
39. Further or in the alternative, insofar as the 1st Defendant, the 3rd and/or 4th Defendants holds any or all of the CS Asia Shares, or the proceeds representing the CS Asia Shares from the 2nd Defendant, the 1st Defendant, 3rd Defendant and/or 4th Defendant (as the case may be) have received the CS Asia Shares knowing they represent trust property beneficially owned by the Plaintiff.
PARTICULARS OF KNOWLEDGE
(1) The 1st Defendant was a director of the 2nd Defendant who was at all material times responsible for the business activities of the 2nd Defendant.
(2) The 1st Defendant knew the fiduciary duties owed by the 2nd Defendant to the Plaintiff and that the 2nd Defendant held the CS Asia Shares on trust for the Plaintiff.
(3) The 3rd Defendant had imputed knowledge from the 1st Defendant as to the 2nd Defendants’ fiduciary duties, by reason that the 1st Defendant was at all material times a director of the 3rd Defendant.
(4) The 4th Defendant had imputed knowledge from the 1st Defendant as to the 2nd Defendants’ fiduciary duties, by reason that the 1st Defendant was at all material times a director of the 4th Defendant.” (emphasis added)
11. In summary, Mr Ng describes the relevant causes of action against the 1st Defendant as follows:
a. The 1st Defendant is liable for procurement of a breach of the Term Sheet by the 2nd Defendant.
b. The 1st Defendant is liable for knowing receipt insofar as the 1st Defendant may be in unconscionable receipt of the CS Asia Shares.
Deliberation
12. The applicable legal principles governing striking out are well-known and shall not be rehearsed here.
Procuring Breach of Contract Claim
13. The modern leading case is of course OBG Ltd v Allan [2008] 1 AC 1. Subsequent cases have endeavoured to summarise the essential elements of the tort and, for ease of reference, it is to those cases that this court shall now turn.
14. In Thames Valley Housing Association Ltd v Elegant Homes (Guernsey) Limited [2011] EWHC 1288 (Ch) at [101], Lewison J summarized the ingredients of the tort of procuring breach of contract, with emphasis on the requisite mental ingredients of the tort, as follows:
a. The defendant must actually know that he is inducing a breach of contract. It is not enough that he ought to have realised that.
b. Actual knowledge, ‘blind eye’ knowledge and recklessness are all sufficient states of mind.
c. The breach of contract must be either an end in itself or the means to an end. If it is merely a foreseeable consequence that is not enough.
d. It is not necessary that the defendant intended to cause damage to the claimant: an intention to cause a breach of contract (in the sense described above) is both necessary and sufficient.
e. There must be an actual breach of contract; merely hindering performance of a contract is not enough.
f. The defendant’s encouragement, threat, persuasion and so forth must have a sufficient causal connection with the breach by the contracting party.
15. In Xiamen Xinjingdi Group v Eton Properties Ltd [2016] 2 HKLRD 1106 at [204.3], Yuen JA observed that the elements of the tort of inducing breach of contract can be broken down as follows:
a. there is a contract between A and B;
b. there is a third party C who has knowledge of that contract;
c. C does an act which induces or persuades A to breach the contract;
d. when C did that act, he did it with intent to cause A to breach the contract, the breach of that contract being an end in itself, or a means to an end, and not merely the foreseeable consequence of C’s act;
e. as a result, B suffered pecuniary loss.
16. Just to recap, in paragraphs 15(4), 40 and 41 of his Submissions, Mr Ng has confined himself that the breach of contract in question is the breach of the Term Sheet by the 2nd Defendant.
17. Mr Ng submits that the Plaintiff’s primary case is that the Composite Agreement is incomplete. The Term Sheet is at best “an agreement to agree” and does not constitute a binding agreement.
18. It is the Plaintiff’s secondary case which concerns the present appeal and is problematic. Mr Ng’s submission is that (i) the Term Sheet has been breached by the 2nd Defendant who had failed to acquire 221,850,000 Group Sense Shares and (ii) the 1st Defendant has procured the 2nd Defendant to act in breach of the Term Sheet for purchasing an insufficient number of Group Sense Shares, by relying on the forged Confirmation prepared by the 1st Defendant.
19. The 1st problem with the Plaintiff’s case is both a matter of pleading and evidence. Mr Ng has not pleaded any terms of the Term Sheet which correspond with the breaches of the Term Sheet pleaded in paragraph 32 of the ASOC and consequently has failed to identify which term(s) of the Term Sheet the 2nd Defendant is said to have breached. In this regard, the relevant paragraphs are paragraphs 6 and 8(1) of the ASOC.
20. At paragraph 6 of the ASOC, instead of pleading the relevant terms of the Term Sheet, Mr Ng has pleaded what was contemplated in it viz:
“… It was contemplated in the Term Sheet that the Plaintiff and the 2nd Defendant would agree to enter into the Arrangement, subject to contract, on the terms, among others, that:
(1) the Plaintiff and the 2nd Defendant are to execute the Confirmation (page 1);
(2) to carry out an “equity swap transaction”, the 2nd Defendant would use the CS Asia Shares as a back-to-back collateral to buy 221,800,000 Group Sense shares…”. (emphasis added)
21. That is clearly not good enough.
22. At paragraph 8(1) of the ASOC, it was pleaded that:
“8. Unbeknownst to the Plaintiff:
(1) In between the period April 2018 and October 2018, contrary to the term in the Term Sheet pleaded in paragraph 6(2) above and without consent of the Plaintiff, the 2nd Defendant had only acquired 125,850,000 Group Sense Shares…”. (emphasis added)
23. So from what was merely contemplated in the Term Sheet that the Plaintiff and the 2nd Defendant would agree in paragraph 6, it was suddenly elevated to a term of the Term Sheet in paragraph 8(1). It is also unknown whether the so-called term of the Term Sheet is supposed to be an express term or an implied one.
24. Importantly, as Mr Ho submits, in order to establish the particulars of breach pleaded in paragraph 32 of the ASOC, the Term Sheet must provide that the 2nd Defendant (i) was obliged to purchase 221,800,000 Group Sense Shares by October 2018 and (ii) was prohibited from selling any Group Sense Shares.
25. The Term Sheet is in evidence. But Mr Ng is simply unable to pinpoint in his skeleton submissions, in particular from the few paragraphs on this issue (ie paragraphs 40-44), where the said two terms can be found in the Term Sheet itself. In Mr Ng’s points of reply at paragraph 15, all he can say is that the Term Sheet provides in writing that the subject matter of the swap is 221,800,000 Group Sense Shares. That may well be so. But there is no explanation by Mr Ng as to how a description of the subject matter of the swap can turn into a positive contractual obligation to purchase 221,800,000 Group Sense Shares by October 2018 and a negative contractual obligation not to sell any Group Sense Shares. In short, on the evidence, the said two terms, whether or not pleaded in the ASOC, are simply not there.
26. As stated by Kwan VP in Chu Yue Bun v Lai Shiu Woon [2021] HKCA 1929 at [35(1)] and [41], the court is not bound to accept an allegation as true and proceed on a fictional basis if it is something which can clearly be shown to be incontrovertibly false. Although the court does not conduct a mini-trial on affirmation in a striking out application, it does not adopt a blinkered approach to the evidence either.
27. The 2nd problem with the Plaintiff’s case is that while Mr Ng has pleaded (i) at paragraph 32 of the ASOC that the 2nd Defendant’s breach was induced, procured and/or carried out by the 1st Defendant as director of the 2nd Defendant and (ii) at paragraph 34 of the ASOC that the 1st Defendant has caused or permitted the 2nd Defendant to breach the Term Sheet, he has not pleaded any acts of inducement, procurement, causing or permitting etc on the part of the 1st Defendant. The only “act” pleaded on the part of the 1st Defendant is that he was being a director of the 2nd Defendant.
28. There is no dispute that the 1st Defendant was a director of the 2nd Defendant at the material time but that is again not good enough. As noted by Steven Chong JA (delivering the judgment of the Court of Appeal of Singapore) in PT Sandipala Arthaputra v ST Microelectronics Asia Pacific Pte Ltd [2018] 1 SLR 818 at [62], [63] and [65]:
“62 Having reviewed the authorities, we find that the scope of the Said v Butt principle should be more clearly demarcated and defined to provide certainty for directors in the performance of their duties. In our judgment, the Said v Butt principle should be interpreted to exempt directors from personal liability for the contractual breaches of their company (whether through the tort of inducement of breach of contract or unlawful means conspiracy) if their acts, in their capacity as directors, are not in themselves in breach of any fiduciary or other personal legal duties owed to the company.
63 We begin by determining the reasons for limiting a director’s personal liability for his company’s contractual breaches. First, conceptually, when a director acts in the exercise of his functions as a director and within the scope of his authority, he essentially acts in the company’s capacity and not his own; he is effectively the company. This is the natural consequence of the separate personality doctrine. The company is an artificial entity which is given personality and status only through the machinery of the law. All of its acts are, in some manner or another, carried out or directed by its agents. It thus makes little sense for a company to be induced into breaching its contract with a third party by the director’s acts, which are treated in law as the company’s own acts…
65 On the basis of the two reasons above, our view is that the most appropriate elucidation of the Said v Butt principle is that a director would ordinarily be immune from tortious liability for authorising or procuring his company’s breach of contract in his capacity as a director, unless his decision is made in breach of any of his personal legal duties to the company. In our judgment, the principle operates as a requirement of liability and not a defence; in other words, the onus is on the plaintiff to prove that the defendant-directors’ acts were in breach of their personal legal duties to the company. Such breach may be a breach of a fiduciary duty to act in the best interests of the company, or it may be a breach of his contractual duty towards the company to act within the scope of his authority as granted by the company.” [emphasis added]
29. Since Mr Ng has not identified the 1st Defendant’s act of inducement, procurement etc, he has also made no plea on his intent or state of mind at the time of the act or how his act caused the breach on the part of the 1st Defendant. Further, Mr Ng has not identified the 1st Defendant’s act of inducement, procurement etc, whatever it may be, was in breach of his personal legal duties to the company.
30. Nor is there any evidence from the Plaintiff about these matters in his affirmations filed in opposition to the striking out application by the 1st Defendant.
31. At paragraph 43 of Mr Ng’s skeleton submissions, he acknowledges that the directorship of the 1st Defendant did not, without more, render him liable for procuring the 2nd Defendant to act in breach of contract. Nevertheless, he submits that it is the 1st Defendant’s act in “preparation the forged Confirmation (as part of the fraudulent scheme)” which gave rise to mala fides in procuring the 2nd Defendant to act in breach of the Term Sheet. As Mr Ho points out, this is not how the Procuring Breach of Contract Claim was pleaded in paragraphs 32 to 35 of the ASOC and the Plaintiff has never sought to re-amend it. Nor can Mr Ng show, either by reference to the ASOC or the evidence, what the casual connection was between the alleged forgery and the breach of the Term Sheet.
32. Lastly, at paragraph 44 of Mr Ng’s skeleton submissions, it is said that as part of the fraudulent scheme, the Plaintiff’s pleaded case is that the 1st Defendant personally signed on inter alia the Term Sheet and the forged Confirmation, as well as requesting the Plaintiff to top up his investment, on behalf of 2nd Defendant. These acts go to show personal participation in the fraudulent scheme by him.
33. The short answer is that if the acts of the 1st Defendant are said to have been done on behalf of the 2nd Defendant, they cannot at the same time and without more be the 1st Defendant’s “personal” participation - a simple application of the Said v Butt principle. It is also illogical for the Plaintiff to contend that the act of signing the Term Sheet could have procured and caused the alleged breaches of the Term Sheet itself.
34. To conclude, this court agrees with Mr Ho that the Procuring Breach of Contract Claim should be struck out as it does not reveal any reasonable cause of action against the 1st Defendant and is bound to fail.
Knowing Receipt Claim
35. The six requirements of liability for knowing receipt are:
a. There is property subject to a trust.
b. The property is transferred.
c. The transfer is in breach of trust.
d. The property (or its traceable proceeds) is received by the defendant.
e. The receipt is for the defendant’s own benefit.
f. The defendant receives the property with knowledge that the property is trust property and has been transferred in breach of trust, or if not a bona fide purchaser of a legal estate without notice, retains the property, or deals with it inconsistently with the trust, after acquiring such knowledge.
Lewin on Trusts 20th Ed, Volume II at para 42-023
36. Mr Ho submits that the Knowing Receipt Claim should be struck out for two main reasons:
a. There is no plea that any part of the CS Asia Shares or proceeds representing the CS Asia Shares had actually been transferred to the 1st Defendant.
b. The CS Asia Shares were not property subject to trust.
37. This court agrees with Mr Ho in relation to para 36 a above. Not only is there no plea that the CS Asia Shares or their proceeds have been transferred to the 1st Defendant, there is not a scintilla of evidence that was so. Mr Ng does not seek to argue otherwise. That is sufficient to dispose of the Knowing Receipt Claim.
38. Just to recap, the Plaintiff’s case is that he had subscribed shares in the Fund ie the CS Asia Shares in the amount of US$3.8m and had duly paid the sum to the Fund.
39. At paragraph 26 of the ASOC, it is pleaded that
“Unbeknownst to and without the authorisation of the Plaintiff, on 1 March 2019, at the procurement of the 1st, 2nd and 4th Defendants, there was a redemption of the CS Asia Shares (the “Redemption”), causing the 2nd Defendant to reduce the balance of the Plaintiff’s account with the 2nd Defendant from US$4,111,862.52 to US$0.”
40. Then came paragraph 39 of the ASOC already quoted above. The crucial words in that paragraph are “insofar as the 1st Defendant, the 3rd and/or 4th Defendants holds any or all of the CS Asia Shares, or the proceeds representing the CS Asia Shares from the 2nd Defendant”.
41. Mr Ho submits that the Plaintiff has never pleaded as a fact that any part of the CS Asia Shares or their proceeds have been transferred from the 2nd Defendant to the 1st Defendant. This should be self-evident from the way paragraph 39 is pleaded. There is also no plea as to when or how the CS Asia Shares or their proceeds have been transferred; nor is there any plea as to how many CS Asia Shares or how much of their proceeds have been so transferred.
42. To put things beyond all doubt, Mr Ng, quite properly, accepts at paragraph 56 of his skeleton submissions that the whereabouts of the CS Asia Shares or their proceeds are currently unknown to the Plaintiff - the Plaintiff only mounts a claim in knowing receipt against the 1st Defendant on the basis that he could be in receipt of the CS Asia Shares.
43. That is clearly not good enough. It is elementary that every pleading must contain a statement of the material facts on which the party pleading relies for his claim. “Material” for this purpose means necessary for the purpose of formulating a complete cause of action - if any one material fact is omitted, the statement of claim is bad: Hong Kong Civil Procedure 2023 para 18/7/7. Without pleading as a fact that the CS Asia Shares or their proceeds have been transferred to the 1st Defendant, half of the requirements of liability for knowing receipt ie paras 35 d to f above cannot be satisfied.
44. Importantly, as stated earlier, the court does not adopt a blinkered approach to the evidence. Here, there is admittedly no evidence of the transfer to the 1st Defendant in order to support the Knowing Receipt Claim. This part of the ASOC is clearly bad.
45. Notwithstanding the above, Mr Ng submits that (i) striking out the claim is premature - the Plaintiff should be allowed to go through discovery of documents (or administer interrogatories as the case may be) to ascertain the whereabouts of the CS Asia Shares or the proceeds; (ii) maintaining the Knowing Receipt Claim preserves the Plaintiff’s right to elect for proprietary remedy against the 1st Defendant at trial; (iii) it is wrong in principle to resolve dispute of facts in a strike-out application - the parties will contest vigorously at trial whether the 1st Defendant was in fact in receipt of the CS Asia Shares or the proceeds.
46. None of the submissions are meritorious.
47. As Mr Ho puts it, the Plaintiff is putting the cart before the horse - as he has no factual basis to substantiate the Knowing Receipt Claim, he has no claim to any remedy, proprietary or otherwise, and there is nothing to preserve. Further, the Plaintiff’s stance amounts to saying he should freely be allowed to plead first and then he can embark on essentially a fishing expedition on the whereabouts of the CS Asia Shares or their proceeds. This is not how civil litigation should be conducted. In any event, the Writ of Summons in this Action was first issued in July 2019 and the 1st Defendant’s striking out summons was issued in November 2021. The Plaintiff has had plenty of opportunity to ascertain the facts in support of the claim. The Plaintiff has also had the opportunity to and did file 2 affirmations in opposition of the striking out summons. Yet, there is still no evidence of receipt by the 1st Defendant at the hearing of this appeal. It is therefore clear that the Plaintiff is not in a position to raise a dispute on whether the 1st Defendant was in receipt of the CS Asia Shares or their proceeds and there is nothing to resolve - he cannot be allowed to put forward baseless assertion in the ASOC and wish something useful may turn up at trial: Chu Yue Bun v Lai Shiu Woon supra.
48. To conclude, this court is satisfied that that the Knowing Receipt Claim should be struck out as it does not reveal any reasonable cause of action against the 1st Defendant and is bound to fail.
Disposition and costs order nisi
49. The Plaintiff’s appeal is hereby dismissed.
50. There shall be an Order nisi that costs of the appeal be to the 1st Defendant, to be taxed if not agreed and paid by the Plaintiff forthwith, certificate for Counsel.
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(Peter Ng)
Judge of the Court of First Instance
High Court
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Mr Felix Ng, instructed by C Y Lam & Co, for the Plaintiff
Mr Leon Ho, instructed by K&L Gates, for the 1st Defendant
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