TSENG-HSIANG WANG AND OTHERS v. YAMAICHI INTERNATIONAL (H.K.) LTD. AND OTHERS

1984 No. 4398

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. This is an application by the plaintiffs to amend the statement of claim pursuant to the provisions of 0 20 r. 5 of the Rules of the Supreme Court.

2. The 1st plaintiff is the chairman, managing director and principal shareholder of the 2nd plaintiff which is a limited company incorporated in Hong Kong. The 1st plaintiff was a speculator on a very large scale in Japanese quoted companies. His practice was to purchase substantial amounts of shares up to the maximum allowed to a foreigner by Japanese law and to recommend friends and associates to buy further shares. Amongst his purchases were shares in the 7th defendant company. The 2nd plaintiff purchased shares in the 7th defendant on behalf of the 1st plaintiff from funds provided by the 1st plaintiff. The 3rd and 4th plaintiffs are associates of the 1st plaintiff and also purchased shares in the 7th defendant on the recommendation of the 1st plaintiff. The 1st, 3rd and 5th defendants are Hong Kong stockbrokers being subsidiaries of the 2nd, 4th and 6th defendants who are Japanese stockbrokers.

3. The plaintiffs claim that they were induced to buy the shares in the 7th defendant as a result of misrepresentations made to the 1st plaintiff by the 1st, 3rd and 5th defendants on behalf of the 2nd, 4th and 6th defendants as a result of a conspiracy between all the defendants.

4. The action against the 7th defendant was stayed by the Court of Appeal on the 23rd December 1985 on the grounds that the allegations of conspiracy had not been adequately pleaded and that overt acts did not implicate the 7th defendant. However, the 7th defendant still remains a party to the action despite the stay. The stay cannot be lifted without the leave of the Court of Appeal.

5. The amendments sought originally included allegations of breach of fiduciary duty and breach of statutory duty, but they have now been abandoned so far as these proceedings are concerned. Mr Chang who appeared on behalf of the plaintiffs, argued that the proposed amendments do not raise a new cause of action against any of the defendants, but merely amount to a rearrangement of the allegations by setting out material amenments in the body of the pleading or by way of particulars. Mr Chang submitted that the amendments should be allowed as they relate to transactions that have already been pleaded and to which each of the defendants has filed a defence.

6. Apart from contentions made by counsel for the defendants that the amendments amount to a new cause of action, it was further argued by Mr Li for the 3rd defendant that the allegations of fraud are imprecise for the plaintiffs have failed to set out the nature of the falsity. The plaintiffs rely, under paragraph 20(a) of the proposed amended statement of claim, upon an allegation against Mr Shiraishi, the managing director of the 4th defendant who was seconded in this capacity to the 3rd defendant in Hong Kong, who supplied a document to the 1st plaintiff that set out information about the assets of the 7th defendant including the liquidation value of those assets. The 1st plaintiff alleges that an oral representation was made by Mr Shiraishi on behalf of the 3rd and/or 4th defendant that the information contained in that document was true and that he urged and advised the 1st plaintiff to buy or procure purchasers for further shares in the 7th defendant. The plaintiffs contend that the document was false and specify particulars of the allegations of falsity in the 4th schedule to the statement of claim. No objection was taker. to the first three particulars (a), (b) and (c) set out in the schedule but, objection was taken to the particulars described in paragraphs (d), (e), (f) and (g). These particulars read as follows: -

7. Mr Chang argued that the gravamen of the plaintiff's complaint is that the document is false. I accept this submission and agree that the allegations have been sufficiently particularised to enable the defendants to plead thereto.

8. It was contended by Mr Barlow on behalf of the 4th defendant that the amendments should not be allowed as the allegations made against his client were inherently unlikely to succeed. However, I reject this submission for it is clear from the pleading that it is alleged that the information in the document was false, and an oral representation was made by Mr Shiraishi that the information was true.

9. I am quite satisfied and I accept the submission made by Mr Chang that the amendments in respect of paragraphs 15 and 16 of the proposed amended statement of claim relate to prior transactions and that at all times the defendants have been aware that a conspiracy is alleged. Overt acts of conspiracy have, in my judgment, been sufficiently pleaded by the plaintiffs.

10. Other objections were raised that the amendments were unfair and constituted prejudice to the defendants, that damages could not be established against the 4th defendant as the shares in the 7th defendant had not been sold and that the plaintiffs were guilty of delay in making the application. However, I found no merit in respect of any of these matters.

11. The same relief is being claimed by the plaintiffs by way of damages for conspiracy.  No new cause of action has been set up for the allegations arise from the same or substantially the same facts. Accordingly I am satisfied that the amendments sought with the exception of the matters relating to breach of fiduciary duty and breach of statutory duty should be granted.