LI TIN SANG v. POON BUN CHAK

HCA9296/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 9296 OF 2000

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REASONS FOR DECISION

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1. These are the court's reasons for dismissing the defendant's appeal against Master Ho's decision, made on 6 January 2003, giving the plaintiff leave to amend the Statement of Claim.

2. The background to this appeal is briefly as follows. On 30 September 2000, the plaintiff issued a Statement of Claim claiming inter alia breach of contract and/or breach of trust and specific performance relating to 21,705,600 shares in a company in which the parties were involved in the early 1990's. On 24 October 2000, an application to strike out the claim was dismissed by a master but that decision was successfully appealed before Woolley DJ on 1 August 2002. The appeal succeeded, however, only on a limited basis. The learned deputy judge said :

" It is clear on the authority of Clarke v. Gray (1805) 6 East 564, that where a contract not under seal is relied on, consideration must be pleaded. This is not just a defect in pleading here, as on any reading of the paragraphs set out above, and upon which the plaintiff relies here to found a case of contract, it is not possible to discern the nature of the contract, or indeed, if there was any contract at all. Applying the test of whether, if the plaintiff was able to prove all the matters pleaded in the statement of claim, he could succeed for the relief claimed, the answer must be in the negative, as no clear case of agreement and breach is there stated.

For this reason only I find that the defendant is entitled to an order on the amended summons to strike out this statement of claim as showing no reasonable cause of action, and the appeal will be allowed to this extent. However, I do not consider that it would be right to shut out the plaintiff from proceeding with this action, particularly in view of the late amendment to include Order 18, rule 19(1)(a), when the plaintiff might otherwise have been able to offer a suitable amendment to the statement of claim. I accordingly order that the plaintiff's claim be dismissed and judgment entered for the defendant for his costs, unless the plaintiff makes application within 14 days from the date of this order to amended his statement of claim, and such application is subsequently granted."

3. Accordingly, by a summons dated 30 August 2002, the plaintiff applied for leave to amend the Statement of Claim. Leave was granted by Master Ho on 6 January 2003. The defendant then appealed that decision to this court.

The issues on appeal

4. Although a second issue (concerning the requirement of an affirmation in support of the application for leave) is vaguely relied on (and I shall deal with it briefly at the conclusion of these reasons), the main point of the appeal concerns section 35 of the Limitation Ordinance, Cap.347 and Order 20, rule 5(5). The limitation period has now expired and thus leave to amend can only be granted if the proposed amendments come within the above provisions.

5. Section 35 provides :

"(1) For the purposes of this Ordinance, any new claim made in the course of any action shall be deemed to be a separate action and to have been commenced -

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(b) .... on the same date as the original action.

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(3) Except as provided by .... rules of court, the court shall not allow a new claim within subsection (1)(b) .... to be made in the course of any action after the expiry of any time limited under this Ordinance which would affect a new action to enforce that claim.

....

(5) Rules of court may provide for allowing a new claim to which subsection (3) applies to be made as there mentioned, but only if the conditions specified in subsection (6) are satisfied, and subject to any further restrictions the rules may impose.

(6) The conditions referred to in subsection (5) are -

(a) in the case of a claim involving a new cause of action, if the new cause of action arises out of the same facts or substantially the same facts as a cause of action in respect of which relief has already been claimed in the action by the party applying for leave to make the amendment;..."

6. Order 20, rule 5 provides :

"(2) Where an application to the Court for leave to make the amendment mentioned in paragraph (3), (4) or (5) is made after any relevant period of limitation current at the date of issue of the writ has expired, the Court may nevertheless grant such leave in the circumstances mentioned in that paragraph if it thinks it just to do so.

....

(5) An amendment may be allowed under paragraph (2) notwithstanding that the effect of the amendment will be to add or substitute a new cause of action if the new cause of action arises out of the same facts or substantially the same facts as a cause of action in respect of which relief has already been claimed in the action by the party applying for leave to make the amendment."

7. Two questions need to be answered. First, do the proposed amendments add a new cause of action? If they do not, no question of limitation arises. If they do, the second question is, does the new cause of action arise out of the same facts or substantially the same facts as those in the original statement of claim? If they do, again, no question of limitation arises.

A new cause of action

8. The basis of Mr Kenneth Kwok, SC's submission on behalf of the defence is that as the original Statement of Claim was struck out as disclosing no cause of action any subsequent pleading which discloses a cause of action must, by definition, be a new cause of action. I do not regard this as a sound argument. "New" should be construed as meaning a different cause of action, not in the sense that hitherto it did not exist. The cause of action in the Amended Statement of Claim did not suddenly appear from nowhere, it existed before albeit it had been defectively pleaded. The fact that new averments are made in the Amended Statement of Claim does not mean it is a new claim. If the underlying basis of the claim remains substantially the same then the likelihood is that it will not be a new claim. The principle was stated by Holroyd Pearce LJ in Robinson v. Unicos Property Corporation Ltd [1962] at p.525 :

" In my view the dictum of Lord Esher was not intended to lay down a rule that no material averment could ever be amended or added to after the period of limitation had expired. When he said 'a cause of action' he was, I think, referring to what is popularly known as a cause of action, namely, a claim made on a certain basis. By 'a new cause of action' he meant a new claim made on a new basis."

9. In my view, in the present case, the amended claim is entirely recognizable as the original (defectively pleaded) claim which has been clarified. Further, it remedies the defects to which Woolley DJ had pointed. The relief sought is the same save in one respect. Of seven forms of relief originally claimed, only the first is amended. Originally it was "damages for breach of contract and/or procurement of breach of trust". The amended version is simply "damages for breach of contract". Far from a new or different claim, submits Mr Michael Bunting, SC for the plaintiff, it is a "slimming down" of the same claim, albeit more particularized. I agree.

10. It is perhaps unnecessary to consider the issue of whether or not it is a "new cause of action" in any greater depth because, even if it is a new cause of action, the second string to the plaintiff's bow is stronger still. The plaintiff's submission that the cause of action as disclosed by the amended claim (whether new or not) plainly arises out of the same, or substantially the same, facts as the original claim is a compelling one and thus renders the first issue academic.

Substantially the same facts?

11. I do not propose to set out all the amendments even though they are neither extensive nor complex. The original claim occupied about five pages, the amended claim about seven pages. The amendments firstly cure the defects in the original statement by pleading the facts and matters relied on in support of the consideration for two agreements (in 1989 and 1992) both of which were pleaded in the original statement. It is true that the word "agreement" was not used to describe the 1989 dealings between the parties in the original statement. In my judgment, little or nothing turns on this. The 1989 dealings were pleaded more in the nature of background to the 1992 agreement. Even so, the use of the word "arrangement" rather than "agreement" would not prevent the plaintiff from arguing that a contractual relationship existed. In any event, the amendment both cures and clarifies.

12. The second, and arguably superfluous, effect of the amendments is to provide greater detail about the plaintiff's case. Without exception they are details relating to the same facts. In broad outline they detail the alleged breaches of the 1992 agreement, they detail the payments of dividends and they detail the plaintiff's requests/demand for the shares in question and the defendant's refusal to comply with those requests.

13. In deciding whether the "new" claim is based on the same facts, ultimately, the court has to take a broad view of the matter before deciding whether or not to exercise its discretion.

14. Litton VP in Leung Kin Fook v. Eastern Worldwide Co. Ltd (No.2) [1997] at p.528 put it as follows :

"The words in O 20 r 5(5) are not to be narrowly construed: they should be given a broad and liberal interpretation in order to attain the objective of the rules. By focusing attention on the additional averments which the plaintiffs need to make to establish the new causes of action, the judge has, in my judgment, applied the provisions of O 20 r 5(5) too narrowly.

If one looks at the issue broadly, what does one see? The contractual duties which are now pleaded arise from the original contract; the duty of care likewise arises from the relationship of owner and charterer of the barge as originally pleaded. There is no complete overlap of facts because, in the new causes of action, additional facts have to be pleaded. This does not, however, take the case out of O 20 r 5(5)."

15. Both the original and the amended statements concern substantially the same shares, the same parties, the same agreements, the same transactions, the same breaches and the same relief. Only the alleged breach of trust is no longer pursued.

The second issue

16. As earlier mentioned, a second issue on appeal is relied on. It does not seem to be advanced with any enthusiasm however because Mr Kwok did not raise it in the course of argument before the master, nor before this court. It is however referred to in his skeleton submission and he did not abandon it. I will therefore deal with it briefly.

17. The practice notes to Order 20 in the Hong Kong Civil Procedure 2002 state :

"an affidavit is not required, as a rule, except ... where the application is made after the expiry after the limitation period."

18. In the present case the plaintiff has not filed an affidavit. Rather than taking a point of preliminary objection, either here or below, the defence seem to be merely bringing this to the court's attention. Moreover, in the first paragraph of his skeleton submissions Mr Kwok refers to a single issue on appeal namely the one dealt with hitherto. I do not regard the failure to file an affidavit as fatal to the application. In the present circumstances an affidavit would add nothing. No purpose would be served by putting the plaintiff's grounds on oath. Mr Bunting has indicated a willingness to file an affidavit within seven days if required to do so. However, neither the court nor, apparently, the defence, seek one.

19. These are the court's reasons for dismissing the appeal. I award costs to the plaintiff in any event with a certificate for two counsel.

Remarks: