LIN HO PIN AND OTHERS v. JAMES TING-YEH YANG

HCA 730/2021

[2025] HKCFI 922

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 730 OF 2021

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BETWEEN

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J U D G M E N T

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1.  The Defendant is appealing the decision of Master Ken To dated 10 May 2024 in:

(1) dismissing the Defendant’s application to strike out the Statement of Claim (“SOC”) and for dismissal of the Action;

(2) allowing the Plaintiffs’ application for leave to amend the SOC as per the draft Amended SOC (“ASOC”).

Background

2.  The Plaintiffs are investors in the open-ended fund Evenstar Funds SPC incorporated in the Cayman Islands (“Fund”) since 2008. Their subscription was through Anuenue Securities Limited (formerly Anue Securities Limited) (“ASL”). ASL is a registered holder of shares in the Fund, and a nominee on behalf of the underlying investors in placing subscription and redemption requests for the Fund.

3.  The 1^st Plaintiff is the prime mover and the 2^nd Plaintiff is a corporate vehicle controlled by him. The 3^rd Plaintiff is the daughter of the 1^st Plaintiff, and the 4^th Plaintiff is the husband of the 3^rd Plaintiff.

4.  The Plaintiffs are suing the Defendant personally in both tort and breach of contract. They are not suing the Fund itself.

5.  The Defendant is a Director of the Fund and a Responsible Officer under the Securities and Futures Ordinance (Cap. 571).

6.  Ms Ingrid Chang is an account executive of ASL, and Mr James Yu a former account executive of ASL, whose employment was terminated by the Defendant in March 2021.

7.  As of 29 November 2019, the Plaintiffs’ shares in the Fund were as follows:

(1) 1^st Plaintiff: 136.5220 shares

(2) 2^nd Plaintiff: 1,122.7220 shares

(3) 3^rd and 4^th Plaintiffs: 56.0140 shares

8.  On or around 29 November 2019, the Plaintiffs served redemption requests on the Fund to redeem a total of 1,114.536 shares (Original Redemption Request):

(1) 1^st Plaintiff: 136.5220 shares (all shares)

(2) 2^nd Plaintiff: 922.0000 shares

(3) 3^rd and 4^th Plaintiffs: 56.014 shares (all shares)

9.  According to the Memorandum and Articles of Association of (“M&A”) and Private Placement Memorandum (“PPM”) of the Fund:

(1) A shareholder may make redemption of shares of the Fund on the first business day of each calendar quarter;

(2) The redemption request must be submitted at least 90 days before the proposed redemption day; and

(3) The redemption price per share shall be its Net Asset Value (“NAV”) on the redemption day.

10.  According to the books of the Fund, the NAV per share as of 31 March 2020 was US$5,064.54 and the proceeds under the Original Redemption Request would have been US$5,644,612.15.

The Plaintiffs’ Case

11.  The Plaintiffs averred that the Defendant is the controlling mind of the Fund. They relied on the evidence of James Yu on behalf of the Plaintiffs. The Plaintiffs also relied two other legal actions concerning the Fund, the BVI action BVIHC 2022/0010 and HCA 1088/2011 involving the Defendant and other third parties.

12.  On 17 January 2020, the Defendant together with James Yu, and Ingrid visited the 1^st and 4^th Plaintiffs in Taichung, Taiwan (“1^st Visit”).

13.  The Defendant and Ingrid sought to persuade the Plaintiffs to cancel or reduce the extent of the Original Redemption Request. The Defendant and/or Ingrid represented that:

(1) The performance of the Fund in 2017, 2018 and 2019 were good and the Fund had good prospects.

(2) Ingrid said the Fund would yield profits of 8-12% per annum.

(3) The Defendant asked the 1^st Plaintiff to cancel the Original Redemption Request or to redeem fewer shares.

(“1^st Set of Representations”).

14.  The 1^st Plaintiff said he would consider the request to cancel or reduce the redemption.

15.  In mid-March 2020, James Yu visited again the 1^st Plaintiff in Taichung (“2^nd Visit”). James Yu persuaded the 1^st Plaintiff to consider the good prospects of the Fund, and to cancel or reduce the extent of the redemption of shares in the Fund (“2^nd Set of Representations”), collectively (“Misrepresentations”).

16.  By reason of the trust on the Defendant by the 1^st Plaintiff and in reliance of Misrepresentations, which were negligent and/or fraudulent, the Plaintiffs reduced the extent of the redemption as follow:

	P1	P2	P3 and P4
Shares to be redeemed pursuant to the Original Redemption Request	136.522	922	56.014
Shares to be redeemed pursuant to the varied request	98	395	0
Retained shares (“Retained Shares”)	38.522	527	56.014

(“Varied Redemption Request”).

17.  On 29 April 2020, the Fund issued a notice of suspension of redemption of the shares and payment of proceeds to the shareholders (“Suspension”) due to market situations and several investment positions currently not considered enough liquid to sell.

18.  After the Suspension, the 1^st Plaintiff approached James Yu and Ingrid for an explanation, and requested payment of the proceeds of redemption under the Original Redemption Request.

19.  James Yu told the Plaintiffs to cancel the Varied Redemption Request as the Fund might adapt a different NAV on a date other than 31 March 2020 if the Suspension were lifted and redemption to resume. However, the Fund did not allow cancellation of the Varied Redemption Request.

20.  On 7 June 2020, the 1^st Plaintiff finally managed to contact the Defendant via telephone conference together with James Yu and Christian Lam, another officer of the Fund.

21.  The Defendant apologized and Christine Lam explained the ill-performance of the Fund in the U.S housing market. More telephone conversation took place afterwards.

22.  The Plaintiffs alleged that an agreement was reached orally and by conduct between the Plaintiffs and the Defendant in that the Defendant would personally buy-out the Plaintiff’s shares in the Fund (“Buy-out Agreement”).

23.  On 12 August 2020, JC Legal, solicitors for the Plaintiffs, issued a letter before action demanding the payment US$5,644,612.15 as per the Original Redemption Request, lest legal action be instituted.

24.  On 9 September 2020, another telephone conference took place between the 1^st Plaintiff, the Defendant and Christine Lam. The Defendant asked for time to seek financing to lend to a 3^rd party to buy-out the Plaintiffs’ shares in the Fund.

25.  In November 2020, James Yu informed the 1^st Plaintiff of a special offer whereby the Defendant would personally first buy out some of the shares held by the 1^st and 2^nd Plaintiffs at NAV as of 31 March 2020.

26.  Also in November 2020, a Bought and Sold note was signed by the 1^st Plaintiff on one part, and by Geminis Investors Limited (“GIL”), allegedly a related company of the Defendant on the other part, for the transfer of 98.726 shares from the 1^st Plaintiff and 296.2740 shares from the 2^nd Plaintiff at the NAV as of 31 March 2020.

27.  On 21 December 2020, Ingrid informed the 1^st Plaintiff that the proceeds had been remitted.

28.  On 22 December 2020, the 1^st Plaintiff received US$499,951.14 (98.726 shares at the NAV of US$5,064.56 per share as of 31 March 2020) from GIL via ASL.

29.  On 8 February 2021, the 1^st Plaintiff received US$99,264.98 and the 2^nd Plaintiff received US$301,098.88 for the respective proceeds for partial redemption of the shares in the Fund from ASL.

30.  On 10 February 2021, the Fund issued a Notice to Investors re: Partial Payment of Redemption Settlement Proceeds under the Fund (“Partial Redemption Notice”). The Notice addressed those shareholders who had submitted notices of redemption on or before 31 December 2019 in respect of the Redemption Day of 1 April 2020. The Directors proposed to make a partial distribution of approximately 20% of the total redemption proceeds.

31.  Despite repeated demands by the 1^st Plaintiff, no further payments was made to the Plaintiffs under the Buy-out Agreement. Hence, the Defendant was liable to pay the Plaintiffs the sum of US$4,744,297.15. The Plaintiffs also sued for damages for misrepresentation.

WhatsApp Messages

32.  From 4 June 2020 onwards, WhatsApp messages were exchanged between the 1^st Plaintiff and Ingrid. Both sides have referred to parts of the messages.

33.  On 12 August 2020, Ingrid said she had asked the “boss” to deal with the matter with sincerity, and the boss had not run away, and the parties in the other litigation had responded well. The 1^st Plaintiff said he did not care about others and it was important that he got the money.

34.  On 6 October 2020, Ingrid said the boss would not join the telephone conference, she and James Yu would explain to the 1^st Plaintiff the sincerity and ideas of the boss.

35.  On 21 December 2020, Ingrid told the 1^st Plaintiff that the remittance had been made, attaching images of some slips. The 1^st Plaintiff thanked her, and referred to the units suggested by them the last year, and asked when the money would be received quickly.

36.  On 5 January 2021, the 1^st Plaintiff asked whether there was progress in the payment. Ingrid said she would ask the boss and revert.

37.  On 12 January 2021, The 1^st Plaintiff asked whether there was still delay? He said he had done his utmost in kindness and righteousness. If there were still delay, he had no choice but to take action.

38.  On 13 January 2021, Ingrid asked for some more time to speak to the boss, and to revert on Friday.

39.  On 20 January 2021, the 1^st Plaintiff said he must have a reply that day. Ingrid repeatedly said the boss would only know by next Tuesday. The 1^st Plaintiff asked her to hurry up.

40.  On 26 January 2021, the 1^st Plaintiff asked what was the situation? Ingrid said there was not much progress. The 1^st Plaintiff said time was pressing, and they could not delay anymore.

41.  On 28 January 2021, the 1^st Plaintiff asked whether any news? There should not be any more delay. And there should be no more bounced cheque. Ingrid said not anymore, and the boss was awaiting urgently the reply from the lawyer.

42.  On 3 February 2021, the 1^st Plaintiff told Ingrid that she must get Mr Yang to sign on when the money was to be paid, as he was dragging on all along, and to avoid all the time would not do. The 1^st Plaintiff said he must have US$1 million before the end of year，and more after the year. The 1^st Plaintiff said he would not accept it orally.

43.  On 8 February 2021, Ingrid said notice should have been sent to their securities department for credit to the client’s account, and the Hong Kong side would be notified immediately if money could be sent out. The 1^st Plaintiff said to let him know as soon as possible. Later in the afternoon, Ingrid said money had been sent out to the two accounts.

44.  On 17 February 2021, Ingrid said to the 1^st Plaintiff she was trying hard to help him, and if he did not believe it, it would be difficult to deal with the matter. She asked the 1^st Plaintiff to “withdraw it first”, and the boss would know his sincerity. Although the sum of “50, 40” was small, it was what the boss was willing to do, and other clients were not receiving it. To force him too much he would let go, and it was no good for everyone.

45.  Ingrid said she had all along told the boss that the 1^st Plaintiff would not complain, and was in extreme need of money before the new year, hence, the boss thought of the 20%. She was chasing after the progress of the loan, and it was possible to pay more. Now the 1^st Plaintiff had complained, the boss thought there was no basis of trust, and it was difficult for her to speak for the 1^st Plaintiff.

SOC and ASOC

46.  The key amendments include:

(1) The deletion of the primary case that the Fund was not entitled to make the Suspension.

(2) The date of Buy-out Agreement was 9 September 2020 in the SOC, amended to on or around 7 June 2020 in the ASOC;

(3) The timing of payment under the Buy-out Agreement was “once the Defendant borrowed sufficient monies” in the SOC, and was changed to “as soon as practicable or in any event within a reasonable time” in the ASOC.

Legal Principles

47.  The court should only exercise the summary power to strike out pleadings or the claim in plain and obvious cases. The claim must be obviously unsustainable, the pleadings unarguably bad, and it must be impossible, not just improbably, for the claim to succeed. There should be no trial upon affidavit. Disputed facts were to be taken in favour of the party sought to be struck out. Nor should the court decide difficult points of law in striking out proceedings (see Hong Kong Civil Procedure 2025 [18/19/4]).

48.  Where a striking out application and an amendment application were both before the court, it would be more expedient and convenient to deal with the striking out application on the facts as set out in the proposed amended pleadings. If the amended pleading could not survive the striking out application, it would be futile to allow the amendments. The court should dismiss the application to amend and consider the striking out application on the pleading as it stands (see Hong Kong Civil Procedure 2025 [18/19/4]).

49.  In Microsoft Corporation v Electro-Wide Ltd [1997] FSR 580, in considering whether the defendant had a real or bona fide defence, Laddie LJ said that “The mere fact that the defendants support their defence by sworn evidence does not mean that the court is obliged to suspend the critical faculties and accept that evidence as if it was probably accurate. If, having regard to the inconsistency with contemporaneous documents, inherent implausibility and other compelling evidence, the defence is incredible, the court must say so”. The learned judge held that these observations are “equally applicable when the credibility and probability of the claim are called into question on a striking out application”. It is “important to approach the matter from a commercial and common sense point of view and not to lose sight of the overall picture presented to the court.” (see [593]-[594]).

50.  In exercise of the powers in amendment of pleadings, the primary aim to secure the just resolution of disputes in accordance with the substantive rights of the parties. (see Hsu Ming Chi v Lam Shu Chit & Ors HCCL 8/2013 unrep. dated 22 October 2014 Per Ng J at [18]).

Grounds for Striking-out

51.  Mr Maurellet SC, for the Defendant, submitted that:

(1) The Alleged Buy-out Agreement is inherently implausible and incredible and there is no serious issue to be tried;

(2) The pleaded loss has yet to materialize and therefore it is contingent and premature;

(3) The pleaded loss was not caused by the Misrepresentations.

52.  Mr Maurellet submitted that the alleged Buy-out Agreement was never documented or reflected in writing despite it involved a substantial sum of US$5.6 million. In any event, the oral agreement was denied by Ingrid on sworn affirmation.

53.  The amendment in the ASOC differed substantially with the SOC and without explanation. And if the alleged Buy-out agreement were already made in June 2020 instead of September 2020, why was there no mention of it in the letter by the Plaintiff’s solicitors in August 2020?

54.  The Bought and Sold note was between the 2^nd Plaintiff as vendor and GIL as purchaser, of 98.726 shares at US$500,000, in that the party and number of shares and purchase price were different from the Buy-out Agreement.

55.  The Defendant was neither a shareholder nor director of GIL. The allegation that Mr Jerry Kuo, the sole shareholder nor director of GIL, was a nominee of the Defendant or that the Defendant was in control of GIL were not supported by pleadings nor evidence.

56.  Furthermore, it is inherently implausible to suggest the Defendant would somehow agree to assume personal responsibilities when the Defendant was only one of the three directors on the board of the Fund.

57.  There is no commercial and common sense for the Defendant to give preferential treatment to the Plaintiffs in complete disregard of him being a Responsible Officer under the SFO, and other investors’ interest in the Fund with the risks with opening floodgate for the other investors.

58.  Even assuming the Defendant did in effect own or control GIL, it did not by itself prove that the Bought and Sold note was entered into between the Plaintiffs and the Defendant.

59.  The WhatsApp messages at most showed Ingrid was comforting the 1^st Plaintiff and there had been negotiations to resolve the matter amicably. None of the messages referred to proved the existence of any legally binding and enforceable contract. If there was a binding Buy-out Agreement, why did the 1^st Plaintiff not simply demand the Defendant to perform it in the WhatsApp messages or letter before action?

60.  As to the misrepresentation claim, it seemed the claim had been subsumed by the alleged Buy-out Agreement covering all of the Plaintiffs’ shares in the Fund, and they were not pleaded as alternatives and the Plaintiffs were not allowed to have any double recovery.

61.  Even if the Suspension were caused by deteriorating performance of the Fund, it would have been inevitable.

62.  In any case, the Plaintiffs are bound to fail since they are unable to prove any causation and loss.

63.  Firstly, the inability to redeem as per the Original Redemption Request was not caused by the Misrepresentations but due to Suspension by the Fund, which case the Plaintiffs were not able to pursue under the PPM, and had now been abandoned in the ASOC.

64.  The Plaintiffs did not plead any quantifiable loss of the Misrepresentations but that the process of redeeming the shares retained under the Varied Redemption Request had become much delayed and more costly, that the Plaintiffs were denied the liquidity, and would no longer be able to the redemption based on NAV as of 31 March 2020 under the Original Redemption Request.

65.  That the Plaintiffs would only be able to redeem upon the lifting of the Suspension at a NAV lower than the one at 31 March 2020 is not materialized and also speculative as the NAV then could be higher. Hence the loss has not accrued and there is no actionable loss.

66.  Mr Maurellet referred to the Court of Final Appeal case of Kensland Realty Ltd v Tai, Tang Chong (2008) 11 HKCFAR 237, where Ribeiro PJ stated in [51] that:

“A cause of action in tort accrues when the damage which results from the tortious conduct is real, as distinct from minimal or negligible and is actual, as opposed to purely contingent. The concept of ‘damage’ is given a broad meaning. It encompasses damage consisting of ‘any detriment, liability or loss capable of assessment in money terms.’ Where economic loss is involved, it includes loss suffered ‘by payment of money, by transfer of property, by diminution in the value of an asset or by the incurring of a liability.’”

67.  In the same case, McHugh NPJ held at [157] that:

“… when a defendant’s negligent breach of a duty of care causes physical harm to the plaintiff or the plaintiff’s property, the defendant incurs a liability to pay damages from that moment. The time for bringing the plaintiff’s action runs from the moment that the plaintiff suffers damage. That the damage cannot be quantified, or is not known, at that moment is not relevant. If the plaintiff acquires a benefit at the same time as acquiring the liability, however, it may not be possible to determine whether the plaintiff has suffered damage until an adverse balance is struck between the benefit and the burden of the liability: Wardley Australia Ltd v. State of Western Australia (1992) 175 CLR 514 at 536 per Brennan J. Similarly, if the damages are not payable until the happening of a further event, the plaintiff’s liability is contingent only and damage is not sustained until the event occurs: Wardley Australia Ltd v. State of Western Australia. Personal guarantees are cases that usually fall within this category.”

68.  In Wardley Australia Ltd v The State of Western Australia (1992) 109 ALR 247, the High Court of Australia unanimously held (in the context of determining limitation) that a claimant who had been induced by misleading conduct to give an indemnity did not suffer damage until it was called on to meet the indemnity. The Court thus rejected the argument that the indemnifier suffered damage (thus giving rise to a cause of action) on the mere entering into of the indemnity agreement. In this regard, as explained by Brennan J [263]:

“when an agreement imposes on a plaintiff an obligation to pay an amount of money without acquiring a benefit and the amount to be paid is quantified by no factors extrinsic to the agreement save the passing of time, it is right to say that the loss is suffered when the agreement to pay becomes binding on the plaintiff. But when the actual loss that a plaintiff suffers depends not only on the making of an agreement but also on circumstances extrinsic thereto, the loss is not suffered until those circumstances have transpired and, in benefit and burden cases, not until the loss is ascertainable.”

69.  In Law Society v Sephton & Co [2006] 2 AC 543, it was held that the Law Society’s cause of action in negligence against accountants in respect of negligent reports on a solicitor’s practice only accrued when it first received a claim on the Solicitors’ Compensation Fund from a client whose money was misappropriated by the solicitor, because until such a claim was actually made no loss or damage had been sustained by the fund (see [18], [25], [30]-[36], [51]-[54], [76]-[77], [82]-[84]).

70.  In Maharaj v Johnson [2015] PNLR 27 at 560, the Privy Council held at para. 19 that where the claimant, in the absence of the defendant’s breach of duty, would have entered into “no transaction” at all, the inquiry on whether, and if so, when the claimant suffered actual or measurable damage is to ask:

“… whether, and if so at what point, the transaction into which the claimant entered caused his financial position to be measurably worse than if he had not entered into it …”

Plaintiffs’ Reply

71.  Mr Lin, for the Plaintiffs, submitted that the allegation of Misrepresentations is not plainly implausible. The Plaintiffs needed cash for their factories in Vietnam, hence, the Original Request for Redemption. Thereafter came the Varied Request for Redemption, where there was substantial reduction in the redemption. Something must have been said to the 1^st Plaintiff during the 1^st and 2^nd Visits to the effect that there were rosy prospects of the Fund, without mentioning any suspension of redemption very soon. Hence, the premise that the Varied Request for Redemption was induced by the Misrepresentations is not unreasonable.

72.  Mr Lin submitted that the existence of the Buy-out Agreement is a factual issue. Whether it will be found to be credible at the trial, it is not unbelievable at this stage.

73.  Although the Buy-out Agreement was never reduced into writing nor mentioned expressly in correspondence, the WhatsApp messages between Ingrid and the 1^st Plaintiff suggested there was some agreement by the Defendant to buy out the Plaintiffs beyond the Partial Redemption Notice, and the 1^st Plaintiff did say he did not want it to be oral, and wanted the Defendant to sign on when the money would be paid.

74.  On actionable loss, Mr Lin submitted that the Plaintiffs had lost the chance to redeem the number of shares at the NAV as of 31 March 2020 under the Original Redemption Request as a result of the Varied Redemption Request as induced by the Misrepresentations.

75.  Mr Lin referred to the English case of Watkins & anor v Jones Maidment Wilson (a firm) [2008] EWCA 134. In 1997, the claimants (Watkins) acquired land to build a house. On 3 April 1998, they entered into an agreement with the builders. The claimants were suing the defendant solicitors for negligent advice.

76.  The first complaint related to the advice given to the claimants by the defendant firm to enter into the building agreement upon terms which the claimants would not have agreed had they been properly advised. The second complaint related to advice with the effect of waiving a contractual right vested in the claimants in favour of the builders.

77.  Under the building agreement, the claimants had the right to terminate the agreement if the builders did not complete by 31 August 1998, subject to payment for work done valued by an expert. On 6 August 1998, upon the advice of the defendant, the claimants waived the right of termination. The builders failed to complete by 31 August 1998. The claimants argued that because of the negligent advice, their dispute later with the builders proved much more expansive to resolve.

78.  Proceedings were issued more than six years after the building agreement was entered into. The defendant argued that if they were negligent, the cause of action arose when the advice was given. The claimants argued that the cause of action arose later when loss was suffered. A preliminary issue of when did the cause of action arise for limitation purpose was raised.

79.  The trial judge rejected the claimants’ arguments. He held that the loss of a chance was a separate loss which arose at the time when the contract was entered into. It did not inevitably lead to the contract not being proceeded with. Accordingly there was an actual tangible loss at the time the contract was entered into and the claim was statute-barred. The claimants appealed to the English Court of Appeal.

80.  Arden LJ (with whom Longmore and Thomas LJJ agreed) held that the claimants suffered a loss as soon as the advice was given and acted upon. By relying on the advice, the claimants lost the chance of negotiating a better deal. After the claimants had acted on the defendant’s advice, they had suffered a loss even though the extent of the loss was not clear until later.

81.  Arden LJ referred to Bell v Peter Browne & Co (a firm) [1990] 2 QB 495, where a husband agreed to transfer the matrimonial home into the sole name of the wife as part of the settlement on divorce on terms that he was to receive one-sixth of the proceeds of sale. The solicitors failed to register a caution for the husband. The property was sold and the proceeds were spent by the wife, and the husband lost his share. It was held by the English Court of Appeal that the cause of action accrued at the time of the failure to register the caution by the solicitors, and not the later date on which the property was sold and the proceeds distributed in disregard of the husband’s right. That was so even though the loss might never have occurred.

82.  Bell v Peter Browne & Co was cited with approval by the House of Lord in Nykredit Mortgage Bank PLC v Edward Erdman Group Ltd (No. 2) [1998] 1 All ER 305. At the hearing before this Court, Nykredit Mortgage Bank (No. 2) was not cited separately, but passages referring to it by Arden LJ in Watkins v Jones Maidment Wilson [13] to [18] were read. Hence, references to Nykredit Mortgage Bank (No. 2) herein were taken from Watkins v Jones Maidment Wilson.

83.  In Nykredit Mortgage Bank (No. 2), the plaintiff had made a loan to a borrower in reliant on the negligent survey of the property charged in support of the loan. The plaintiff would not have entered into the loan but for the negligent survey. The borrower immediately defaulted and the plaintiff obtained judgment for damages against the negligent surveyor. The House had to determine the date from which interest would run on the damages and that depended on when damages occurred.

84.  Lord Nicholls of Birkenhead, with whom the other members of the House agreed, held that the first step was to identify the relevant measure of loss, which was a comparison between what the plaintiff's position would have been if the defendant had fulfilled his duty of care, and the plaintiff’s actual position. If the plaintiff would not have entered into the transaction but for the negligent advice, the comparison fell to be made between his position had he not entered into the transaction in question and his position under the transaction.

85.  Lord Nicholls held that damage occurred as soon as the lender sustained measurable, relevant loss. Sometimes this would be immediately on making the loan, such as in this case where the borrower’s covenant to repay was worthless. In other cases this might be at the later time when the borrower defaulted. In yet other cases it might be at other points in time. It depended on the facts. Lord Nicholls further stated that within the bounds of sense and reasonableness the policy of the law should be to advance, rather than retard, the accrual of a cause of action.

86.  Law Society v Sephton & Co was also referred to in [14]-[18] of Watkins v Jones Maidment Wilson. Law Society v Sephton & Co concerned the accrual of a cause of action when the breach of duty of care had resulted in a party being subject to a contingent liability. The defendant accountants had negligently failed to identify a solicitor’s fraud. The solicitor’s clients in due course made claims against the Solicitors’ Compensation Fund, of which the Law Society was trustee. The Law Society sued the accountants, who raised a limitation defence (see [16] of Watkins v Jones Maidment Wilson).

87.  The case turned on whether the loss suffered by the Law Society occurred when the solicitor had originally committed the fraud, thereby exposing the Fund to potential claims, or when the claims were actually made against the Fund. The House of Lords unanimously held that, until a claim was actually made, no loss or damage had been sustained by the Fund and no cause of action had accrued (see [16] of Watkins v Jones Maidment Wilson).

88.  In Law Society v Sephton & Co, the leading speech was given by Lord Hoffman. His Lordship held in Nykredit Mortgage Bank (No. 2) that Law Society v Sephton & Co had decided that:

“in a transaction in which there are benefits (covenant for repayment and security) as well as burdens (payment of the loan) and the measure of damages is the extent to which the lender is worse off than he would have been if he had not entered into the transaction, the lender suffers loss and damage only when it is possible to say that he is on balance worse off.”

(see [14] of Watkins v Jones Maidment Wilson).

89.  Lord Hoffman further held that cases like Bell v Peter Browne & Co and Knapp v Ecclesiastical Insurance Group plc [1977] PNLR 172:

“are readily explicable as cases in which the damage was the difference between the plaintiff's position as it was and as it would have been if the defendant had performed his duty and in which it was possible to infer that the plaintiff’s failure to get what he should have got from a bilateral transaction was quantifiable damage, even though further damage which might result from the flaw in the transaction was still contingent. The plaintiff had paid money, transferred property, incurred liabilities or suffered diminution in the value of an asset and in return obtained less than he should have got.”

(see [16] of Watkins v Jones Maidment Wilson).

90.  Lord Hoffman summarized his conclusion in In Law Society v Sephton & Co in that:

“[30] In my opinion, therefore, the question must be decided on principle. A contingent liability is not as such damage until the contingency occurs. The existence of a contingent liability may depress the value of other property, as in Forster v Outred & Co (a frim) [1982] 2 All ER 753, [1982] 1 WLR 86, or it may mean that a party to a bilateral transaction has received less than he should have done, or is worse off than if he had not entered into the transaction (according to which is the appropriate measure of damage in the circumstances). But, standing alone as in this case, the contingency is not damage.”

(see [17] of Watkins v Jones Maidment Wilson).

91.  And in Law Society v Sephton & Co, Lord Walker referred to cases such as DW Moore & Co Ltd v Ferrier [1988] 1 All ER 400, Forster v Outred & Co (a firm) [1982] 2 All ER 753 and Bell v Peter Browne & Co (a firm) and concluded:

“In all these cases the claimant has as a result of professional negligence suffered a diminution (sometimes immediately quantifiable, often not yet quantifiable) in the value of an existing asset of his, or has been disappointed (as against what he was entitled to expect) in an asset which he acquires, whether it is a house, a business arrangement, an insurance policy, or a claim for damages…”

(see [18] of Watkins v Jones Maidment Wilson).

Discussion

92.  I have referred to the WhatsApp messages between Ingrid and 1^st Plaintiff quite a bit, not because I seek to resolve the factual disputes, but the nuances in the messages do throw some light on the relationship between the Plaintiffs and the Defendant at the relevant time.

93.  Mr Lin submitted since the Plaintiffs were in need of money, the Varied Redemption Request was induced by the Misrepresentations without mentioning the Suspension is not unreasonable. I agree.

94.  Mr Lin submitted the Defendant did have control of the Fund as well as GIL. The Plaintiffs also alleged the plan was for the Defendant to borrow the money and on-lend to third parties (such as GIL) to buy-out the Plaintiffs. There are factual disputes which have to be resolved at trial.

95.  The WhatsApp messages do show the 1^st Plaintiff was pressing Ingrid for money, and Ingrid attributed it to the efforts of “the boss” for the remittances to the Plaintiffs, and indicating there might be more to come. The 1^st Plaintiff was not happy for the matter to remain oral, and urged Ingrid to get the boss to sign on the dotted line. Again there are factual disputes which have to be resolved at trial.

96.  There are questions of interplay or inconsistencies between the Buy-out Agreement and the partial redemption. The Fund’s records must be looked to reconcile them. Granted there are inconsistences between the SOC and ASOC as to the making of the Buy-out Agreement, the WhatsApp messages tend to show that facts were not simple and straight forward.

97.  As to the Misrepresentation claim and the Buy-out Agreement not pleaded as alternatives, logically they must be. All in all, the criticism that the Buy-out Agreement was not reduced into writing must be seen in the light of the WhatsApp messages. In any case, all these matters involve evidence cannot be resolved on paper.

98.  In Nykredit Mortgage Bank (No. 2), Lord Nicholls held that the first step was to identify the measure of loss, and the loss might accrue at different stages in time. It depends on the facts.

99.  In Watkins v Jones Maidment Wilson, Arden and Longmore LJJ commented that such question of accrual of actionable loss is not a simple question that ought not be decided as a preliminary point.

100.  In the premises, both the appeal against the rejection against of the striking-out and allowance of the amendment must dismissed.

101.  I order costs nisi be to the Plaintiffs, with certificate for two counsel, to be taxed if not agreed.

102.  Lastly, may I thank Mr Maurellet and Mr Lin for their helpful submissions.