XCHRX WONG WING KIN v. HONGKEW HOLDINGS LTD.

1997, No. A4804

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4804 OF 1997

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J U D G M E N T

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1. This is an appeal by the Defendant against the order of Master Ho made on 19th October 1998 whereby he ordered that the Defendant's summons dated 22nd June 1998 to strike out the Statement of Claim be dismissed and that the Plaintiff be given leave to amend the Statement of Claim as per the draft attached to the Plaintiff's summons dated 28th July 1998 save for the claim in detinue.

2. The writ in this action was issued on 7th May 1997. The claims at that time were in respect of money had and received by the Defendant and paid by the Plaintiff, conversion of shares in Kee Shing (Holdings) Limited ("Kee Shing") held for the benefit of the Plaintiff and negligence against the Defendant arising out of the loss of the Kee Shing shares.

3. The Statement of Claim was filed on 28th July 1997. After the Defendant took out its summons on 22nd June 1998 to strike out the Statement of Claim, the Plaintiff applied by summons dated 28th July 1998 to amend his Statement of Claim. It is this pleading that the court should consider in dealing with the application to strike out.

4. I have been referred to a lot of evidence filed for the purpose of the applications before the master and also filed in relation to earlier O. 14 proceedings. It is well settled that it is only in plain and obvious cases that the court should exercise its power to strike out. It must be demonstrated that the Plaintiff is bound to fail before the court would exercise its summary power to strike out and dismiss a claim. It is also well settled that it is no part of a court's function at this stage to embark on a mini-trial of this action based on affidavit evidence. I respectfully adopt what Danckwerts L.J. said in Wenlock v. Moloney [1965] 1 WLR 1238 at 1244:

"But this summary jurisdiction of the court was never intended to be exercised by a minute and protracted examination of the documents and facts of the case, in order to see whether the plaintiff really has a cause of action. To do that is to usurp the position of the trial judge, and to produce a trial of the case in chambers, on affidavits only, without discovery and without oral evidence tested by cross-examination in the ordinary way. This seems to me to be an abuse of the inherent power of the court and not a proper exercise of that power."

I mention this particularly as I have been taken at length to the evidence filed by the parties in an attempt to show that the case advanced for the Plaintiff is weak. These are matters that should be sorted out at trial.

5. The Plaintiff's case is that on or about 14th November 1990, the Defendant purchased 10,000,000 shares of Kee Shing at the price of $1.30 per share amongst which 4,000,000 shares were purchased and held for the benefit of the Plaintiff. This was done pursuant to an oral agreement with the Defendant through its director, Sunny Tan, whereby sums totalling about $3.5 million would be deposited with the Defendant by the Plaintiff and the Defendant would use the said sums together with advances by the Defendant to the Plaintiff to purchase and hold shares in Kee Shing for the benefit of the Plaintiff. The Plaintiff caused cheques totalling $3,723,370.50 to be drawn in favour of the Defendant for such investment. The Plaintiff's shares were lost when one Jeremy So said to be the employee of the Defendant's stockbroker with whom the shares were entrusted, converted the same to his own use. The Plaintiff was only informed of the misappropriation on 11th May 1991. Despite demands, the Defendant has failed, refused or neglected to repay the Plaintiff's investment or transfer the Plaintiff's said shares to the name of the Plaintiff or to return the Plaintiff's said shares. A claim is made for money had not received, further or in the alternative, damages for negligence, further or in the alternative, damages for conversion, further or in the alternative, return of the Plaintiff's shares.

6. All of the above facts can be discerned from a fair reading of the Amended Statement of Claim. For the purposes of the application to strike out, I must assume the facts as pleaded to be true and which will be proved at trial.

7. The evidence shows that the misappropriation took place on 11th January 1991 and that the Plaintiff was informed of the misappropriation only on 11th May 1991. On the facts as pleaded, I am of the view that it is reasonably arguable that the Plaintiff is claiming a proprietary right to the 4,000,000 shares in Kee Shing so as to enable him to sue in conversion. It is, in my judgment, reasonably arguable that the Plaintiff has a sufficient proprietary right to sue in conversion (see International Factors Ltd. v. Rodriguez [1979] 1 Q.B. 351).

8. I have considered counsel for the Defendant's criticism of the way the Plaintiff's various causes of actions are pleaded and in particular, the lack of particularity. I consider that these are matters in respect of which the Defendant should apply for particulars rather than for an order to strike out the pleading.

9. Submissions were also made on the question of limitation of actions. It is correct that the limitation period for the causes of action in money had and received, conversion and detinue is six years from when the cause of action arose.

10. As far as the claim in detinue is concerned, this must be six years from wrongful refusal to deliver after demand for delivery has been made as a demand is necessary to complete the cause of action. The earliest time that a demand could have been made on the evidence is 11th May 1991 as that was the date the Plaintiff was informed of the misappropriation. Demands have been pleaded in the pleading. It is a question of asking for particulars as to when such demands were made. It is not a question of striking out the pleading for lack of particularity. It may be that the Defendant will plead a limitation defence to the claim in detinue in its defence and the Plaintiff will then have an opportunity to reply to the same. Where there is a defence of limitation of action, it is only in a very clear case that the Defendant can apply to strike out the claim on the ground that it is frivolous, vexatious and an abuse of the process of the court (Ronex Properties Ltd. v. John Laing Construction Ltd. and Others [1983] 1 Q.B. 398).

11. On the money had and received claim and the conversion claim, the limitation period expired six years from when the cause of action arose, that is six years from 11th January 1991. On these claims, counsel for the Plaintiff submitted that the facts relevant to the Plaintiff's right of action have been deliberately concealed from the Plaintiff by the Defendant and prays in aid S. 26(1) of the Limitation Ordinance (Cap. 347) to postpone the period of limitation to run from discovery of the concealment, namely from 11th May 1991. On the evidence of the Plaintiff in paras. 9 and 10 of his affirmation affirmed on 4th January 1998, it is, in my view, reasonably arguable that the fact that the shares had been misappropriated was concealed from him. It is reasonably arguable that the Plaintiff can rely on S. 26(1) of the Limitation Ordinance to postpone the period of limitation. This is a matter no doubt the Plaintiff can plead more fully to in the reply should the Defendant plead a defence of limitation. It is not a plain and obvious case for striking out those claims.

12. As regards the negligence claim, however, I am of the view that a very clear case has been made out that the claim in negligence is statute barred. S. 31 of the Limitation Ordinance makes it plain that a claim of negligence shall not be brought after the expiration of (a) six years from the date on which the cause of action accrued or (b) three years from the date of knowledge if that period expires later than the said six-year period. The relevant knowledge is the knowledge required for bringing an action for damages in respect of the relevant damage. The six-year period began to run from 11th January 1991 and the three-year period from 11th May 1991. In either case, the claim for damages for negligence is very clearly, in my view, statute barred and should be struck out. Such claim should be dismissed.

13. Apart from the negligence claim, this is not a plain and obvious case for employing the summary power to strike out and dismiss the Plaintiff's claims. I do not think this is an appropriate case for an O. 14A determination as sought in the Defendant's summons dated 22nd June 1998. The facts are in dispute and the question of limitation and whether or not the period of limitation ought to be postponed is sensitive to the facts.

14. I would allow the appeal in part by striking out the pleading as regards the negligence claim and dismiss such claim. Save for that, the master's order is to stand.

15. As far as the cross-appeal is concerned, S. 35(6) of the Limitation Ordinance and O. 20, r. 5(5) permits the court to allow an amendment the effect of which is to add a new cause of action if such new cause 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. The facts on which the cause of action in detinue are based are, in my view, substantially the same as the facts in which the existing cause of action in conversion is founded. There is, of course, the additional requirement of the demand in the claim for detinue. I would allow the cross-appeal.