SO YUE BUN v. GLORY SKY GLOBAL MARKETS LTD AND ANOTHER

CACV 237/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 237 OF 2015

(ON APPEAL FROM HCA 1042/2015)

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REASONS FOR JUDGMENT

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Hon McWalters JA (giving the reasons for judgment of the court):

Introduction

1.  On 12 May 2015 the plaintiff filed a Writ of Summons in the High Court against the two defendants.  It had attached to it a 25 page Statement of Claim (“SOC”).  The 1^st defendant is, essentially, a stock broking company licenced by the Securities and Futures Commission (“SFC”) to deal in securities and other financial products.  The 2^nd defendant is the Chairman of the Board of Directors of the 1^st defendant.  The plaintiff was a customer of the 1^st defendant and his contractual relationship with the 1^st defendant was the subject of a Client Account Agreement dated 6 June 2012.  Pursuant to this agreement the plaintiff operated with the 1^st defendant an individual trading account with margin lending facilities in respect of dealing in futures contracts and leveraged foreign exchange trading.

2.  On 18 March 2015, the 2^nd defendant caused all open futures and foreign exchange contracts in the plaintiff’s account with the 1^st defendant to be closed out, causing total loss and damages to the plaintiff of US$367,347.50.[1]

3.  By paragraph 67 of the SOC the plaintiff’s claims against the two defendants are said to be based on:

“(a) deceit;

(b) conspiracy to defraud;

(c) breach of the [Client Account] Agreement including breach of fiduciary duties, statutory, equitable or tortious duties;

(d) money had and received;

(e) conversion;

(f) constructive trust.”[2]

4.  By summons dated 9 July 2015 the defendants sought the following orders under Order 19(1)(a), (b) and (d) of the Rules of the High Court and under the court’s inherent jurisdiction:

“1. The Statement of Claim dated 12 May 2015 (the ‘SOC’), insofar as it relates to the 2^nd Defendant, be struck out and the action be dismissed on the grounds that:

(1) it discloses no reasonable cause of action;

(2) it is scandalous, frivolous or vexatious; or

(3) it is otherwise an abuse of the process of the court.

2. Further, that the SOC, insofar as it relates to the 1^st Defendant, be struck out on the grounds as set out in paragraph 1(1) to 1(3) above, and the further ground that it prejudices, embarrasses or delays a fair trial.”

5.  Paragraph 1 of this summons relates to the 2^nd defendant only and asks, in respect of him, that the SOC “be struck out and the action be dismissed.”  Paragraph 2 of the summons relates to the 1^st defendant only and only asks, in respect of him, that the SOC “be struck out”.

6.  In the alternative the summons sought determinations on questions of law under Order 14A, rule 1, in respect of a number of different issues arising from the SOC.

7.  The summons was heard by Deputy High Court Judge Seagroatt (“the judge”) on 22 September 2015.  He granted the defendants’ application and ordered that the SOC be struck out and dismissed the action against both defendants with costs.

8.  The plaintiff appealed this order of the judge.  At the hearing of the appeal we allowed the appeal to the extent of setting aside the order of the judge dismissing the action as against the 1^st defendant, and gave leave to the plaintiff to amend his SOC by filing the Replacement SOC (see paragraph 13 below).  We further ordered that the costs order of the judge should be affirmed and that the 1^st defendant should have the costs of the appeal on party and party basis to be taxed if not agreed.  We said we would hand down our reasons for doing so at a later date and this we now do.

The judgment of Seagroatt, DHCJ

9.  The judge commenced his judgment by characterizing the SOC as “a rambling, disordered, incoherent and, in some respects, unintelligible document of 25 pages which offends all the basic criteria for a statement of claim…”  He employed equally strong language when describing the task required of him by the plaintiff in finding within such pleadings a proper cause of action.  He said:

“In effect, it verges on the insulting to the court when it expects a court to endeavour to sift through such a mass of extraneous and muddled material and identify the germ of a civil cause of action.”

10.  The judge referred to the plaintiff counsel’s submission that the plaintiff should be given the opportunity to provide particulars in respect of some of the most important claims.  In rejecting this request the judge said that he was not satisfied that the SOC “should stand”.  He then concluded:

“Accordingly, all claims are struck out. The Statement of Claim as a whole will therefore be struck out, and the action I dismiss. The very formulation of the matters in this Statement of Claim I consider to be an abuse of the court process.”

The appeal

11.  The appeal is limited to only the judge’s striking out of the SOC and dismissal of the plaintiff’s action against the 1^st defendant. The order that the plaintiff seeks from the Court of Appeal is for the judge’s ruling and order to be set aside “with leave to the Plaintiff to file and serve an RHC-compliant SOC within 7 days, plus an order that the Plaintiff’s costs here and below be paid by the 1^st Defendant.”

12.  Part of the plaintiff’s complaint is that the judge should have allowed the plaintiff the opportunity to amend the SOC to remove its embarrassing features and provide the missing particulars.

Discussion

13.  Prior to the hearing of the appeal the plaintiff presented the court with a draft Replacement Statement of Claim (“Replacement SOC”) which set out the case that the plaintiff now wishes to pursue against the 1^st defendant in an action only against the 1^st defendant.[3]

14.  The 1^st defendant accepts that this Replacement SOC contains a cause of action which, the court cannot dispose of summarily without seeing the 1^st defendant’s response.  Consequently, the 1^st defendant does not oppose the appeal to the extent that leave be given to the plaintiff to file the Replacement SOC. 

15.  That left as the only outstanding matter the issue of costs.  The 1^st defendant submitted the costs order of the judge should be upheld and that it should be awarded the costs of the appeal on an indemnity basis.

16.  Mr Barlow SC, for the plaintiff, argued that costs should follow the event and asked that the plaintiff be awarded the costs of the appeal and that the judge’s order below be set aside.  Were we against him, he submitted that in respect of the hearing below, the 1^st defendant should only receive the costs of the hearing and not, as the judge ordered, the costs of the action. 

17.  We do not agree that the costs order of the judge should be set aside.  We note that the plaintiff did not challenge the judge’s order as it related to the 2^nd defendant and there is no doubt that the robust comments of the judge in respect of the SOC were largely justified.  We also note that at the hearing of the summons the plaintiff did not place before the judge a replacement or amended statement of claim.  

18.  Furthermore, in the present case there is little meaningful difference, in terms of costs, between the action and the costs of the striking out summons.  The filing of the striking out summons was prompted solely because the action was initiated on a defective SOC. 

19.  As to the costs of the appeal we are of the view that they should be awarded to the 1st defendant.  The 1^st defendant’s concession was triggered by the plaintiff filing its Replacement Statement of Claim.  Immediately it did so the 1^st defendant very responsibly acknowledged that the proper course it should adopt was to no longer oppose the appeal.  But the plaintiff left the filing of its Replacement Statement of Claim until only a matter of days before the hearing of the appeal.  The sad history of this litigation is entirely the fault of the plaintiff who should have recognized at an early stage that he had to get his house in order but this he singularly failed to do.  Nevertheless, we are not persuaded that this is an appropriate case for costs to be taxed on an indemnity basis and decline to so order.

Conclusion

20.  For these reasons we allowed the appeal to the extent of setting aside the order of the judge dismissing the plaintiff’s action against the 1^st defendant and ordered that the plaintiff have leave to amend his SOC by filing the Replacement SOC.  We further ordered that the costs order of the judge should be affirmed and that the 1^st defendant should have the costs of the appeal on a party and party basis, to be taxed if not agreed.