SUN FOCUS INVESTMENT LTD v. TANG SHING BOR AND ANOTHER

HCA538/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 538 OF 2007

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J U D G M E N T

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1.  On 5 October, in this action, I acceded to the Defendants’ application to strike out the entirety of the amended statement of claim of the Plaintiff.  However, I did not dismiss the action.  Effectively, I gave the Plaintiff liberty to issue an application to file a fresh statement of claim within 14 days, failing which, the action shall stand dismissed.

2.  The Plaintiff has not sought leave to appeal against my judgment striking out the amended statement of claim; rather, it is the Defendants who have sought leave to appeal against my refusal to strike out the action.  In other words, the Defendants, having succeeded in striking out the amended statement of claim, complain that I have not gone far enough.

3.  Today, there are two summonses before me.  One is the Defendants’ application for leave to appeal against my refusal to dismiss, and also leave to appeal against my not making an order for security for costs in favour of the Defendants.

4.  The second summons is the Plaintiff’s summons for leave to file a fresh statement of claim.  It was originally supposed to be returnable before a master but it has been directed to be heard by me as well, immediately after the result of the application for leave to appeal.

5.  There is, first of all, an issue as to whether or not leave is required for there to be an appeal against my refusal to dismiss at all.  At first, Mr Calvin Cheuk for the Defendants tried to pray in aid of Order 59, Rule 21(1)(a), Rule 21(2)(b) and Rule 21(4) in support of an argument that leave is not required for an appeal against my refusal to dismiss the action.  However, as a result of exchange between the Bar and the Bench, he had not pressed the argument further, to the effect that leave was not required, and I say no more on the matter except that I proceed on the basis that leave is required.  I am unable to find any rule which stipulates that leave is not required in the case of a refusal to dismiss an action consequential upon an order striking out a pleading.

6.  I now come to the merits of the application for leave to appeal.  First of all, I deal with the application for leave to appeal against my refusal to dismiss.  I must say that, on both applications for leave to appeal, the arguments currently pursued before me have not been, or at least have not seriously been pursued at the original hearing.  Be that as it may, I am prepared to entertain argument because if arguable grounds of appeal can be sustained, I believe that the fact that they have not been seriously pursued before me should not, at least on the facts of this case, preclude leave being granted.  Those arguments do not turn on any new facts or evidence that the parties could have adduced.

7.  The argument of Mr Cheuk initially, on paper, is that I should have regard to certain observations by the Court of Final Appeal in the decision of Mak Shiu Tong v Yue Kwok Ying [2004] 7 HKCFAR 228 at page 242, paragraph 41, observations by Ribeiro J.  I had initially understood, at least on paper, the Defendants’ argument to be that because the proposed amendments have not been articulated or formulated before me, then somehow I was wrong, or arguably wrong in making the order that I had made.

8.  To that argument, it can only be said that, as I indicated in my original judgment, upon striking out a pleading, it does not necessarily follow that an action should be dismissed.  There are occasions when the court, if it sees that a viable cause of action could conceivably be pleaded, for the court to strike out a pleading and yet allow the offending party, usually the Plaintiff, a chance to revamp its pleadings.  If precedent is required for this well-known course of action, I had referred the parties to the Court of Appeal decisions of Empire Engineering Company Limited v John Lok & Partners Limited, CACV128/1989, dated 16 February 1990, as well as the more recent one in Guang Xin Enterprises Limited v Kwan Wong Tan & Fong, CACV263 and 292/2002, judgment date 13 March 2003, where the Court of Appeal adopted and/or sanctioned a course of action to this effect.

9.  By definition, if a court accedes to an application to strike out but refuses to dismiss and give a chance for the offending party to recast the pleading, the amendments would necessarily not be before the court at the striking-out stage.  But the court is not deciding anything at that time.  The court is not granting blanket leave for the offending party.  The court is only giving a timetable for the offending party to get on with issuing any summons to amend.  If the proposed new pleading still offends the rules of pleading, then it would be refused and the matter is as simple as that. 

10.  As the argument unfolded before me orally today, it seemed that the real emphasis of the Defendants is really that, in the exercise of my discretion - and it is accepted that I have a discretion either to refuse to dismiss, or to dismiss - the argument is that, in the exercise of my discretion, having taken into account the fact that the entire pleading has been struck out and that the proposed pleading is said to be something which is substantially different from the original pleading, then the proper course that I should adopt in the exercise of my discretion would be to dismiss the entire action and let the Plaintiff start all over again, because it is said that it will be unfair, clumsy and unsatisfactory for the old action to continue and then for the Defendants to get into difficulties in ascertaining what bits of the existing work can be retained or resuscitated, to be used for the recast pleading.

11.  These are all discretionary matters that I have considered at the stage when considering whether or not the pleading should be struck out and the action dismissed.  Even if these matters are now raised before me by way of grounds of appeal, I do not find them arguable at all. 

12.  The writ as originally issued is a specially endorsed writ with a statement of claim attached, so any application to recast the statement of claim is effectively an application to amend the writ as well and, therefore, there can be no argument that somehow the amended statement of claim does not fit into the writ as originally put forward.

13.  In any event, if there are any problems about limitation, such as the newly recast pleading is a different claim from the old pleading and somehow the new claim is time-barred, these matters can all be raised at the time when the application to file the fresh statement of claim is argued.  In other words, the course that I have adopted from the case management point of view is, in my view, the most sensible one, leaving open all possible arguments to be argued at the time when leave to file the fresh statement of claim is to be made.

14.  As to the argument that the Defendants might find themselves embarrassed or in difficulty in ascertaining which bits of the old work done can be usefully fit into the new work, I find that of little substance.  A perusal of the papers in this case will show that there should be little difficulty in identifying which part of the work already done can fit into the newly cast claim, if the claim is to be recast.

15.  In any event, I cannot see how any such difficulties can go away if a new action is commenced.  The Defendants would still be in the same difficulty in having to reconsider what they have done previously and to see whether or not any of the old work can be adopted to meet the new writ.  So in other words, if there is any difficulty in deciding whether any old work can be used to meet the new claim, such difficulties would exist whether or not the new claim is made by way of issuing a statement of claim under the old action, or issuing a new writ.  That is not to say I accept that there are any difficulties at all, but be that as it may, that is my decision.

16.  The Defendants accepted that if I were to strike out, dismiss the old action, with costs, then the work done in the old action would have to be paid for by the Plaintiff and there is, of course, then a risk that the Defendants would have benefited because a lot of the old work done could well be reused in opposing the new claim.

17.  In trying to diffuse or deflect the possible unfairness of such a course of action, namely, to dismiss the old action with costs, Mr Cheuk suggested that perhaps the court can insert some costs order in its order for dismissal to cater for that.  Suffice it for me to say that I do not see how any possible costs order made in the old action for dismissal can cater for any injustice that might occur. 

18.  Therefore, I do not find the proposed grounds of appeal in relation to the refusal to dismiss to be arguable and therefore I refuse leave for that application.

19.  I now turn to security for costs.  The argument of the Defendants for leave to appeal against my order not making security for costs is that it would be unfair because the Plaintiff had come and it had failed to put forward materials before me to uphold the statement of claim, and somehow the Defendants argued that it would be unfair for them to “suffer” by having no order for security for costs.

20.  I confess that I had great difficulties in understanding why it is said that the Defendants would “suffer” in not having an order for security for costs.  As I had tested with Mr Cheuk, had I dismissed the entire action on 5 October, then no doubt the Defendants would have got all their costs in the action incurred so far, but they would then be unprotected completely by security.  That is a consequence of their not having applied for security for costs earlier.

21.  Secondly, under my order, if the Plaintiff had applied successfully for leave to file a fresh statement of claim, the Defendants would then be at liberty to issue a fresh application for security, and if it is able to substantiate the grounds for security under the newly cast statement of claim, then it will get security and it will then be protected, and it will then not “suffer”.

22.  So the question arises as to how it is said to be suffering.  The only possible gap, or lacuna, which I can think of, but which actually is not seriously pursued by Mr Cheuk, is this:  if the Plaintiff were to issue a summons to issue a fresh statement of claim and then the Defendants were to oppose it, and successfully oppose it, then it may well be said that the Defendants’ costs in opposing the Plaintiff’s application for leave to issue a fresh statement of claim would be unprotected by any security for costs. 

23.  But those costs, if any, may or may not be covered by a self-standing application for security for costs.  I am not saying that there is necessarily jurisdiction to apply for security for costs for the application to issue a fresh statement of claim.  All I am saying is that the application for security for costs before me is for security for costs for the entire action, not for covering the Defendants’ costs in opposing the application to issue a fresh statement of claim.

24.  But as I said, this is really not the suffering which Mr Cheuk had impressed upon me.  The suffering that Mr Cheuk had impressed upon me is that the Defendants should not be put into a position of having to apply again for security for costs if the Plaintiff managed to successfully file a fresh statement of claim. 

25.  I confess that I cannot see how the Defendants can be said to “suffer” in having to apply for fresh security.  The old application for security is premised upon the pleadings as they then stood.  Those pleadings have gone as a result of my decision to strike out.  It would be entirely academic for me to make an order for security for costs based on issues, or supposed issues, on pleadings which are no longer in existence. 

26.  Mr Cheuk prayed in aid a passage in the Hong Kong Civil Procedure, under Order 23, at 23/3/34, to the effect that a security for costs order can be varied as a result of a change in circumstances.  I can perfectly well understand if, as a result of circumstances having changed after an order has been made, for example, the issues having been changed, the length of trial having been altered, things like that, then the amount perhaps should be altered and varied and the court, no doubt, as a matter of common-sense, would have power to vary that. 

27.  But Mr Cheuk tried to extrapolate that by saying that I should make an order for security based on the old pleading and if the statement of claim is revamped as a result of the application to file a fresh statement of claim, and if there should be any change, the burden is then on the Plaintiff to come back to seek to vary it. 

28.  In my judgment, that is a complete misapprehension of the power of the court to vary as postulated in 23/3/34.  The power to vary under 23/3/34 presupposes that an order is made initially on the basis of pleadings as they then stood, and then the configuration of the case changed maybe, and then the amount of the security would have to be altered accordingly.

29.  What Mr Cheuk is now impressing upon me is that, even though everyone knows full well that the pleading is gone and there is no longer any issue on the court file that could sustain any order for security, I should pretend that the old pleading, which I had just struck out, continues to be in place and give an order for security which everyone knows to be completely fictitious and which everyone knows does not reflect the state of the court file. 

30.  I need say no more about this argument, except to say that I refuse leave to appeal, with costs against the Defendants, to be taxed if not agreed.