TONY WONG CHUN LOONG v. JADEMAN (HOLDINGS) LTD. AND OTHERS

Headnote

Civil practice - Indorsement of claim - Statement of claim pleading a different cause of action - Ord. 15, r. 18(2).

Abuse of process of the Court - what constitutes.

Damages - claim of - based on damage as a result of obligation to pay legal costs - not a damage recognised by law.

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J U D G M E N T

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Hon. Yang, C.J.:

1. This is an appeal by D1 and D2 against the order made on the 14th May 1991 by Master Cannon in respect of the plaintiff's Indorsement of Claim and the Statement of Claim.

2. By the Indorsement of Claim, as amended on the 17th April 1991, the plaintiff prings the action as a minority shareholder in D1 and on behalf of D1 in respect of wrongs done to D1 by D3 to D6 in respect of three acts which are alleged to amount to an abuse of process of the Court. Where is no allegation that D1 and D2 were the tortfeasors. The plaintiff claims in his personal capacity (i) damages against D1 and D2 for abuse of process of the Court, (ii) damages against D1 and D2 for unlawful and wrongful interference with an agreement between the plaintiff and Arbus Incorporated ("Arbus") which agreement is contained in or evidenced by a letter ("the Facility Letter") dated the 28th June 1990, (iii) damages against D3, D4, D5 and D6 for unlawful conspiracy to procure the abuse of process of the Court by D1 and D2, (iv) interest, and (v) costs.

3. It will be noted that the Indorsement of Claim was amended pursuant to leave granted by Master Cannon by adding a claim for unlawful interference, and whilst it is not explained here how the Facility Letter came about and what connection it had with the allegation of abuse of process, the situation is made clear in the Amended Statement of Claim.

4. Another point to be noted is that the plaintiff's claim here is based on wrongs done by D3, D4, D5 and D6 to D1. It is therefore a little difficult to see how a claim for damages could be made against D1 and D2 for a tort which they are not accused of. Indeed the allegation is that D1 was the victim. The claim against D3 to D6 for unlawful conspiracy does not affect D1 and D2.

5. Before coming to that part of the Master's order appealed against, it is necessary to summarise the Amended Statement of Claim.

6. D1 is a company engaged in the publishing of comics and investment holding. D2 is a wholly-owned subsidiary of D1. The plaintiff is a minority shareholder of D1 and until his resignation on 14th June 1989 that company's Chairman. D3 to D6 were until their removal on 28th September 1990 directors of D1.

7. By para. 5(b) it is pleaded that as D3 to D6 are no longer in control of D1, the plaintiff "abandons the part of this action which was brought on behalf of D1".

8. At all material times just over 225 million shares of D1 beneficially owned by the plaintiff ("the said Shares") were mortgaged to three named creditor companies for the purpose of securing the indebtedness of the plaintiff to each of them. In August 1989, by two documents, collectively called the Loan Documentation, both dated 10th August 1989 and executed by a company formed by D3 and D4 called Tabor, it was agreed that Tabor should lend the plaintiff up to HK$117 million to enable him to be discharged from his indebtedness to the thret named creditor companies: paras. 7 and 8.

9. Since November 1989 there had been a dispute between D3 and D4 on the one hand and the plaintiff on the other about the Loan Documentation, the voting rights of the said Shares, redemption of the said Shares, and ultimately the control of D1: para. 9. It is also pleaded that whilst Tabor attempted to exercise its power to sell the said Shares, on 15th February 1990 the plaintiff informed Tabor of his intention to redeem all of the said Shares by repaying the moneys he owed to Tabor: paras. 10-13.

10. By para. 14, it is pleaded that D3 and D4 well know that should the plaintiff be able to redeem the said Shares, ultimately the contrel of D1 would be reverted to the plaintiff. So in order to retain their control of D1, D3 to D6, at the instructions of D3 and D4, had "by divers means" attempted to prevent and/or delay the redemption by the plaintiff.

11. The Amended Statement of Claim then goes on to state that "D3 to D5 procured the board of D1 ... to cause D1 and its subsidiary companies to commence legal action against the plaintiff" in High Court Commercial List No. 15 of 1990, and a world-wide Mareva Injunction was obtained to prevent the plaintiff from redeeming the said Shares. Subsequently the Mareva Injunction was varied by the Court of Appeal allowing the plaintiff to borrow from Arbus for the sole purpose of redeeming the said Shares from Tabor. By the Facility Letter dated 28th June 1990 Arbus offered to lend the plaintiff such sum as may be necessary for the sole purpose of enabling the plaintiff to redeem all outstanding security over the said Shares in favour of Tabor, which offer was duly accepted by the plaintiff. The plaintiff then made three tenders to Tabor to redeem the said Shares, all of which were rejected by Tabor "without any lawful justification": paras. 15-19.

12. Then follow three paragraphs which warrant quoting in full.

"21.     As a result of the matters aforesaid, the 3rd and 4th Defendants realised, as at 31st July 1990, that notwithstanding their previous attempts to prevent or delay the redemption of the said Shares by the Plaintiff from Tabor, there would not be any other legal means directly preventing the Plaintiff from redeeming the said Shares from Tabor in the event of an Order being made in favour of the Plaintiff at the hearing on 1st August 1990 before the Hon. Mr. Justice Godfrey in H.C.M.P. No. 424 of 1990. In order to indirectly prevent the Plaintiff from redeeming the said Shares, the 3rd, 4th, 5th and 6th Defendants procured the 1st and 2nd Defendants to take the actions described in paragraphs 22 and 23 below.

22.     At 8.45 a.m. on 1st August 1990 (before the hearing scheduled to be held before the Hon. Mr. Justice Godfrey at 10.00 a.m. on the same morning in H.C.M.P. 424 of 1990), the 2nd Defendant applied ex parte on notice to the Hon. Mr. Justice Kaplan, the Duty Judge at the time, in the Action for an interlocutory injunction restraining Sing Tao Holdings Limited, Sing Tao Limited and Sally Aw Sian, their servants or agents or any of them from procuring or permitting or guaranteeing or otherwise securing the advance of monies to or on behalf of Arbus for the purpose of lending, advancing or securing any loan or advance to the Plaintiff for the purpose of the acquisition or redemption of shares in the capital of the 1st Defendant company and obtained an interlocutory injunction to that effect ("the said Interlocutory Injunction"). Although the application was represented as being made "ex parte on notice", notice of such application and the date and time of the hearing was only given to Messers. Deacons, solicitors for Sing Tao Holdings Limited, Sing the Limited and Arbus at 9.51 p.m. on 31st July 1990.

23.     The said Interlocutory Injunction was granted upon terms, inter alia, that the order granting the injunction ("the Order") do lapse if by 4.30 p.m. on 1st August 1990 the 1st Defendant had not given an undertaking to abide by any order that the Court may make as to damages should the defendants in that action, namely, (1) Sing Tao Holdings Limited, (2) Sing Tao Limited, (3) Arbus and (4) Sally Aw Sian ("the Defendants in the Ada Action") suffer any by reason of the Order, which in the opinion of the Court, the 2nd Defendant ought to pay. An undertaking to this effect was duly given by the 1st Defendant thus enabling the Order to continue. A Writ of Summons was also issued on the same day in that action known as High Court Action No. A5236 of 1990 ("the Ada Action").

13. Para. 24 plends that the Interlocutory Injunction "effectively" prevented Arbus from advancing any loans to the plaintiff under the Facility Letter; as a consequence the plaintiff was prevented from redeeming the said Shares.

14. On 9th August 1990 the plaintiff obtained leave to be added as a defendant in the Ada Action: para. 25.

15. The matter then came before Liu, J. who discharged the Interlocutory Injunction thereby the plaintiff was able to and did redeem all the said Shares: para. 27.

16. By para. 28, the plaintiff says that (i) the institution of legal proceedings by D2 in the Ada Action, (ii) the obtaining by D2 of the Interlocutory Injunction ex parte before Mr. Justice Kaplan on 1st August 1990 in the Ada Action, and (iii) the giving of the undertaking of D1 as referred to in para. 23 of the Amended Statement of Claim to continue the said Interlocutory Injunction was abuse of process of the Court, maliciously employed for the ulterior purpose of preventing, impeding and/or delaying the plaintiff from redeeming the said Shares charged to Tabor.

17. The plaintiff further says, at para. 29, that the matters pleaded in paragraph 28 constituted unlawful and wrongful interference of the Facility Agreement by D1 and D2.

18. Lastly, the plaintiff says he has suffered loss and damage in respect of (1) the difference in the amount of interest under the Loan Documentation and the Facility Agreement from 1st to 21st August 1990, and (2) legal and other professional fees costs and expenses incurred in the Ada Action. No calculation or amount of the loss or damage is given.

19. Against D1 and D2 the plaintiff claims damages for abuse of process and/or wrongful interference with the Facility Agreement.

20. It is conceded by counsel for the plaintiff (the respondent) that if the claim based on abuse of process fails, the claim for wrongful interference must also fail.

21. I do not propose to deal with counsel's submissions in any detail, suffice it to say I acknowledge the assistance they have given me and I have considered their arguments with care.

22. Now I come to that part of Master Cannon's order which is made the subject matter of this appeal. Firstly, the learned Master declined to strike out the claims against D1 and D2, not even the claims in respect of legal costs" in the Ada Action. Secondly, D1 and D2 complain that the Master should not have granted leave to the plaintiff to amend the Writ by adding a claim for unlawful interferance. Thirdly, they appeal against the Master's order deleting the words "the 3rd, 4th, 5th and 6th defendants procured in para. 21 of the Amended Statement of Claim (supra), and the words "to take" and substituting the word "took" in the same paragraph. Lastly, there is an appeal against the order for costs to be in the cause with certificate for counsel. No oral arguments were addressed, nor is the question of costs dealt with in the skeleton arguments of the appellants' counsel.

23. D1 and D2 now seek an order that the part of the decision of the learned Master appealed against be set aside or varied; that the claims of the plaintiff against D1 and D2 be struck out, alternatively, the claims against D1 and D2 for aests in the Ada Action be struck out.

24. Counsel for the appellants submits that the grounds of appeal could be grouped into three main headings, viz. - (I) The plaintiff's claim against D1 and D2 cannot be converted from an abuse of process committed against D1 to an abuse committed by D1, as has been done by the Master's order deleting the words in para. 21 of the Amended Statement of Claim alleging that D3 to D6 "procured" D1 to commit the abuse. (II) The pleadings do not disclose any abuse of process: see Grainger v Hill (1838) 4 Bing. NC 212, at 221, followed in Speed Seal Products Ltd. v Paddington (1986) 1 All ER 91, at 97-98. (III) The claim for damages based on expenses incurred as legal costs, etc. is misconceived: see Quartz Hill Consolidated Gold Mining Co. v. Eyre (1883) 11 QBD 674, at 682, 688-690, Berry v British Transport Commission (1962) 1 QB, 306, at 316, 320.

(I)    Wrong to or by D1

25. The Amended Indorsement of Claim pleads "wrongs done to the 1st Defendant company by the 3rd to 6th Defendants, its directors". Neither D1 nor D2 was therefore alleged to be a tortfeasor. But the prayer claims damages against D1 and D2 for abuse of process of the Court. Without amending the Indorsement, the Amended Statement of Claim now alleges that D1 and D2 committed the abuse: see para. 21 (supra). This claim is such a fundamental departure from that which is pleaded in the Amended Indorsement as to be tantamount to an entirely new cause of action based on new facts not disclosed in the Amended Indorsement of Claim. Clearly it does not fall within the exception envisaged in 0.18 r.15(2).

(II)     Was there an abuse of process?

26. Grainger v Hill was discussed in Metall & Rehstoff v Donaldson, Inc. (1989) 3 WLR 563. There Slade, L.J. (at 612 B) held that a person alleging an abuse of process must show that the predominant purpose of the other party in using the legal process (in our case D1 and also D2, who was plaintiff in the Ada Action) has been one other than that for which it was designed and that as a result he had caused him damage. Counsel for the plaintiff contends that the ostensible purpose of the Ada Action was to protect the 2,000 shares in Sing Tao Holdings, Ltd. (a defendant in the Ada Action) held by Ada whilst the true purpose was to prevent the plaintiff from redeeming the said Shares. This argument is not revealed in the pleadings, there being no allegation as to what Ada was actually claiming in that action. The truth of the matter is that Ada by that action sought to prevent the plaintiff from redeeming the said Shares, which was in fact what they wished to achieve. No "ulterior purpose" has been shown to support a claim based on abuse of process: this is fatal to the plaintiff's action. There is no cause of action. It has already been seen that the claim for abuse and that for wrongful interference stand or fall together.

(III)     Obligation to incur legal costs as damage

27. I am content to follow Quartz as authority for saying that the obligation to pay legal costs is not damage: see pp. 682-683 per Brett, M.R. Bowen, L.J. said (at p. 690) that if costs had been properly incurred, the winning party would have been awarded his costs any way. If costs had not been properly incurred - if there had been extra costs, then he ought not to receive them in a subsequent action. In Berry, Ormerod, L.J. said this (at 316):

    "Diplock J. in his judgment discussed at some length the position in the event of an award of costs in a civil action, and he cited the well-known passage from the judgment of Bowen, L.J. in Quartz Hill Consolidated Gold Mining Co. v Eyre. There can, I think be no doubt that costs incurred in excess of the sum allowed on taxation cannot be recovered as damages. As Bowen, L.J. said in the passage cited by Diplock, J.: 'If the judge refuses to give him costs, it is because he does not deserve them: if he deserves them, he will get them in the original action.' Considerable doubt has been expressed from time to time as to the reality of that view, but it is well established and in any event it is not for this court to disturb it."

28. Here the plaintiff's claim is for "legal and other professional fees costs and expenses incurred in the Ada Action". I accept the contention of the appellants' counsel that there is in reality nothing more than costs. The obligation to pay those expenses is therefore not damage.

29. For the reasons given above, I allow the appeal by making the following orders: -

(a)    The Amended Indorsement of Claim as well as the Amended Statement of Claim are struck out as showing no cause of action based on abuse of process of the Court.

(b)    It follows that the additional claim based on unlawful interference is also struck out.

(c)    As the deletion of the words in para. 21 of the Amended Statement of Claim by order of the learned Master fundamentally altered the plaintiff's cause of action as compared with that which is pleaded in the Amended Indorsement of Claim, the order is set aside.

(d)    Costs in the proceedings before the Master must in the circumstances go to the appellants, namely, D1 and D2.

30. Costs of the whole action as well as the appeal to the appellants.