LIMING CAPITAL LTD v. CLSA LTD

HCA 2055/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 2055 OF 2008

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REASONS FOR DECISION ON
RE-AMENDMENT OF STATEMENT OF CLAIM

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1.  Leave was given to the plaintiff to re-amend its amended statement of claim on the first day of trial.  Below are the brief reasons for the decision.

2.  This is a claim commenced in 2008 to sue for the outstanding balance of consultancy fee.  The defendant was the placement agent of a share placement which was completed in late 2007; the plaintiff was engaged by the defendant as a consultant in that exercise.

3.  The parts of the proposed re-amendment (“draft amendment”) where the parties’ main disagreement focused on were those pertaining to the quantum of loss.

4.  In the (then current) amended statement of claim, it was pleaded:

“… the Defendant, … in breach of the Agreement, effected a transfer of only 151,150,000 shares of A-Max to the Plaintiff, which number of shares represented only 40% of [the defendant’s] Fee … ” (para 19 thereof);

“… 151,150,000 A-Max Shares were only transferred to the Plaintiff on 10 January 2008 … ” (para 20 thereof).

The quantum of loss was essentially said to be:

“… the drop in price of A-Max Shares from 24 December 2007 to 10 January 2008 … ” (para 20 thereof).

In the prayer for relief, the total sum claim was put at about $7.9 million.

5.  In the draft amendment, the said 151 million odd shares (“the transferred shares”) were pleaded as:

“… which number of shares represented only 40% of the amount payable on the Defendant’s own calculation of the [defendant’s] Fee ... ” (para 19 thereof).

6.  The defendant complained that this amounted to a withdrawal of an admission that the transferred shares represented 40% of the defendant’s fee.  Further, it opened up the new issue of how the plaintiff’s fee was to be calculated (assuming the defendant’s liability has been established).  This would require an examination of:

(a) what “completion of the Placing” meant (a phrase used in para 19(1), draft amendment);

(b) what date was 14 business days after “completion of the Placing”;

(c) what the date for calculating the number of shares was (on the date of “completion of Placing”, or as at 14 business days thereafter, or on the date of actual share transfer/delivery).

It would appear sub-para (a) and (b) are inter-related, in that once a conclusion has been reached for one, a conclusion for the other will be a matter of mathematical calculation.

7.  The defendant further complained that the new issue would require new evidence to be gathered, and pleading to be prepared, by the defendant.

8.  None of the defendant’s above complaints was of sufficient weight to justify an adverse finding against the plaintiff.

9.  The first complaint (withdrawal of admission) (para 6 above) is misconceived.  A fair reading of the amended statement of claim showed that para 19 and 20 thereof were related, and should not be understood separately.  What in essence was the plaintiff’s claim was that:

(1) the defendant had refused to duly perform its payment obligation by transferring only a quantity of shares which could at most amount to 40% of the defendant’s fee (as opposed to the agreed 50% of the defendant’s fee) (para 19 thereof);

(2) further to the above, because the defendant had delayed in delivering the said shares to the plaintiff, loss had resulted because the share price had dropped between the due date for share delivery and the date of actual share transfer (para 20 thereof).

(see also the quotes in para 4 and 5 above)

10.  What could properly be regarded as a change of substance was the manner in which the quantum of loss was to be calculated (and correspondingly the amount being claimed).  In the amended statement of claim, it was pleaded as the stock price drop from 24 December 2007 to 10 January 2008 (para 4 above).  In the draft amendment, it was pleaded in effect as the difference between the placement price and the price on the date of delivery.

11.  But this is a matter which ultimately turned on the construction of the contractual terms (be it a verbal contract (as the plaintiff asserted in this action), or a written contract (as the defendant asserted in this action)) and is very much a matter of construction, rather than one of evidence.  Thus, the defendant’s complaint that new evidence would be required (para 7 above) was unfounded.

12.  Apart from the above, and besides a semantic difference, para 19, draft amendment (especially para 19(2) (part of which has been quoted above)) was in effect a repeat of para 9(1) above.  Similarly, para 20, draft amendment was in substance not fundamentally different from para 20, amended statement of claim (para 9(2) above).

13.  As for new pleading (part of the defendant’s second complaint) (para 7 above), when leave to re-amend was given to the plaintiff, leave to make consequential amendments has also been given to the defendant.

14.  By reason of the above matters, no irreparable prejudice was likely to be caused to the defendant.  Despite this being a very late application for leave to re-amend, this was a case where exceptionally leave to do so should still be given.