ALBERT E. SNELLINK v. DATA GENERAL HONG KONG LTD AND OTHERS

1988, A3658

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

------------------

----------------------

J U D G M E N T

----------------------

1. This is an appeal from a decision of Master O'Donnell made on the 21st March 1989 when he refused an application by the 1st and 2nd defendants to strike out the amended endorsement on the writ and amended statement of claim on the grounds that a reasonable cause of action had not been disclosed.

2. The plaintiff issued a writ against the three defendants on the 20th May 1988 in which he has claimed damages for breach of contract on the part of the three defendants with reference to his employment. Damages are also claimed for breach of a collateral contract between the plaintiff and the 3rd defendant by virtue of representations and warranties made by the 3rd defendant on the 24th April 1986 and other dates, that the corporate structure of the 3rd defendant, including the 1st and 2nd defendants, would include the post of Regional Manager of Far East Marketing or equivalent status and that the plaintiff would fill that post for a minimum period of two years save for misconduct. Damages are claimed against the 3rd defendant for reckless or negligent mis-statement whilst a separate claim for damages has been made against the 1st, 2nd and 3rd defendants for conspiracy to induce a breach of contract between the plaintiff and the 3rd defendant.`

3. By the amended statement of claim, it is pleaded that the 1st and 2nd defendants are Hong Kong subsidiaries of the 3rd defendant which are owned and managed by the 3rd defendant. The negotiations for the employment of the plaintiff by the 3rd defendant were carried out in February 1986 with employees of the 3rd defendant. By paragraph 15 of the amended statement of claim, it is alleged that the plaintiff was assigned by the 3rd defendant to the 1st and 2nd defendants but that he was, at all material times, an employee of the 3rd defendant subject to the directions of the directors and the corporate executives of the 3rd defendant. By paragraph 16, the plaintiff took up his duties in Hong Kong on the 1st July 1986 under the title of Regional Manager of Far East Marketing and alternatively, Managing Director/Far East Data General. Paragraph 18 pleads that at all material times it was agreed that any sums expended by the plaintiff as business expenses recently incurred and in the interests of the 1st, 2nd or 3rd defendant would be reimbursed to the plaintiff. By paragraph 22, the plaintiff claims reimbursement for a business expense for joining the Aberdeen Marina Club which he claims was to be met by the 1st, 2nd or 3rd defendants. By paragraph 24, the plaintiff alleges that on the 3rd August 1987 while he was at the 3rd defendant's headquarters in Massachusetts U.S. A., he received a letter dated the 31st July 1987 signed on behalf of the 2nd defendant, informing him that the position of Area Manager, Data General Asia Marketing had been eliminated and that Data General Hong Kong, was serving notice of its election to proceed under section 7 of a Foreign Assignment Agreement dated the 24th April 1987 to terminate the assignment. He was also told that there was no other position with the 3rd defendant or the Data General group available so that he would receive three months' pay in lieu of notice together with certain other benefits.

4. Paragraph 49 of the amended statement of claim pleads a conspiracy by the 3rd defendant with the 1st and 2nd defendants to induce a breach of contract between the 3rd defendant and the plaintiff to injure the plaintiff by eliminating the post of Area Manager/Data General Asia Marketing by the 2nd defendant's earlier notice terminating the plaintiff's employment with the 3rd defendant or alternatively, the Data General group generally and thereafter withholding certain contractual benefits which are pleaded in paragraph 27.

5. It was submitted by Mr Huggins, counsel for the 1st and 2nd defendants, that as the allegations in the amended endorsement of the writ with regard to the plaintiff's employment with the 1st and 2nd defendants had not been repeated in the amended statement of claim and that the contract was with the 3rd defendant alone, the allegations were deemed to have been abandoned and should therefore be struck out. Mr Huggins went on to argue that the 3rd defendant could not conspire with the 1st and 2nd defendants to induce itself tobreak a contract between itself and the plaintiff because it would involve an allegation that the 3rd defendant intended to break its contract with the plaintiff by obtaining the 1st and 2nd defendants' agreement that they should combine with the 3rd defendant to induce the 3rd defendant to do so. He submitted that this contention is absurd for the 3rd defendant could not be induced by itself and the 1st and 2nd de defendants, because the 3rd defendant would need no inducing as it would have already decided to break the contract when it combined with the 1st and 2nd defendants. Alternatively, there could be no persuasive communication, persuasive communication being an essential ingredient of the tort of conspiracy, by the alleged conspirators, the 1st, 2nd and 3rd defendants, since the 3rd defendant as already persuaded. Further, there is no allegation of knowledge by the 1st and 2nd defendants of the existence of the relevant contract of employment between the plaintiff and the 3rd defendant, which knowledge is material, and an essential averment for a cause of action that cannot be inferred from other facts pleaded in the statement of claim.

6. Neither the 1st nor 2nd defendants could have eliminated the post of Area Manager for they are separate legal entities, nor was it alleged that they persuaded the 3rd defendant to do so. In respect of the service of the notice of termination, no liability could be attached to the 1st defendant whilst the 2nd defendant was acting as agent for the 3rd defendant, so that it was the 3rd defendant's act which terminated the contract. It is therefore not an act whereby the 2nd defendant induced or procured the 3rd defendant to break its contract with the plaintiff.

7. Mr Graham for the plaintiff argued that although the plaintiff was employed by the 3rd defendant, Data as a group was responsible. However, it is clear that Data cannot be liable as a group, for it is not a separate legal entity.

8. On behalf of the plaintiff, it was contended that the pleadings should be looked at as a whole and that the plaintiff was assigned by the 3rd defendant to the 1st and 2nd defendants in order to conduct the 3rd defendant's business in Hong Kong. Mr Graham agreed that the 3rd defendant was contractually bound to ensure that the plaintiff received contractual benefits through the 1st and the 2nd defendant and that the expenses incurred by the plaintiff to take up his post here for the 3rd defendant, was through the operation of the 1st and 2nd defendants.

9. With regard to the contractual benefits, it was only pleaded that they were to be provided by the 3rd defendant, so that only the 3rd defendant could withhold them. Even if the 1st and 2nd defendants were obliged to provide the benefits, the withholding of them which they were contractually obliged to provide to the plaintiff, could not involve the 1st and 2nd defendants inducing or procuring the 3rd defendant to break its contractual obligations with the plaintiff.

10. Having considered the endorsement on the amended writ and the amended statement of claim, there is no repetition in the statement of claim of the allegation set out in the writ that the plaintiff was employed by one of the three defendants, but only by the 3rd defendant. The averments pleaded in the amended statement of claim with regard to the breach of contract terminating the plaintiff's employment only relate to the 3rd defendant. No allegation has been made of a breach of contract by either the 1st or 2nd defendants. Whilst I accept that the 1st, 2nd and 3rd defendant may well be part of a group of companies, nevertheless, each company must be treated as a separate legal entity. The contention made by Mr Huggins that material facts must be set out to support the plaintiff's claim have not in fact been complied with by the plaintiff in the pleading. Further the basis for the claim for reimbursement of expenses is totally lacking from the pleading. It is trite law that a claim set out in the endorsement of the writ which has not been repeated in the statement of claim, is deemed to have been abandoned and should, therefore, be struck out. I am also satisfied that no cause of action has been alleged in paragraph 18 of the amended statement of claim against the 1st and 2nd defendants.

11. I accept the argument that was put forward by Mr Huggins with regard to the allegation of conspiracy that the 3rd defendant cannot induce itself to break its contract with the plaintiff, nor could there, therefore, be any persuasive communication as is required. Knowledge by the 1st and 2nd defendants off the existence of the contract between the plaintiff and the 3rd defendant was also absent. Accordingly, I agree that the allegation of conspiracy is misconceived and must be struck out The appeal is therefore allowed and the action against the 1st and 2nd defendants will be struck out. There will be an order nisi for the costs of the appeal and before the master to the 1st and 2nd defendants.