HUIBERT FRITS VAN DELFT AND ANOTHER v. HORWATH FINANCIAL SERVICES LTD

HCA898/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.898 OF 2006

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D E C I S I O N

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1. By a written decision dated 9 July 2007, the learned Registrar ordered the defendant to provide numerous further and better particulars pursuant to the request of the Third Party.  This is an appeal by the Third Party in relation to those requests which were not allowed by the Registrar.

2. The case, in brief, concerns a claim by two plaintiffs against their financial adviser, the defendant, for breach of contract and breach of statutory duty arising out of an investment made by them on the defendant’s advice.  The defendant has joined and claims against the Third Party in relation to the ‘financial product’ which formed the basis of the plaintiffs’ investment.  Against the Third Party, the defendant alleges breach of contract between them, further breaches of a contract between the Third Party and the plaintiffs and breach of tortious duties owed by the Third Party to both the defendant and the plaintiffs.

3. This single private investment has spawned lengthy and complex pleadings in a case which has one unusual feature which is worthy of mention.  The policy in question is due to mature in 2011 and remains in place.  Until that date it seems impossible to know what loss has been incurred, if any.

4. However, this appeal concerns not the big picture but pleading issues.  The Third Party claims it is entitled to know, from the defendant, what the case against it is.  The defendant submits that the Third Party is fully cognizant of the case against it and many of the documents it seeks are already in its possession.  In short, the Third Party’s response is that the defendant cannot identify with particularity the particulars requested because it does not have the basis of case against the Third Party and it would be wrong to let the defendant wait until after discovery to enable them to shore up their case which is presently lacking.

5. In general, I accept that, in resisting this application on appeal, the defendant is not taking technical pleading points.  In broad terms it has provided such answers as it can.  Where answers have not been provided it has been on the basis that the pleadings are sufficient and/or it does not have the answers and/or the particulars requested are within the Third Party’s own knowledge.  The issue is, given that the Third Party’s position is that the defendant has no case against it, is their response sufficient and proper?  The Registrar went a long way towards granting all the Third Party’s requests.  Should he have gone further?

A. REQUESTS FOR FURTHER AND BETTER PARTICULARS OF THE THIRD PARTY STATEMENT OF CLAIM

(i) Request 26

6. This is a request for which particular CMI seminars, brochures etc. are alleged to have been “in breach of duty”.  The Registrar refused this request (at the same time as refusing Requests 27, 28 and 32) by saying “I think that the allegations are not beyond comprehension and one knows what the defendant’s case is”.

7. In fact Request 26 is linked to Request 25 which seeks particulars of statements and representations relied on.  The Registrar did grant Request 25 and the defendant has given a supplemental answer to Request 25 which refers to a number of documents and brochures.  I think the Third Party is still entitled to know if these are the brochures etc. relied on in answer to Request 26 and what else, if anything.  If the defendant cannot provide such particulars, it is indicative of a possible flaw in their case and not merely an example of the Third Party asking for something which they already have.

(ii) Request 27

8. This request seeks particulars of the alleged breach of the terms of business and/or “tortious duty”.  In my judgment, the paragraph in question in the Statement of Claim is adequately particularized in this regard.

(iii) Request 28

9. This seeks particulars of the alleged “inaccuracies and representations which are misleading or misrepresentative”.  The Third Party complains that the answer merely lists a number of non-disclosures.  In my judgment, the answer provided is adequate in that it stated that the non-disclosures were the very inaccuracies and misleading representations which are relied on.  The Third Party’s point that no duty of disclosure is pleaded is a different argument.  The “inaccuracies” etc. stemming from non-disclosure is what is presently pleaded.

(iv) Request 29

10. This request is specific to paragraph 27(f) of the Statement of Claim.  It claims, inter alia, that the Third Party arranged a gearing loan.  The Third Party is entitled to know how it is said that it did so.  To this limited extent, the answer provided is inadequate.  Particulars should be provided.

(v) Request 32

11. This request seeks the identification of specific statements etc. in the literatures pleaded in paragraph 27(i).  I agree that such statements should be specifically pleaded.  The answer provided did not do so.

(vi) Request 36(1)

12. I agree with the Registrar that there is no obligation on the defendant to further particularize its answer to this request.

(vii) Requests 39, 42 and 43

13. These relate to paragraph 29 of the Third Party Statement of Claim which alleges deliberate and intentional misconduct.  In my judgment, claims of deliberate and intentional misconduct are specific and serious allegations.  It is inadequate to answer the request by stating only that they are “consistent with the Third Party’s negligent breaches of contract and tortious duties as pleaded in the Third Party Statement of Claim”.  The Third Party is entitled to know what misconduct it is said was deliberate and intentional.

B. REQUESTS FOR PARTICULARS OF THE REPLY

14. This appeal is in relation to eight of the requests made.

(i) Requests 4, 5, 7, 11 and 15

15. These can be dealt with together.  They all refer to the allegation made in the Reply that the Third Party “promoted” the use of gearing.  The Registrar declined these requests primarily on the basis that they are matters more appropriately dealt with in the discovery process.  With regard to these particular requests I agree.

(ii) Requests 12, 13 and 14

16. These also can be dealt with together.  Request 12 seeks particulars of an allegation of knowledge that information would be passed on by its brokers to its investors.  Request 13 seeks particulars of an alleged purpose.  Request 14 seeks particulars of “marketing material”.

17. The appeal against the Registrar’s refusal to order these particulars is primarily based on the Third Party’s contention that the Registrar was wrong to say that, in general terms, it would be better to wait until the conclusion of the discovery process before addressing these issues.

18. It is of course correct to submit, as the Third Party does, that a party is entitled to know the nature of the case against it before the close of pleadings.  However, deciding what facts should be pleaded and what matters should await discovery is often a difficult line to draw.  In this instance, I think the Registrar took a correct and common sense view of the matter and I do not propose to vary his order.

19. In conclusion, the appeal is allowed in part.  I have ordered further particulars in respect of Requests 26, 29, 32, 39, 42 and 43.  The Third Party has had a measure of success which should be reflected in costs.  I make no order in respect of the costs below which shall remain the same but I make an order nisi that the defendant shall pay 50% of the Third Party’s costs of the appeal.