HECNY SHIPPING LTD AND OTHERS v. HUANG CHUN JEN JERRY AND ANOTHER

HCA1126/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1126 OF 2007

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J U D G M E N T

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1.  By their summons dated 14 December 2010 (“the plaintiffs’ Summons”), the plaintiffs sought, inter-alia, the following orders :

(a) that the plaintiffs be at liberty to amend their writ of summons and Re-Amended Statement of Claim by adding Hecny Transportation (Shanghai) Ltd (“the intended 3^rd plaintiff”) and Madam Han Huy Ling (“the intended 2^nd defendant”) respectively as the 3^rd plaintiff and the 2^nd defendant; and

(b) that the plaintiffs be at liberty to amend their re-amended statement of claim in the manner shown in drafts of this document annexed to the summons.

2.  The plaintiffs’ application was heard on 13 May 2011 before Master Woolley who dismissed the application and ordered that the costs of the plaintiffs’ Summons be paid by the plaintiffs to the defendant, such costs to be taxed if not agreed, with Counsel’s certificate.  This is an appeal against the decision of Master Woolley.

BACKGROUND

3.  The 1^st plaintiff is a limited company incorporated under the laws of Hong Kong, carrying on the business of providing ocean freight services in Hong Kong.  The 2^nd plaintiff is a limited company incorporated under the laws of Hong Kong and is the holding company owning (either in majority or wholly) various subsidiaries including the 1^st plaintiff and the intended 3^rd plaintiff.  The intended 3^rd plaintiff is a wholly owned foreign investment enterprise company registered under the laws of mainland China (“the PRC”) and is a subsidiary of the 2^nd plaintiff.  The intended 3^rd plaintiff carries on the business of providing ocean freight services in different regions of the PRC.

4.  It is not in dispute that the defendant was formerly employed by the 1^st plaintiff and was also its managing director.  The intended 2^nd defendant is the wife of the defendant.  The plaintiffs’ claims against the defendants are essentially that the defendant has acted in breach of certain duties owed to them and that the intended 2^nd defendant has assisted the defendant in such breaches.

5.  The present action was commenced in 2007 and the Statement of Claim was filed on 30 May 2007.  The Statement of Claim was first amended in September 2007.  It was re-amended in September 2009.  The amendments made in September 2007 were consented to by the defendant.  Although the defendant did initially oppose the application to re-amend, such opposition was not persisted with and eventually, the re-amendments made in September 2009 were also consented to by the defendant.  The Re-Amended Defence and Amended Counterclaim was filed in December 2009 and the Amended Reply and Defence to Counterclaim was filed in February 2010.  I was informed by counsel that the action has not proceeded beyond the pleadings stage.

6.  The fact that both the amendments made in September 2007 and those made in September 2009 were consented to by the defendant is significant.  This is because, as will become apparent from the discussion below, many of the allegations in the draft Re-Re-Amended Statement of Claim which the defendants’ counsel, Mr Paul Carolan, now contends should not be allowed to be introduced by way of the present application to amend are not in fact allegations sought to be introduced by the present application to amend but are already in the Re-Amended Statement of Claim, having been pleaded in the Statement of Claim filed in May 2007 or introduced by way of the amendments in September 2007 or September 2009 which were consented to by the defendant. 

7.  It is also pertinent to note that although the plaintiffs have only applied to join the intended 3^rd plaintiff as a party pursuant to their present application to re-re-amend the Statement of Claim, the intended 3^rd plaintiff had already featured in the Re-Amended Statement of Claim, the plaintiffs alleging that the defendant was in charge of and was responsible for managing the intended 3^rd plaintiff.  The plaintiffs had also pleaded that it was one of the implied terms of the employment agreement between the 1^st plaintiff and the defendant that the defendant should not act in a manner which may prejudice the business of the 1^st plaintiff or of any related companies of the 1^st plaintiff including the 2^nd plaintiff and the intended 3^rd plaintiff.  Further, the plaintiffs had pleaded that the defendant had committed wrongful acts against the intended 3^rd plaintiff and that the 1^st and 2^nd plaintiffs had suffered loss and damage via the intended 3^rd plaintiff.

8.  Similarly, although the plaintiffs have only applied to join the intended 2^nd defendant as a party pursuant to their present application to re-re-amend the Statement of Claim, in the Re-Amended Statement of Claim, the plaintiffs had already alleged that some of the wrongful acts committed by the defendant were done through the intended 2^nd defendant as his agent or with the participation of the intended 2^nd defendant.  Indeed, the plaintiffs had also alleged in the Re-Amended Statement of Claim that the intended 2^nd defendant was a party to the conspiracy complained about.  The cause of action in conspiracy was introduced by way of the amendments introduced in the Re-Amended Statement of Claim in September 2009.

AMENDMENTS IN THE PROPOSED RE-RE-AMENDED STATEMENT OF CLAIM AND THE OBJECTIONS THERETO

9.  As very fairly summarised by Mr Jeffrey Haydn Lane, the defendant’s solicitor, in his affidavit in opposition to the plaintiffs’ application, the amendments proposed by the plaintiffs comprise, in large part, a rearrangement of the existing pleadings, the addition of several material changes and the deletion of certain claims. The material changes consist of :

(a) the introduction of the intended 3^rd plaintiff as a new party to the action;

(b) reliance on a Shareholders’ Agreement between the 2^nd plaintiff and the defendant executed in or about September 1996 and an allegation that the defendant had acted in repudiatory breach of this agreement;

(c) reliance on certain additional express terms of an employment agreement which had already been pleaded and referred to in the Re-Amended Statement of Claim;

(d) the introduction of the intended 2^nd defendant as a new party to the action and allegations as to her involvement in the wrongful acts of the defendant including an allegation that the intended 2^nd defendant had dishonestly procured and/or assisted in the defendant's breach of his duties owed to the plaintiffs; and

(e) particulars of certain losses alleged to have been suffered by the intended 3^rd plaintiff as a result of certain acts of the defendant already complained of in the Re-Amended Statement of Claim.

10.  Further, as is also very fairly summarized by Mr Lane in his affidavit, save for the above material changes and the deletions of certain claims, the remaining amendments proposed by the plaintiffs are largely cosmetic changes, technical rearrangements of paragraphs and/or splitting of paragraphs for clarity.  Although Mr Lane stated in his affidavit that the defendant had no objection to such remaining amendments (because he stated that they help to clarify what he categorized as “an otherwise chaotic pleading”) or indeed to the amendments particularised in sub-paragraphs (a), (c) and (e) of the previous paragraph, the position taken by Mr Carolan is that the Re-Re-Amended Statement of Claim is vague, ambiguous and therefore embarrassing and is insufficiently and/or wrongly pleaded so that the application to amend should simply be dismissed.  Additionally, Mr Carolan contends that the application should be dismissed as it is not bona fide and because some of the claims made are in respect of alleged breaches of duty said to have been committed by the defendant in the period from 2000 and are therefore time-barred.

Application not bona fide

11.  Mr Carolan argues that the plaintiffs’ application is not bona fide as it is made without sufficient evidence to explain the delays in the litigation and the changes to the plaintiffs’ case.  I do not accept this argument.  As has been explained in the Affirmation of Lee Arnold made in support of the plaintiffs’ application, there had been a change in the plaintiffs’ legal team whereby different counsel had been retained and it was on the advice of the new legal team that the present application has been made.  Further, from my reading of the proposed Re-Re-Amended Statement of Claim, far from not being bona fide, the plaintiffs’ present application appears to me to be a genuine attempt on the part of the plaintiffs’ new legal team to plead the plaintiffs’ claims in a clearer and more concise manner, to join necessary and proper parties and to delete irrelevant and untenable allegations.  Indeed, I agree with Mr Lane that the proposed amendments do in fact help to clarify “an otherwise chaotic pleading”.

12.  Mr Carolan also argues, relying on a Settlement Agreement which was entered into between the plaintiffs and various parties (other than the intended 2^nd defendant) who were the parties to the conspiracy complained about in this action, that plaintiffs’ present application is not bona fide.  Relying on the fact that the Settlement Agreement was entered into shortly after the re-amendments were made to the Statement of Claim, Mr Carolan contends that had the defendant known at the time of the plaintiffs’ application to re-amend the Statement of Claim (pursuant to which the conspiracy claim was introduced) that it was the plaintiff’s intention to introduce his wife as a party to the action, he would not have agreed to it but would have opposed it.  He also argues that given the timing of the settlement agreement, there is good reason to believe that at the time the plaintiffs were seeking to plead the conspiracy against the defendant in Hong Kong, the plaintiffs were themselves conspiring with those they had named as the defendant’s co-conspirators, the effect of which would be to leave the defendant solely answerable and liable to the plaintiffs with regard to the conspiracy claim.

13.  I do not accept Mr Carolan’s arguments.  It would have been apparent to anyone reading the Re-Amended Statement of Claim that the plaintiffs were alleging that the wrongful acts of the defendant had been committed with the participation and assistance of the intended 2^nd defendant.  It was also expressly pleaded that the intended 2^nd defendant was a party to the conspiracy alleged.  It would and should therefore have been apparent to the defendant and his legal advisers that it was possible that the plaintiffs would apply to join the intended 2^nd defendant as a defendant.  I therefore accept the argument made by Mr Clive Grossman (who appears with Mr Jonathan Wong for the plaintiffs) that the defendant’s claim that he would not have agreed to the re-amendments to the Statement of Claim had he known that it was the plaintiffs’ intention to introduce the intended 2^nd defendant as a party to the action is an irrelevant afterthought.

14.  A party who has a claim for conspiracy against several defendants is entitled to arrive at a settlement with some, but not all, of those defendants.  That the party has entered into such a settlement is not a basis for concluding that the parties to the settlement have entered into a wrongful conspiracy.  I therefore also reject Mr Carolan’s argument that by entering into the Settlement Agreement, it is to be inferred that the plaintiffs had entered into a conspiracy against the defendants.  I am therefore of the view that none of the matters relied upon by the defendants show that the plaintiffs’ present application to amend is not bona fide.

Limitation

15.  Mr Carolan also opposes the plaintiffs’ application to amend on the ground that some of the claims made are in respect of alleged breaches of duty said to have been committed by the defendant in the period from 2000 and that any such breaches occurring before 31 May 2001 were time-barred when the writ in this action was issued on 30 May 2007.  The first problem with this argument is that the allegations that the defendant had committed breaches of duty from 2000 are not sought to be introduced by way of the proposed amendments under the plaintiffs’ present application.  These allegations were already pleaded in the original Statement of Claim filed in May 2007 and remained in the Amended Statement of Claim and Re-Amended Statement of Claim the filing of which was consented to by the defendant.  Further, as Mr Grossman submitted, these allegations having always been in the Statement of Claim, no limitation defence had ever been pleaded by the defendant in the Defence, the Amended Defence or the Re-Amended Defence.  Nor has any application to strike out such allegations ever been made.

16.  It is also important to note that the allegation pleaded is not that the defendant had only committed breaches of duty in 2000 but that he had committed such breaches from 2000 to April 2007.  Accordingly, even if it may be argued that the claim in respect of some of the breaches may have been time-barred by the date of the issuance of the Writ, the claim in respect of many of the other breaches would not have been time-barred.  As Mr Grossman submitted, the allegation that the breaches of duty started in 2000 is part of the history of the matter and it may be that after trial, the plaintiffs will only be able to recover in respect of the later breaches but not the earlier ones.  That does not render the whole of the plaintiffs’ claim time-barred.

17.  For the reasons set out in the two previous paragraphs, I reject Mr Carolan’s argument that the proposed amendments should not be allowed because they seek to introduce claims which are time-barred.

Merit based arguments

18.  Mr Carolan also argued against specific aspects of the proposed amendments on the grounds that those parts of the claim as amended disclose no reasonable cause of action or are embarrassing and/or require further and better particulars to be provided.  In this regard, Mr Carolan agreed with Mr Grossman that the proper approach is to examine whether the matters pleaded in the proposed Re-Re-Amended Statement of Claim disclose a reasonable cause of action, namely one with some chance of success when only the allegations in the pleadings are considered.

Joinder of the intended 3^rd plaintiff

19.  Mr Carolan argued that no sufficient basis is pleaded to justify the joinder of the intended 3^rd plaintiff.  I do not agree. In the proposed Re-Re-Amended Statement of Claim, it is pleaded :

(a) that the defendant was a director of the intended 3^rd plaintiff and was tasked with the central direction, management and supervision of the intended 3^rd plaintiff (paras. 10 and 12);

(b) that arising from his directorship of the intended 3^rd plaintiff, the defendant owed various specified fiduciary duties to the intended 3^rd plaintiff (para. 13(2));

(c) that by reason of the relationship of trust and confidence between the defendant and the intended 3^rd plaintiff, the defendant owed various specified fiduciary duties to the intended 3^rd plaintiff (paras. 13(3) and 14);

(d) that prior to the defendant’s resignation from his directorship of the intended 3^rd plaintiff, he had committed various breaches of the fiduciary duties owed by him to the intended 3^rd plaintiff (paras. 15, 16, 18, 19, 21 to 24);

(e) that by reason of the breaches complained of, the intended 3^rd plaintiff had suffered loss and damage (paras. 17, 20 and 25); and

(f)  that the defendants had, wrongfully and with intent to injure the plaintiffs, conspired and agreed with various named persons and entities, to commit to the acts complained of with the predominant and unlawful purpose to injure the plaintiffs in their respective trades (para. 26).

20.  Adopting the approach which the parties have agreed to be the proper approach, I am of the view that the matters as set out in sub-paragraphs (a) to (f) in the previous paragraph do indeed disclose reasonable causes of action by the intended 3^rd plaintiff against the defendants.

21.  Mr Carolan, however, argued that there could be no basis for the duties alleged owed by the defendant to the intended 3^rd plaintiff.  I do not agree.  As it is alleged that the defendant was a director of the intended 3^rd plaintiff, there is clearly very sound basis for alleging that he owed the various specified fiduciary duties to the intended 3^rd plaintiff.  It is trite law that a director owes such fiduciary duties.

22.  Mr Carolan also argued that the acts pleaded in paras. 21 to 24 of the proposed Re-Re-Amended Statement of Claim as constituting breaches of the duties owed by the defendant do not disclose a reasonable cause of action.  Again, the first point to be noted about the allegations pleaded in these paragraphs is that they are not new and are not sought to be introduced for the first time by way of the present application.  On the contrary, these allegations had already been introduced by way of the amendments pleaded in the Re-Amended Statement of Claim, albeit as allegations of breaches by the defendant of duties owed by him to the 1^st plaintiff only.  Indeed, these allegations in the Re-Amended Statement of Claim had already included allegations that employees of the intended 3^rd plaintiff had been solicited by the defendant.  The amendments introduced to the Re-Amended Statement of Claim were consented to by the defendant and there has not been any application to strike out such allegations as disclosing no reasonable cause of action.

23.  More importantly, Mr Carolan’s arguments against paras. 21 to 25 of the Re-Re-Amended Statement of Claim in his Skeleton Submissions seemed to focus on the heading of the relevant section of the Re-Re-Amended Statement of Claim rather than the substance what is pleaded in these paragraphs.  As that section is headed “Wrongful disruption of business”, Mr Carolan argued in his Skeleton Submissions that no such claim is legally recognised and proceeded to further argue that what is pleaded does not support a claim for “causing loss by unlawful means”.  However it is clear from what is pleaded in paras. 21 to 25 that although the section is headed “Wrongful disruption of business”, what the plaintiffs are complaining about is the alleged wrongful solicitation and/or enticement of employees of the 1^st plaintiff and the intended 3^rd plaintiff in breach of duties allegedly owed to the 1^st plaintiff and the intended 3^rd plaintiff. When this was pointed out in the course of the hearing, Mr Carolan very fairly abandoned his arguments.

24.  Another ground upon which Mr Carolan opposed the joinder of the intended 3^rd plaintiff is that the conspiracy claim as pleaded in para. 26 of the draft Re-Re-Amended Statement of Claim does not disclose a reasonable cause of action. In that paragraph, it is alleged as follows :

“ Further, the Plaintiffs say that since or about June 2006, the defendant, the 2^nd Defendant, SG, ML, the SeaMaster Group, and Robert Agresti (‘Agresti’), Christopher Dombalis (‘Dombalis’), Peter Stone (‘Stone’) and Raymer McQuiston (‘McQuiston’) (‘collectively referred to as the ‘Co-conspirators’ and their respective particulars are set out in schedule 2 hereto’), and each of them, wrongfully and with intent to injure the Plaintiffs, conspired and agreed together to commit the matters as pleaded above with the predominant and unlawful purpose to injure the Plaintiffs in their respective trades in order to deprive the Plaintiffs of key employees and the Plaintiffs’ respective crucial business; and as the direct results of the same, the Plaintiffs have respectively suffered loss and damages as pleaded above. Further particulars of the conspiracy are set out in schedule 3 hereto.”

25.  Mr Carolan first argued that what is pleaded in this paragraph is insufficient to ground a claim for what is referred to as “unlawful means” conspiracy.  However, Mr Grossman confirmed that the plaintiffs are not alleging that the defendants were parties to an “unlawful means” conspiracy.  Instead, the plaintiffs are alleging that the defendants were parties to what is referred to as a “lawful means” conspiracy.

26.  The authorities cited by Mr Carolan show that it is well established that as a matter of pleading, a case based on “lawful means” conspiracy must contain the following elements :

(a) the combination or agreement between 2 or more individuals;

(b) a predominant intention to injure the plaintiff;

(c) acts that were carried out pursuant to the combination or agreement and with that predominant intention; and

(d) resulting in loss and damage to the plaintiff.

Pido v. Compass Technology Company Ltd [2010] 2 HKLRD 537, per Ma CJHC at para. 17, citing Bullen & Leake & Jacob’s Precedents of Pleadings (16^th Ed., 2008) Vol.2, p.855 para. 51-02.

27.  Mr Grossman submitted that para. 26 of the draft Re-Re-Amended Statement of Claim pleads all the above elements of the cause of action. I agree.

28.  However, Mr Carolan argued that although it is pleaded in para. 26 that the defendants had the predominant intention to injure the plaintiffs, it is also alleged in the draft Re-Re-Amended Statement of Claim that the conduct of the defendants complained of was intended to switch or divert business from the plaintiffs to the Seamaster Group.  Mr Carolan argued that such intention is necessarily to benefit the new business by competing successfully with the existing one.  If that results in disadvantage to the plaintiffs it is not a loss which the defendants intended to cause in the sense that it is required for a “lawful means” conspiracy.  In this regard, Mr Carolan relied on allegations in the draft Re-Re-Amended Statement of Claim that the defendant committed wrongful acts with the assistance of the intended 2^nd defendant “… with the aim and purpose to carry on the business as in direct competition with the 1st plaintiff… ” (para. 15(1)(a)) and that the defendant, in conjunction with the intended 2^nd defendant, had done certain acts “with the intent that following his departure from the Plaintiffs, he would direct and manage the Seamaster Group in competition with the 1^st Plaintiff and the 3^rd Plaintiff so as to cause loss and damage to both companies” (para. 24(3)).

29.  In support of his submissions, Mr Carolan relied on the following paragraph in Clerk & Lindsell on Torts, (20^th Ed., 2010), para. 24-108 :

“ It is plain that a combination may have more than one object or purpose. If so :

‘ liability must depend on ascertaining the predominant purpose. If that predominant purpose is to damage another person and damage results that is tortious conspiracy. If the predominant purpose is the lawful protection or promotion of any lawful interests of the combiners (no illegal means being employed) it is not a tortious conspiracy even though it causes damage to another person.’

          In ascertaining that predominant purpose the court can have regard to both the short- and the long-term objectives of the combiners.”

The passage cited in the above paragraph was extracted from the opinion of Viscount Simon L.C. in Crofter Hand Woven Harris Tweed Company v. Veitch [1942] A.C. 435 at 445.

30.  However, in the extract from Bullen & Leake & and Jacob’s Precedents of Pleadings also relied upon by Mr Carolan, the learned editors express the following views in their discussion of the requirement of proving an intention to injure in the context of a conspiracy claim :

“ The mental element of intention to injure the claimant will be satisfied where the defendant intends to injure the claimant either as an end in itself or as a means to an end such as to enrich himself or protect or promote his own economic interests. It will not be satisfied where injury to the claimant is neither a desired end nor a means of attaining it but merely a foreseeable consequence of the defendant’s actions. Where a defendant seeks to advance his own business by pursuing a course of conduct which he knows will, in the very nature of things, necessarily be injurious to the claimant, that is where loss to the claimant is ‘the obverse side of the coin from gain to the defendant’ the defendant’s gain and the claimant’s loss are to the defendant’s knowledge inseparably linked. The defendant cannot obtain one without bringing about the other. If the defendant goes ahead in such a case in order to obtain the gain he seeks his state of mind will satisfy the mental ingredient of the tort: see OBG Ltd v Allan [2007] UKHL 21 per Lord Hoffman at [62] and per Lord Nicholls at [164]-[167] regarding intent to injure within the context of the economic tort of interference with the claimant’s business by unlawful means.”

31.  Mr Carolan submitted that the learned editors may have made an error in expressing the above views relying on OBG Ltd v. Allan in the context of the discussion relating to a conspiracy claim as the claim in OBG Ltd v. Allan was not a conspiracy claim.  He further submitted that the views expressed by the learned editors are contrary to those expressed by the learned editors of Clerk & Lindsell on Torts in the passage cited above.

32.  For his part, Mr Grossman submitted, relying on Shenzhen Futaihong Precision Industry Co. Ltd & Others v. BYD Co. Limited & Others, unreported, HCA2114/2007, 24 August 2010, per Deputy Judge L. Chan at para. 18, that, as in the case of striking out applications, difficult points of law should not be decided in applications to amend pleadings and that only claims which are obviously unsustainable and pleadings unarguably bad which should be disallowed.  He also argued that the plaintiffs having pleaded that the defendants had acted with the predominant purpose to injure the plaintiffs, whether or not the plaintiffs will be able to succeed in proving this allegation will depend on the evidence which will be adduced at trial.  The trial judge will have to consider and weigh up the evidence and decide whether the allegation had been made out.

33.  I agree with Mr Grossman.  It is not for me on an application such as the present, and without full consideration of all relevant authorities, to try to resolve what may be perceived to be a conflict in the views expressed by the learned editors of textbooks.  In any event, even accepting the views expressed by the learned editors of Clerk & Lindsell on Torts in the passage relied upon by Mr Carolan, I am of the view that although the plaintiffs have alleged in the draft Re-Re-Amended Statement of Claim that the conduct of the defendants complained of was intended to switch or divert business from the plaintiffs to the Seamaster Group, this does not necessarily preclude the possibility of a finding at trial that the defendants had acted with the predominant purpose of injuring the plaintiffs.  As stated in the above passage cited from Clerk & Lindsell on Torts, a combination may have more than one object or purpose and if so, liability will depend on ascertaining the predominant purpose.  Accordingly, I am of the view that there is no necessary inconsistency between the plaintiffs’ allegations that the conduct of the defendants complained of was intended to switch or divert business from the plaintiffs to the Seamaster Group and their allegation that the defendants’ acts complained of were done pursuant to a conspiracy with the predominant purpose to injure the plaintiffs.  The defendants may have intended both to switch or divert business from the plaintiffs to the Seamaster Group and to injure the plaintiffs.  The court will, at the trial of this action, have to decide which was the predominant purpose.

34.  I therefore reject Mr Carolan’s contention that what is pleaded in para. 26 of the draft Re-Re-Amended Statement of Claim does not disclose a reasonable cause of action in conspiracy.

35.  The next paragraph in the draft Re-Re-Amended Statement of Claim which Mr Carolan argues does not disclose a reasonable cause of action is the paragraph (para. 27) in which the plaintiffs allege that the intended 2^nd defendant had dishonestly procured and/or assisted in the defendant’s breach of his duties owed to the plaintiffs.  Mr Carolan argues that the cause of action relied upon by the plaintiffs is that of dishonest assistance in the breach of fiduciary duties, and, relying on citations from Bullen & Leake & and Jacob’s Precedents of Pleadings, op.cit., Vol. 2, para. 54-04, and Parker & Mellows : The Modern Law of Trusts, (7^th Ed. 1998), pp. 323-335, he argues that one of the essential elements of this cause of action is that there has been a disposal of the plaintiffs’ assets in breach of trust or fiduciary duty.  Mr Carolan argues that as it has not been alleged that the defendant has disposed of any assets of the plaintiffs, what is pleaded by the plaintiffs is insufficient to ground the cause of action.

36.  In answer to Mr Carolan’s submissions, Mr Grossman referred to Company Directors : Law & Liability, para. 11.66, in which the learned editors highlighted that the English Court of Appeal had, in 3 cases (Brown v. Bennett [1999] 1 BCLC 649; Satnam Investments v. Dunlop Heywood [1999] 3 All ER 652; and Goose v. Wilson Sandford & Co. (a firm) [2000] EWCA Civ 73) left open the question whether a third party could be held liable for dishonest assistance even if there is no trust property or traceable proceeds involved.  He further relied on Underhill and Hayton, Law Relating to Trusts and Trustees, (18^th Ed., 2010), para. 98.47, where the learned editors expressed the view that :

“ Most probably liability as a dishonest assistant can also be incurred by a defendant who has assisted in a breach of trust or other fiduciary duty that does not entail the misapplication of property, consistently with the courts’ general desire to preserve the integrity of fiduciary relations.”

37.  The case J D Wetherspoon plc v. Van de Berg & Co. Ltd & Others [2009] EWHC 639 is cited in support of this proposition.  Although neither Mr Grossman nor Mr Carolan has referred me to that authority, I have read it and note that the judgment in that case was delivered on 7 April 2009, after both the textbooks relied upon by Mr Carolan were published.  More importantly, the learned judge in that case, Peter Smith J, was also faced with an argument that claims in dishonest assistance cannot succeed unless there is property held on trust the breach of which would give rise to accessory liability.  He concluded (at paras. 511 to 518), after considering the decisions of the English Court of Appeal in Satnam Investments v. Dunlop Heywood, op.cit. and Goose v. Wilson Sandford & Co. (a firm), op.cit., that in a case for accessory liability there is no requirement for there to be trust property.

38.  As noted above, J D Wetherspoon plc v. Van de Berg & Co. Ltd & Others was decided after the particular edition of Parker & Mellows : The Modern Law of Trusts cited by Mr Carolan (the 7^th Ed., 1998) had been published.  In the edition cited by Mr Carolan, the learned author expressed the view that the elements of liability for “dishonest assistance” were “the existence of a trust; the existence of a misfeasance or breach of trust on the part of the trustee of the trust; being accessory to or assisting in the misfeasance or breach of trust; and dishonesty by the accessory or person assisting”.  The reference to one of the elements being the existence of the trust therefore lent support to Mr Carolan’s argument that one of the essential elements of this cause of action is that there has been a disposal of the plaintiffs’ assets in breach of trust or fiduciary duty.

39.  With a view to ascertaining if J D Wetherspoon plc v. Van de Berg & Co. Ltd & Others had been considered in any later edition of Parker & Mellows : The Modern Law of Trusts, I checked to see if there had been any edition of that textbook published after the edition cited and relied upon by Mr Carolan.  I was surprised to find that there had in fact been two subsequent editions, the 8^th edition published in 2003 and the 9^th edition published in 2008, which Mr Carolan had not drawn to my attention.

40.  Whilst both the 8^th and 9^th editions had also been published prior to the decision in J D Wetherspoon plc v. Van de Berg & Co. Ltd & Others, in both these editions, the learned author’s views as to the elements of liability for “dishonest assistance” appear to have changed from those which he had expressed in the 7^th edition.  In both these later editions, the learned author stated that the current requirements for the imposition of liability for dishonest assistance are “(i) a breach of trust or fiduciary duty by someone other than the defendant, (ii) in which the defendant assisted (iii) dishonestly, together with (iv) resulting loss”.  The views expressed by the learned author in these editions accordingly appear to also support the view expressed in Underhill and Hayton, Law Relating to Trusts and Trustees and indeed, also in J D Wetherspoon plc v. Van de Berg & Co. Ltd & Others, that liability as a dishonest assistant can also be incurred by a defendant who has assisted in a breach of trust or other fiduciary duty which does not entail the misapplication of property.

41.  In the light of the foregoing, whilst no decision from a court at appellate level that liability as a dishonest assistant can also be incurred by a defendant who has assisted in a breach of trust or other fiduciary duty that does not entail the misapplication of property has been cited by Mr Grossman, the latest authorities which have been drawn to my attention and which I have found tend towards that view or at least have left open the question for further consideration.  I am therefore not prepared, on this application to amend, to hold that what is pleaded by the plaintiffs in support of their claim that the intended 2^nd defendant dishonestly procured and/or assisted in the defendant’s breach of fiduciary duties is insufficient to ground the cause of action as there is no allegation of any disposal of the plaintiffs’ assets or property.  I therefore reject Mr Carolan’s submission that para. 27 of the Re-Re-Amended Statement of Claim does not disclose a reasonable cause of action.

Joinder of the intended 2^nd defendant

42.  Mr Carolan objects to the joinder of the intended 2^nd efendant on the ground that the pleadings relating to the causes of action for conspiracy and dishonest assistance relied on as against her do not disclose reasonable causes of action.  He relies on the same submissions as those which I have already considered and rejected in the context of my discussion of his objection to the joinder of the intended 3^rd plaintiff.  Accordingly, I also reject his submissions in so far as they relate to the joinder of the intended 2^nd defendant.

CONCLUSIONS

43.  For the above reasons, I allow the plaintiffs’ appeal and set aside the Order of Master Woolley dated 13 May 2011 in so far as it dismissed the plaintiffs’ Summons and awarded the costs of the hearing on 13 May 2011 to the defendant.

44.  I grant leave to the plaintiffs to amend their Writ of Summons and Re-Amended Statement of Claim by adding Hecny Transportation (Shanghai) Ltd and Madam Han Huy Ling as the 3^rd plaintiff and the 2^nd defendant respectively.

45.  I further grant leave to the plaintiffs to amend the Re-Amended Statement of Claim by superseding it with a fresh document in the manner shown on the copy annexed as Annexure B to the plaintiffs’ Summons dated 24 May 2011 (save that the reference to the intended 3^rd plaintiff in para. 21 of the draft should be deleted, as conceded by Mr Grossman and Mr Wong in the course of argument).  I further order that the Amended Writ of Summons and the Re-Re-Amended Statement of Claim be served within 10 days after the date of my order.

46.  I grant leave to the defendant to file and serve a Re-Re-Amended Defence and Amended Counterclaim within 14 days after the service upon him of the Re-Re-Amended Statement of Claim and I grant leave to the plaintiffs to file and serve a Re-Amended Reply and Defence to Counterclaim within 14 days after the service of the Re-Re-Amended Defence and Amended Counterclaim.

47.  The plaintiffs’ Notice of Appeal seeks various costs orders including an order that the intended 2^nd defendant’s costs of this appeal should be provided for.  However, no submissions have been made by the parties in relation to costs.  I therefore direct that the plaintiffs shall lodge and serve submissions on costs within 14 days.  The defendant and the intended 2^nd defendant shall lodge and serve submissions in response within 14 days thereafter.  Then the plaintiffs shall have 7 days to lodge and serve submissions in reply.