GLOBAL BRIDGE ASSETS LTD AND OTHERS v. SUN HUNG KAI SECURITIES LTD

HCA 317/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 317 OF 2008

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BETWEEN

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R U L I N G

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Introduction

1.  I have two summonses before me.  Firstly, one by the Defendant [pages 2053-2058, Supplemental Bundle D] for leave to appeal to the Court of Appeal against my order dated 12 May 2011 [page 2088 of the same Bundle] giving leave to all three plaintiffs to amend the statement of claim.  The other summons is one taken out by the Plaintiffs [2050-2052] to vary, under the slip rule, the costs order made on 12 May 2011 alternatively, for leave to appeal against that order.

The Test

2.  The burden that a would-be appellant carries in obtaining leave to appeal is to show that the appeal has a reasonable prospect of success (or there is some other reason in the interests of justice why the appeal should be heard) [Section 14AA(4), High Court Ordinance].  As Le Pichon JA observed at para.16 of her judgment in Winnie Ho & Anr. v Stanley Ho & Anr., HCMP 1009/2009, merely showing that the appeal is “arguable” and “not fanciful” is not sufficient.  Both Mr McCoy, SC for the Defendant and Mr Dawes for the Plaintiffs are, of course, agreed that this is so.

The Defendant’s Appeal

3.  I should observe that the Defendant has a summons for leave to amend its original summons for leave to appeal [2058-1 to 2058-10] and it is on the basis of this summons that I propose to decide whether the Defendant should have leave to appeal.

4.  The first question identified by Mr McCoy is about limitation; the question being whether the amendments that I have allowed to proceed based on allegations of fraud and deceit raise a new cause of action that did not arise out of substantially the same facts as had been originally pleaded in the statement of claim.  Because I expressly found that the allegations of fraud did not arise out of the same facts, Mr McCoy submits that in those circumstances I had no jurisdiction to allow the amendments to be made.  This is so because O.20 r.5 does not apply — I have no discretion in the matter.  It is simply a matter that goes to jurisdiction only. 

Mr McCoy’s Analysis 

5.  Nevertheless, there is a second limb to this. Having found that this was a new cause of action I decided that there was a perfectly arguable evidential case to be tried as to whether, as the Plaintiffs contended, they had only discovered the fraud after the Defendant had served its defence.  If the Plaintiff could establish this to be so then time would only run from that event and the plea of fraud would not be out of time.

6.  Before me the Defendant had contended that in truth there were a number of opportunities well before service of the defence which would have indicated to the Plaintiffs that the fraudulent acts that they seek to rely on existed and those occasions all occurred well before the expiry of the limitation period.

7.  I concluded that the Plaintiffs’ factual case as to when they became aware of the fraud would need to be decided by the trial judge.  I described the issue as a “live” one at this stage.  See para. 63 of my judgment.  I went on to say that there was no basis for saying that the Plaintiffs’ case was so hopeless on the facts as to when the fraud was discovered so as to render it unworthy of being tried by the trial judge, if thought  expedient by him , as a preliminary issue.  This issue would need to be pleaded out by the Plaintiffs and the Defendant and be decided then.

8.  Mr McCoy’s point is that the court cannot defer the decision on jurisdiction until trial.  That decision needs to be made at the amendment stage.  The Plaintiffs have failed to do this and therefore leave to amend should not have been given.  Mr McCoy contemplates that if evidence is to be called to substantiate the case that the fraud was not discovered until after the expiry of the limitation period, that would need to be decided at the hearing when the application for leave to amend is made and not, erroreously, says Mr McCoy, as I have allowed to occur, at the trial with the factual issue of when the fraud was and/or could have been discovered deferred to the trial judge.

9.  To support that approach he has referred to Sun Focus Investment Ltd v Tang Shing Bor & Anr., HCMP 2290/2010 in which the Court of Appeal has given leave to appeal (the appeal will be heard in December this year to which appeal Mr McCoy will seek to add this matter).  In that case Chung J, at first instance, gave leave to amend in similar circumstances to this case and on the same basis. Le Pichon JA held that there was a very compelling case for saying that he was wrong in consequence of which leave to appeal was given.

10.  Mr Dawes, for the Plaintiffs, submits that the case of Sun Focus Investment is to be distinguished.  In Sun Focus, the learned Judge, he says, was very brief in discussing the Plaintiffs’ prospects of showing on the evidence that the facts supporting the new cause of action only came to light after the available limitation period.  In this case, he submits that I had given much fuller consideration to the factual issues and held that it should therefore be permitted to go to trial.

11.  In saying that Mr Dawes says that the proper procedure would be that the limitation issue might be hived off and decided as a preliminary issue at which the trial judge would then decide when, with reasonable diligence, the Plaintiffs could have discovered the fraud and whether that moment was within the limitation period or after its expiry.

Conclusion

12.  I am bound to say that Mr Dawes’ analysis of the procedure to be adopted in situations such as this accords with my own experience but where in Sun Focus Investment, Chung J had made an order in effectively identical circumstances to those obtaining before me in this case and the Court of Appeal in granting leave in that case held that; “Very arguably, the premise upon which the judge granted leave to file the fresh statement of claim would appear to be incorrect:  if the new causes of action are deemed to have commenced as at the date of writ, section 26, Limitation Ordinance will not be engaged at all and will not be a live issue at all” [para.13, Le Pichon JA supra], it seems to me notwithstanding that I had dealt with the evidence perhaps more fully than the hearing judge in Sun Focus Investment I ought to say that reasonable prospects of success are present.  It seems to me that this matter may also raise a point of general procedural importance as to how these issues should be resolved by the first instance judge and therefore may also engage the second limb of section 14AA, High Court Ordinance when considering whether to grant leave which is the “some other good reason” ground upon which I am also disposed to grant leave.

13.  As to the second ground of appeal which relates to the claims for damages, these all turn on the correctness of the decision by me to allow the amendment based on fraud or deceit to go to trial.  Fraud or deceit will defeat the Deed of Waiver.  If it is shown that I was wrong to have allowed the amendment to be made then the damages claim must fail.  It seems to me that where I have given leave on the amendment to plead fraud then I should also give leave on this ground as well because the two are linked.

14.  The third ground of appeal is distinct.  This raises a pure question of fact.  It turns on the genuineness of the letter dated 8 May 2003 by Mr Hui to the 3rd Plaintiff acknowledging the debt of US$3 million.  This is a loss occasioned by the Plaintiff as a partner of the JV.  Mr McCoy says the loss is the JV’s and not the 3rd Plaintiff’s.  I had examined and analysed the nature of this claim and held it to be a loss occurring to the 3rd Plaintiff and not to the JV.  Being as objective as I can, I do not think that Mr McCoy has shown reasonable prospects of success under this head and accordingly, I refuse to grant him leave.

15.  Where I have granted leave on two of the three heads of appeal, I will say that the costs of the summons and of the hearing should be in the appeal with certificate for one counsel, in this instance Senior Counsel appearing alone.

The Plaintiffs’ Summons

16.  I now come to the Plaintiffs’ summons to vary the order for costs under the slip rule or alternatively, for leave to appeal.

17.  It is plain that O.20 r.11 does not apply in these circumstances.  What had happened is that in drafting the summons to amend the statement of claim the person drafting it conceded both limbs of the costs order that the court will make on an amendment, these being the costs of and occasioned by the amendments and the other being the costs of the hearing itself.  I took that concession as to costs at face value when I gave judgment and ordered that the, albeit successful, plaintiff at the hearing should pay all the costs, of the amendment and of the hearing itself.

18.  Mr Dawes has shown me the correspondence as to how the order was sealed and the immediate steps taken by the Plaintiffs’ to deal with it. Although this was the Plaintiffs’ summons and they had succeeded at the hearing and one might have expected them to have carriage of the order, it was the Defendant’s solicitors who got in first, on the day, and drew up the order and had it sealed without responding to the Plaintiffs’ solicitors’ letters that had been sent out promptly after the hearing itself, seeking to correct the matter of costs.  There are here proper grounds for thinking that the Defendant’s solicitors had acted a little too quickly.  Less complimentary language could be used but I am content to leave it like that at this stage.

19.  Mr McCoy says it is too late now and that the Plaintiffs have their right of recourse against their legal advisers.  But this is not the correct response on this occasion.  I have seen how this has come about from the correspondence and justice demands that the Plaintiffs should have leave to appeal against the order.  I find that they have reasonable prospects of success in all the circumstances given the conduct of the Defendant’s solicitors in getting the order sealed in the way that they did.  These costs do not represent a small amount by any means and the successful Plaintiffs should have an opportunity of arguing the issue before the Court of Appeal.

20.  The costs of this summons will also be costs in the appeal.