XCHRX Lau Hing Wan and Another v. So Wing Yee and Another

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 12206 OF 2000

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R U L I N G

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1. This is a summons taken out by the defendants under Order 18, Rule 19, to strike out paragraph 13 of the statement of claim because it is said that it discloses no reasonable cause of action. Clearly, the other limbs to Order 18, Rule 19, do not apply to these circumstances.

2. The matter concerns a stall at Stanley which had been operated by the plaintiffs and effectively comprised a business selling watches to tourists. The action is brought on the basis of an agreement dated 29 November 1997 whereby the plaintiffs joined that business. The parties agreed that the value of the existing stock represented by the watches was $250,000 and the defendants agreed to contribute one half of that in consideration of the plaintiffs allowing the defendants to join in as partners in the business.

3. The story, as it were, is recounted in the various paragraphs of the statement of claim.

4. What is now said is that the defendants have made off with the stock and with some change, I think, amounting to $500 and the plaintiffs seek damages to compensate them for what the defendants are alleged to have done.

5. Paragraph 13 of the statement of claim is in these terms:

"Further or alternatively, in reliance of the defendants' operation of the stall, the defendants were in breach of trust to the plaintiffs and had wrongfully misappropriated all the inventory of watches together with $500 change to themselves on 8 April 1998."

6. There are then some particulars to paragraph 13 which I can summarise. It is said that in the afternoon of 8 April, the defendant's misappropriated the goods, that is to say the remaining stock of watches together with $500 change, and as a result the plaintiffs have suffered loss and damage.

7. Before I turn to the particular complaint made on behalf of the defendants which is said to justify the court now striking out that paragraph, I should look at the test which the court needs to apply in such circumstances. It is helpful to look at page 349 of the Supreme Court Practice 1999. The principles are said to be the following:

"A reasonable cause of action means a cause of action with some chance of success when only the allegations in the pleading are considered. So long as the statement of claim or the particulars disclose some cause of action or raise some question fit to be decided by a judge or a jury, the mere fact that the case is weak and is not likely to succeed is no ground for striking it out."

8. Those are the material parts of the note which I need to refer to. So it is clear from that that any party seeking to strike out a pleading or any part of a pleading under this rule has a very high burden to discharge.

9. I am bound to say, by way of general comment, that this statement of claim perhaps is not in the best of shape but the matter has to be dealt with on its merits as they presently stand.

10. What Mr Fung on behalf of the defendants says is this: that where one has a partnership at the core of this dispute, one is not entitled to sue in conversion in respect of partnership property because, as he submits, one is required to demonstrate an exclusive right to possession of the particular goods which are the subject matter of the dispute and so where, as in this case, the matter is brought against a background of partnership, the plaintiffs simply do not qualify as appropriate plaintiffs in an action for conversion. In those circumstances, paragraph 13 of the statement of claim is simply not maintainable.

11. As against that, Mr Lam who appears for the plaintiffs, says that firstly, given the high burden which is placed upon the defendant to justify a striking out, the defendants have simply not shown that the matter is so hopeless as it presently stands as to justify striking out.

12. I have also had my attention drawn to a passage from Clark & Lindsell On Tort, the 18th Edition, paragraph 1446, which is in these terms:

"A person has title to sue for conversion if and only if he had at the time of the conversion either actual possession or the immediate right to possess. It is not necessary to prove ownership and indeed even an owner may not sue unless he either possesses or has the immediate right to possess."

13. Then in paragraph 1447, the following sentence appears and Mr Lam also relies on this:

"The right of a co-owner to sue his other co-owners is limited to cases of destruction, wrongful sale and disposal which pass good title to the disponee. Secondly, where co-owners join in entrusting a chattel to a third party, no action lies for detention or refusal to return it unless all the co-owners concur in demanding its redelivery."

[although perhaps that does not really suit the circumstances of this dispute].

14. What Mr Lam particularly relies upon is clause 6 of the agreement. The agreement in its material parts is pleaded at paragraph 4 of the statement of claim. Clause 6 is in the following terms:

"During the said period, if the defendants withdraw prematurely any contributed capital and any inventory will belong to the plaintiff's unconditionally."

15. Although, as I pointed out to Mr Lam in the course of the argument, it does not immediately appear on the face of the statement of claim that the matter is put specifically on the basis of clause 6, it seems to me that Mr Lam has just about done enough to persuade me that it would be wrong to strike out the claim based as it is on paragraph 13 of the statement of claim. If only, perhaps on a charitable view of the matter, all the facts are there on the pleading and what Mr Lam submits on behalf of the plaintiffs is that there is sufficient material on the face of the pleading to indicate in this case that the defendants, if the plaintiffs are right on their pleaded case, having made off with the stock, acted in a way that was totally inconsistent with the basis of the agreement amounting to a premature withdrawal and consequently that would bring the partnership to an end, thereby giving the plaintiffs exclusive possession and thereby justifying the claim for conversion under paragraph 13.

16. And so, as I indicated earlier in my judgment, whilst I take the view that this is not the happiest of pleadings and it may well require amendment, I cannot characterise it as being so hopeless as to justify my striking it out on the basis of Order 18, Rule 19.

17. So for these reasons, this summons must be dismissed.

18. Plaintiff's costs in the cause.