XCHRX ELEGANT JUMP LTD. v. TRIBUNE BRIDGE LTD.

HCA 14037/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 14037 OF 1999

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R U L I N G

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1. This summons is for leave to be granted to the Plaintiff to amend the Statement of Claim filed on 31 August 2000 in accordance with the draft annexed to the summons.

2. Mr Lee for the Plaintiff submits that these amendments reflect the charge of circumstance since the issue of the writ in particular those brought about by the order of To DJ on 21 September 1999. As a result of that order the shares in New Media Corporation which were the subject of the writ have now been sold and the proceeds (or part thereof) are being held by Messrs Sinclair Roche and Temperly on their undertaking to hold them in their custody until trial.

3. Mr Lee argues that the effect of the amendments sought will be to change the object of the relief sought from those shares to the proceeds of the shares.

4. Mr Barlow does not object to the amendments which reflect the reality of the sale of the shares to Hanshaw. He objects, however, to certain of the amendments. They are:

(i) the words "and an equitable interest in the New Media Shares and Tribute Bridge Shares" in paragraph 16 of the proposed Statement of Claim;

(ii) paragraphs 22 and 23 of the proposed amended Statement of Claim;

(iii) the proposed paragraphs 2, 2A and 2B of the prayer of the proposed amended Statement of Claim.

5. He does so primarily because he says they are "immaterial and useless amendments" which raise a case which is bound to fail. The court should not grant an indulgence to a plaintiff to amend its pleadings in such circumstances.

6. He says that there is no juridical basis for the Plaintiff's proposed claim. His argument is essentially this. That the Plaintiff's claim is one in contract for the sale of the New Media shares. There could not be specific performance of a contract for the sale New Media shares, as they were freely available. Although in the case of a contract for the sale of land, the vendor becomes, as between himself and the purchaser, a constructive trustee for the purchaser, there is no similar trust concept in law in other contracts. There can, therefore, be no tracing. He further argues that the concept of a contract (as opposed to a term thereof) arising by implication is unknown to law. The allegation that an agreement can have arisen from the matters raised in the proposed paragraphs 18-21 is unsustainable.

7. His subsidiary arguments are based on an allegation that in asking for these amendments the Plaintiff is guilty of abuse of process and if the amendments were allowed the Defendants should be released from their undertakings to To DJ.

8. He further argues that the proposed amendment to paragraph 22 should not be allowed because it results in ambiguity.

9. I have borne in mind that all I must be satisfied of in an application is that the amended case which the Plaintiff proposes to put forward is arguable. I find that the proposed amendments do put forward an arguable case.

10. Mr Lee has informed the court that it is the Plaintiff's case that New Media shares were not freely available in that they were not and have not been traded on any exchange anywhere in the world. If the Plaintiff can establish that fact then it may have been entitled to specific performance.

11. There is authority for the argument that a purchaser of shares under a contract which is specifically enforceable becomes beneficially entitled to the shares as soon as the contract is made (see Halsbury Vol. 44(1) para. 827 at page 481 and Jones v. Goodhart, Specific Performance 2nd ed. page 162). I am satisfied also that there is authority for the argument that a beneficial owner with an equitable interest in shares can trace the proceeds of the shares (see Snell's Equity 30th ed. para. 13-29, 13-40 and 13-33). I have not been persuaded that it is unarguable that simply because, by agreement of the parties, the shares to which the Plaintiff claimed on beneficial interest have been sold, the Plaintiff would have thereby lost a right to trace the proceeds.

12. I am satisfied that it is at least arguable that a contract arose by implication from the matters raised in paras. 18-21 of the proposed amended Statement of Claim.

13. I am satisfied that the proposed para. 22 is not ambiguous and that the construction put forward by Mr Lee in his written reply is the correct one.

14. Bearing in mind that the amendments put forward by the Plaintiff do put forward an arguable case it cannot be an abuse of process to seek to put them forward, even if they were incidentally to bolster the Plaintiff's position in relation to other applications before the court. Although the Plaintiff did list this summons for a three minute hearing, I bear in mind that the defence has been aware of this summons since its issue on 27 September and indeed the Plaintiff wrote to them on 5 October seeking to proceed by way of consent application but there was no reply to this approach.

15. The question of whether these amendments should result in a release of the Defendants from their undertakings to To DJ is not a matter that concerns this court on this application.

16. I therefore make an order in terms of paras. 1 and 2 of the Plaintiff's summons. I order that, unless either party applies to be heard on the question of costs within 14 days of today, the costs of this application be to the Defendant.