HCA002015/1980
1980, No. 2015
IN THE SUPREME COURT OF HONG KONG
HIGH COURT
____________
BETWEEN
| LO KA CHUN otherwise known as BRIAN LO | Plaintiff |
| AND | |
| LO To | 1st Defendant |
| LAW Tsoi | 2nd Defendant |
___________
Coram: Hon. Clough, J.
Dates of Hearing: 4, 7, 8, 10, 11 and 12 January 1985
Date of delivery of Judgment: 28 February 1985
__________
JUDGMENT
__________
1. In this action the Plaintiff applies by a summons issued on the 2nd July 1984 to amend the writ. By another summons issued on the same date he applies for leave to serve a new Statement of Claim and also for directions concerning the further conduct of the action.
2. The applications are the sequel to an order made by me on the 22nd May 1984 on the application of the 1st Defendant striking out the Plaintiff's previous Re-Amended Statement of Claim and ordering that the action should be stayed and stand dismissed unless within six weeks the Plaintiff issued a summons applying to serve a new Statement of Claim.
3. The state of the pleadings at the date of my order dated the 22nd May 1984 was briefly as follows. The writ had been issued on the 26th April 1980. The Statement of Claim had been filed on the 7th July, amended on the 28th July and re-amended on the 25th September 1980.
4. The Plaintiff asserted two principal claims by his writ and Re-Amended Statement of Claim. First the Plaintiff claimed, as Executor and sole beneficiary of the estate of his deceased father LO Sum, various forms of relief against both the Defendants on the basis that until his death on the 16th October 1970 LO Sum was in partnership in equal shares with the Defendants in the businesses of the Cheoy Lee and Hip Hing Cheung Shipyards. The Plaintiff further alleged that the Defendants have failed to account for the assets of the partnership after LO Sum's death, wrongfully continued the businesses and divided its assets and the shares of their five associated companies when settling litigation in four actions between them by an Agreement of Settlement and Indemnity dated the 28th September 1978 ("the 1978 compromise").
5. The second limb of the Plaintiff's claim was for various forms of relief against the 1st Defendant on the footing that the 1st Defendant was the trustee and the Plaintiff the sole beneficiary under a written instrument of trust dated the 18th August 1970 (" the Undertaking") relating to one third of the "shares" in the Cheoy Lee Shipyard and to certain shares in the companies associated with the partnership businesses.
6. The Undertaking is an instrument written in the Chinese language by the 1st Defendant and witnessed by the Plaintiff when he was only 18 years of age. By the Undertaking the 1st Defendant purports to record that he is willing at any time under the direction of LO Sum (who was to die on the 16th October 1970) to transfer "one third of the shares in Cheoy Lee Shipyard" and in four of the above named companies "...... to be under the name of LO Sum or under the name of the person appointed by him as the beneficiary." The 1st Defendant adds that "the 124 shares in Leung Fung Enterprises Ltd." (one of the five companies) "will be dealt with in the same way as above. When the Undertaking was executed Lo Sum was still alive and had made all but one of the transfers but the deeds referred to below had not been executed. The Undertaking concluded with the words - "If because of change of circumstances then until his son Ka Chun" (the Plaintiff) "grows up, the above shares will be transferred to his son for him to take up. This is proof."
7. The Re-Amended Statement of Claim included the allegation that transfers("the transfers" )purporting to have been made by LO Sum into the name of the 1st Defendant of shares in the name of LO Sum in the five above mentioned companies, on the 17th August 1970 in the case of four of the companies and on the 13th October 1970 in the case of the fifth company, were "never intended to and did not affect the beneficial interest therein."
8. The same pleading also included the following allegation in relation to two deeds dated the 7th October 1970 ("the deeds") made between LO Sum and the Defendants whereby the parties purported to dissolve the respective shipyard partnerships and LO Sum purported to record that he had assigned his share in each of the partnerships to the 1st Defendant for specified sums with the consent of the 2nd Defendant :-
"LO Sum deceased never received the sums of $250,000.00 and $85,000.00 referred to in paragraphs 17 and 18 hereof, or any part thereof as consideration as alleged or otherwise. Neither of those Deeds were intended to have or did have any legal effect."
9. The 1st Defendant had filed his Defence and Counterclaim on the 14th October 1980. That pleading includes a denial of the partnership alleged by the Plaintiff and the assertion that the 1st Defendant was until about September 1978 the beneficial owner of the shipyards and all the relevant shares and that the LO Sum and the 2nd Defendant had at all material times been the 1st Defendant's nominees.
10. The transfers and the deeds were admitted and the 1st Defendant pleaded that they were executed pursuant to an oral agreement so to do made between LO Sum and the 1st Defendant at about the end of July or the beginning of August 1970, The Plaintiff's allegations regarding the inefficacy of the transfersand Deeds were denied and the 1st Defendant alleged further or in the alternative that if, contrary to his denials, LO Sum had any beneficial interest in the company shares or the shipyards that interest became vested under the transfers and deeds in the 1st Defendant who paid LO Sum the amounts on the dates particularised in the pleading pursuant to the oral agreement alleged by the 1st Defendant.
11. In compliance with a request filed on the 9th May 1983 for further and better particulars of the consideration for and all the other terms of the alleged oral agreement the 1st Defendant pleaded, in particulars filed on the 14th July 1983, that his primary case was that he was at all material times the onwer of "all the shares and companies" comprised in the transfers and deeds and that the agreement merely constituted an agreement for LO Sum to carry out his existing obligation to the 1st Defendant. In the alternative the 1st Defendant pleaded that the consideration for the agreement consisted of the payment of the various sums pleaded in his Defence and the forgiveness of LO Sum's defalcations. Its also pleaded that it was a term of the agreement that he should forgive all LO Sum's previous defalcations.
12. The 1st Defendant had admitted the Undertaking in his Defence but pleaded inter alia that it evidenced his intention to provide thereafter for LO Sum, or the beneficiary appointed by him, by way of gift out of brotherly love and affection.
13. The 1st Defendant also pleaded estoppel in his Defence and he contended that the Plaintiff's claims were barred under the Limitation Ordinance (Cap. 347) and or alternatively by laches.
14. The 2nd Defendant filed his Defence and Counterclaim on the 28th November 1980. The Defence consisted primarily of a blanket of non-admissions. He did not admit the partnership alleged by the Plaintiff to have subsisted between LO Sum and the Defendants or that any of the relevant company shares were partnership assets or beneficially owned by LO Sum. The transfers and the deeds were not admitted and the 2nd Defendant pleaded lack of knowledge of the Undertaking. He admitted the 1978 compromise but alleged inter alia that the Plaintiff gave it his consent and was also estopped from maintaining any claim against the 2nd Defendant. He further relied on laches and the Limitation Ordinance as a defence.
15. By his Reply and Defence to the Counterclaim of the 1st Defendant filed on the 21st February 1983 the Plaintiff pleaded inter alia that the Defendants had acknowledged his entitlement to a one third share in the shipyards and companies and that, by his leading counsel, he had made it clear to the Defendants that they entered into the 1978 compromise at their own risk regarding the Plaintiff's claims.
16. On the 17th January 1984 Master Clay gave the Plaintiff leave to amend his Reply to allege that by a letter ("the 1974 letter") dated the 17th June 1974 written by the 1st Defendant to the Plaintiff, who had attained 21 on the 5th October 1972, the 1st Defendant had acknowledged that he was liable to account to the Plaintiff for "the assets of the partnership" so that time did not begin to run until the 17th January 1974 for the purposes of the Limitation Ordinance. The order of Master Clay is subject to an appeal by the 1st Defendant which I adjourned on the 22nd May 1984 to the hearing of the present application and which both leading counsel have now agreed has become academic.
17. The 1974 letter is written in Chinese. It appears to refer to the Undertaking and includes the following passages which I set out to indicate only the general tenor of the letter :-
"After the death of your father ..... I, in memory of my late elder brother, and because of your young age, take care of (his) estate and had written down that (this estate) will be given back to you when you grow up ..... But my service to your family has gradually become your unlimited rights; this can be sensed in your latest two letters ...... I cannot satisfy unlimited demands. (I) therefore decide to give you or Ka Luen" (LO Sum's second son) " back your late father's business that he had left; thereafter you can do whatever you like and I can be greatly relieved from my burden ..... you can return to Hong Kong to do the necessary procedure".
18. When applying to strike out the Re-Amended Statement of Claim the 1st Defendant had relied on all the grounds mentioned in Order 18 rule 19(1) and on the inherent jurisdiction of the court. I struck out the pleading on the ground that although the application was made late it was fully justified under Order 18 rule 19(1)(c) because the pleading was thoroughly abscure and embarrassing. Leading counsel for the Plaintiff had rightly pressed me with the Undertaking and the 1974 letter and contended that there were matters arising between the parties which ought to be tried. He had also indicated that the Plaintiff intended to invoke the principle of implied or resulting trust against the 1st Defendant on the basis that he was a volunteer in relation to LO Sum's assets. Although there were difficulties arising in connection with partnership law and the construction of the Undertaking and the deeds it seemed to me that the Plaintiff's pleading was capable of improvement by amendment and that he should be given an opportunity to put his house in order. I therefore did not dismiss the action, which I understood to relate to vary substantial assets. Instead I made the order indicated above which leading counsel for the 1st Defendant had invited me to make if I had entertained doubts about the justice of dismissing the action after striking out the Re-Amended Statement of Claim.
19. In taking this course I stressed, in my subsequent written reasons for my judgment delivered on the 11th June 1984, certain matters which have again become relevant on the hearing of the present application. One matter was the unparticularised pleading in paragraph 19 of the Re-Amended Statement of Claim that the transfer were never intended to and did not affect the beneficial interest therein. I stressed that if such allegations were going to be repeated in a new proposed Statement of Claim there should be particularisation pursuant to Order 18 rule 12(1) of the facts which were relied on as the basis for any intention alleged.
20. I also stressed that in previous interlocutory proceedings in this action Mr. Commissioner Litton had emphasised the importance of section 45 of the Partnership Ordinance (Cap. 38) in providing that, subject to any agreement between the partners, the amount due from continuing partners to the representative of a deceased partner is a debt accruing at the date of dissolution or death and not a right to specific partnership assets. I went on later to indicate that I regarded myself as bound by the decision of the House of Lords in Knox v Gye (1872) L.R. 5H.L. 656 on this point as requiring me to hold that any claim of LO Sum's personal representatives in an action for an account against the Defendants would be time barred on the 16th October 1970 under section 4(2) of the Limitation Ordinance. I did not deal with the issue of acknowledge-ment for limitation purposes sought to be raised in the amendment to the Reply permitted by Master Clay.
21. Another matter dwelt upon in my previous written judgment was the embarrassing pleading in paragraph 16 of the Re-Amended Statement of Claim of the allegation that the reference in the Undertaking to 124 shares in Leung Fung Enterprises Limited "ought to have been a reference to 1,288 shares". I considered such a pleading embarrassing because it was equally consistent with the alternative contentions that the pleading is based on the interpretation of the Undertaking to mean something different from its clear text or that the instrument should be rectified to mean something different.
22. In the event the present application of the Plaintiff by his summons dated the 2nd July 1984 pursuant to my order made on the 22nd May 1984 seeks to introduce new causes of action not previously mentioned in the writ and so the Plaintiff also applies by a separate summons to amend the writ in line with the prayer to the proposed new Statement of Claim ("the new pleading"). By the conclusion of the six day hearing on the 12th January 1985 the count had before it the third version of the proposed amended writ and the Plaintiff's leading counsel, Mr. Swaine, undertook that the Plaintiff's solicitors would supply the court with the seventh and final version of the new pleading. By then there had been numerous amendments to the new pleading and Mr. Swaine had formally abandoned some allegations and conceded that others were what he termed vulnerable.
23. The general structure of the new pleading was as follows. After pleading in paragraphs 2 and 3 that the Plaintiff sued as beneficiary of a trust and also as sole beneficiary and executor of the Will dated the 14th August 1970 of LO Sum deceased the matters set out below are pleaded.
(A) Background before August 1970 (paragraphs 4 to 17 and Prayer (1))
24. The background of the Plaintiff's family and of the alleged partnerships and the five companies is pleaded in this part of the new pleading. The allegation in paragraph 13 that until about October 1970 LO Sum and the Defendants carried on the businesses of the two shipyards as partners in equal shares is the basis for the declaration to that effect, but without reference to any date, sought by the Plaintiff in paragraph (1) of the prayer.
25. In paragraph 16 it is pleaded that the companies were formed with partnership funds from the partnership businesses and that specified shares held by LO Sum were paid for with partnership moneys and were therefore partnership property. In paragraph 17 the Plaintiff alleges in the alternative that LO Sum paid for the shares with his own money and that he is the beneficial owner of them.
(B) The events of August to October 1970 (Paragraphs 18 to 26 and 37)
26. These are the matters, in addition to the alleged partnership, out of which the Plaintiff's claims arise but the claim under paragraph 36 is based on the allegations of undue influence therein mentioned.
27. By paragraphs 18 and 19 it is alleged that in about August 1970, when the Plaintiff was 18 years of age and at a school in Canada, LO Sum and the Plaintiff and the 1st Defendant came to know that LO Sum was suffering from a recurrence of cancer and had not long to live. Paragraph 20 pleads the Will of LO Sum referred to above and the death of LO Sum on the 16th October 1970 is pleaded in paragraph 37.
28. Paragraphs 21 to 27 relating to the transfersand the deeds were the subject of important amendments shortly before the hearing. As originally settled these paragraphs alleged that early in August 1970 the 1st Defendant had caused transfer forms and bought and sold notes (referred to together in that part of the pleading as "the said transfers") and the deeds to be prepared and had taken them on or about the 17th August 1970 to LO Sum's house for signature but that LO Sum had not then signed them. By paragraph 23 it was also originally pleaded that during this visit the 1st Defendant orally promised LO Sum that if he would "sign the said transfers and the said Deeds" the 1st Defendant "..... would transfer back the assets covered by the said transfers and Deeds to LO Sum (deceased) or his nominee upon request, or in the event of LO Sum's death, to the Plaintiff upon his attaining majority."
29. In paragraph 24 it was originally pleaded that on the 18th August 1970 the 1st Defendant went again to LO Sum's house and asked him if he had made up his mind to sign the transfers and deeds. It was further pleaded originally that when LO Sum showed no response the 1st Defendant "..... in order to further induce LO Sum (deceased) to sign the said transfers and the said Deeds, did there and then," write and sign the Undertaking.
30. By paragraph 25 it was originally pleaded that after the 1st Defendant had left LO Sum signed the deeds and transfers which had not then been signed by the Defendants in the case of the deeds (which did not bear any seal), or by the 1st Defendant in the case of the transfers. It was further pleaded that LO Sum kept the transfer and deeds without giving instructions for their delivery to the 1st Defendant or to anyone, despite seeing the 1st Defendant on many occasions until his death. It was then pleaded inter alia that on or about the 14th October 1970 when LO Sum was critically ill and unable to speak, the Plaintiff delivered to the 1st Defendant, on his own initiative and without LO Sum's instructions or consent (1) the deeds without seals affixed thereon and signed only by LO Sum, and (2) the transfers signed only by LO Sum. This paragraph concluded by alleging that no part of the purported consideration for the transfers or the deeds was ever paid or intended to be paid.
31. As originally settled paragraph 26 contained the plea that LO Sum did not intend the transfers and the deeds to be binding on him or his estate in that they were never delivered by him or his agent. It was also pleaded that the consideration never having been paid the Plaintiff's delivery of the transfers and deeds, not being delivery contemplated or authorised by LO Sum, was ineffective. Finally it was pleaded as an alternative in relation to the deeds that even if delivered they were not sealed at the time of delivery by the Plaintiff and therefore not duly executed by LO Sum.
32. All these allegations were the basis for a claim in the original paragraphs 27, 38, 48 and paragraph (2) of the prayer that the partnerships continued until dissolved on LO Sum's death, and that the Defendants were liable to account to him accordingly and that in the alternative if the shares comprised in the transfers were not partnership assets they were held by the 1st Defendant for LO Sum's estate.
33. The fabric of these original allegations was punctured in relation to the transfers by the affidavit of Mr. Gerald TO, the 1st Defendant's solicitor, made on the 3rd January 1985 exhibiting correspondence passing between his firm and the Hong Kong Stamp Office demonstrating that the practice of that office in 1970 was such that the bought and sold notes (included in the term "the said transfers" in the relevant pleadings) would not have been stamped unless and until they had been signed by both purchaser and seller.
34. The reaction of the Plaintiff's solicitors to Mr. To's evidence was to concede the point and revise the new pleading to the third version which they sent to the 1st Defendant's solicitors under cover of a letter dated the 3rd January 1985 which was the day before the Plaintiff's applications came before me for hearing. An affirmation of Mr. WONG Sui Kwan, the Plaintiff's solicitor, attributed the manifest flaw in the previous new pleading "...... to a possible ambiguity in the plaintiff's instructions to me which gave rise to a misunderstanding by Junior Counsel and myself that documents left with LO Sum (deceased) by LO To on or about 17th August 1970 had included the share transfers."
35. The revised new pleading was, Mr. Wong affirmed, made after taking further instructions, and accorded with the correct understanding of the position. He affirmed his belief that the Plaintiff had never intended to mislead or act mala fide. On the fourth day of the hearing when Mr. Saville challenged the bona fides of the Plaintiff and invited the court to reject Mr. Wong's explanation, Mr. Neoh, junior counsel for the Plaintiff, took the responsibility for the demonstrably false allegation in the original new pleading relating to the alleged non-execution of the transfers by LO Sum.
36. The substance of Mr. Neoh's explanation, which the court accepted, was that in fresh instructions taken after the previous striking out of the Re-Amended Statement of Claim the Plaintiff, who did not have the actual transfers, had said that the 1st Defendant took a bundle of documents to the home of LO Sum and then went in to the discussions pleaded. The Undertaking must, Mr. Neoh submitted, have arisen from antecedent oral discussions. The "possible ambiguity" referred to by Mr. Wong related to the contents of the bundle of documents.
37. According to Mr. Neoh he had asked the Plaintiff about the contents of the bundle. The Plaintiff had replied that he remembered the deeds and other documents dealing with various companies. He had given no precise instructions in relation to the other documents. The Plaintiff simply could not remember. He did however remember that when the 1st Defendant had left LO Sum's house after giving the Undertaking LO Sum had signed all the documents.
38. It was Mr. Neoh who had assumed that the other documents were transfers. He was very busy at the time and should have verified with the client whether the transfers were signed. The company searches showed the dates of August transfers but Mr. Neoh failed to check. This was an omission on his part. The Statement of Claim had been sent to the Plaintiff to be checked. He did not object to the pleading about the transfers because he could not be certain and did not therefore object to the pleading suggested by Mr. Neoh. The Plaintiff might have objected if challenged on the dates by Mr. Neoh.
39. Mr. Neoh told the court that when Mr. To's affidavit was filed and the Plaintiff said he could not say when the transfers were signed the point was conceded at once. With the candour that the court expects of counsel Mr. Neoh apologised to the court and said the fault was his because he should have verified the point with the Plaintiff but failed to do so. I have dwelt on these matters because they become material later.
40. The new pleading having begun life as a pleading to support the allegation that the transfers and deeds were never duly executed, the third version of the new pleading which came before me when the hearing began on the 4th January 1985 and was further revised as the hearing progressed, bore the imprint of the pleader's struggle to come to terms with the fact that the transfers had been shown to have been executed by LO Sum whilst at the same time preserving in the new pleading the alleged oral promise of the 1st Defendant to transfer back all the property comprised in the transfers and the deeds.
41. Paragraph 21 was ajusted to plead that on dates unknown to the Plaintiff the 1st Defendant had "procured" the signature of LO Sum to the transfers but that the 1st Defendant had not paid the consideration stated in the transfers which was their nominal value, and that no consideration was ever intended to be paid. There followed a plea that the 1st Defendant accordingly held LO Sum's shares on implied or resulting trust for LO Sum or his estate or alternatively for the partnership.
42. Paragraph 22 was revised to introduce the plea that the purported consideration of $250,000 and $85,000 mentioned in the deeds represented half the book value of LO Sum's share in the capital of the respective partnerships and paragraph 23 was altered to allege that on or about the 17th August 1970 the 1st Defendant brought only the deeds to LO Sum's house but that LO Sum did not sign them. The 1st Defendant's alleged promise to LO Sum was modified to the extent of pleading that it was made to LO Sum if the latter would execute the deeds, the reference to the signing of the transfers being deleted.
43. A similar modification was made to the allegation of inducement in paragraph 24 and to the allegation of non-execution and non payment of consideration contained in paragraphs 25 and 26. References to the transfers were deleted. However the amendments to paragraph 21 had been such that, even on the basis of the revision to eliminate previous allegations of non-execution of the transfers, the effect of paragraphs 21 to 26 as pleaded originally in paragraph 27 remained the same as before and paragraphs 38 and 48 and paragraph (2) of the prayer remained.
44. On the last day of the hearing Mr. Swaine abandoned the proposed pleading that the Deeds were never executed and all the consequential pleading including paragraph (2) of the prayer. At this stage he proposed inter alia a very minor amendment to paragraph 23, modification of paragraph 25 so that it now alleged the signature and delivery of the deeds by LO Sum and the deletion of paragraphs 26, 27, 38 (with consequential deletion of part of paragraph 39), part of paragraph 46(a), paragraph 48 and paragraph (2) of the prayer. This final revision of the proposed new pleading left the five alternative claims mentioned below.
(C) The Plaintiff's 5 alternative claims
(1) The "true agreement" claim (Paragraphs 28 and 29 and Prayer (3))
45. Under paragraph 28 the Plaintiff seeks to plead that the transfer and the deeds did not embody the true agreement between LO Sum and the 1st Defendant because (a) neither of them intended any part of the purported consideration to be paid nor (b) did they intend that there should be any transfer of the beneficial interest of LO Sum in the "partnership" or LO Sum's shares to the 1st Defendant "for himself". It is further alleged in paragraph (c) that the true agreement was that the 1st Defendant would hold LO Sum's interest in the businesses and in LO Sum's shares upon trust for LO Sum or his nominee or, in the event of LO Sum's death, for the Plaintiff upon his attaining his majority.
46. This true agreement is alleged, in the final version of the new pleading, to be implied from the facts and circumstances pleaded in the final versions of paragraphs 23, 24 and 25 of the new pleading. The effect of the true agreement is pleaded to be that the deeds and transfers conveyed "the interests therein stated" to the 1st Defendant on trust as alleged in paragraph (c). Paragraph 29 adds nothing material to paragraph 28.
(2) The implied or resulting trust claim (Paragraphs 30 and 31 and Prayer (4))
47. Paragraph 30 (echoing previous allegations to the same effect in relation to the transfers in paragraph 21 and in relation to the deeds in the now deleted part of paragraph 25) pleads that the 1st Defendant was a volunteer because no part of the purported consideration for the deeds or transfers was ever paid or intended to be paid. Paragraph 31 goes on to plead that the 1st Defendant therefore holds (a) the "interest of LO Sum (deceased) in the said businesses" upon implied or resulting trust for the estate of LO Sum and (b) LO Sum's shares upon implied or resulting trust for the "partnership" if such shares are partnership property or, if not, for LO Sum's estate.
(3) The "oral promise" claim (Paragraphs 32 to 34 and Prayer (5))
48. The claim under this head relates back to the promise and inducement alleged in paragraphs 23 and 24. Paragraph 32 pleads that LO Sum executed the deeds and transfers in consideration of the 1st Defendant's oral promise, that "these interests" under both the deeds and the transfers would be transferred back upon request as pleaded in paragraphs 23 and 24. The 1st Defendant is alleged to have taken "the interests conveyed" by the deeds on that basis.
49. Paragraph 33 pleads that the oral promise was evidenced in part by the Undertaking. This allegation is followed by the averment that (a) the reference to change of circumstances in the Undertaking means the eventuality of LO Sum's death (b) the reference to 124 Leung Fung Enterprises shares in the Undertaking should be to 1,288 shares as that was the registered holding of LO Sum at the time (c) the 1st Defendant should not have omitted reference to Hip Hing Cheung Shipyard in the Undertaking as LO Sum was a one third partner in that business and one of the deeds was concerned with it and (d) the 1st Defendant was or ought to have been aware of LO Sum's holdings in the businesses and of the nature and quantity of LO Sum's shares.
50. On the basis of what is alleged on paragraphs 32 and 33 the Plaintiff proposes to plead in paragraph 34 that the 1st Defendant is bound by his oral promise to transfer to the Plaintiff or LO Sum's estate "all the interests covered by" the deeds and transfers. In the alternative the Plaintiff proposes to plead that the 1st Defendant holds on trust for the estate of LO Sum or the Plaintiff all of "LO Sum's one third interest" in the business transferred to the 1st Defendant by the deeds, including LO Sum's shares if they constituted partnership property. It is further proposed to plead that in so far as LO Sum's shares did not constitute partnership property they are held by the 1st Defendant on like trusts.
(4) Claim that deeds executed in consideration of Undertaking (Paragraph 35 and Prayer (6))
51. Paragraph 35 pleads that if the oral agreement which is the basis of claim (3) above fails then the Plaintiff will allege that LO Sum executed the deeds in consideration of the 1st Defendant executing the Undertaking and as the 1st Defendant took the property conveyed by the deeds he is bound by the terms of the Undertaking to transfer the interests "therein stated" to LO Sum's estate or the Plaintiff. In the alternative it is sought to plead that the 1st Defendant was constituted a trustee for the Plaintiff or for LO Sum's estate "of the interests therein stated".
(5) The undue influence claim (Paragraph 36 and Prayer (7))
52. By paragraph 36 the Plaintiff seeks to introduce the pleading that the transfersand the deeds were procured by the 1st Defendant by the exercise of undue influence over LO Sum. It is alleged that the transactions were therefore liable to be set aside and that in the mean time the 1st Defendant holds "the interests in the said businesses and LO Sum's shares (if they do not constitute partnership's property)" as constructive trustee for LO Sum's estate. Included in the particulars of undue influence is the allegation (itself particularised) that the stated consideration in the deeds and transfers, if paid (which is denied) was a gross undervaluation of LO Sum's interest in the partnership in the businesses and in the companies affected by the transfers.
53. Material to all the Plaintiff's alternative claims is the allegation made in the surviving sentence of paragraph 39, as sought to be revised by Mr. Swaine at the end of the hearing, that the partnership as reconstituted by the deeds was continued by the Defendants with the 1st Defendant holding two thirds of the shares in the new partnership and one half of that two thirds share upon the express or resulting or implied trusts pleaded in paragraphs 28 to 36 of the new pleading.
(D) Additional allegations (Paragraphs 40 to 47 and 49)
54. The pleading concludes with allegations of matters concerning the 1974 letter claimed to be an acknowledgement for limitation purposes, allegations of concealed fraud for limitation purposes, allegations of breach of trust and contract by the 1st Defendant and of his liability to indemnify the estate of LO Sum for any prospective penalty imposed under the Estate Duty Ordinance (Cap. 111), the allegation that the 2nd Defendant intermeddled with trust assets and the allegation that the Defendants intermeddled with partnership assets which were required to be wound up under the Partnership Ordinance. All these matters become material to this application only if leave is given to plead the causes of action upon which they are sought to be based.
55. The 2nd Defendant had played no part in the 1st Defendant's previous application to strike out the Re-Amended Statement of Claim. At the hearing of this application by the Plaintiff for leave to serve a new Statement of Claim and amend the writ the 2nd Defendant was represented by his solicitor, Mr. Ribeiro, who made no submissions and informed the court that his client would abide the decision of the court. Towards the end of the hearing another solicitor, Mr. Miles, from the same firm as Mr. Ribeiro, informed the court that the 2nd Defendant supported the 1st Defendant in opposing the applications.
56. By the end of the hearing on the 12th January 1985 the Plaintiff had clearly abandoned his claims made in the previous Re-Amended Statement of Claim to be suing as a beneficiary under the Undertaking as a trust instrument because under the new pleading he claimed to be suing simply as a "beneficiary of a trust" and Mr. Swaine had informed the court that the Plaintiff had accepted the view that the Undertaking was not a declaration of trust. The Plaintiff had also abandoned his previous claim made in the Re-Amended Statement of Claim that the alleged partnerships between LO Sum and the Defendants had continued until the death of LO Sum. This was clear because all the allegations in relation to non-execution of the transfers and deeds by LO Sum had been abandoned by Mr. Swaine and all the surviving claims in the new pleading alleged that these instruments had some effect.
57. Mr. Saville submitted that my order made on the 22nd May 1984 giving leave to the Plaintiff to apply within six weeks to serve a new Statement of Claim to avoid the dismissal of the action was an order giving the Plaintiff an opportunity to plead and formulate his claims properly, but was not intended to permit the addition of new causes of action. The court should, he contended, look at the claims made in May 1984 by the Re-Amended Stateemnt of Claim and consider whether the new pleading properly supported those claims. If so, the court should consider the new claims in the context of amendment. If on the other hand, the original claims were not supported (and they certainly were not) the application and the action should be dismissed, Otherwise the new case would be permitted to circumvent the previous application to strike out.
58. However I was persuaded by Mr. Swaine not to put a narrow construction on my order, certainly, in respect of the new claims seeking to allege the creation of trusts of which the Undertaking was claimed to be evidence. I had made my previous order in a form suggested by Mr. Saville as appropriate if I considered the Plaintiff's Re-Amended Statement of Claim was capable of improvement by amendment. I did so consider. Mr. Beveridge, leading counsel for the Plaintiff on the striking out application, had indicated that the Plaintiff wanted to amend his pleading and to allege the existence of an implied or resulting trust in relation to the assets transferred by LO Sum to the 1st Defendant. Furthermore it seemed to me then, as indeed it does now, that the existence of the Undertaking and the 1974 letter indicated that this was a case which should be tried and in which the expertise of counsel should be able to produce triable issues in conformity with the rules of pleading.
59. Accordingly, when I made my previous order I did not intend to confine the Plaintiff's application to serve a new Statement of Claim to the causes of action appearing in the writ. If a claim based on resulting or implied trust was to be pleaded in the new pleading an amendment to the writ would be necessary. The absence of any reference to the writ in my previous order was not intended to indicate that the effect of my order was to inhibit the Plaintiff rom invoking Order 20 rule 5(1) and applying to amend his writ at the same time as he applied for leave to serve a new Statement of Claim.
60. I appreciate the force of Mr. Saville's argument that a new case, as distinct from the amendment of the original case, should not be permitted to circumvent a strike out application but, bearing in mind the circumstances under which my previous order was made, I consider that I should interpret it liberally and consider the present applications in accordance with the principles applicable to any other application to amend under Order 20 rule 5(1) save that this is a case where the previous pleadings have been struck out as being embarrassing and the Plaintiff is being given an opportunity to put his house in order.
61. At the end of the hearing, Mr. Saville raised a formidable argument for the dismissal of the applications and of the action on the grounds that the Plaintiff was demonstrably abusing the process of the court and acting in bad faith.
62. Mr. Saville pointed out that by the end of the hearing Mr. Swaine had abandoned all the allegations that the transfers and deeds had not been duly executed and had no legal effect and the Plaintiff's case now depended exclusively on legal effect being given to the deeds and transfers as instruments which had been duly executed. However Mr. Neoh's statement to the court explaining his reasons for pleading originally that the transfers had not been executed by LO Sum included the clear assertion that the Plaintiff had instructed Mr. Neoh that the deeds were not executed and it was implicit that the pleading of non-execution of the deeds in the new pleading was in accordance with the Plaintiff's instructions.
63. It followed, Mr. Saville submitted, that the Plaintiff's pleading that the deeds were duly executed by LO Sum was not a genuine plea because the Plaintiff had told his lawyers otherwise and this was to be assumed to be true. If it was not true the Plaintiff acted in bad faith. Furthermore Mr. Saville contended that the Plaintiff could not succeed at the trial in proving the due execution of the deeds, which was at the root of his claims, because his instructions to his own lawyers were to the opposite effect.
64. The admission of the deeds by the 1st Defendant in his Defence did not, Mr. Saville submitted, avail the Plaintiff because the admission was made in ignorance of the Plaintiff's allegation of non -execution by LO Sum. He further contended that if the case were to be permitted to continue under these circumstances it would be contrary to every rule and principle and would amount to treating pleadings as a game.
65. This was a powerful argument but after anxious consideration I do not accede to it despite the very serious implications it raises regarding the bona fides of the Plaintiff. The allegation that the deeds were not duly executed by LO Sum was abandoned on his own initiative by Mr. Swaine on the last day of the hearing. He clearly had no faith in it. He told the court, in reply to Mr. Saville's arguments for dismissal of the action that he foresaw insuperable difficulties in advancing the allegation, particularly in relation to the 2nd Defendant , who could raise an estoppel.
66. Mr. Swaine also said that he was influenced in his action by the arguments of Mr. Saville when opposing the introduction of the non-execution allegation in the new pleading and by the comments made by the court. Indeed when he abandoned the allegation in question I informed him that I considered he was taking the proper course. I should never have allowed the Plaintiff to introduce this allegation for the first time in the fifth year of the action without explanation, which there was none, for the failure to plead such an important factual allegation earlier.
67. Mr. Saville had strongly opposed the introduction of the allegation when resisting paragraph 25 of the new pleading. He had referred to the allegation as extraordinary and very serious and contended that it was not being made bona fide by the Plaintiff who had made no mention of it in his affirmation made on the 22nd January 1979 in proceedings taken by him to obtain a limited grant of the reconstructed will of LO Sum.
68. In that affirmation the Plaintiff had referred to the two deeds and exhibited copies of them without any reference to any alleged non-execution of those instruments by LO Sum or to any unauthorised purported delivery of them to the 1st Defendant on behalf of LO Sum. Later in the same paragraph the Plaintiff referred to the two deeds again and affirmed that it appeared that they might have been entered into simply to avoid death duties and that the true position was that the 1st Defendant was holding the assets listed in the Undertaking in trust for the Plaintiff.
69. This evidence was admittedly given to the court in the probate proceedings but its purpose was to indicate to the court that LO Sum's estate might well comprise substantial assets. If there were any substance in the allegation, now raised for the first time, that the deeds were never duly executed by LO Sum and that the Plaintiff himself had direct knowledge of this because he himself had purported to deliver them without LO Sum's authority, the Plaintiff must have been deliberately suppressing evidence in his affirmation in the probate proceedings.
70. I had accordingly formed the firm view that leave should not be given at this stage to the Plaintiff to introduce any claim based on the allegation of non-execution by LO Sum of the deeds because in all the circumstances the absence of any explanation for the making of such a serious allegation now was extraordinary and raised the gravest doubts in my mind regarding the bona fides of the Plaintiff in seeking to make the allegation.
71. Initially the allegation of non-execution of the deeds by LO Sum was made together with alternative claims made on the footing that he had executed the deeds. I was concerned with the apparent lack of bona fides of the non-execution allegation. I had borne in mind that the deeds had been pleaded initially in the Re-Amended Statement of Claim without any allegation of non-execution and they had been admitted by the 1st Defendant, albeit not by the second Defendant.
72. Until the Plaintiff sought to introduce the allegation of non-execution by LO Sum in the new pleading there was no issue in these proceedings between the Plaintiff and the 1st Defendant regarding the due execution of the deeds. When Mr. Saville pressed me to dismiss the action I enquired if his client proposed to put the Plaintiff to proof regarding the due execution of the deeds by LO Sum. He was understandably not in a position to say what his client's attitude would be.
73. It may well be that if this action or a second action is fought out as between the Plaintiff and the 1st Defendant there will continue to be no issue between them on the pleadings as to the due execution by LO Sum of the deeds. If such an issue should arise in this or any future action between the Plaintiff and both the Defendants it may be that the Plaintiff will be able to prove the due execution of the deeds aliunde notwithstanding his having told his lawyers that the deeds were not duly executed. In this connection both the Deeds purport on their face to have been withessed by the same solicitor as having been signed sealed and delivered by all the parties thereto. The court was not told if he is still alive.
74. I do not consider that where the Plaintiff has made the allegation of non-execution to his lawyers for the first time at a late stage in the action and they have pleaded it and supported it until Mr. Swaine eventually lost faith in it the court, having made up its mind earlier to disallow the allegation as probably not genuine because made without explanation for its tardiness should conclude that the Plaintiff is to be debarred from maintaining his original implied plea of due execution of the deeds made in the initial pleading in this action.
75. The Plaintiff emerges with no credit from this episode but his primary misdemeanour in the eyes of the court is making the allegation of non-execution when he did without an explanation. This savours of mala fides. If he had persisted with the allegation by his leading counsel the court would have refused leave to introduce the allegation. He should not, in my judgment, be further penalised by having his action dismissed as an abuse of the process when his leading counsel has rightly abandoned the allegation in implied acceptance of Mr. Saville's grounds of opposition and in the face of the court's indications of disapproval, and committed his client to rely on his original pleading.
76. I come at last to the heart of the matter which is the substance of the new pleading. In considering that pleading I have borne in mind that the present applications are an attempt by the Plaintiff to put his house in order after a successful strike out application by the 1st Defendant. Subject to that distinguishing factor I treat the applications in all respects in the same way as any other applications under Order 20 rule 5(1) for the amendment of a writ and statement of claim. Such applications receive liberal consideration and as a rule amendments, however substantial, will be allowed to be made at any stage of the proceedings and particularly before the trial if, by allowing the amendments on terms as to costs or otherwise, the real question in controversy between the parties can be raised without injustice to the other side : see Bullen and Leake 12th ed. at pp. 124-5 and the cases there cited.
77. Three other settled rules of practice in relation to the exercise of the courts discretion to give leave to amend pleadings are material to these applications and the grounds upon which they have been opposed. First, in determining whether the purpose of a proposed amendment really is the raising of the real question in controversy between the parties good faith on the part of the applicant is important and if there are grounds for believing that he is not acting in good faith an application to amend may be dismissed : Lawrence v Lord Norreys (1888) 39 Ch. D.213 (C.A.) and (1890) 15 App. Cas. 210 (H.L.) Bullen and Leake at pp. 128 and 130.
78. Secondly, a proposed amendment seeking to introduce at an advanced stage of the proceedings an allegation of fraud not pleaded in the first instance will cause the court to enquire into the reason for the failure to plead the fraud when the action was launched and into the bona fides of the application and the charge of fraud : Hendriks v Montagu (1881) 17 Ch. D.638 per Jessel M.R. at p.642 (reversed on appeal but not on matters affecting this practice); Bentley v Black (1893) 9 TLR 580; Lawrence v Lord Norrevs (1888) 39 Ch. D.213 per Bowen L.J. at p.235; c.f. Riding v Hawking (1889) 14 P.D.56. The practice on this point is accurately stated in Bullen and Leake at pp. 130-131.
79. Thirdly, it goes without saying that where an original pleading is unsupportable a proposed amendment which would leave the pleading equally unsupportable will not be allowed : Buller and Leake at p.131 citing Sinclair v James[1894] 3Ch 554 at p.557 and Jones v Hughes[1905]1Ch 180 (C.A.) per Vaughan Williams L.J. at p.187.
80. For convenience I will consider the final version of the proposed new pleading in the same sequence and under the same general headings and sub headings as were adopted when I summarised the effect of the new pleading above.
(A) Background before August 1970 (Paragraphs 4 to 17 and Prayer (1))
81. No attack was made by Mr. Saville on this part of the pleading except in relation to paragraph 17 where the Plaintiff had pleaded that the relevant shares formerly held in the name of LO Sum had been paid for with LO Sum's own money and that he was therefore the beneficial owner of the shares. This plea was in the alternative to the plea in paragraph 16 that the shares were partnership property because they were paid for with partnership funds. Mr. Saville contended that paragraph 17 represented a departure from the Re-Amended Statement of Claim where, in paragraph 4 of that pleading, it had been pleaded that all the shares were bought with partnership funds which had been withdrawn from the partnership by the partners and used "..... for their own purposes or for the purposes of the partnership".
82. This apparent departure from the case pleaded in the Re-Amended Statement of Claim gave rise, Mr. Saville contended, to obscurity and embarrassment. If paragraph 17 was intended to plead that the shares were bought with partnership funds drawn for the private purposes of the partners no facts had been pleaded as the basis for this allegation. There was no explanation offered and the pleading was the antithesis of my striking out order which was intended to require the Plaintiff to plead his case without embarrassment to the 1st Defendant.
83. Mr. Swaine's answer was that it was in order for the pleading in paragraph 17 to stop where it did and that it was within the ambit of the pleading to prove a distribution of partnership funds followed by the application by LO Sum of the funds distributed to him for his own purposes. The 1st Defendant was not really embarrassed, contended Mr. Swaine, and the reality of the situation was that the defence of the let Defendant was that he claimed all the money was his own.
84. In my judgment Mr. Swaine was technically correct in contending that he had pleaded enough in paragraph 17 to satisfy Order 18 rule 7(1) but the very general pleading in paragraph 17 of the source of the relevant funds in terms apparently chosen deliberately to widen the ambit of paragraph 4 of the Re-Amended Statement of Claim would inevitably lead to a successful application by the 1st Defendant under Order 18 rule 12(3) for further and better particulars of the source of LO Sum's funds referred to in paragraph 17 of the new pleading. If the 1st Defendant's real case in the alternative continues to be, as Mr. Swaine seemed to imply, that the shares were paid for by LO Sum with money distributed to him for his own purposes out of the partnership, then, in my judgment, in the context of a second attempt to produce a pleading that is not embarrassing, the Plaintiff should not deliberately use much wider language in his pleading which must leave the 1st Defendant in the position that he cannot be sure precisely what case he has to meet unless he applies for and obtains an order for further and better particulars.
85. Before leaving this part of the pleading I should mention again that it is the basis for the claim in paragraph (1) of the prayer of the new pleading for a declaration that LO Sum and the Defendants carried on the two shipyard businesses as equal partners. Mr. Swaine described the Plaintiff's claim that LO Sum was a partner with a one third share in the two shipyard businesses and not the 1st Defendant's nominee as the "gut issue" in this action. It certainly is essential for this issue to be resolved in the Plaintiff's favour if he is to succeed in the action but I emphasise, in relation to the new pleading, that clearly the claim that LO Sum was a partner, and not a nominee of the 1st Defendant, is nevertheless the first of a number of facts which it is necessary for the Plaintiff to plead properly in order to show that he has pleaded any of the causes of action upon which he relies in the new pleading. The claim for the declaration in paragraph (1) of the prayer in the new pleading is not one which the court would therefore entertain if the pleading of the other facts essential to establish the Plaintiff's causes of action is unsupportable.
(B)The events of August to October 1970 (Paragraphs 18 to 26 and 37)
86. I have described above the various permutations to which this part of the new pleading has been subjected. I now consider it in its final version.
87. As to paragraph 21, Mr. Saville contended, in my view rightly, that the allegation that the 1st Defendant "on dates unknown to the Plaintiff, procured the signature of LO Sum" to the transfers was an allegation, so far as the procuring was concerned, which was unsupported by any facts or matters in the pleading and that as it was now obvious that the Plaintiff knew nothing about the signature of the transfers he could not in good faith assert that the 1st Defendant took the initiative in obtaining LO Sum's signature of the transfers. I agree.
88. A more important and far reaching point taken by Mr. Saville in relation to paragraph 21 concerned the allegation that no consideration was ever paid or intended to be paid for the transfers. This was the basis for the allegation that the 1st Defendant was a volunteer and held the shares comprised in the transfers on implied or resulting trust for LO Sum or the partnerships.
89. Mr. Saville reminded the court of the warning if gave in my previous judgment in the previous striking out application that if the Plaintiff intended to repeat allegations of intent in the new pleading, then they must be particularised. The Plaintiff was now disregarding that warning by making an unparticularised allegation that no consideration was ever intended to be paid for the transfers.
90. Mr. Swaine contended that this attack on paragraph 21 was unrealistic bearing in mind that the 1st Defendant's primary line of defence pleaded in his Defence and Counterclaim was that LO Sum was never his partner but only a nominee performing his duty as such when making the transfers. He contended that if the Plaintiff established that LO Sum was not a nominee of the lot Defendant but a partner in the business and that no consideration was in fact paid for the transfers then, having regard to the terms of the Undertaking, it would be unrealistic to entertain the view that the transfers created any debt of the 1st Defendant to LO Sum.
91. He referred to the note in Volume 1 of the Annual Practice at paragraph 18/12/17 on Order 18 rule 12(1)(b) and asked rhetorically what particulars of overt acts and other facts could be required to support the allegation that no consideration was ever intended to be paid for the transfers. Having regard to the Undertaking and the 1974 letter what more particulars could be required of the Plaintiff?
92. I am unable to accept Mr. Swaine's arguments on this important point which has repercussions in paragraph 28(a) and (b) and in paragraphs 30 and 31 of the new pleading. In so far as the Defence of the 1st Defendant to the previous pleading in the Re-Amended Statement of Claim is relevant now he has clearly relied, albeit in the alternative, on the particularised allegation that consideration was in fact paid for the transfers (and the deeds). A realistic view of the new pleading must have regard to this fact.
93. Furthermore Order 18 rule 12(1)(b) explicitly requires that the allegation of intention made by the Plaintiff in the new pleading should be particularised. In the absence of particularisation the pleading is embarrassing : see Feeney v Rix[1968]1Ch 693 (C.A.) (cited in the note in the Annual Practice to which Mr. Swaine referred the court) per Willmer L.J. at p.701 D. Moreover, as Winn L.J. explained in that case at p.702 -
"..... R.S.C. Ord. 18, r.7, which draws the distinction between pleas of fact and matters of evidence, is by its express terms made subject to any overriding provision in rule 12 of the same order, and I read rule 12(1)(b) as making it plain that particulars of the facts on which the party relies to establish 'any condition of mind of any person' which he alleges must be particularised."
94. Accordingly in my judgment this unparticularised pleading of alleged intention made despite the warning of the court administered in the judgment following the strike out application and not accompanied by an application for discovery is embarrassing and deficient. I do not consider that either the Undertaking or the 1974 letter contain any particularisation of the intention pleaded. This is manifest from the terms of the two documents themselves which make no reference to this matter.
95. At the end of the hearing Mr. Swaine conceded that the allegation of the 1st Defendant's oral promise in paragraph 23 and the allegation of inducement in paragraph 24 were vulnerable. By this stage both the promise and the inducement had been revised so as to relate to the execution by LO Sum of the deeds only.
96. There was no attempt made by the Plaintiff, who had not mentioned the promise or the inducement in his affirmation in 1979 in the probate proceedings or in the Re-Amended Statement of Claim, to explain why these matters were now being sought to be alleged for the first time in the new pleading. Furthermore, in its final revised form the promise was alleged in terms to have contained an express reference to the transfers but it was acknowedged that the Plaintiff had instructed his lawyers of a bundle of documents including deeds but was now unable to be specific about the transfers. It was eventually made clear by Mr. Swaine as the hearing progressed that the Plaintiff was really raising the pleading of the oral agreement and the inducement as being implicit and matters of fair inference from the narration of the events occurring between August and October 1970 in conjunction with the Undertaking and the 1974 letter.
97. It is well settled as a matter of practice that if a party seeks to plead a promise or agreement to be inferred from documents or circumstances the promise or agreement should be pleaded as a fact followed by the pleading of the documents, conversations or circumstances from which the promise or agreement is alleged to be inferred : see the notes under the rubric "Agreement" in the Annual Practice, Vol. 1 paragraph 18/12/5. Here the Plaintiff, whose leading counsel has acknowledged that the Plaintiff relies on implication only has purported to plead the promise and the inducement without alleging that it is based on implication or identifying specifically the matters relied upon as the basis for the implication. Moreover the Undertaking itself is not expressed to relate to all the assets or interests which were comprised in the transfers and deeds. The pleading is in my judgment unsupportable in this form.
98. The allegations of non-execution formerly in paragraphs 25 and 26 were all abandoned by the end of the hearing. Paragraph 25 is now confined to alleging that LO Sum signed the deeds subsequent to the Undertaking being signed by the 1st Defendant. Accordingly the pleading that is supportable in this part of the new pleading does not include the allegation of implied or resulting trust sought to be alleged in paragraph 21, the promise or the inducement sought to be pleaded in paragraph 23 and 24 respectively or the allegations of non-execution in paragraphs 25 and 26 (and all subsequent allegations in the new pleading based on them) which were abandoned by the end of the hearing.
(C) The Plaintiff's 5 alternative claims
(1) The "true agreement" claim (Paragraphs 28 and 29 and Prayer (3))
99. In making unparticularised allegations that no consideration was intended by LO Sum or the 1st Defendant to be paid for the transfers or the deeds and that neither of those persons intended that there should be any passing to the 1st Defendant of the beneficial interest of LO Sum in the partnership or LO Sum's shares paragraph 28(a) and (b) transgress the combined effect of Order 18 rules 7(1) and 12(1)(b) and for the reasons given above in relation to similar allegations of intent in paragraph 21 I consider this part of the pleading is embarrassing and cannot stand.
100. In its final form which only emerged on the last day of the hearing after Mr. Saville had concluded his submissions on this part of the pleading, paragraph 28(c), seems to me to be unsupportable for a number of reasons previously advanced by Mr. Saville. No factual grounds are pleaded to supply the reason why the transfers and the deeds, which are good on the face of them, are not to be given their purported effect. If and so far as the promise and inducement pleaded in paragraphs 23 and 24 are relied on they are no longer available to the Plaintiff in the new pleading because they have already been disallowed. The Undertaking does not support the agreement alleged (namely that the 1st Defendant would hold LO Sum's interest in the businesses and LO Sum's shares upon trust for LO Sum or the Plaintiff) because it clearly does not relate to all the relevant assets. In the earlier versions of the new pleading paragraph 33 was relied on in an attempt to get round this difficulty but by the end of the hearing Mr. Swaine had conceded that paragraph 33 was vulnerable and reliance was no longer placed on that paragraph in the final version of paragraph 28(c).
101. The consideration moving from LO Sum for the alleged agreement is not specified in paragraph (c) and the date of the alleged agreement is not pleaded. Furthermore the Plaintiff fails altogether to make any reference to or plead "the consent or knowledge of the 2nd Defendant who was named as a party to the deeds which purport to deal with the property of a partnership in which the 2nd Defendant is alleged in the new pleading to have been a partner with a one third share.
102. Finally those parts of paragraphs 23, 24 and 25 which have not been disallowed cannot, on any view, be any basis for pleading that the 1st Defendant ever impliedly agreed to hold for LO Sum or transfer back to LO Sum any assets other than those mentioned in the Undertaking.
(2) The implied or resulting trust claim (Paragraphs 30 and 31 and Prayer (4))
103. For the reasons given above in relation to paragraph 21 I hold that paragraph 30 which is based on unparticularised allegations of intent is embarrassing and should be disallowed.
(3) The "oral promise" claim (Paragraphs 32 to 34 and Prayer (5))
104. Mr. Swaine conceded at the end of the hearing that this part of the new pleading was vulnerable. In my judgment this part of the pleading has no basis once the oral promise and the inducement pleaded in paragraphs 23 and 24 have been disallowed. The latter paragraphs contain the foundation upon which paragraph 32 is sought to be based. That foundation has now gone. Paragraph 33 (which seems to perpetuate in paragraph 33 (b) and (c) the embarrassment and obscurity inherent in paragraph 16 of the Re-Amended Statement of Claim) and paragraph 34 cannot stand without paragraph 32 and I therefore conclude that the whole of this part of the new pleading is unsupportable.
(4) Claim that deeds executed in consideration of Undertaking (Paragraph 35 and Prayer (6))
105. In my judgment this is the claim which goes nearest to the heart of the matter as evidenced by the 1st Defendant's own documents, the Undertaking and the 1974 letter. Mr. Swaine described paragraph 35 as linked with the "true agreement" plea in paragraph 28. Mr. Saville regarded it as another facet of the "true agreement" claim and asked how the Plaintiff could particularise this claim.
106. For my part I consider the pleading in paragraph 35 to be not only embarrassing but to lack essential averments of facts. If paragraph 35 is intended to be a permutation of paragraph 28 but claiming an obligation on the part of the 1st Defendant to transfer back fewer assets, namely only those mentioned in the Undertaking, then the pleading has all of the vices of paragraph 28 mentioned above except that the claim now relates only to the assets mentioned in the Undertaking.
107. Furthermore if the claim made in paragraph 35 is meant to be a true alternative claim it is manifestly deficient in necessary averments of fact. It does not plead what, if any, of the facts or matters previously pleaded in the new pleading are relied on in paragraph 35 and it pleads no facts or matters relied upon to establish that the stated consideration in the deeds should not be given its purported effect. In my previous judgment on the striking out application I stressed and I now do so again the importance of setting out distinctly the facts relied on to establish an alternative claim and I cited the observations of Thesiger L.J. in Davy v Garrett (1878) 7 Ch. D. 473 (C.A.) at p.489 that -
"..... in any properly constituted system of pleading, if alternative claims are alleged, the facts ought not to be mixed up, leaving the Defendant to pick out the facts applicable to each case; but the facts ought to be distinctly stated, so as to show what facts each alternative of the relief sought is founded ..... I attach no blame to the pleaders in the present case, I have come here too lately to have lost the recollection of the difficulty of framing pleadings satisfactorily. But though counsel may have done their best and shewn their skill in the preparation of statements of claim, it is not less the duty of the Court to show its skill in preventing Defendants from being embarrassed in their defences."
108. It has occurred to me that in reliance inter alia on equitable principles in relation to the assignment of future assets the Plaintiff's experienced advisers, who have to contend with considerable problems in connection with partnership law, might have contemplated pleading, in reliance upon the background events between August and October 1970 and upon the relevant documents, that an underlying oral agreement is to be implied to have been made between LO Sum and the 1st Defendant. One such agreement might be that these two brothers made an agreement preceding the transfers and the deeds, as the 1st Defendant alleges in his Defence, but that the agreement was one whereby the transfers of LO Sum's shares and the deeds were to be entered into at a gross undervalue regarding the assets concerned and in consideration for LO Sum agreeing to this course the 1st Defendant agreed that he would hold certain shares and one half of his future two thirds shares in the new partnership in the Cheoy Lee Shipyard with the 2nd Defendant in trust for LO Sum or the Plaintiff. Alternatively it might have been considered appropriate to rely on the contention that the shares were partnership property and the implication of an oral agreement whereby LO Sum agreed between the 18th August 1970 (the date of the Undertaking) and the 7th October 1970 (the date of the deeds) to enter into the deeds at a gross undervalue regarding his shares in the partnerships and in consideration for LO Sum agreeing to this course the 1st Defendant agreed as above.
109. However, even on the pure hypothesis that those advising the Plaintiff and the Plaintiff himself may at any time have had any such possible claims in mind they certainly have not pleaded them in paragraph 35 of the new pleading which I feel constrained to disallow for the reasons given above.
(5) The undue influence claim (Paragraph 36 and Prayer (7))
110. Mr. Swaine, when introducing this claim, said that it had always called out to be made and was so closely connected with the heart of the matter that it was properly raised at this stage. The background facts relevant to the issues pleaded before the striking out of the Re-Amended Statement of Claim would, he submitted, be essentially the same in relation to the new claims in the new pleading including the undue influence claim, and no new matter would arise for evidence in the sense that incidents pleaded in the former Re-Amended Statement of Claim would call into question the entire relationship between the parties during the critical months.
111. One of the particulars of undue influence sought to be relied upon in paragraph (h) of the relevant particulars in paragraph 36 was that if the stated consideration in the transfers and deeds was paid, which the Plaintiff denied, that consideration was a gross undervaluation of LO Sum's interest in the partnership in the businesses and in the companies affected by the transfers. Mr. Swaine stressed that if the Plaintiff proved at the trial only that the consideration, though paid, was an undervalue, then the inevitable conclusion on the facts must be that the 1st Defendant had taken advantage of LO Sum.
112. Mr. Swaine relied on the often cited dicta of Bowen L.J. in his dissenting judgment in Cropper v Smith (1884) 26 Ch. D. 700 (C.A.) at p.710 which is cited in the Annual Practice, Vol. 1 at paragraph 20/5 - 8/6 propounding the principle that powers of amendment should be liberally applied where costs can compensate the other side and no injustice will result, because courts do not exist for the sake of discipline but for the sake of deciding matters of controversy.
113. However Cropper v Smith was a case concerned with patent infringement and not fraud and Bowen L.J. used qualified language when observing "I know of no kind of error or mistake which, if not fraudulent or intended to overreach, the Court ought not to correct, if can be done without injustice to the other party." Moreover it was the same strong judge who later in Lawrence v Lord Norreys (1888) 39 Ch D. 213 (C.A.) at p.235 in an equally often cited passage commenting on an unsuccessful attempt to introduce a plea of fraud in an action where it had not been pleaded intially, applied what I have already stated above to be my understanding of the settled practice in relation to applications to amend to introduce a plea of fraud when he observed -
"If there has been a mistake in the first instance on the part of the pleader by omitting to plead fraud, an affidavit might have said so, and explained how the statement of claim came to be launched in such a form, and it ought to have gone on to explain to the Court what the fraud alleged was, and how the Plaintiff came to think that there was ground for putting it forward."
114. In the present case there was no such evidence put forward to explain why a case of constructive fraud and unconscionable conduct now alleged for the first time, in the fifth year of this action, had not been pleaded earlier. The Plaintiff had made no mention in his affirmation in the probate proceedings in 1979 of any matters relating to undue influence. None of the leading counsel who acted for the Plaintiff in the past had seen fit to plead undue influence on his behalf and leading counsel, Mr. Beveridge, who had done his utmost to avoid the striking out of the Re-Amended Statement of Claim in May 1984 had given not the slightest indication to the court that the Plaintiff had even at that late stage any ground for alleging undue influence against the 1st Defendant. Under such circumstances I do not accept as a satisfactory explanation for this late attempt to introduce allegations of undue influence against the 1st Defendant, the observation from Mr. Swaine that the plea always called out to be made. There has been no attempt made to inform the court why the Plaintiff let the call go unheeded until now. The submission by Mr. Swaine that the background facts relevant to the undue influence claim would be essentially the same as those relevant to the issues pleaded in the Re-Amended Statement of Claim does not bear close scrutiny. As Mr. Saville pointed out, of the facts alleged in the particulars of undue influence contained in paragraph 36 none, except the allegation in paragraph (g) of the particulars that the 1st Defendant as LO Sum's partner owed him a fiduciary duty, had been alleged in the Re-Amended Statement of Claim.
115. Mr. Saville also drew attention to the inconsistency between, on the one hand the allegation in paragraph (i) of the particulars of undue influence that the 1st Defendant failed to disclose to LO Sum any or all of the material matters relating to the financial position of the partnership business and the relevant companies and, on the other hand the allegation which the Plaintiff tried to introduce into paragraph 19 of the proposed re Re-Amended Statement of Claim which Barnes J. had disallowed an appeal on the joinder issue on the 14th October 1981. The allegation was to the effect that "as well known to all parties to the transactions" the consideration stated in the deeds for LO Sum's retirement from the partnerships did not represent the real values of LO Sum's shares in the partnerships which were "far in excess of the alleged consideration." This latter allegation contradicts directly the allegation of concealed gross undervaluation which, on Mr. Swaine's own submission, was one of the principal bases for the proposed plea of undue influence.
116. Mr. Swaine eventually conceded that paragraph (i) of the particulars of undue influence was vulnerable. This was inevitable because it had been demonstrated that paragraph (i) contained allegations which the Plaintiff could not be making in good faith.
117. I do not dwell on the difficulties created in relation to the relief claimed under paragraph 36 based on the alleged constructive trusteeship of the 1st Defendant by the provisions of sections 41, 44 and 45 of the Partnership Ordinance and by the decision of the House of Lords in Knox v Gye (1872) L.R. 5 H.L. 656 because, in my judgment, the proposal to introduce allegations of undue influence into this action in the fifth year of its life without any adequate explanation for the Plaintiff's failure to plead these allegations earlier should not, in accordance with the settled practice of the courts, be permitted, particularly where one of the most important of the allegations has been demonstrated to have been made by the Plaintiff without good faith.
(D) Additional allegations (Paragraphs 40 to 47 and 49)
118. All these pleadings are dependent on what has gone before in the new pleading. I have already found that no supportable claim has been pleaded in the earlier parts of the new pleading and so, no useful purpose will be served by my dealing with the arguments advanced on both sides on the limitation and other issues raised in this part of the new pleading.
119. The inevitable result of my findings is that I must dismiss both applications of the Plaintiff. I will defer a decision on costs because the precise order made on costs will depend on whether this action is to continue or not.
120. The action is now nearly 5 years old and there is no Statement of Claim. An attempt to re-amend the Re-Amended Statement of Claim failed before Barnes J. on the 14th October 1981 and that pleading was struck out by me on the 22nd May 1984 as being thoroughly embarrassing. The Plaintiff has been given a second opportunity to plead his case in a supportable manner. By the end of the last hearing before me the Plaintiff had reached the seventh version of his proposed new pleading and leave to amend in accordance with its terms has now been refused.
121. Against this background Mr. Saville urged the court to dismiss the action on the grounds that the court has inherent jurisdiction to do so under the circumstances because it is oppressive and an abuse of the process to permit litigation to be conducted against a defendant in this way.
122. This submission came right at the end of the hearing of applications for leave to amend made by the Plaintiff. Mr. Swaine asked the court to give the Plaintiff an opportunity to be heard if it was minded to accede to Mr. Saville's informal application. I think it is right that I should do so and I will invite further submissions from both sides on this issue and on the question of costs at the time this judgment is handed down.
| ( P. G. Clough )
Judge of the High Court |
Representation:
Mr. John Swaine, Q.C. with Mr. Anthony Neoh instructed by M/s S.K. Wong & Co. for the Plaintiff.
Mr. Mark Saville, Q.C. with Mr. Ronny Wong instructed by M/s T.S. Tong & Co. for the 1st Defendant.
Mr. G. Ribeiro of M/s Denton, Hall & Burgin for the 2nd Defendant.