WONG LUEN HANG AND ANOTHER v. CHAN YUK LUNG AND OTHERS

HCA 1382/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 1382 OF 2011

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AND

HCA 1265/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 1265 OF 2015

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D E C I S I O N

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1.  The Plaintiffs (“Ps”) in the above actions have taken out the applications for an order for sequential trials of the actions before the same judge.  The evidence of each of the actions, so far as it is relevant, is mutually admissible.

2.  The Defendants (“Ds”) in HCA 1382/2011 (“the 2011 action”) are represented by the same firm of solicitors, namely Messrs. Cheung & Liu.  D5 is only a nominal defendant.[1]

3.  D1 and D2 in 2011 action do not oppose this application.

4.  D3 & D4 oppose this application.

5.  The solicitor acting for Ps has made an affidavit on 6 June 2016 in support of the applications.  Ps’ applications are pursuant to Hon. Cheung JA’s comments in a hearing for security for costs in CACV 194/2015.  The grounds in support of the applications, as stated in the affidavit, are that these two actions share the same factual background with substantial overlapping issues and they have similar legal representatives.[2]

6.  D3 and D4 oppose the application on two main grounds, viz.: (a) the 2011 Action and 2015 Action are wholly distinct actions and they should not be “tried together” (b) they would be prejudiced by the long delay if the 2 actions should be “tried together”. [3]

7.  For HCA 1265/2015 (“the 2015 action”), only D7, D8 and D9 oppose this application on the grounds as follows:

(a) Little “commonality” between the 2 actions.

(b) No saving of time and costs.

(c) The 2 actions are at very different stages.

(d) There was a delay of 7 months on the part of the Plaintiffs in taking out the present applications.

(e) The Plaintiffs brought the present applications with the ulterior motive of obtaining prejudicial evidence and findings against D1 and D2 in both actions in the 1^st trial, so as to use them in the 2^nd trial against them rather than to save time and costs.

(f) Cheung JA did not in fact suggest that the 2 actions should be consolidated.

The law and the relevant legal principles

8.  The Court has a discretion to make an order that the actions to be tried at the same time, or one immediately after another actions under O.4, r.9(1) of RHC where:

(a) That some common question of law or fact arises in both of them;

(b) That the rights to relief claimed are in respect of or arise out of the same transaction or series of transactions; or

(c) That for some other reason it is desirable to make an order for consolidation.

9.  Order 4, r. 9(2) provides:

“Where the Court makes an order under paragraph (1) that two or more causes or matters are to be tried at the same time but no order is made for those causes or matters to be consolidated, then, a party to one of those causes or matters may be treated as if it were a party to any of those other causes or matters for the purpose of making an order for costs against him or in his favour.”

10.  The main purpose of the Court to order consolidation is to save costs and time.  The Court has an unfettered discretion in deciding whether to make the order as requested.  There is no hard and fast rule for the exercise of discretion other than that it would be expedient and proper to make the order.  No order should be made without hearing all parties affected.  As a general principle, the court will take a practical and common sense approach to meet the justice of the situation, bearing in mind the underlying objectives under O.1A RHC, always recognizing that the primary aim in exercising the powers of the Court is to secure the just resolution of disputes in accordance with the substantive rights of the parties.[4]

The factual background

11.  The facts of these actions are convoluted.  So far as the facts are concerned for these applications, they are distilled from Ps’ affidavits and written submissions and are necessarily brief for a clear perspective of the issues in dispute.

12.  The main disputes are between Ps and D1 and D2 in both actions.  Ps accused D1 and D2 of having breached fiduciary duties as directors and shareholders of Topmix (International) Company Limited (TICL) and Topmix Industrial Limited (TIL), which produce and sell carbon fibre automobile body parts.  Production is done by TIL’s factory in China (“the China Factory”). These companies are under the control of D1 and D2.

13.  In the 2011 action, Ps accused D1 and D2 of having set up two companies in China to which they diverted the raw material, production and business of TIL and the China Factory without Ps’ consent.  The profits of the diverted business were obtained by D3 and D4.

14.  The 2015 action was instituted as a result of discovery of information in the 2011 action where it was discovered that D1 and D2 had caused TICL and TIL to transfer their assets and business to another company Faithful Rainbow Limited, D3 in 2015 action.  They then cause another BVI company which they control to create sham proceedings and judgment against TICL and TIL with a view to winding them up.

15.  Ps therefore issued the 2015 action against D1, D2 and D3, with D4 to D9 being the conspirators in the transfer of the assets and the attempted winding up of TICL and TIL.  D4, D5 and D6 are the shareholders of D3.  D6, D8 and D9 are those behind the winding-up petitions.

Discussion

16.  On the question that there is not much commonality between these two actions, the defendants who are opposing the applications submit that since the parties, the locations of the business, the remedies asked for and the legal issues involved are quite distinct, there is very little common overlapping facts between these two actions.

17.  Even though there is very little common fact or law involved in these two actions, if one judge hears both actions one after the other or together, which the trial judge has the final determination, time for preparation for the case and the hearings of the separate trials will be saved.  As to what extent will costs and time be saved I have no submissions from any of the parties to assist me.  However, no one has argued against this simple feature, which is only common sense.

18.  As stated in the legal principles above, apart from saving costs and time, the Court has also to bear in mind the underlying objectives under O.1A RHC, always recognizing that the primary aim in exercising the powers of the Court is to secure the just resolution of disputes in accordance with the substantive rights of the parties.[5]

19.  This is a fundamental reason for having case management for civil litigation, a fair trial being the cornerstone of our civil justice system.

20.  Any experienced legal practitioner will not lose sight of the reality of a trial in a civil action.  The Court will be eager to be apprised of the full scope of the facts from the parties through the evidence.

21.  Here, as I have said above, the main dispute will be between Ps and D1 and D2 in the 2011 action.  The disputes between them will be mainly factual.  The finding of the facts will determine the liabilities.  In the 2015 action, there are allegations of conspiracy between D1 and D2 with other defendants other than the companies, which Ps claim to sue on their behalf in these derivative actions.  Such allegations of conspiracy involve the fraudulent intention of D1, D2 and knowledge and agreement of the other defendants in the 2015 action.

22.  It is not disputed that the 2015 action was instituted as a result of discovery of information from the 2011 action.

23.  The finding of fact in the 2011 action will determine not only the act of D1 and D2, but also their integrity as shareholders and directors of TIL as Ps allege that they had diverted the company’s raw material, business and profits to other parties which they set up for that purpose.  Such evidence on the character of D1 and D2 will also be relevant for the court to assess their evidence, which they will give in the 2015 action.

24.  If these two actions are tried separately before different judges, it is simply inconceivable that in the trial of the action 2011, Ps’ counsel will not ask D1 and D2 on the transactions in the 2015 action as those transactions were discovered from the 2011 action.  In the circumstances, application will be made for such evidence in the 2011 action to be admissible in the 2015 action.  Likewise, if D1 and D2 succeed in the 2011 action, I believe they will also make the same application to the court.  For better case management of these two actions, it is desirable to resolve all these issues at this preparatory stage.  The question is whether they should be tried by the same judge; and if so, at what cost.

25.  For parity of reasons, the opposing defendants in the 2015 action will be interested in what evidence D1 and D2 will be giving in the 2011 action.  This may affect their evidence as well.  However, they are not obliged to do so.  They can elect to attend the trial in the 2011 action to hear the relevant parts of the evidence only at their own discretion.  They may simply not attend the hearing of the 2011 action at all.  They have the same liberty even if these two actions are ordered to be tried before the same judge one after the other, though they may be given the right to attend the trial of the 2011 action.

26.  The opposing defendants have no right to prohibit Ps or D1 and D2 from making application to the court for admission of the evidence in the 2011 action into the evidence of the 2015 action. The evidence of their character is clearly relevant to both actions for determination of whether their evidence is credible.

27.  On the question of the proposed order will cause the opposing defendants, especially those in the 2015 action to incur more costs as they are otherwise not obliged to attend the trial of the 2011 action, I consider that the order proposed will not oblige them to attend the trial of the 2011 action.  They will only be given the entitlement to attend the trial of the 2011 action.  They may elect not to attend at their discretion.  Of course, there will be direction that the evidence in 2011 action will be admissible in the 2015 action.  As discussed above, this is necessary as there will be common evidence on the conduct and character of Ps and D1 and D2 in the course of running the businesses in order to save costs and time for the trial of 2015.  Costs are at the discretion of the trial judge.  If the opposing defendants are successful in the 2015 action, they may ask for costs for attending the 2011 action against Ps.

28.  For the sake that a fair trial, I consider that there are good reasons for this Court to consider that these two actions should be tried by the same judge, whether at the same time or one after the other.

29.  However, I have to consider other objections raised by the opposing defendants.

30.  On the question of delay because the 2015 action cannot catch up with the 2011 action, which is ready to be set down for trial.  According to Ps, witness statements in the 2015 action have been ordered to be exchanged on 6 December 2016, less than two weeks from today.  The opposing defendants have no dispute about this timetable.  Further application for extension of time will be met with an “unless order” since the matter has entered into the stage of Case Management Conference.

31.  The opposing defendants also submit that there is an outstanding appeal by Ps in respect of their application for appointment of a receiver in the 2015 action.  The hearing date of the appeal has not yet known.  However, I do not consider the pending appeal or even the result of the appeal will affect the pleadings.  It is only an interim relief sought by Ps based upon the existing pleadings.  There is no evidence or reasons that the result of the appeal will affect the pleadings.  Ps agree that their appeal will not affect the progress of these two actions to trial.  They confirm that they will expedite the application and that they have no intention of using this appeal to delay the proceedings of the trials.

32.  On the question of delay in practical terms, I have today ascertained from the parties that the only outstanding matter in the 2015 matter is the exchange of the witness statements, which has been ordered to be done by 6 December 2016.  The opposing defendants submit that they may require an extension of time.  D3 and D4 in the 2011 action ask for 28 days, whereas D7 to D9 in the 2015 action ask for 42 days. Given the long period of time allowed for the parties to prepare the witness statements and taking into consideration that there had been amendments of the pleadings by Ps, I consider that the parties should have proceeded to prepare their witness statements before the amendments to the pleadings, which will only add to amendments to the witness statements.  Given the fact that the opposing defendants are so minded about the delay in the trial of the actions, I consider that 28 days will be extended to the parties, with an “unless order” imposed.  Although D3 and D4 in the 2011 action have asked for time to take out an application for expert evidence, they did not take out such application within the time allowed by the court which is in August this year.  I shall therefore take it that no application for expert evidence will be made in these two actions.  Taking all the time factors into consideration, even if I allow the applications, the delay will be about 3 months.

33.  On the question of late application, there is no statutory provision in respect of the time for such application to be made.  D7, D8 and D9 in the 2015 action rely upon Re Shui On Construction Co. Ltd. and Schindler Lifts (H.K.) Ltd. [1986] HKLR 1177 (HC).  This case held: “normal practice is to apply for consolidation of actions at a stage well before the close of pleadings.  Such an application should ideally be made at the earliest convenient moment”.  However, these two actions are not normal actions, particularly the 2015 action was instituted at the discovery stage of the 2011 action.

34.  Also, I had, in my previous Decisions, emphasized that delay should be considered within the context of the relevant authorities where trial dates had been fixed.  No trial date has been fixed for the 2011 action.  This is not even a relevant factor for this Court’s consideration in the exercise of my discretion.

35.  It is not necessary to place any weight on Hon. Cheung JA’s comment in my deliberation because the above reasons are sufficient for me to dispose of the applications.  Weighing the relevant factors in balance, for the sake of fair trial, these two actions should be listed before the same judge for disposal, either at the same time or one after the other.  Since Ps apply for the trials to be one after the other, I shall accede to their requests.  The ultimate decision must be that of the trial judge.

36.  As to the costs of these applications, Ps ask for costs of this hearing only and the costs of the applications should be in the cause.  The opposing defendants argue that the costs of the whole application and the hearing today should be in the cause, whereas D7 to D9 in the 2015 action submits that there should be no order as to costs.  They rely upon the authorities submitted by Ps: Komal Patel and others v Chris Au and others (unreported, HCA 183/2014 and HCA 2063/2015, 14 January 2016 by Zervos J. in chambers), Big Island Construction (HK) Limited v Wu Yi Development Company Limited and others (unreported, HCA 1957/2005 and others, 10 April 2008 by Chu J. (as she then was)) and Re The Prudential Enterprises Ltd and Lee Tak (or Tuck) Yan and others vs The Prudential Enterprises Limited and others (unreported, HCCW 594/1999 and others, 19 August 2003 by Chu J. (as she then was)).  First of all, I consider that this Court is bound by those decisions though costs are at the court’s discretion.  Ps submit that the judges had not segregated the costs of the applications and the costs of the hearings.  The opposing defendants submit that the judges must have included the costs of the hearings as well.  Ps submits that the Court should adopt the treatment of costs as for the application of amendment.  I consider that there is a difference between these two applications, one being for leave for the applicant to amend the pleadings for the benefit of the applicant, whereas the other is for the mutual benefit of having the most appropriate mode of trial.  I have to assume that the judges must have the treatment of costs for amendment in mind when they made the orders as they did.  In the circumstances for consistency, I follow the higher courts’ decisions and make an order that the costs of the applications including the costs for the hearing today be in the cause of the actions, with certificates for one counsel.  However, I wish to make it clear here that this decision on costs is as a result of the previous Decisions of the other courts and that Ps do not make further submissions on them.  This decision is not binding upon other cases.

The order

37.  This Court shall grant an order in terms of the Ps’ summonses and the costs are as per paragraph 37 above

38.  By consent, the Case Management Conference for the 2011 action on 8 December 2016 be vacated and the Case Management Conference be adjourned to 27 March 2017 to be heard together with the 2015 action.

HCA 1382/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1382 OF 2011

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DECISION

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1.  This is an appeal by the defendants against an order of Master K Lo made on 13 January 2015. The order requires the defendants to provide further and better particulars.

2.  This action is a common law derivative action instituted by the plaintiffs as shareholders of the 5th defendant, a Hong Kong company, against the 1st and 2nd defendants and for the benefit of the 5th defendant.  The 5th defendant is under the management and control of the 1st and 2nd defendants who are its controlling shareholders and directors.  When I refer to the defendants’ hearing below, I am only referring to the 1st to 4th defendants.

3.  The 5th defendant has a subsidiary called Dongguan Shipai Longwei Fabric Manufacturing Factory (“Long Wei”).  Long Wei is a joint venture company operating a factory in the mainland that manufactures automobile parts.

4.  The plaintiffs have queries on the finance of the 5th defendant.  They say that the 1st and 2nd defendants did not answer the queries satisfactorily.  They therefore engaged private investigators to investigate on what the 1st and 2nd defendants had done to the business and operation of Long Wei.  As a result of the investigation, the plaintiffs instituted this action.

5.  The part of the statement of claim relevant to this appeal are §§33 to 39 as follows:

“33. The investigation has revealed that the 1^st and 2^nd Defendants have on about 17^th November 2006 set up another factory in the vicinity of Long Wei by the name of Dongguan City Shipai Sun Fu Yee Fabric Manufacturing Factory (東莞市石排新富宜纖維製品廠) (‘Sun Fu Yee’), and wrongfully caused Long Wei’s raw materials, moulds and labour force to be diverted to Sun Fu Yee without payment, so as to enable Sun Fu Yee to produce the same or substantially the same automobile parts as Long Wei, thereby wrongfully converting such raw materials, moulds and labour force, which belonged to Long Wei and hence the 5th Defendant, to the use of Sun Fu Yee.

34. In about May 2009, with a view to covering up their wrongdoings, the 1^st and 2^nd Defendants caused Sun Fu Yee to be taken over by a company formed in the Mainland by the name of Dongguan City Wang Bon Fabric Manufactory Company Limited (東莞市宏邦纖維製品有限公司) (‘Wang Bon’). Thereafter, the 1^st and 2^nd Defendants have wrongfully caused Long Wei’s raw materials, moulds and labour force to be diverted to Wang Bon without payment to enable Wang Bong to produce the same or substantially the same automobile parts as Long Wei, thereby wrongfully converting such raw materials, moulds and labour force, which belonged to Long Wei and hence the 5th Defendant, to the use of Wang Bon.

35. The 1^st and 2^nd Defendants have also wrongfully caused orders for automobile parts which were previously placed with the 5^th Defendant by its 2 major customers, namely, an American company known as Seibon International Inc (‘Seibon’) and a Taiwanese company known as Regal International Co Ltd (‘Regal’), to be diverted, firstly to Sun Fu Yee, and subsequently to Wang Bon, thereby wrongfully depriving the 5^th Defendant of such orders.

36. In the premises, all automobile parts sold by Sun Fu Yee and Wang Bon respectively to Seibon and Regal respectively belong to the 5^th Defendant as the operator of Long Wei.

37. By the same token, the price paid or payable by Seibon and Regal respectively to Sun Fu Yee and Wang Bon respectively for the said automobile parts also belongs to the 5^th Defendant as the operator of Long Wei.

38. The investigation has also revealed that since about 28^th June 2007 the 1^st and 2^nd Defendants have set up a limited company in Hong Kong by the name of Sun Fu Yee Limited (新富宜有限公司), i.e. the 3rd Defendant herein, for the purpose of receiving payment made by Seibon and Regal for the automobile parts produced and sold by Sun Fu Yee or Wang Bon pleaded in paragraphs 33 and 34 above, which payment was remitted by Seibon and Regal into a Hang Seng Bank account maintained by the 3^rd Defendant in Hong Kong with account number 385-756986-883.

39.Following the takeover of Sun Fu Yee by Wang Bon as pleaded in paragraph 34 above, the 1^st and 2^nd Defendants have on or about 6 December 2010 set up another limited company in Hong Kong by the name of Wang Bon Company Limited (宏邦中國有限公司), i.e. the 4^th Defendant herein, for the purpose of receiving payment made by Seibon and Regal for the automobile parts produced and sold by Wang Bon pleaded in paragraph 34 above, which payment was remitted by Seibon and Regal into a Hang Seng Bank account maintained by the 4^th Defendant in Hong Kong with account number 762-154128-883.”

6.  The defendants dealt with §§38 and 39 of the statement of claim in §27 of their defence filed on 11 October 2011 as follows：

“27. Save it is admitted that the 3^rd and 4^th Defendants maintain the bank accounts as alleged and that there were occasional payments from Seibon and Regal, paragraphs 38 and 39 are not admitted. The Plaintiffs are put to strict proof thereof.”

7.  The plaintiffs asked for further and better particulars of, among other matters, §27 of the defence.  The requests and the defendants’ answers on §27 that were provided on 19 December 2011 (“the first particulars”) are as follows:

“11. Under paragraph 27

Of the admission that ‘the 3^rd and 4^th Defendants maintain the bank accounts as alleged and that there were occasional payments from Seibon and Regal’

Please:

a. Provide a schedule identifying each and every payment from Seibon into the bank account maintained by the 3^rd Defendants, the date of payment, the amount of payment, and the purpose thereof in chronological order.

b. Provide a schedule identifying each and every payment from Seibon into the bank account maintained by the 4^th Defendant, the date of payment, the amount of payment, and the purpose thereof in chronological order.

c. Provide a schedule identifying each and every payment form Regal into the bank account maintained by the 3rd Defendant, the date of payment, the amount of payment, and the purpose thereof in chronological order.

d. Provide a schedule identifying each and every payment from Regal into the bank account maintained by the 4^th Defendant, the date of payment, the amount of payment, and the purpose thereof in chronological order.

e. In each of the 4 cases above, provide a copy of the relevant bank statements evidencing the payments in the schedule.

Answer:

a. Please see attached schedule of payment received for and on behalf of the 3^rd Defendant. The payments were for payment of proceeds of sale to Seibon.

b. Please see attached schedule of payment received for and on behalf of the 4^th Defendant. The payments wee for payment of proceeds of sale to Seibon.

c. Please see attached schedule of payment received for and on behalf of the 3rd Defendant. The payments were for payment of proceeds of sale to Regal.

d. Please see attached schedule of payment received for and on behalf of the 3^rd Defendant. The payments were for payment of proceeds of sale to Regal.

e. The bank statement will be available at the stage of discovery.”

8.  There is a schedule annexed to the answers.  It lists out the dates and amounts of receipts and whether the amounts were paid by Seibon or Regal.  There is no other information.  The plaintiffs therefore made a further request for particulars on 7 July 2014 (“the further requests”) after having spent a lot of time and efforts to obtain discovery of the relevant documents from the defendants.  The further requests are as follows:

“1. Under Answer 11(b) of the 1^st Answers

Of the answer ‘please see attached schedule of payment received for and on behalf of the 4^th Defendant. The payments were for payment of proceeds of sale to Seibon.’

(a) Despite what the answer stated, no schedule identifying the payments from Seibon into the bank account maintained by the 4^th Defendant has been attached to the 1^st Answer. Please therefore provide such schedule of payment as stated therein; and

(b) Please also identify the seller or sellers of the goods which sales gave rise to the payments from Seibon into the bank account maintained by the 4^th Defendant in the aforesaid schedule of payment.

2. Under Answer 11(d) of the 1^st Answers

Of the answer ‘Please see attached schedule of payment received for and on behalf of the 3^rd Defendant. The payments were for payment of proceeds of sale of Regal.’

(a) As the Plaintiff’s request was related to the 4^th Defendant, please clarify whether the phrase ‘the 3^rd Defendant’ in such answer actually meant ‘the 4^th Defendant’.

(b) If yes, despite what the answer stated, no schedule identifying the payments from Regal into the bank account maintained by the 4^th Defendant has been attached to the 1^st Answer. Please therefore provide such schedule of payment as stated therein; and

(c) Please also identify the seller or sellers of the goods which sales gave rise to the payments from Regal into the bank account maintained by the 4^th Defendant in the aforesaid schedule of payment.

3. Under the Schedule to the 1^st Answers

According to the Schedule, there were a total of 88 ‘Receipts from Seibon’ into the bank account maintained by the 3rd defendant, please identify the respective seller or sellers of the goods which sales gave rise to such payments made by Seibon into the 3^rd Defendant’s bank account.

4. Under the Schedule to 1^st Answers

According to the Schedule, there were a total of 4 ‘Receipts from Regal’ into the bank account maintained by the 3^rd Defendant, please identify the respective seller or sellers of the goods which sales gave rise to such payments made by Regal into the 3^rd Defendant’s bank account,”

9.  The defendants did not provide the particulars. Their solicitors wrote on 17 July 2014 advising the plaintiffs’ solicitors that the defendants were going to amend their defence and the amendment would make the further requests totally irrelevant.

10.  However, the defendants did not issue a summons to amend the defence within a month thereafter.  Hence, the plaintiffs issued a summons on 26 August 2014 for an order requiring for the further requests.

11.  The defendants then filed a summons to amend the defence on 11 September 2014 annexing to it a draft amended defence.  §27 of the draft amendment reads:

“27. Save it is admitted that the 3^rd and 4^th Defendants maintain the bank accounts as alleged and that there were occasional payments from Seibon and Regal, paragraphs 38 and 39 are not admitted. The Plaintiffs are put to strict proof thereof. The Defendants aver that payments into the bank accounts were sales proceeds received successively for Sun Fu Yee and Wang Bon and the 5^th Defendant is not entitled to such payments as alleged or at all.”

12.  The proposed new §27 did not make any material change to the original §27 as read in conjunction with the first particulars.  The enw paragraph made further admissions that the payments by Seibon and Regal into the accounts of the 3rd and 4th defendants were sale proceeds that the 3rd and 4th defendants received for Sun Fu Yee and Wang Bon.  Hence, the merits of the further requests were not affected by the draft amended defence.

13.  Leave was given by Master Chow on 26 March 2015 for the defence to be amended in terms of this draft.

14.  The defendants, after issuing the summons to amend the defence, filed the 2nd affirmation of Chan Yuk Wai on 3 October 2014 opposing the summons for further particulars requested in the further requests.  Mr Chan said in §8 of his 2nd affirmation (“§8 of the affirmation”):

“8. The Plaintiffs ask for details of the seller of the goods which gave rise to the payments from Seibon and Regal, respectively in paragraph 1(b), 2(c), 3 and 4. The Defendants’ case on Defence is that while those payments were receipt on behalf of some mainland companies, the Defendants do not actually sell and therefore have no knowledge of who sold those and what goods. The Plaintiffs have not specified what goods in respect of which they seek particulars of the sellers.”

15.  The defendants’ case as advanced in §8 of the affirmation is different from §27 of the existing defence read in conjunction with first particulars or the new §27 in the draft amended defence.  §8 of the affirmation said that the payments deposited by Seibon and Regal into the accounts of the 3rd and 4th defendants were not for payment of the sales of goods by Sun Fu Yee and Wang Bon to Seibon and Regal, but were payments made by Seibon and Regal to the 3rdand 4th defendants which received them on behalf of some unparticularized mainland companies.

16.  Despite the filing of Chan’s 2nd affirmation, the defendants did not seek to amend §27 of the existing defence or file a fresh summons to amend with a new draft amended defence so as to make the pleaded defence case the same as §8 of the affirmation.  Hence, the defendants were still bound by its pleaded defence.

17.  When the summons for further requests was before Master K Lo on 13 January 2015, Mr Kwok, counsel for the defendants admitted that the schedule produced by the defendants in the first particulars only mentioned the payments received by the 3rd defendant. Mr Kwok also agreed to provide a further schedule for the payments received by the 4th defendant.  Hence, Master K Lo made an order 1(b) which is pursuant to further requests 1(a) and Mr Kwok’s concession.  The order requires the defendants to provide further and better particulars in the form of:

“1(b) a table (with columns similar to the schedule attached to the Defendants’ Answers to Request for Further and Better Particulars of the Defence filed herein on the 19^th day of December 2011) identifying each and every payment from Seibon or Regal into the bank account maintained by the 4^th Defendant, the date of payment, the amount of payment and the purpose thereof in chronological order;”

18.  There is no appeal from order 1(b) save that Mr Kwok has indicated in his written submissions that the schedule provided in the first particulars contained payments received by both the 3rd and 4th defendants.  This is contrary to his admission before Master K Lo on 13 January 2015.

19.  Mr Tang, counsel for the plaintiffs said at the hearing of the appeal that he wanted separate schedules for the payments received by the 3rd and 4th defendants and Mr. Kwok did not demur.

20.  Master K Lo further made an order 1(c) which is in terms of 1(b) of the further requests.  It requires the defendants to provide:

“(c) identity(ies) of the seller(s) of the goods which sales gave rise to the payments from Seibon and Regal into the bank account maintained by the 4^th Defendant in the aforesaid table;”

21.  Since §8 of the affirmation has advanced a different case from §27 of the defence, Master K Lo also made orders 1(a) and 1(d) requiring the defendants to provide particulars to the plaintiffs under §8 of the affirmation as follows:

“(a) the name(s) and address(es) of the alleged mainland company(ies) on whose behalf(ves) the 3^rd Defendant received payments from Seibon and Regal (as alleged in paragraph 8 of the 2^nd Affirmation of CYW) together with particulars (including the date(s), place(s) and person(s) involved) of such alleged arrangement;

…

(d) if the Defendants’ answer to paragraph (1)(c) above is similar to paragraph 8 of the 2^nd Affirmation of CYW, the name(s) and address(es) of the alleged mainland company(ies) on whose behalf(ves) the 4^th Defendant received payments from Seibon and Regal together with particulars (including the date(s), place(s) and person(s) involved) of such alleged arrangement;”

22.  I have already mentioned above that the defendants are not appealing against order 1(b).  They are only appealing against orders 1(c), 1(a) and 1(d) in the sequence as used in Mr Kwok’s written submissions for the appeal.

23.  The basis of the defendants’ appeal against order 1(c) is the unpleaded defence embodied in §8 of the affirmation.  Mr Kwok submitted that the 3rd and 4th defendants were not sellers of the goods and, apart from receiving the proceeds of sale from Seibon and Regal for the mainland companies, they did not have information about the sellers.  He further submitted that the defendants were unable to provide the particulars required in this order and were not compellable to do so even if their version in §8 of the affirmation was not to be believed. He further said that there was no justification to compel the defendants to confess to something which they had clearly denied knowledge and were therefore unable to answer.

24.  However, the pleaded defence clearly said that the payments received by the 3rd and 4th defendants were proceeds of goods sold to Seibon and Regal.  This was the case in the original §27 of the defence as read together with the first particulars.  This is still the case in the new §27 after the defence was amended on 26 March 2015 by the order of Master Chow.  The new §27 further says that these payments were proceeds of sale received by the 3rd and 4th defendants for Sun Fu Yee and Wang Bon.  Hence, order 1(c), which was made pursuant to request 1(b) of the further requests raised on the previous §27 is also apposite for the new §27 in the amended defence.

25.  The defendants cannot use an affirmation to replace their pleaded defence.  If they should consider the pleaded case in the amended defence incorrect, they should seek leave to correct it by re-amendment. Whether they would be allowed to re-amend the amended defence to reflect the case advanced in §8 of the affirmation is of course a matter that may have to be considered on another occasion.  However, in the meantime they are bound by their amended defence. They cannot rely on an affirmation which purportedly discloses a different defence and then oppose the request for particulars of the pleaded defence.  I find the ground of appeal against order 1(c) has no merit and I dismiss it.

26.  Regarding order 1(a), it requires the defendants to provide particulars of the mainland companies referred to in §8 of the affirmation. Mr Chan alleged in §8 of the affirmation that these are the companies for which the 3rd and 4th defendants had received payments from Seibon and Regal.

27.  The defendants’ ground of appeal against this order is that the plaintiffs had not asked for these particulars in the further requests.  Mr Kwok said that the particulars requested for are different from the particulars ordered.

28.  However, Mr Kwok at the hearing of the appeal abandoned his appeal to this order.  He accepted that the Master had jurisdiction to order particulars even without a request.  He however submitted that the particulars as ordered had not been sought by the plaintiffs in the request or the summons but were only ordered by the master at the hearing.  The defendants therefore had been taken by surprise.  Hence, he argued that it was unfair to order the defendants to bear the costs of the application and the hearing.

29.  I disagree.  Whether those entities referred to in §8 of the affirmation were sellers on whose behalf the 3rd and 4th defendants had received the proceeds of sale of goods from Seibon and Regal or were just mainland companies for whom the 3rd and 4th defendants had received monies from Seibon or Regal, they were the purported beneficiaries of the payments received by the 3rd and 4th defendants from Seibon or Regal.  When the defendants opposed the application for particulars of the sellers by saying in §8 of the affirmation that there were no sellers but only beneficiaries of payments, they were trying to avoid the need to provide the particulars of these purported beneficiaries and the payments purportedly received by the 3rd and 4th defendants on their behalf.  The Master’s order 1(a) defeats this opposition.  It is therefore just and fair to require the defendants to pay the costs of the application and the hearing.

30.  Order 1(d) is in similar terms as order 1(a) but relates to the 4th defendant.  My ground for disagreeing with Mr Kwok on costs for order 1(a) should apply to this order as well.  However, Mr Kwok did not make the same argument he used for order 1(a) as against this order.  He instead used the same ground of appeal that he had used against order 1(c).  He relied on §8 of the affirmation that the defendants did not know what they were ordered to particularize.  I have already dismissed this ground under order 1(c) above.  I therefore dismiss the appeal against order 1(d) as well. 

31.  In the premises, I dismiss the appeal with costs against the defendants to be taxed.  I also extend the time for compliance with the order by fourteen days from today.