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Personal Injuries Action2013

WONG CHAU WAN v. INCORPORATED OWNERS OF NOS 11 12 CANAL ROAD WEST, HONG KONG

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105893-EN-2016-09-14

WONG CHAU WAN v. INCORPORATED OWNERS OF NOS 11 12 CANAL ROAD WEST, HONG KONG

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DCPI227/2013

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

PERSONAL INJURIES ACTION NO 227 OF 2013

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BETWEEN  
 WONG CHAU WAN (黃秋雲)Plaintiff
 and 
 INCORPORATED OWNERS OF NOS 11-12 CANAL ROAD WEST, HONG KONGDefendant

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Before:  Deputy District Judge Kam K L Cheung in Court
Dates of Hearing:  6, 7 and 10 June 2016
Date of Judgment:  14 September 2016

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JUDGMENT

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1.  This action arose out of a slip and fall accident that allegedly happened behind the main gate of the building at Nos11-12 Canal Road West, Hong Kong (“the Building”) sometime after 11:00 pm on 27 March 2012. Broadly speaking there are two issues, namely, whether the alleged accident did happen, and, if there was indeed an accident to the plaintiff, whether the accident was due to the negligence or breach of common duty of care on the part of the defendant.

The parties and history of proceedings

2.  The Building is an old low-rise composite building with residential units on the upper floors. It is not serviced by elevator and the entrance at Canal Road West and the common staircase provide the only means of access to the residential units on the upper floors.

3.  The defendant is and was at the time of the alleged accident the incorporated owners of the Building.  The plaintiff was at all relevant times the majority shareholder of Ka Wan (International) Properties Limited (“Ka Wan”), a company through which she carried on her property agency business, holding 80% of its shares.  Mr Chan Ka Wai (“Mr Chan”), a friend of the plaintiff, is the other shareholder of Ka Wan holding the remaining 20% shares.  At the time of the alleged accident, Ka Wan was the registered owner of a residential unit on the 4/F of the Building.

4.  The plaintiff and the defendant are no stranger to each other.  Ever since the plaintiff acquired the unit on 4/F of the Building in around 2009, they had been having arguments over the management of the Building and the use of a signboard said to be erected by either the plaintiff or Ka Wan on the external wall of the Building.  The arguments resulted in complaints to the Buildings Authority, laying of charge against the plaintiff by the Buildings Authority and action by the defendant against Ka Wan in the Lands Tribunal.  There were also heated arguments in meetings of the owners of the Building.  On one occasion, Mr Chan went into fierce arguments with another owner of the building, which necessitated the calling of the police.

5.  Following the commencement of the present personal injury action by the plaintiff, the defendant filed a counterclaim and claimed that the plaintiff is estopped from making any claim against the defendant because her company (ie Ka Wan) had, by committing various breaches of the deed of mutual covenants and some safety regulations, prevented the defendant from securing insurance cover for the risks that gave rise to the plaintiff’s claim.  Upon application by the plaintiff and for the primary reason that that the plaintiff and Ka Wan are separate legal entitles, Deputy District Judge Winnie Tsui struck out the estoppel defence on 13 December 2014.

6.  Subsequently, the defendant applied for and was granted leave by a Master to re-amend its pleadings.  By its Re-Amended Defence and Counterclaim, the defendant sought a declaration that upon the lifting of the corporate veil of Ka Wan, the defendant be entitled to set off any amount that it may be ordered to pay to the plaintiff against any amount that Ka Wan may be found liable to pay to the defendant.  On the plaintiff’s appeal, Judge Levy set aside the Master’s order and refused to grant leave to the defendant to amend its pleadings.

7.  On 13 April 2016, the defendant discontinued its counterclaim against the plaintiff.  Following the discontinuance of the defendant’s counterclaim, a large part of the defendant’s pleadings and evidence have become irrelevant. At the beginning of the trial I ordered that paragraphs 10, 11(a) of the Re-Amended Defence and the entire part under the heading “RE-AMENDED COUNTERCLAIM” be struck out. I also ordered that paragraphs 16-55 of the witness statement of Madam Fung (馮㓗英) and paragraphs 18-65 of the witness statement of Madam Au-Yeung (歐陽碧珍) be expunged.

The plaintiff’s case

8.  The plaintiff’s case is that she was at the relevant times residing at a unit on the 4/F of the Building. On 27 March 2012 at around 11:00 pm, she wanted to go to a nearby convenience store to make some purchases.  Upon reaching the bottom of the staircase and as she was pushing open the metal gate at the entrance, she noticed that there were a few passers-by on the other side of the gate.  To avoid hitting them, she took a step back and pulled the gate inward.  There was a puddle of water on the floor which she was not aware of.  In taking a step back, she stepped on the puddle of water and slipped and fell.

9.  The plaintiff claims that the defendant was negligent and/or in breach of its duties in, among others, failing to ensure that the lower part of the staircase was sufficiently lit and/or to keep the staircase in a safe condition.

10.  According to the plaintiff, she was seriously injured as a result of the accident.  Prolonged sick leave and medical treatments were required. At present, she is still complaining about pain and numbness in the neck, right hand and right leg, and inability to sit, stand or walk for more than 15 or 30 minutes.  She is afraid of going out alone and sometimes feel anxious.  She also claims that her employer (which is, in fact, her own company, namely Ka Wan) tried to arrange lighter duties to her but she was unable to cope with them.  As a result, she resigned from her job in October 2013.

11.  The plaintiff’s claim is well over $3million but she has waived anything in excess of $1million to bring her claim within the jurisdiction of the District Court.  About 2/3 of the total amount claimed is represented by a claim for loss of future earnings, which amounts to $2,169,600.  On the first day of the trial the plaintiff through her counsel informed the court that she would drop such claim.

The defendant’s case

12.  Without any eye-witness of the alleged accident, which happened late at night, the defendant is inhibited from putting forward any positive case.  Its defence is essentially one of a collection of non-admission and denial.  At trial, Mr Sze, counsel for the defendant, submits that the plaintiff is a wholly untrustworthy witness and that the alleged accident was staged by her.

The witnesses

13.  The plaintiff herself gave evidence at trial.  For reasons not known to the court, Mr Chan, who was more than a quiet observer of the alleged accident, was not called as a witness.

14.  Three witnesses were called on behalf of the defendant.  They are: Madam Fung, owner of a unit on 3/F and the ex-chairperson of the defendant; Madam Au-Yeung, owner of a unit on 5/F; Madam Yuen (袁靜平), owner of a unit on 2/F who had installed a CCTV system on 2/F to have the areas outside her unit monitored.

The evidence

15.  Apart from the plaintiff, other witnesses are unable to give direct evidence on the alleged accident.  The plaintiff’s evidence is therefore the focus of attention at trial.  In assessing the credibility of the plaintiff, the court takes into account, among other things, the inherent probabilities or improbabilities of her testimony, the contemporaneous documents or any evidence, which is undisputed or indisputable, tending to support or contradict one account or the other and the overall impression of the plaintiff: Ip Fung Kuen HCA 1897/2009 (unreported, date of judgment: 6 April 2016) at §65-67; Big Island Construction (HK) Ltd v Wu Yi Development Co Ltd (unreported) HCA 1957/2005, 28 July 2011.

16.  I have cautioned myself against the dangers of too readily drawing conclusions about the plaintiff’s truthfulness and reliability solely or mainly from her appearance or demeanour: Ting Kwok Keung v Tam Dick Yuen (2002) 5 HKCFAR 336 at §§36-37 (Bokhary PJ); Esquire (Electronics) Ltd v HSBC [2007] 3 HKLRD 439 at §135 (Stock JA).

17.  Mr Chan, who was with the plaintiff all the time that evening, was not called as a witness.  Not calling him though, the plaintiff has produced and heavily relied on the photos that are said to be taken by Mr Chan immediately after the accident.  Among the photos produced by the plaintiff are:-

(1) Photos of the lower part of the staircase taken for the purpose of showing that the lower part of the staircase and the spot where the plaintiff fell were unlit and very dark;

(2) Two photos of the plaintiff sitting in darkness waiting for the ambulance;

(3) A photo of the landing between G/F and 2/F taken for the apparent purpose of showing that the other parts of the staircase were better lit;

(4) A photo of the upper part of the gate taken for the purpose of showing that the area behind the gate was not illuminated;

(5) Photos of the ground behind the gate purportedly taken for the purpose of showing that there was water on the ground; and

(6) A photo of the walls alongside the staircase taken for the specific purpose of showing that there was no warning on the walls.

18.  It is obvious that the photos were not taken at random and that the photographer had one specific purpose in mind, namely, to show it to the viewers of the photos how dark the place was and what caused the plaintiff to slip and fall.  Except the last-mentioned photo, all the photos were taken without flashlight.  Given that one of the photos was taken with flashlight, Mr Chan must have with him a camera or phone that was equipped with flashlight.  Although I can understand that he might have chosen to switch off the flashlight because he wanted to show how dark the place was, I cannot understand why he should choose to turn off the flashlight when he was trying to capture the puddle of water on the ground.  It should be noted that the photos that are purportedly produced to prove the presence of a puddle of water on the ground do not quite serve their intended purpose, that is to say they do not actually show any water on the ground (at least they are not clear enough to show any water).  If Mr Chan was so concerned about the absence of warning on the walls that he bothered to turn on the flashlight when taking photos, why should he not turn on the flashlight to get a better picture of water on the ground?  After all, the puddle of water was the direct cause of the accident to the plaintiff.  Furthermore, the ambulance did not arrive until after some 10 minutes.  Had there been a puddle of water on the ground, Mr Chan had all the time he needed to take a better photo of it.  In the absence of evidence from Mr Chan, the photos produced by the plaintiff raise more questions that they solve.

19.  I shall add that I am with Mr Sze that the court is, in reliance on authorities like Chan Sze Yuen v Tin Wo Engineering Co Ltd CACV 71/2011 (25 July 2012) and Tam Po Kei v Tam Bo Kin [2011] 1 HKLRD 537, entitled to draw an adverse inference against the plaintiff’s case for her failure to call Mr Chan as a witness.

20.  As for the lighting condition, the plaintiff’s evidence is that there was no light on either side of the metal gate at the time of the accident and that the fluorescent light on the street-facing side of the gate was installed by the defendant in early January 2014.  In support of her claim that the fluorescent light was not there in March 2012, the plaintiff has drawn my attention to the minutes of meeting of the defendant held on 22 February 2014, which record a resolution that a fluorescent light be added at the top of the gate.  On the other hand, it is the evidence of Madam Fung that there was always a fluorescent light on the street-facing side of the gate.  The reference in the minutes of meeting to the addition of a fluorescent light is a reference to the addition of another fluorescent light on the top of the existing one.

21.  I have no hesitation in rejecting the plaintiff’s evidence.  It is plain and clear from the two photos respectively marked D2 and D3, which were taken by Madam Fung on 7 August 2012 during an operation undertaken by the Buildings Authority to remove an illegally erected signboard on the side of Canal Road, that there was indeed a fluorescent light at the top of the gate.  As against such indisputable evidence, the plaintiff’s evidence that the fluorescent light was installed in early 2014 can have no truth in it.

22.  Insofar as the area behind the gate is concerned, although I accept that the lower part of the staircase and the landing at the bottom of it were not well lit and relatively dark, there must be some light from outside and the top of the staircase.  I do not accept that walking down the staircase was like walking in darkness and prefer Madam Fung’s evidence that the staircase was not so dark that it was unsafe to walk on it.

23.  I now turn to another piece of important evidence, namely, the CCTV footage.

24.  The entrance of the Building and parts of the staircase were monitored by CCTV.  Although the alleged accident happened in a blind spot, the CCTV footage does provide some useful insight into what happened on that particular evening.  The CCTV footage shows:-

Plaintiff walking up

22:28:52  The plaintiff entered the Building with Mr Chan.

22:33:28  The plaintiff and Mr Chan reached 2/F.

22:33:38  The plaintiff and Mr Chan walked past the landing between 2/F & 3/F.

Plaintiff walking down after a brief visit to the upper floor

22:38:26  The plaintiff and Mr Chan reached the landing between 2/F & 3/F from the upper floor.

22:38:34  The plaintiff and Mr Chan reached 2/F.

22:41:48  The plaintiff reached the ground floor.

22:51:20  The ambulancemen arrived.

25.  As shown in the CCTV footage, the plaintiff and Mr Chan were walking at a good pace.  It took them a couple of seconds to walk up from the 2/F to the landing between 2/F and 3/F.  Strangely, it took them some 4 minutes and a half to walk from G/F to 2/F and some 3 minutes from 2/F to G/F.  The question is: Why it took them so long to walk up to 2/F and down from 2/F to G/F?  The plaintiff’s evidence is that when they walked up, they spent some time reading the notices on the notice board.  When asked whether there was anything in the notices that caught her attention, she said there was nothing remarkable.  As to why it took them more than 3 minutes to walk from the 2/F to G/F, the plaintiff was unable to offer any satisfactory explanation.  All that she said was that she might have stopped to read the notices again.

26.  I do not find the plaintiff’s explanation satisfactory because I consider it implausible that she needed to stop to read what she had just read less than 10 minutes ago.  As she said, there was nothing remarkable in the notices.  In my view, she is determined not to tell the court what she and Mr Chan did in the 3 minutes.

27.  I also disbelieve the plaintiff on other issues.  Insofar as her injury and alleged residual disability is concerned, she claims that she was seriously injured and still feels debilitated.  However, her claim that she has pain in many parts of her body and is unable to bend forward, sit, stand or walk for more than 15 or 30 minutes is inconsistent with the medical and surveillance evidence.  I shall deal with the medical evidence first.  It should be noted that there is no medical finding of anything particularly serious.  In the A&E report, it is noted that the plaintiff complained about pain and numbness in the head, neck right elbow, right hip and right knee.  However, the doctor at the Accident and Emergency Department, after examining her and carrying out X-ray of the skull, cervical spine, right elbow, right knee and the pelvis, could find nothing remarkable.  The plaintiff was discharged without hospitalization.  All that she was prescribed was a few pain-killers and analgesic balm.

28.  I shall add that the plaintiff actually refused to stay in hospital for observation (given her complaints, the doctor advised her to remain in hospital for further observation).  Her case is that she needed to go home as soon as possible to attend to a child.  However, as revealed in cross-examination, the so-called child was actually her 20-year-old daughter who was attending university.  I do not accept her evidence that she discharged herself from hospital because she needed to attend to her daughter.  The truth is more likely to be that she did not want to spend more time at hospital because she was not bothered by the alleged or any injury.

29.  In the joint medical report of Dr Johnson Lam (instructed by the plaintiff) and Dr Li Wing Kin (instructed by the defendant), Dr Lam, referring to the MRI of the spine notes that the plaintiff’s complaint of pain in the neck is consistent with the condition of the spine.  However, Dr Lam accepts that the injury to the plaintiff was no more than soft tissue injury.  He also accepts that the plaintiff should be able to cope with normal daily duties.  On the other hand, Dr Li notes that he is unable to identify any underlying pathology for the various complaints of the plaintiff and that she has magnified her symptoms.

30.  I find Dr Li’s opinion more convincing.  Not only is it more consistent with the objective medical findings, it is consistent with the surveillance evidence.  On 25 March 2015, 18 May 2015 and 29 May 2015, the plaintiff was followed by a private investigator and observed to be able to walk up a slope, walk down a staircase at a good pace without holding the handrail, run across a road, board a bus and proceed to the upper deck, walk along the aisle of a bus while browsing her cell phone and attend a gathering at a Chinese restaurant.  In the gathering at the restaurant, the plaintiff was busy serving others tea, talking to the waitresses, shaking hands and greeting people.  I am mindful that surveillance evidence has it limitation: the subject does not go out on a bad day to be followed and videotaped.  However, the dichotomy between the plaintiff’s complaints and the surveillance evidence is so great that the only conclusion is that the plaintiff has grossly if not dishonestly exaggerated her problems.

31.  I also find that the plaintiff is less than truthful in her evidence as to what the alleged accident has cost her.  The plaintiff was the proprietor of a property agency business and her own boss.  Leaving aside whether she has suffered any significant residual disability, it is an abuse of the language to say that she had to resign from her job because she was unable to cope with the lighter duties that her employer had kindly agreed to assign to her.  Furthermore, despite the fact that the plaintiff should have in her possession her and Ka Wan’s financial documents, it remains a mystery how much she was earning at the time of the accident.  It is pleaded that she used to earn $42,600 per month.  In support of her pleaded case, she has produced a note issued by Ka Wan and her employment contract with it.  Ka Wan being her own company, the note and the contract are self-serving and of no use to the court.  The documents that she has disclosed do not lend any support to her claim that she was earning $42,600 a month at the time of the accident.  Interestingly, one of the duplicate demand notes issued by the Inland Revenue Department shows that she paid $558,000 in tax for the profits that she had earned in 2011-2012.  Obviously, she was earning much more than $42,600 a month.  It is anyone’s guess why she chose to understate her actual income but I have no doubt that she is not forthcoming when called upon to tell the court how much she actually earned.

Conclusion on liability

32.  All in all, it is my view that the plaintiff is not a truthful witness.  I am not satisfied that there was an accident to her as alleged.  The plaintiff’s claim is dismissed.

Other matters

33.  Before I put a full stop on the liability issue I feel obliged to deal with a few points raised by Mr Shum, counsel for the plaintiff.

34.  First, Mr Shum has cited quite a number of authorities to me and argued that the defendant, which was in occupational control of the common parts of the Building and being the incorporated owners of the Building, was under a duty to keep and maintain the common parts in a safe condition.  Having dismissed the plaintiff’s claim on factual grounds, there is no need for me to give any detailed account of the legal duties of the occupier/manager of the common parts of a building.  Suffices it to say that I do not take issue with the proposition that the defendant being the incorporated owners and occupier of the common parts of the Building was under a duty to keep and maintain the staircase in a safe condition.

35.  Dozens of photos have been produced to show that the common parts of the Building were not managed properly.  It might well be that the defendant had neglected its duties in maintaining and managing the common parts of the Building.  However, given my finding that the plaintiff has failed to prove the alleged accident, it does not matter how badly the defendant managed the common parts of the Building.

36.  Further, Mr Shum, relying on cases like In the Matter of Colorado Products Pty Ltd (in provisional liquidation) [2014] NSWSC 789, HKSAR v Subramaniam Navarajan CACC 480/2006 and Ho Sing Yin v Chan Yiu Ling HCA 90/2010, urges me to completely disregard the evidence of the defendant’s witnesses on the ground that their respective witness statement is a copy and paste version of each other.  While I can understand why one may raise his eyebrows if two police officers, who both claim to have made independent observation of the very same event, give evidence that is completely identical in terms, I find nothing objectionable in the present case that certain parts of the witness statements of the defendant’s witnesses are identical in terms.  After all, the identical parts of the witness statements relate to matters that are not seriously in dispute.  The present case is clearly distinguishable from the cases cited by Mr Shum.  In any event, I do not have to rely on the parts that are identical in terms to come to the same conclusion that the plaintiff is not a truthful witness.

37.  Mr Shum has also raised an interesting argument.  He submits that the defendant has through counsel conceded in the defendant’s opening submission that the plaintiff was earning $36,000 a month.  To be fair to counsel, I shall set out the relevant part of the defendant’s counsel’s written opening.

“24. The joint experts were told by P that she was paid a fixed salary of $36,000 per month prior to the accident.

25. Dr Li Wang Kin who examined P opined that a justifiable period of sick leave should be from 28 March 2012 to 15 September 2012, ie 172 days.

26. It is submitted that the appropriate award uner this head should be $36,000 x 172/30 x 1.05 = $216,720.”

38.  Relying on the above-quoted passages, Mr Shum submits that the plaintiff is at the very least entitled to an award of $216,720 for pre-trial loss of earnings.

39.  A binding concession must be clear and unequivocal.  With respect to Mr Shum, I am afraid that there is not any clear and equivocal concession.  After all, why should the plaintiff be entitled to claim the benefit of a reference in the defendant’s counsel’s opening to the figure $36,000 if her case is that she was earning $42,600?  Furthermore, it should be noted that it is pleaded in the defendant’s Answer to Revised Statement of Damages that “… subject to proof of the Plaintiff’s monthly salary, an appropriate award should be HK$36,000 x (172/30) x 1.05 = HK$216,720”.  Objectively, I have no doubt that Mr Sze is simply arguing that the plaintiff can at best ask for an award based on the figure of $36,000.

Quantum

40.  For completeness sake and in case I am wrong on my judgment on liability, I shall deal with quantum briefly.

Damages for pain, suffering and loss of amenities

41.  It is plain that there was nothing but soft tissue injury to the plaintiff.  Relying on cases like Fazal Ahmed v MTR Corporation Limited DCPI 29/2011, Lo Yin Fong v Maxim’s Caterers Ltd DCPI 1424/2009 and Tam Fu Yip v Sincere Engineering & Trading Co Ltd HCPI 473/2006, I allow $50,000 under this head.

Pre-trial loss of earnings

42.  I prefer Dr Li’s evidence that the appropriate period of sick leave should be 172 days.

43.  Having decided on the length of sick leave, it remains necessary for me to decide on the multiplicand.  The plaintiff having refused to tell the court how much she was earning at the time of the accident, I am inhibited from deciding on the multiplicand and have no choice but to conclude that the multiplicand is, on the evidence, zero.  172 times zero is zero.  No award is made under this head.

Future loss of earning

44.  The claim was abandoned at the beginning of the trial.

Loss of earning capacity

45.  There being no evidence that the plaintiff has suffered any marginally significant residual disability, the claim under this head is bound to be dismissed.

Medical expenses

46.  Although the plaintiff did attend to various private practitioners, a chiropractor and Chinese medicine practitioner, I am not satisfied that all of the treatments/consultations were reasonable or necessary.  Doing the best I can, I assess the award under this head at $5,000.

Travelling expenses

47.  I agree with the defendant’s counsel that the appropriate award should be $1,000 and accordingly award $1,000.

Tonic food

48.  There being no evidence that the plaintiff needed or would be benefited from any tonic food, the claim under this head is dismissed.

Interest

49.  There will be interest on (a) damages for PSLA at 2% per annum from the date of the writ of summons and (b) special damages at 4% per annum from the date of the accident.  I shall leave it to parties’ legal teams to work out the amount of interest recoverable.

Disposal of the action

50.  I make the following orders:-

(1) The plaintiff’s action be dismissed with costs to the defendant with certificate for counsel; and

(2) The above costs order being a costs order nisi will become absolute in the absence of application for variation within 14 days.

51.  Lastly, I thank counsel for their assistance.

 ( Kam K L Cheung )
 Deputy District Judge

Mr Erik Shum, instructed by Cheung & Liu, for the plaintiff

Mr Jeffrey Sze, instructed by Eric Yu & Co, for the defendant

98221-EN-2015-04-30

WONG CHAU WAN v. INCORPORATED OWNERS OF NOS 11 12 CANAL ROAD WEST, HONG KONG

HTML content

DCPI227/2013

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

PERSONAL INJURIES ACTION NO 227 OF 2013

----------------------

BETWEEN

 WONG CHAU WAN (黃秋雲)Plaintiff

and

 INCORPORATED OWNERS OF NOS 11-12 CANAL ROAD WEST, HONG KONG Defendant

----------------------

Before:  HH Judge Levy in Chambers
Date of Hearing:  11 March 2015
Date of Judgment:  30 April 2015

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JUDGMENT
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1. This is an appeal by the plaintiff, Mdm Wong, against the decision of a master on 23 January 2015 in granting leave to the defendant, the incorporated owners of Nos 11-12 Canal Road West, to amend its Amended Defence and Counterclaim (“ADAC”) . At the conclusion of the hearing, judgment was reserved which I now give.

BACKGROUND

2. The defendant’s application to re-amend the ADAC was premised upon the order of Deputy Judge Winnie Tsui on 13 November 2014, by which the Deputy Judge directed, amongst other things, (i) the striking out of §10(a) to (n) and §11(a) of the ADAC and the whole of the Amended Counterclaim and, (ii) the issuance by the defendant, on an unless basis, of a summons for leave to amend the ADAC.

3. The background of these proceedings have been set out in great detail in §§2-14 of the judgment (“Judgment”) of the Deputy Judge handed down on 13 November 2014, which background can be briefly summarized as follows:

(1) The plaintiff allegedly sustained personal injuries on 27 March 2012 from an accident that allegedly took place on the ground floor of the residential building at Nos 11-12 Canal Road West, Wanchai (“ Building”).  She claims against the defendant for negligence and breach of common duty of care.

(2) At the time of the alleged accident, the plaintiff was a resident of the fourth floor of the Building (“Premises”) whereas the registered owner of the Premises was a company called Ka Wan (International) Properties Limited (“Ka Wan”). The plaintiff was an 80% shareholder and a director of Ka Wan. 

(3) In the ADAC, the defendant, apart from putting the plaintiff to strict proof and denying liability, and further alleging contributory negligence, pleads an additional defence in §10(a) to (n) of the ADAC (which additional defence was referred to in the striking out hearing as the “Insurance Defence” (“Insurance Defence”)), averring:

(i) The erection by the plaintiff of an extension (“Extended Signboard”) to an existing advertisement signboard (“Original Signboard”) on the external wall of the Building. The Original Signboard had been approved by the Buildings Department but the Extended Signboard was not.

(ii) The plaintiff’s breach of the Building Management Ordinance and the Deed of Mutual Covenant (“DMC”) and other safety regulations as a result of the erection of the Extended Signboard, which rendered the defendant “totally incapable of securing an appropriate type of insurance policy” to cover the Building or to cover the plaintiff’s claim in this action.

(4) The defendant pleaded in § 11(a) of the ADAC a defence of set off in respect of  the plaintiff’s  alleged wrongful acts and/or negligence in respect of the erection of the Extended Signboard.

(5) The undisputed evidence showed that the plaintiff purchased the Premises in April 2009 and Ka Wan was incorporated in September of that year. In October 2010, the plaintiff sold the Premises to Ka Wan. After Ka Wan became the owner of the Premises,  a number of legal proceedings in relation to the Extended Signboard were issued:

(i) A summons by the Building Authority in September 2011 against the plaintiff which was later withdrawn.

(ii) The defendant commenced a lands tribunal action on 21 March 2012 against Ka Wan (and not the plaintiff) by alleging that Ka Wan had refused to pull down the Extended Signboard, and that the defendant was unable to secure insurance cover for the Building.

(iii) A notice on 16 July 2012 by the Buildings Department against the “owner” of the Extended Signboard, ordering its removal.

(6) (i) In August 2012, the Buildings Department removed the    Extended Signboard.

 (ii) In December 2012, the defendant’s lands tribunal action against Ka Wan was concluded with no order having   been made.

4. The learned Deputy Judge found, on the undisputed evidence, that the various wrongful acts in relation to the Extended Signboard had been alleged against Ka Wan and not the plaintiff personally, and concluded that the defendant’s Insurance Defence was obviously unsustainable and bound to fail.

5. The learned Deputy Judge however considered that the defence of set off as pleaded in 11(a) the ADAC was “potentially arguable” (that is, assuming that the plaintiff was the owner of the Extended Signboard) (see §§43 & 52 of the Judgment), and allowed the defendant to bring an application to re-amend the ADAC.

THE PROPOSED RE-AMENDMENTS

6. The gist of the defendant’s averments in the recast Insurance Defence in §10(a) to (s) of the Re-Amended Defence and Counterclaim (“RADAC”) are almost identical to those pleaded in §10(a) to (n) of the ADAC except that the allegations concerning the Extended Signboard are now directed against Ka Wan instead of against the plaintiff.  Thus, in the RADAC, the defendant now pleads that Ka Wan was the owner of the Extended Signboard, and that the various wrongs and breaches that the defendant had earlier particularized in the ADAC concerning the Extended Signboard were carried out (with the exception of an allegation against the plaintiff in §10 (e) to be discussed in § 10(3) below) by Ka Wan. The various legal proceedings and their disposals that I have summarized in §3(5) and (6) above are also identically pleaded in § 10 (h) to (m) and (q) of the RADAC.

7. Similarly, the earlier allegations in the ADAC of the defendant’s inability to secure insurance are also pleaded in § 10(n) of the RADAC but are now further elaborated by additionally asserting in § 10(p) to (p) that the defendant’s attempts to secure an insurance policy to cover third party liability were rejected and it was only able to secure insurance cover for the Building at the end of November 2012, three months after the Extended Signboard had been removed.

8. What is entirely new in the RADAC is the raising by the defendant for the first time a new plea of the lifting of the corporate veil, which was undisputedly done with a view to cure the defect in the ADAC that led to the striking out of the relevant paragraphs in the ADAC.

9. The defendant’s new plea of the lifting of the corporate veil is based on a number of factual assertions concerning the plaintiff’s relationship with Ka Wan as pleaded in §10(a) to (f) of the RADAC. The circumstances for the lifting of the corporate veil are specifically set out in §10(r) and (s) of the RADAC.

10. It appears to be the defendant’s case that the relationship between the plaintiff and Ka Wan particularized in §10(a) to (f) of the RADAC, to be set out below, forms its basis for making the plaintiff personally liable for, by the lifting of the corporate veil, the wrongdoings committed by Ka Wan.  The defendant thus avers to :

(1) The plaintiff’s shareholder and director relationship with Ka Wan (§10 (a) & (b);

(2) The plaintiff being the former owner of the Premises before she sold it to Ka Wan (which was thus the owner at the material times) (§10(c) to (d)); and

(3) The erection of the Extended Signboard by the plaintiff and Ka Wan, which owned the Extended Signboard (§ 10 (e) to (f)).

11. The specific allegations of the plea of the lifting of the corporate veil are set out in §10(r) and (s) of the RADAC, in which the defendant alleges in §10(r)  that the plaintiff  had used Ka Wan to conceal the fact that she was the real actor behind Ka Wan to perform the illegal or improper conduct (in relation to the Extended Signboard) and had, in §10 (s) abused Ka Wan’s separate legal entity to perform the illegal and/or improper conduct.

12. The remedies of set off against the plaintiff are pleaded in §11(a) and the indemnity against the plaintiff and/or Ka Wan is counterclaimed in §§12 and 13 of the RADAC.

13. In spite of a specific allegation in §10 (e) of the RADAC that the plaintiff “erected” the Extended Signboard, there is no dispute however that the alleged “erection” was only based on the plaintiff’s association with Ka Wan. Thus, it would appear that the defendant’s proposed re-amendments against the plaintiff in respect of the re-amended Insurance Defence in §10, the set off in §11(a) and the re-amended counterclaim in §§12 to 13 are dependent upon the viability of the defendant’s new plea of the lifting of the corporate veil.

APPLICABLE LEGAL PRINCIPLES

14. The hearing of this appeal is by way of an actual rehearing: see Hong Kong Civil Procedure 2015 (Vol 1) (“HKCP”) §58/1/2.

15. An amendment of pleadings is governed by O.20 r.8 of the Rules of the District Court, which, according to sub-r (1), is to be carried out for the purpose of determining the real question in controversy between the parties, or of correcting any defect or error.

16. The Civil Justice Reform has added a new sub-r (1A), which provides that the court shall not order “a pleading to be amended unless it is of the opinion that the order is necessary either for disposing fairly of the cause or matter or for saving costs.”

17. Generally, the Court needs to be satisfied as to the truth and substance of the proposed amendment if either party seeks to amend his pleading, by introducing for the first time an allegation of fraud, or misrepresentation, or other such serious allegations : HKCP §20/8/10.

18. Leave will not be given to amend a defence by adding a plea which is no answer to the action, nor to add an unnecessary counterclaim, nor to make any other amendment raising a case which must fail:HKCP §20/8/24 ).

19. A court will not allow amendments which have no prospects of success as a matter of law or on the evidence:  C & A Consultants Limited & Anor v Hong Kong Airlines Limited (formerly known as CR Airways Limited), HCA279/2007, unreported, 17 August 2010.

20. With these principles in mind, I will next consider the plaintiff’s objections to this application before deciding whether the court should allow the defendant’s proposed re-amendments.

DO THE RE-AMENDMENTS HAVE ANY PROSPECTS OF SUCCESS

The parties’ contentions

21. Since the striking out application, no fresh evidence has been filed, and the only new matter is the issuance by the defendant on 6 February 2015 of a Third Party Notice against Ka Wan for indemnity or contribution for the wrongful or negligent erection of the Extended Signboard.

22. Notwithstanding the undisputed facts that the allegations concerning the Extended Signboard are now being made against Ka Wan, Mr Poon (who was also counsel for the defendant in the striking out application) on behalf of the defendant submitted ( at §§13 & 15 of his written skeleton) that the defendant’s plea of lifting the corporate veil is sustainable as the proposed amendments in the RADAC and the evidence are able to show that the plaintiff had, “under the disguise of Ka Wan”,  “used Ka Wan to evade limitations on her conduct by law, or to commit crimes”, which conduct, Mr Poon submitted, is  “sufficient impropriety or wrongdoing to lift its (meaning Ka Wan’s) corporate veil” (words in brackets are added).

23. As a matter of law, Mr Poon further submitted, a corporate veil would be lifted if “impropriety, wrongdoing, concealment, sham or fraud” were involved (Harvest Industrial (HK) Company Ltd v Ng Yeung & Anor, DCCJ 175/2010, unreported, 15 November 2010 at §7); or “where a defendant had used the corporate structure as a device or facade to conceal his criminal activities” (Re H and others (restraint order: realisable property) [1996] 2 All ER 391 at 391h) or “where a defendant by the device of a corporate structure to attempts to evade (i) limitations imposed on his conduct by law..." (Re H [1996] 2 All ER 391 at 401j, quoting Adams v Cape Industries plc [1991] 1 All ER 929 at 1026).

24. Counsel for the plaintiff, Mr Shum (who did not appear before the Deputy Judge in the striking out application) however contended that the defendant’s pleaded case against the plaintiff in the re-amendments, in spite of the allegations having been re-modified by way of a new plea of the lifting of the corporate veil, was doomed to fail.

25. Mr Shum further submitted that Mr Poon’s reliance on the above-mentioned authorities; in particular the case of Re H, to support the defendant’s plea for the lifting of the corporate veil, was misconceived and fundamentally erroneous in law. Re H, Mr Shum suggested, was not an authority establishing that the court would lift the corporate veil whenever a company had engaged in criminal activities.  It should be noted, Mr Shum submitted, that the facts in Re H that led to the court’s decision to lift the corporate structure in fact involved a criminal prosecution against three defendants who owned 100% of the shares of the company, which facts were wholly distinguishable from the present case.

26. The correct test, it was submitted, to be applied is found in C & A Consultants Limited & Anor. v Hong Kong Airlines Limited (formerly known as CR Airways Limited), HCA279/2007, unreported, 17 August 2010;Dransfield Holdings Limited (in Liquidation) v Pearl Oriental Oil Limited (formerly known as Pearly Oriental Innovation Limited, HCMP 1392/2011, unreported, 29 May 2012, and Lee Thai Lai v Wong Chung Kai & Anor, HCLA 64/2003, unreported, 8th December 2003. Particularly instructive is a passage Mr Shum quoted from Lee Thai Lai (at §7):

“ …The general rule of company law is that a company is a separate legal entity from its controlling shareholders and directors: Salomon v Salmon & Co. [1897] AC 22, even in a one-man company situation. The company is neither an agent nor a trustee of its shareholders in respect of the company’s assets, business and affairs. The corporate veil may only be lifted in very limited circumstances. The relevant legal principles have been discussed in Gower and Davies’ Principles of Modern Company Law (7th ed.) 184 et seq; Gore-Browne on Companies (44th ed.) paras 1.3.1 and 1.3.2. Without seeking to be exhaustive, the normal circumstances for lifting the corporate veil are the prevention of the corporate form from being used for the purposes of fraud, or as a device to evade a contractual or other legal obligation. On the other hand, using a corporate structure to avoid the incurring of any legal obligation in the first place is not objectionable; the court’s power to lift the corporate veil does not exist for the purpose of reversing such avoidance so as to create legal obligations: China Ocean Shipping Co. v Mitrans Shipping Co. Ltd [1995] 3 HKC 123. The court cannot lift the veil merely because it considers that justice so requires: China Ocean Shipping Co. at page 128B/C to F/G (per Nazareth VP). ” (the emphasis is that of the plaintiff’s)

27. The lifting of the corporate veil, according to these authorities, is confined to, Mr Shum suggests, limited circumstances, which need to involve a serious case of misconduct by a defendant who has hidden behind the corporate veil of a company which the defendant controls (C & A Consultants Limited & Anor. at §7) and it will not be lifted by the mere fact that it was wholly owned by the defendant (Dransfield Holdings Limited (in Liquidation) at §50).

28. Applying the test to this case, Mr Shum argued that the re-amendments had no chance of success as the new plea of the lifting of the corporate veil lacked particulars. The allegations in §10(r) and (s) of the RADAC that the plaintiff had concealed ‘the fact that she was the real actor behind Ka Wan” and had “abused Ka Wan’s separate legal entity” to perform illegal and/improper conduct were no more than bare assertions.

29. The new averments presently pleaded in the RADAC Mr Shum further suggested, even taken to the highest, only went to the extent of showing the plaintiff’s relationship with Ka Wan in the recast §10 of the RADAC. None of the averments however contained any assertions showing how the plaintiff had allegedly “concealed” the fact of or “abused” Ka Wan’s separate legal entity.  The assertions in §10(b) that the plaintiff was the director and an 80% shareholder of Ka Wan at the material times, and in §10 (d) that the plaintiff sold the Premises to Ka Wan (which sale, according to the land search record, was shown to have been a genuine sale with the plaintiff having made a profit from the sale) only showed her link with the Premises. The remaining averments such as those set out in  §10 (a) about the status of Ka Wan; in §10 (c) the plaintiff being the original owner of the Premises; and in §10 (e) the erection of the Extended Signboard, Mr Shum further contended, were not even  matters concerning the plaintiff’s relationship with Ka Wan.

30. Apart from the proposed amendments lacking particulars to support the defendant’s new plea for the lifting of the corporate veil, Mr Shum further contended that the evidence in this case was also insufficient to support a case for the lifting of the corporate veil. 

31. The undisputed evidence, Mr Shum submitted, only showed that the plaintiff was involved in the erection of the Extended Signboard as Ka Wan’s “employee”. Mr Shum argued that mere directorship or the holding of shares or control, according to the authorities he referred to in the above, would not be sufficient for the court to lift the corporate veil. The undisputed evidence that Mr Shum relied on is as follows:

(1) The plaintiff had represented to Ka Wan in one of the owners meetings in June 2011 (as referred to in § 27 the judgment of the Deputy Judge) that the plaintiff was the majority shareholder of Ka Wan;

(2) The plaintiff was the director performing the duty of negotiating deals for Ka Wan in respect of its business of tenancy management and property development; and

(3) The plaintiff was employed as Ka Wan’s managing director (as stated in the affirmation of Fung Kit Ying of the defendant in opposition to the striking out application).

32. Pertinently, Mr Shum further suggested, the evidence showed that Ka Wan had been formed as a property holding company for profit rather than having been formed for any unlawful purpose. More importantly was also, Mr Shum argued, the plaintiff’s undisputed realization of a profit from the sale of the Premises to Ka Wan, which fact, Mr Shum suggested, would have militated strongly against any inference that the plaintiff had used Ka Wan as a device to evade existing contractual or legal obligations owed by the plaintiff.

My view

33. The defendant’s Insurance Defence against the plaintiff, or the proposed amendments of the RADAC for that matter -  as has been noted in §18 of the Judgment : “ he (Mr Poon) submitted that even though Ka Wan might have officially owned the Extended Signboard, the corporate veil should be lifted or pierced to the effect that the plaintiff should be treated as the owner of being responsible for the Extended Signboard” -  is  entirely basedon the plea of the lifting of the corporate veil, without which plea, the defendant’s case against the plaintiff in the proposed amendments of the RADAC is frivolous.  

34. Although the defendant in §10(e) of the RADAC has made one specific allegation against the plaintiff by alleging that she (and Ka Wan) had erected the Extended Signboard, the defendant’s case against her was not based on any personal involvement but was principally premised on the plaintiff’s directorship of and 80% shareholding in Ka Wan (see §§27 &29 of the defendant’s written skeleton before the master, which skeleton Mr Poon also relied on in this appeal). It was Mr Poon’s submission that the plaintiff, by virtue of her employment with Ka Wan, would have likely been “involved” in the erection of the Extended Signboard.

35. Mr Poon further argued that although the defendant’s case against the plaintiff is not based on the actual and direct wrongdoings, there was nonetheless sufficient evidence to support a claim for the lifting of the corporate veil. He has further urged this court not to, in the interlocutory stage, undergo extensive fact-finding but should leave that to the trial.

36. Whilst I agree with Mr Poon that it is not suitable for the court to conduct a fact-finding exercise in relation to the evidence for the purpose of this application, I consider that after the Civil Justice Reform the court needs to take a more robust approach when considering whether any amendments to a pleading should be allowed, and that they should only be allowed if the amendments are “necessary either for disposing fairly of the cause or matter, or for saving costs.” See: O.20 r.8 (1A), Rules of the District Court. 

37. It is further noted that counsel have no dispute that a court is entitled to examine the evidence and form a view as to whether the proposed amendments have any prospects of success. Amendments that have no prospects of success will be refused (C & A Consultants Limited §§27 & 28).

38. In my judgment, the defendant’s new plea of the lifting of the corporate veil as set out in §10(r) and (s) of the RADAC seems to have also encountered similar deficiencies to those noted by the Deputy Judge in the striking out application, vis-a-vis, an absence of particulars in the pleadings or evidence to support the plea of the lifting of the corporate veil.

39. I am in respectful agreement with Mr Shum’s contention regarding the lack of particulars as well as the insufficiency of the evidence in this case outlined above.

40. Broadly, the evidence the defendant seeks to rely on to support its claim for the lifting of the corporate veil, is, to a large extent, based on the plaintiff’s directorship of and shareholding in Ka Wan, and to a lesser extent, on the plaintiff’s involvement through her employment with Ka Wan by, for example, representing the latter in matters concerning the Extended Signboard.

41. None of the above-mentioned evidence the defendant relies on however comes anywhere near showing that Ka Wan was incorporated otherwise than for the purpose of conducting its business of tenancy and property development. The plaintiff’s association with Ka Wan, according to the undisputed facts, is none other than, through her shareholding in and acting as a director and employee of Ka Wan, for genuine business purposes.

42. It is trite that there is nothing objectionable to individuals forming a company for the purpose of holding or managing properties or for conducting commercial businesses for the avoidance of incurring personal legal obligations. The lifting of the corporate veil requires, as the authorities establish,  circumstances showing that a company has been used as the “alter ego” by a defendant for the purpose of fraud, or as a device or sham to commit impropriety or wrongdoing, which circumstances, as Mr Shum has suggested, are absent in this case.

43. It is however argued on the defendant’s behalf that the erection of the Extended Signboard constituted crimes under the Buildings Ordinance and the Public Health and Municipal Services Ordinance, which facts; it was argued, showed sufficient impropriety or wrongdoing enabling a court to pierce the corporate veil.

44. The facts of Re H are concerned with corporate structures being used (as the UK Court of Appeal has found) by individual shareholders who controlled the companies to commit fraud (evasion of excise duty) (Re H at 391h-j).  It would thus appear that before a court will lift the corporate veil, it needs to be satisfied as to the existence of a nexus between the intentional use by an individual of a corporate structure (as a façade) and the unlawful purpose (criminal activities) for which it is used.

45. It has been established from the authorities discussed above that the court will only pierce the corporate veil in limited circumstances, which are confined to situations where a corporate structure has been used for the purpose of committing fraud or wrongdoing.  The mere fact that a company has committed a wrongdoing without linking its wrongdoing with the purpose for which the corporate structure has been used will be insufficient. 

46. The “crimes” in this case, according to the authorities, including the case of Re H, which Mr Poon has heavily relied on, do not, in my judgment, support his contention that they amount to the types of wrongdoings that would lead to the lifting of the corporate veil.

47. Pertinently, the undisputed facts, in my judgment, do not show that the plaintiff had used Ka Wan as a corporate vehicle for the purpose of and as a façade to conceal the alleged unlawful act of erecting the Extended Signboard. Although the defendant has now rectified the earlier defect in having failed to plead the plaintiff’s shareholding and directorship in Ka Wan in the ADAC by having it so pleaded in the RADAC, its plea on the lifting of the corporate veil in §10(r) and (s), in my view,  still  faces the same hurdle as that identified in §30 of the Judgment by the Deputy Judge in the striking out application, which states:

“ Neither is the plaintiff’s intention to use Ka Wan to conceal her involvement in the Extended Signboard or make use of Ka Wan’s separate legal personality to evade liability referred to at all (have been pleaded or featured at all in the pleadings), let alone supporting particulars. ”

48. By merely averring a plea for the lifting of the corporate veil without any particulars or evidence showing that the plaintiff had an intention to use Ka Wan to conceal her involvement in the Extended Signboard or make use of Ka Wan’s separate legal personality to evade liability will not suffice.

49. In conclusion, I consider that there is no real question in controversy that needs to be decided in trial as Mr Poon has argued.  I am in respectful agreement with Mr Shum that, in the absence of any allegations of impropriety or wrongdoing against the plaintiff, mere directorship, shareholding or employment are insufficient for the court to pierce the corporate veil, and the proposed re-amendments basing entirely on this new plea, are doomed to fail and should be refused.

50. Having ruled against the defendant on the first objection, I do not strictly need to deal with the plaintiff’s remaining two objections.   For completeness, however, I will briefly deal with them below.

Is the Insurance Defence related to the Extended Signboard

51. It was contended by Mr Shum that the evidence, similar to that relating to the lifting of the corporate veil, also failed to support the defendant’s allegation in the RADAC that the defendant could not purchase insurance for the Premises due to the presence of the Extended Signboard.

52. First, as to the replies from the insurance companies (AXA Insurance Co Ltd and Blue Cross Insurance Co Ltd and China Ping An Insurance Co Ltd) to the inquiries by the defendant in connection with the purchase of the insurance, Mr Shum pointed out that the short replies from the insurance companies, apart from stating a preference to “abstain from quoting… because of the nature of risk” or “advise not refer to quote”, had made no mention at all of the Extended Signboard.

53. Second, in respect of the contents of the minutes of the meetings of the defendant from April to November 2012, Mr Shum suggested that they made no reference to the Extended Signboard as a reason for the defendant’s inability to purchase insurance for the Premises. Mr Shum surmised that the defendant’s inability to secure insurance might have been due to the presence of other advertisements signboards that were in breach of the BMO or even due to the lack of a management company providing professional management services.

54. Third, Mr Shum further referred to a “Special Exclusion” clause in the insurance that the defendant later purchased from Asia Insurance Limited in November 2012 after the removal of the Extended Signboard. Mr Shum further argued that since the insurance company in the said policy had been able to exclude liability “in respect of bodily injury arising from “unauthorized structure/works” within the common parts of the Building, it would have also been possible for the defendant to secure relevant insurance coverage by an insurance company inserting such a similar exclusion clause limiting liability by excluding areas with illegal structures such as the Extended Signboard, and by only covering, for example,  certain parts of the Building, such as the internal staircase at which the plaintiff suffered personal injuries. It was therefore contended that the presence of the Extended Signboard would not have been the reason for the defendant’s alleged inability to secure the necessary insurance.

55. Mr Poon had sought to resist the plaintiff’s contentions on the relationship between the Insurance Defence and the presence of the Extended Signboard by arguing that due to a concession the plaintiff’s former counsel made at the striking out hearing that if the plaintiff was indeed the owner of the Extended Signboard, the defence of set off could stay, the plaintiff should be precluded from raising these arguments at the amendment application. I am unable to accept Mr Poon’s argument as the so-called concession that he referred to was before a different tribunal and was also concerned with a different type of application. I will thus broadly examine the evidence Mr Shum has referred to.

56. Insofar as the replies from the insurance companies were concerned, the replies were so brief that it is not, in my view, possible at this stage to draw any concluded view that the Extended Signboard was or was not the reason for the stance taken by those insurance companies. 

57. Regarding the minutes of the defendant’s meetings, I have an impression that the presence of the Extended Signboard had been the defendant’s concern insofar as it had to take actions in respect of the Extended Signboard. At the interlocutory stage, it would not have been possible to form any concluded view as to whether the Extended Signboard was the reason for the defendant’s inability to purchase the necessary insurance.

58. Lastly, I also do not consider that the exclusion clause Mr Shum referred to is able to conclusively show that the defendant could have been able to, in spite of the presence of the Extended Signboard, obtain insurance coverage in respect of the other parts of the Building as Mr Shum had contended.  Broadly viewed, I consider that there seems to have some evidence suggesting that the presence of the Extended Signboard might have caused problems, prior to the removal of the Extended Signboard, in the defendant’s attempts to secure the relevant insurance coverage for the Building.

59. Since it has been determined above that the defendant’s plea of the lifting of the corporate veil is unsustainable, and that the evidence shows that the wrongdoings concerning the Extended Signboard were committed by Ka Wan, it follows that the defendant’s proposed re-amendments in relation to the relationship between the defendant’s alleged inability to secure relevant insurance coverage and the Extended Signboard as well as the defence of set off are also unsustainable.

Would the plaintiff be prejudiced

60. Lateness is the plaintiff’s last objection in Mr Shum’s written submissions. It was contended that prejudice would have been caused to the plaintiff if the court were to allow the amendment as further amendments would have to be made to the parties’ pleadings, and the filing of further witness statements would have to be filed. At the hearing, Mr Shum did not seek to vigorously argue this point.

61. As a general rule, an amendment should be allowed however late the amendment if it would not prejudice the opponent party in some way that cannot be compensated for by costs or otherwise. The burden is on the party opposing the amendment to show prejudice. Given the limitation imposed by O.20 r8(1A), that the court needs to be satisfied that any proposed amendment to a pleading is necessary either to dispose fairly of the cause or matter or for saving costs, any proposed amendment to a pleading at an advanced stage of the proceedings will face more onerous hurdle : See HKCP §20/8/9.

62. Given the fact that this application is premised on the order of the Deputy Judge who had directed the defendant to issue an re-amendment application, and further that a case management conference has not yet been held, I’d be inclined to consider that any prejudice that may have been caused to the plaintiff could have been compensated by costs in this case had the plea of the lifting of the corporate veil had been found to have been sustainable.

Conclusion

63. For the reasons above, I conclude that all the proposed re-amendments, which are entirely dependent on the defendant’s successful plea of the lifting of the corporate veil, which proposed plea has been rejected, have no prospects of success, and I am therefore not inclined to allow the proposed amendments.

64. The plaintiff’s appeal is therefore allowed and the order of the master dated 23 January 2015 is set aside. The defendant’s summons dated 26 November 2014 is dismissed.

65. As for costs, I grant a costs order nisi that the costs of the appeal and the costs below be paid by the defendant, with certificate for counsel to be taxed if not agreed.

66. Lastly, I wish to thank counsel for their able assistance in this application.

(Katina Levy)
District Judge

Mr Erik Shum, instructed by Yip, Tse & Tang, for the plaintiff

Mr Jackson Poon, instructed by K Y Lo & Co, for the defendant

95733-EN-2014-11-13

WONG CHAU WAN v. INCORPORATED OWNERS OF NOS 11-12 CANAL ROAD WEST, HONG KONG

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DCPI 227/2013

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

PERSONAL INJURIES ACTION NO 227 OF 2013

____________

BETWEEN

 WONG CHAU WAN (黃秋雲)
Plaintiff
 and
 INCORPORATED OWNERS OF NOS 11-12 CANAL ROAD WEST, HONG KONG
Defendant

____________

Before: Deputy District Judge Winnie Tsui in Chambers

Date of Hearing: 6 October 2014

Date of Decision: 13 November 2014

_______________

DECISION

_______________

 

1.  This is a striking out application taken out by the plaintiff for an order that paragraphs 10(a) to (n) and 11(a) of the defendant’s Amended Defence and Counterclaim be struck out and further that the whole of the Amended Counterclaim be struck out and the counterclaim be dismissed pursuant to RDC Order 18 rule 19(1)(a), (b), (c) and/or (d) and/or the inherent jurisdiction of the court.

The parties and the pleadings

2.  This personal injuries action arises out of an alleged accident which took place on the ground floor of the residential building at Nos 11-12 Canal Road West, Wanchai (“the Building”).

3.  At the time of the alleged accident, the plaintiff was a resident of the fourth floor of the Building (“the Unit”) whereas the registered owner of the Unit was a company called Ka Wan (International) Properties Limited (“Ka Wan”).  The plaintiff was an 80% shareholder and director of Ka Wan.  The remaining 20% shares were held by an individual called Chan Ka Wai Aaron, who was also a director.  There is no evidence before the court as to who Mr Chan is and his relationship with the plaintiff.

4.  The defendant was incorporated in August 2011 as the incorporated owners of the Building.

5.  The plaintiff claims that on 27 March 2012, when she was leaving the Building, she stepped on a puddle of water at the bottom of the stairs on the ground floor of the Building.  She slipped and fell down.  As a result, she sustained injuries (“the Alleged Accident”).  She claims against the defendant for negligence and breach of common duty of care.  The Statement of Claim sets out various particulars, including, for instance, inadequate lighting and failure to cause the water puddle to be cleaned up.

6.  In the Amended Defence and Counterclaim, the defendant puts the plaintiff to strict proof as to the circumstances in which she allegedly slipped and fell.  Further, the defendant denies liability and further alleges contributory negligence on the part of the plaintiff.

7.  In paragraphs 10(a) to (n), the defendant pleads an additional ground of defence.  This was referred to in the hearing as the “Insurance Defence”.  In gist, the defendant says the following:

(a) The plaintiff had erected an advertisement signboard forming an extension to an existing signboard erected on the external wall of the Building.  The original signboard was approved by the Buildings Department and was erected outside the fourth floor only whereas the extension was not approved and was erected outside the windows stretching from the second floor to the fifth floor of the Building.  From the photographs attached to the Amended Defence and Counterclaim, it can be seen that the Extended Signboard was one whole signboard stretching across the four floors.  I shall refer to this advertisement signboard as “the Extended Signboard” and the original approved part (which formed part of the Extended Signboard) “the Original Signboard” below.  

(b) The Extended Signboard was in breach of, amongst other things, the Building Management Ordinance, Cap 344, the deed of mutual covenant relating to the Building and applicable fire safety rules and regulations. 

(c) Paragraph 10(b) of the Amended Defence and Counterclaim refers to the Extended Signboard as “[t]he said illegal extensions by the Plaintiff of an existing signboard” (emphasis added). 

(d) Paragraph 10(c) states at the end: “The Plaintiff is in breach of the DMC.” (emphasis added)

(e) Paragraph 10(d) states that “the Plaintiff also fails to have regard to the safety regulations” (emphasis added) under various applicable Codes of Practice.

(f) Paragraph 10(h) states that the plaintiff has been collecting rental as a result of leasing out the Extended Signboard on a regular basis.

(g) In paragraph 10(j), the defendant pleads that by reason of, inter alia, “the acts or series of acts of wrongful acts and/or negligence and/or omission on the part of the Plaintiff at all material times in the erections of [the Extended Signboard]” (emphasis added), the defendant “was rendered totally incapable of securing an appropriate type of insurance policy to cover [the Building]”.

(h) The defendant further explains in paragraph 10(k): “The Defendant’s attempts to secure an appropriate form of insurance policy to cover third party liability were practically rejected by the insurance companies and frustrated by the wrongful acts and/or negligence and/or omission on the part of the Plaintiff at all material times in the erections of [the Extended Signboard]” (emphasis added).

(i) As a result, the defendant was not able to put in place a third party liability insurance policy to cover the plaintiff’s claim in this action.

(j) In the circumstances, the defendant says that the plaintiff is estopped from claiming against the defendant in respect of the Alleged Accident.

(k) Further or alternatively, the defendant says in paragraph 11(a) that if damages are payable by the defendant to the plaintiff in respect of the Alleged Accident, the damages should be “set off against the wrongful acts and/or negligence committed by the Plaintiff against the Defendant hereinabove” (emphasis added).

8.  The plaintiff now seeks to strike out the Insurance Defence, whether it operates by way of estoppel, as pleaded in paragraphs 10(a) to (n), or by way of set off, as pleaded in paragraph 11(a). As the counterclaim is basically premised on the same allegations constituting the Insurance Defence, the plaintiff says that the entire counterclaim should be struck out as well.

9.  In order to evaluate the viability of the Insurance Defence, it is necessary to look at the circumstances surrounding the Extended Signboard, including (a) how and by whom it was put up, (b) the action taken by the Buildings Department, and (c) the proceedings taken out by the defendant against Ka Wan at the Lands Tribunal under LDBM No 92 of 2012 (“the Lands Tribunal Action”).

The Extended Signboard

10.  According to the Land Registry records, the plaintiff purchased the Unit in April 2009.  In September that year, Ka Wan was incorporated.  There was a sale and purchase agreement in respect of the Unit between the plaintiff and Ka Wan in October 2010 and the assignment was executed the following month.

11.  In the Lands Tribunal Action, it was Ka Wan’s case (as respondent) that application papers were initially submitted to the Buildings Department for approval for the erection of the Original Signboard outside the Unit in late 2009.  When Ka Wan acquired the Unit, it took over such application.  According to Ka Wan, a certificate of completion was issued in respect of the Original Signboard on 3 March 2011.  There is no evidence before me which helps to pinpoint the exact time of when the Original Signboard and the Extended Signboard were respectively put up. 

12.  However, the Extended Signboard must have been erected prior to 29 April 2011 as on that day the Buildings Authority served a section 24(1) notice on the plaintiff ordering her to demolish that part of the Extended Signboard which formed the unauthorised extension to the Original Signboard.

13.  This was followed by a summons laid against the plaintiff on 20 September 2011 for failing to comply with the section 24(1) order. However, the summons was subsequently withdrawn.  Instead, on 16 July 2012, the Buildings Department issued a notice of Dangerous Advertisement Hoardings under section 105(1) of the Public Health and Municipal Services Ordinance, Cap 132 to the “owner” of the Extended Signboard ordering the demolition of the Extended Signboard on the ground that it was dangerous.  Then in early August 2011, the Buildings Department removed the part of the Extended Signboard forming the unauthorised extension to the Original Signboard.

The Lands Tribunal Action

14.  Following a number of owners meetings held by the defendant (and, prior to its incorporation in August 2011, by owners of the Building) in which the Extended Signboard was discussed, the defendant commenced the Lands Tribunal Action on 21 March 2012.  I do not propose to go into any detail of this application save to highlight the following matters which are relevant to the issues presently before me:

(a) The Lands Tribunal Action was taken out against Ka Wan, and not the plaintiff.

(b) In paragraphs 19 to 21 of the Application, the defendant pleaded that Ka Wan had refused to pull down the Extended Signboard, which was unauthorised, and as a result the defendant was not able to secure insurance cover for the Building. 

(c) In paragraph 22 of the Application, the defendant sought, amongst other things, an injunction against Ka Wan for the removal of the Extended Signboard.

(d) A number of interlocutory steps were taken by the defendant and Ka Wan in the course of 2012.  The action was however brought to a conclusion in the hearing on 12 December 2012 where it was ordered, inter alia, that there be no order made as to defendant’s application in the action.

(e) It would appear that the presiding officer made the above order after he had been told that the unauthorised portion of the Extended Signboard had already been removed.

The plaintiff’s grounds of striking out application

15.  Ms Jolie Chao, counsel for the plaintiff, put forward the following grounds in support of the striking out application:

(a) The Insurance Defence is wholly irrelevant to the plaintiff’s present personal injuries action.

(b) There is no basis for the operation of the estoppel, as relied upon by the defendant.

(c) The plaintiff was not the owner of the Extended Signboard.  In fact, it is the defendant’s own case that Ka Wan was its owner but the defendant has not joined Ka Wan as a party to the present action.

(d) The defendant should not be allowed to re-litigate the Insurance Defence as it was a matter already determined in the Lands Tribunal Action.

Legal principles on striking out

16.  The principles on which the court approaches an application to strike out, whether under RDC Order 18 rule 19 or the inherent jurisdiction, are clear and were not in dispute.  It is only in plain and obvious cases that the court should exercise its summary powers to strike out an action or pleading.  There should be no trial upon affidavits.  Disputed facts are to be taken in favour of the party sought to be struck out.  Nor should the court decide difficult points of law in striking out proceedings.  The claim must be obviously unsustainable, the pleadings unarguably bad and it must be impossible, not just improbable, for the claim to succeed before the court will strike it out.  See Hong Kong Civil Procedure 2015(Vol 1) at paragraph 18/19/4.

The issue of ownership of the Extended Signboard

17.  I shall first deal with the issue of ownership of the Extended Signboard, which in my view would conclusively determine the outcome of this striking out application against the defendant.

18.  Mr Jackson Poon, counsel for the defendant, argued, first, that the Extended Signboard was owned by the plaintiff and/or Ka Wan.  It is to be noted that this notion of joint or alternative ownership is itself unclear and Mr Poon did not elaborate on this either in his written submissions or at the hearing.  Secondly, he submitted that even though Ka Wan might have officially owned the Extended Signboard, the corporate veil should be lifted or pierced to the effect that the plaintiff should be treated as the owner or being responsible for the Extended Signboard.  

19.  On the first part of the submission, I refer to the following:

(a) In the affirmation made by a Madam Fung Kit Ying and filed on behalf of the defendant, Madam Fung deposed (at paragraph 15) as follows:

“In light of the above matters, I verily believe that there is no doubt that at the material time of the Alleged Accident, the ownership of the Advertisement Signboard [ie, the Extended Signboard], which was an illegal structure, belonged to Ka Wan and/or the Plaintiff. …” (emphasis added)

(b) Further, in the defendant’s written skeleton submissions, Mr Poon wrote (at paragraph 17(a)):

“The Plaintiff impliedly admitted that she and/or Ka Wan was the owner of the Advertisement Signboard.” (emphasis added)

20.  Notwithstanding the defendant’s position that the ownership vests in the plaintiff and/or Ka Wan, there is no evidence adduced by the defendant to support this notion of joint or alternative ownership.  Instead, the undisputed evidence, the evidence adduced by the defendant itself and the position taken by the defendant prior to the present striking out application all point overwhelmingly towards the finding that the Extended Signboard was owned solely by Ka Wan at the relevant time.

21.  In coming to the above conclusion, I have relied on the following matters: 

(a) First, in the affirmation made by Madam Fung filed on behalf of the defendant, it was accepted that Ka Wan was the owner of the Unit.  This is also clear from the Land Registry records – see paragraph 10 above.

(b) The summons laid against the plaintiff with regard to the Extended Signboard was subsequently withdrawn – see paragraph 13 above.

(c) More importantly, in her witness statement filed on behalf of the defendant, Madam Au Yeung Pik Chun, the present chairperson of the defendant, recounted the history relating to the Extended Signboard and throughout cited as a fact that Ka Wan was the owner of the Extended Signboard (see, eg, paragraphs 24, 27, 30 and 36).

(d) Equally significant is the defendant’s stance in the Lands Tribunal Action.  In that action, the defendant complained about the Extended Signboard.  The defendant sought relief against Ka Wan alone – see paragraph 14 above.  The defendant has not offered any reason why it did not claim against the plaintiff either jointly or in the alternative in that action.  I consider that this is inconsistent with, and contradicts, the position now taken by the defendant, namely that the ownership vests in the plaintiff and/or Ka Wan.

(e) In his written skeleton submissions, Mr Poon referred to a number of matters which point to the fact that Ka Wan was the owner of the Extended Signboard, including, for instance, a letter dated 10 April 2012 from Ka Wan to the defendant confirming that Ka Wan was the owner – see paragraphs 17(b) and (c) of the defendant’s skeleton submissions. 

22.  On the basis that Ka Wan alone was the owner of the Extended Signboard, the matters complained of in the Insurance Defence (assuming for present purposes that the defence does work as a matter of law) would only operate against Ka Wan, but not the plaintiff.  That is to say, for example, if there is indeed an estoppel arising out of the facts, that estoppel would work against Ka Wan only, but not the plaintiff.  This would be so notwithstanding that the plaintiff was at the material time a shareholder and director of Ka Wan.  As submitted by Ms Chao, it is trite law that a company is a separate and distinct entity from its shareholders: see Salomon v Salomon [1897] AC 22 at 51.

23.  However, in the Amended Defence and Counterclaim, Ka Wan is not joined as a party.  In fact, Ka Wan is not mentioned at all in the pleading.

24.  As quoted in paragraph 7 above, the defendant has pleaded the Insurance Defence on the basis that it was the plaintiff, and not Ka Wan, who committed the various wrongful acts in relation to the Extended Signboard.  As such, the Insurance Defence, as presently pleaded, must fail.

25.  In answer to this, Mr Poon submitted that even if Ka Wan was legally responsible for the Extended Signboard, the plaintiff should be regarded by the court as the person in control and hence should be responsible for the wrongful act of Ka Wan in relation to the Extended Signboard. 

26.  In this regard, I quote from Mr Poon’s written submissions:  

“Secondly, the Defendant submits that even though Ka Wan was the owner of the flat on 4th Floor of No. 11 Canal Road West (the “Flat”), it is an appropriate case for the Court to lift the corporate veil as Ka Wan is only a device used to conceal the fact that the Plaintiff is the real person controlling Ka Wan.” (paragraph 22)

“Even though Ka Wan was the official owner of the Flat, the Defendant submits that it is an appropriate case for the Court to lift the corporate veil.” (paragraph 31)

27.  Initially, at the hearing, Mr Poon sought to rely on the concealment principle as recently explained in the Supreme Court decision in Prest v Petrodel Resources Ltd [2013] 2 AC 415 (at paragraph 28 and 61) and submitted that although Ka Wan might have been the legal owner, the plaintiff was the ‘real actor’ in causing the wrongful erection of the Extended Signboard thus contributing to the defendant’s failure to secure the requisite insurance cover for the Building.  Mr Poon invited the court to take into account the fact that (1) the plaintiff was at that time a shareholder (holding 80% shares) and director of Ka Wan, and (2) she had represented Ka Wan at one of the owners meeting in June 2011.  He submitted that it does not matter that the plaintiff, in so acting, might have acted in her capacity as director of Ka Wan and not in her individual capacity.  She nonetheless had caused or contributed to the wrongful act of Ka Wan.  Because of that, she should be personally responsible for such act, namely that the estoppel or set off as pleaded in the Insurance Defence should operate against her personally.

28.  At the hearing, Mr Poon further expanded this submission and said that the plaintiff had used Ka Wan to engage in an illegal activity (ie the erection of the Extended Signboard which was unauthorised) so as to escape liability herself.  On that basis, she should be held liable for that illegal activity and be deprived of the advantage which she would otherwise have obtained by reason of Ka Wan having a separate legal personality.  The evasion principle as described in Prest v Petrodel Resources Ltd (at paragraph 35) should apply and the corporate veil should accordingly be pierced. 

29.  In my mind, it is doubtful whether this would indeed be an appropriate case for the court to either lift or pierce the corporate veil in the manner suggested by the defendant.  All that the defendant seems to be relying on is the plaintiff’s shareholding and directorship in Ka Wan and her acting as its representative in the context of the Extended Signboard.  These factors do seem to me to be consistent with how generally a company incorporated for the purpose of holding or managing properties would be run.  Also, there is to date no evidence adduced to the effect that the plaintiff had deliberately evaded liability in respect of the Extended Signboard.  However, I do not propose to comment further on this point save to raise my initial doubts on the viability of the argument.

30.  More importantly, however, for the purpose of the present striking out application, it must be noted that none of the matters set out in paragraphs 26 to 28 above and relied upon by the defendant in seeking to lift or pierce the corporate veil are pleaded in the Amended Defence and Counterclaim.  As already observed, Ka Wan does not feature at all in the pleading.  The plaintiff’s shareholding and directorship in Ka Wan is not pleaded.  Neither is the plaintiff’s intention to use Ka Wan to conceal her involvement in the Extended Signboard or make use of Ka Wan’s separate legal personality to evade liability referred to at all, let alone supporting particulars.

31.  As Ms Chao rightly submitted, it is simply impossible for the plaintiff to answer such claims relating to Ka Wan because they are just not there in the present form of the Amended Defence and Counterclaim.

32.  For the above reasons, the Insurance Defence as presently pleaded is unarguably bad and should be struck out.

33.  In light of this conclusion, it is not necessary for me to deal with the other grounds put forward by the plaintiff.  However, for completeness, I shall briefly deal with each of them.

Estoppel

34.  Insofar as the estoppel as pleaded in paragraph 10 of the Amended Defence is concerned, the defendant relies on two grounds.

35.  First, the defendant submits that the plaintiff has “made a waiver by election inconsistent with a tort claim” and therefore she should be estopped from claiming against the defendant.  This point is further developed in the defendant’s skeleton submissions:

“26. The Plaintiff, as the Managing Director of Ka Wan, had 2 choices. The first was to keep the Advertisement Signboard, which was an illegal structure, and obtain benefit by leasing it out. As the owner of a flat in the Premises, she would take up the risk of facing legal actions without protection of the insurance companies. The second choice was to dismantle the Advertisement Signboard. The Defendant could then secure the Insurance Policy and obtain protection of the insurance companies.

…

28. The Plaintiff’s action would imply that she has chosen to indemnify any accident by herself and unfairly deprive the other owners of the Premises from having protection of the Insurance Policy. ...

29. The Plaintiff had taken the former route when she had clear notice of the Defendant’s problem of securing the Insurance Policy due to the Advertisement Signboard.  She should be responsible for damages successfully claimed against the Defendant and the owners of the Premises, who have no other choices because of the Plaintiff’s deliberate and conscious decision to take the first route and ignore the Defendant’s failure to secure the Insurance Policy.”

36.  The defendant seeks to rely on the passages in Clerk & Lindsell on Torts (20th ed) at paragraph 31-03 and Balgobin v South West Regional Health Authority [2013] 1 AC 582 at paragraph 29 which discuss the effect of an election out of two inconsistent remedies.  In gist, if a person is entitled to one of two inconsistent remedies and has chosen one of them by an unequivocal act, he cannot afterwards pursue the other.  He must be taken as having waived the latter remedy.

37.  I do not consider that the above estoppel is arguable as a matter of law on the defendant’s pleaded case. 

38.  First, in the present situation, assuming all the facts are in favour of the defendant, namely, that it was due to the Extended Signboard that the defendant could not put in place insurance to cover the plaintiff’s personal injuries claim, it remains the case, which Mr Poon accepted at the hearing, that if the plaintiff succeeds in proving her personal injuries claim at trial, the defendant would remain liable to the plaintiff whether or not it can claim on any insurance policy.  The plaintiff’s right to damages in this regard is not dependent on the existence of an insurance cover for the Building.    

39.  Any insurance cover is there to protect the defendant, rather than the plaintiff (or other potential claimants).  It helps the defendant to pay up and satisfy any legal liability owed to a potential claimant.  But it does not in any way operate to relieve the defendant from such liability.  As such, there are no inconsistent rights open to the plaintiff as submitted by the defendant.  The defendant remains liable to the plaintiff for her tort claim.  The plaintiff may consistently claim damages from the defendant in respect of the Alleged Accident (rather than get reimbursement from the insurance company) and at the same time enjoy (though wrongfully) the benefits derived from the Extended Signboard.

40.  Secondly, the passages relied upon by Mr Poon show clearly that the principle discussed there is relevant in the context of legal remedies.  Where the waiver operates, it does so by barring a claimant from pursuing a legal remedy.  It does not prevent a cause of action from arising in the first place.  Examples of inconsistent remedies cited in the passage in Clerk & Lindsell include, for instance, a landlord’s choice to sue for rent rather than bringing ejectment proceedings by way of forfeiture for breach of covenant.  Mr Poon could point to no authority which extends the application of such principle to support the Insurance Defence, which effectively bars a substantive cause of action from arising.

41.  Next, the defendant relies on equitable estoppels in pais – see the defendant’s supplemental skeleton submissions (at paragraph 1):

“By the conduct of the Plaintiff in erecting the illegal signboard, she has prevented the Defendant from securing insurance policy for accidents similar to the alleged accident. The improper conduct of the Plaintiff has led to the situation with no insurance policy for the Defendant. She has by conduct represented that she has given up her right to be protected by insurance for such accidents. Therefore, she is estopped from claiming against the Defendant.”

42.  For the same reasons set out in paragraphs 38 and 39 above, I do not think that such estoppel can arise on the defendant’s factual case.

Relevance of the Insurance Defence

43.  While the estoppel point is not arguable, I consider that the defence of set off as pleaded in paragraph 11(a) is potentially arguable (that is, assuming that the plaintiff was the owner of the Extended Signboard). 

44.  Although in her written submissions, Ms Chao argued that the Insurance Defence is wholly irrelevant to the Alleged Accident and the plaintiff’s alleged injuries and for that reason alone ought to be struck out.  At the hearing, Ms Chao conceded that if the plaintiff was indeed the owner of the Extended Signboard, the defence of set off which is premised on the Insurance Defence can stay.  I think that she is right in making that concession.  This is because on that factual basis, the plaintiff is arguably in breach of the Building Management Ordinance and the Deed of Mutual Covenant and it is arguable that such breach has led to the defendant’s failure to obtain insurance cover and consequently be reimbursed for any damages that may be awarded to the plaintiff in the personal injuries action.  The defendant has suffered loss as a result, for which the plaintiff is liable. The defence of set off against the plaintiff’s personal injuries claim thus potentially arises.

45.  While it is true that the Alleged Accident and the matters raised in the Insurance Defence are independent events, there is no reason why they cannot be tried in the same action.  The Insurance Defence operates as both a defence and a counterclaim.  As noted in Hong Kong Civil Procedure 2015 (Vol 1) at paragraph 15/2/2, if a defendant has a valid cause of action of any description against a plaintiff, there is no necessity for him to bring a cross-action, unless his cause of action is of such a nature that it cannot be conveniently tried by the same tribunal or at the same time as the plaintiff’s claim. 

46.  In summary, it seems to me that (assuming that the plaintiff owned the Extended Signboard) there is an arguable basis on which the plaintiff might be entitled to seek relief under the Insurance Defence by way of set-off. 

Res judicata – the Lands Tribunal Action

47.  Under this head, Ms Chao submitted in her written submissions that since the Lands Tribunal Action was dismissed, it is “an abuse of process for the defendant to now reopen the identical matter of insurance which has already been or should have been brought forward in previous proceedings and which have, or could have, been decided in earlier proceedings.”

48.  In light of the matters set out in paragraph 14 above, I think it is incorrect to say that the Lands Tribunal Action was dismissed.  There was simply no adjudication on the merits of the defendant’s application.  No order was made on the defendant’s application.  In this regard, I agree with the defendant that the Insurance Defence does not amount to a re-litigation of the present subject-matter as no estoppel, whether cause of action estoppel, issue estoppel or res judicata can be said to have arisen by reason of the Lands Tribunal Action.

Conclusion

49.  In conclusion, the Insurance Defence ought to be struck out for the reasons set out in paragraphs 17 to 42 above, as it is obviously unsustainable and bound to fail.

50.  I should perhaps deal briefly with the defendant’s submission on the lateness of the striking out application.  The application was taken out more than a year after the filing of the Amended Defence and Counterclaim.  Discovery had already taken place and witness statements had been exchanged.  However, given that the Insurance Defence as presently drafted is clearly unsustainable, I consider that it is one of those clear cases in which the defence should not be allowed to stay, notwithstanding the lateness: see, eg, Poon Lai Bing v Golden Dragon Ltd trading as Club Paris, CACV 136/2007, 13 December 2017 at paragraph 30.

51.  By way of footnote, I should also add that the Insurance Defence is to be struck out pursuant to RDC Order 18 rule 19(b) and the inherent jurisdiction of the court, on the ground that it is obviously unsustainable.  In substance, Ms Chao did not really pursue the striking out pursuant to RDC Order 18 rule 19(a) in her arguments as she had made references to the affidavit evidence which is plainly not allowed under that sub-rule.

52.  I have come to the conclusion that the Insurance Defence, as pleaded, ought to be struck out.  It simply does not plead or reflect the defendant’s case.  While I have indicated my doubt on the viability of the case, I cannot say for sure that there is no realistic possibility of the Amended Defence and Counterclaim being amended to cure the defect. Accordingly, I do not think that the counterclaim should be dismissed now: see Pido v Compass Technology Company Ltd [2010] 2 HKLRD 537 at paragraph 27.  The defendant should be given an opportunity to take such steps to make good its case against the plaintiff and/or Ka Wan.  If it chooses not to take up this opportunity, it may face the consequence of not being allowed to bring such claim in the future: see Total Lubricants HK Ltd v De Chanterac (No 2) [2013] 2 HKLRD 838 at paragraph 40.

53.  In the circumstances, I make the following orders:

(a) paragraphs 10(a) to (n) and 11(a) of the Amended Defence and Counterclaim be struck out;

(b) the whole of the Amended Counterclaim be struck out;

(c) unless within 21 days or such further time as may be agreed between the parties or allowed by the court, the defendant takes out a summons seeking leave to amend its Amended Defence and Counterclaim, the Counterclaim be dismissed;

(d) there will be a costs order nisi that the defendant pay the plaintiff’s costs of the application, with certificate for counsel; and

(e) there will be a summary assessment of the plaintiff’s costs on the papers.  I direct that the plaintiff lodge and serve her statement of costs within 7 days from the date of this decision and the defendant lodge and serve its list of objections within 7 days thereafter.

  (Winnie Tsui)
  Deputy District Judge

Ms Jolie Chao, instructed by Yip, Tse & Tang, for the plaintiff

Mr Jackson Poon, instructed by K.Y. Lo & Co., for the defendant