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CACV 205/2013
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IN THE HIGH COURT OF THE

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HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 205 OF 2013

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(ON APPEAL FROM HCA 2507/2003 & HCA 2520/2009 (Consolidated))

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HCA 2507/2003
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BETWEEN
EAA SECURITIES LIMITED

Plaintiff

and
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FATTYDAD ALICE PUI YAN, THE

ADMINISTRATRIX OF THE ESTATE OF
FATTYDAD HENRY, DECEASED

Defendant
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and
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SO TAI FAI

Third Party

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AND
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HCA 2520/2009
BETWEEN
EAA SECURITIES LIMITED

Plaintiff

and
SO TAI FAI

1st Defendant

FATTYDAD ALICE PUI YAN, THE

ADMINISTRATRIX OF THE ESTATE OF
FATTYDAD HENRY, DECEASED

2nd Defendant

_________________
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(Consolidated by the Order of Registrar Lung dated 25 May 2011)

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Before: Hon Cheung CJHC, Yuen and Chu JJA in Court

Date of Hearing: 14 October 2014

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Date of Judgment: 14 October 2014

Date of Reasons for Judgment: 11 November 2014

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REASONS FOR JUDGMENT

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Hon Cheung CJHC:

1.

After hearing on 14 October 2014, we dismissed the appeal of

Alice Fattydad, the administratrix of the estate of Henry Fattydad, deceased

(the deceased) from the ruling of Poon J on 12 September 2013

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disallowing certain proposed

amendments

to

the

administratrixs

consolidated defence and counterclaim and striking out prayers (A) and (C)

in the pleading; however, we allowed, to a limited extent, her appeal

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against the judges order on costs which he made on the following day after
allowing the remainder of the proposed amendments.

We now give our

reasons.
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The facts

2.

Very briefly, the deceased used to maintain a cash

(subsequently margin) securities trading account with the plaintiff, EAA

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Securities Limited (formerly known as BDNI Securities Limited), through

his wife, So Tai Fai (Anita So).
plaintiff until May 2002.

Anita So was a dealing director of the

She was subsequently convicted of 18 counts of

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false accounting and 3 counts of using a false instrument in relation to

various clients accounts whilst in the employment of the plaintiff.

It is

the case of the deceased and his estate that as at 6 September 2000, the last
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time he had transactions through his account with the plaintiff, he had
101,160 shares of PCCW Limited, 1.5 million shares of CCT Technology

Holdings Limited, 0.5 million shares of Sen Hong Resources Holdings

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Limited, 50,000 shares of China Unicom and 50,000 shares of Hong Kong
Exchange and Clearing in his account with the plaintiff.

Unbeknown to

him, his wife made use of his account to carry out unauthorised
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transactions.

3.
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These unauthorised transactions resulted in a net debit balance

(after disposal of the securities) of over $700,000 in the securities trading

account by April 2003.

In July 2003, the plaintiff commenced

HCA 2507/2003 against the deceased to recover the outstanding balance.

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The deceased filed a defence and counterclaim in October 2003.

claimed ignorance of the (allegedly) unauthorised transactions carried out

in his account.

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He counterclaimed for the delivery of the shares described

above as well as all the proprietary rights deriving from and/or arising out
of those said shares between 6 September 2000 and present, including but

not limited to all the dividends (whether in cash or by way of shares),

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bonus shares and warrants, etc.

Alternatively, he counterclaimed for

damages to be assessed in relation to the shares and the proprietary rights

deriving from the shares.

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4.

The deceased passed away in September 2004.

5.

In December 2009, the plaintiff commenced another action,

HCA 2520/2009, against Anita So and the deceaseds estate (represented

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by the administratrix), in relation to certain cheque proceeds of over

$4 million paid by the plaintiff at Anita Sos instructions (as its dealing

director) into a joint names account of the deceased and his wife,
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purportedly relating to transactions in the securities trading account.

6.
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In 2011, the two actions were consolidated and consolidated

pleadings were filed.

In the administratrixs consolidated defence and

counterclaim dated 1 September 2011, the deceaseds claim of ignorance of

the allegedly unauthorised transactions carried out by his wife in his

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securities trading account was repeated, and the same counterclaim for the
delivery of the shares (prayer (A)) and for all the proprietary rights deriving

from and/or arising out of those shares (prayer (C)) was repeated.
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7.

The consolidated action came on for trial before Poon J on

10 September 2013.
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8.

The judge had difficulty in understanding the estates

counterclaim for the delivery of the shares and the proprietary rights
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(dividends, bonus shares and warrants, etc) arising from those shares.
There was practically nothing in the body of the counterclaim to shed light
on the basis on which the two items of relief were sought.

That prompted

counsel, Mr Brian Wong, to make an application for leave to amend the

counterclaim on the second day of trial, that is 11 September 2013.

The

proposed amendments pleaded various contractual provisions regulating

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the securities trading account (paragraphs 46 to 48).

The amendments

then sought to introduce an implied term:

49. Further and/in the alternative, it is averred that it is an
implied term in the CCA, GTA and MCA which is implied by
reason of business efficacy that otherwise provided by express
terms and conditions of the aforesaid documents, the Plaintiff

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9.

shall delivery (sic) shares purchased or held custody on behalf of

the Deceased or shares being identical with such shares
purchased or held under custody on behalf of the Deceased or his
nominee in terms of numbers, class, denomination, nominal
amount and rights attached thereto at the request of the Deceased
or his nominee.

Paragraph 51 of the proposed amendments alleged that the

plaintiff, in breach of the relevant agreement(s) governing the securities

trading account, had allowed the deceaseds shares to be lost or

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diminished.

Paragraph 52 then said that by reason of the plaintiffs claim

for the debit balance in the securities trading account, the plaintiff had

evinced an intention not to return any of the shares or to deliver any of the
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identical shares to the deceased.

Paragraph 53 therefore pleaded an

entitlement to claim for the delivery of the shares or identical shares.

Paragraph 54 claimed damages in the alternative.

The proposed

amendments sought to expand on prayer (A) to ask for the delivery by the
Plaintiff of the said shares or such identical shares in terms of numbers,

class, denomination, nominal amount and rights attached thereto as set out
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in [the pleading].

The decision below

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10.

The judge was not impressed by these proposed amendments

to justify prayers (A) and (C).

By a short ruling, he refused the

amendments in relation to the implied term and struck out prayers (A) and
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(C).

11.
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In his ruling, the judge observed that he was faced with a very

late application.

He noted that by the proposed amendments the estate

sought to frame its counterclaim purely on contract.

He pointed out that

both prayers (A) and (C) were based on the implied term pleaded in
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paragraph 49.

He took the view that a request by the deceased or his

nominee was a prerequisite for invoking the suggested implied term for the
plaintiff to deliver the shares in question.

He noted Mr Wongs

concession that the demand was only made by way of the proposed
amendments placed before him.

In other words, at the time of the

counterclaim, no proper cause of action based on implied term was

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constituted.

The judge further noted that the shares were sold by the

plaintiff in 2000.

He said that if he were to allow the amendments, he

would be allowing a claim which was clearly time barred.

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12.

He refused to

exercise his discretion to allow the amendments relating to or in support of

prayers (A) and (C).

Instead, he struck out those two prayers.

Under those circumstances, Mr Wongs side came up with a

revised draft amended defence and counterclaim on the following day,

which no longer contained the alleged implied term or prayers (A) and (C).
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After further arguments, the judge allowed the bulk of the amendments, but
awarded all costs incurred from November 2003 including the costs of and

occasioned by the amendments, save and except the costs of the hearing on
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10 September 2013, against the administratrix.

13.
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Given the late amendments, the parties agreed that the trial

could not continue, and by consent obtained an adjournment from the judge,
who also gave directions for the further conduct of the case.

The appeal

14.

Aggrieved by the judges decision, the administratrix appealed

to this court, seeking to reinstate prayers (A) and (C) on the basis of the
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alleged implied term, which she said the judge ought to have given her
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leave to plead.

She also complained about the costs order made by the

judge.

Prayer (A)

15.

I first turn to prayer (A).

Mr Wong accepted at the hearing

that the counterclaim for the delivery of the original shares purchased in the
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account is quite out of the question.

It is common ground that the shares

have long been sold by the plaintiff, rightly or wrongly.

Indeed, by 2003,

the plaintiff was suing the deceased for a debit balance in the shares trading
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account.

Importantly, Mr Wong also accepted that the only claim made

under prayer (A) in its unamended form was the delivery of the original

shares.
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16.

In other words, the amendments presented before the judge on

the second day of trial sought to introduce, under prayer (A), a new claim
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based on contract, that is, the implied term, for shares identical to the
original shares.

However, on the administratrixs own case, the

contractual right to claim the identical shares would have arisen following
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the disposal of the original shares by the plaintiff in 2000 which the
administratrix says was wrongful.

17.
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In those circumstances, the judge was correct to say that the

new claim sought to be introduced by the amendments was time barred.

It

is of course true that this fact alone need not be conclusive against allowing
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a late amendment.
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(Cap 4A).

See Order 20 rule 5 of the Rules of the High Court

But whether to allow such an amendment was a matter of

discretion for the judge.

He no doubt took into account the fact that the

claim was time barred, and it was a very late amendment.

Moreover, one

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could easily see the injustice to the plaintiff if such a late claim for the

delivery of identical shares were allowed to be run.

If the claim had been

included in the original counterclaim in the 2003 action, the plaintiff could
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have gone to the market to buy the (identical) shares so that, in the event of
its losing the counterclaim, it could use those shares to satisfy the courts
judgment for delivery of identical shares.

the identical shares to be made now would be quite unfair to the plaintiff.

All this was a matter of discretion for the judge to consider.

He gave the application his consideration and exercised his discretion

against allowing the addition of such a late claim.

He was entitled to do

so, and under well established principles, this court simply had no ground
to interfere with his exercise of discretion.

19.

Given the long lapse of time

and the inevitable changes in market prices, to allow such a late claim for

18.

Once the proposed amendments to substantiate prayer (A)

were disallowed, the judge was of course right to strike out prayer (A) in its

original form.
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Prayer (C)
20.

As regards prayer (C), the counterclaim for bonus shares,

dividends, warrants etc was parasitic on prayer (A).

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The striking out of

prayer (C) must follow the striking out of prayer (A).

Moreover, as

mentioned, the original shares had long been sold and the right to the
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warrants etc arising from those original shares must have belonged to third
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parties to whom the shares had been sold (or resold).

Unlike prayer (A),

there was not even an attempt to ask for identical bonus shares, warrants
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etc.

Prayer (C) must be a bad claim on the facts.

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21.

Even if one were to limit the claim for the bonus shares etc to

those issued before the (allegedly) wrongful disposal of the original shares

from the deceaseds account, on the facts, it is clear that everything in the
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account had long been liquidated by 2003, leaving the net debit balance
which the plaintiff sued on in the 2003 action.

There is simply no

question of counterclaiming for those bonus shares etc.

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22.

The alternative claim for damages under prayer (C) must also

be bad because the administratrix is already counterclaiming for damages

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in relation to the lost shares.

23.
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In those circumstances, the judge was right to strike out

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prayer (C).

Costs
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24.

As for costs, the judge ordered the administratrix to pay all

costs incurred right from the beginning (2003) up to and including the

aborted trial (except the first day) on the basis that the administratrix had
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obtained leave from him to make substantial amendments to the

counterclaim, without which the counterclaim would not be sustainable.

25.
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Mr Wong, at the hearing, did not dispute that without the

amendments eventually allowed, his counterclaim would be in great

difficulty.

But he criticised the judge for awarding the costs of the main

action in the 2003 action as well as the costs of the 2009 action against his
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client.

He argued that they had nothing to do with the counterclaim in the

2003 action.
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26.

Mr Dennis Kwok, for the plaintiff, conceded that the costs of

the 2009 action should not have been awarded against the administratrix.

However, as for the costs of the main action in the 2003 action, he
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maintained that the defence and the counterclaim there were simply two
sides of the same coin, and on that basis, the judges order could be

justified.
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27.

I agree with Mr Wong.

The administratrix has a free standing

defence to the plaintiffs claim in the 2003 action, unaffected by the

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success or failure of her counterclaim.

There was no basis to award costs

against her in relation to her defence of the main action in the 2003 action.

Disposition

28.

For these reasons, the administratrixs appeal relating to the

amendments and prayers (A) and (C) was dismissed, whereas his appeal in
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relation to costs was allowed to a limited extent, that is, the judges order
for costs should be limited to the costs of the counterclaim in the 2003

action, the costs of the aborted trial (except the first day) as well as the
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costs relating to the amendments.

29.

As for the costs of the appeal, the plaintiff was substantially

successful in resisting the appeal, although the administratrix had to come

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to court to reverse (in part) the judges costs order.

The administratrix

was therefore ordered to pay 80% of the costs of the appeal to the plaintiff,
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to be taxed if not agreed.

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was also ordered.

Legal aid taxation of the plaintiffs own costs

No order was made regarding the costs of Anita So.

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Hon Yuen JA:

30.

I agree with the reasons of the Chief Judge.

Hon Chu JA:

31.

I agree.

(Andrew Cheung)
Chief Judge of the
High Court

(Maria Yuen)
Justice of Appeal

(Carlye Chu)
Justice of Appeal

Mr Dennis WH Kwok, instructed by Woo, Kwan, Lee & Lo for the

plaintiff

Mr Brian CW Wong, instructed by Keith Lam Lau & Chan, for the
defendant in HCA 2507/2003 and the 2nd defendant in HCA 2520/2009

The third party in HCA 2507/2003 and 1st defendant in HCA 2520/2009
appeared in person