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HCA 167/2008
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
ACTION NO. 167 OF 2008
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BETWEEN
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MOULIN GLOBAL EYECARE HOLDINGS
LIMITED (IN LIQUIDATION) (formerly
known as MOULIN INTERNTIONAL HOLDINGS LIMITED) |
1st Plaintiff |
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MOULIN GLOBAL EYECARE TRADEING LIMITED (IN LIQUIDATION)(formerly known as MOULIN OPTICAL MANUFACTORY LIMITED) |
2nd Plaintiff |
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OAKTREE INVESTMENTS LIMITED (IN CREDITORS' VOLUNTARY LIQUIDATION) |
3rd Plaintiff |
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and |
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OLIVIA LEE SIN MEI |
Defendant |
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Before: Deputy High Court Judge Carlson in Chambers
Dates of Hearing: 3–4 November 2008
Date of Judgment (Handed Down): 6 April 2009
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J U D G M E N T
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Introduction
1. This is a summons dated 16 June 2008 taken out by the Defendant, Olivia Lee to strike out the action on a number of bases which can be compendiously described as amounting to a complaint that the writ and the statement of claim disclose no reasonable cause of action. There is also a summons by the Plaintiffs to amend the statement of claim. This summons had been taken out three months after the Defendant had issued her's to strike out the action. For the purposes of this judgment, in relation to the strike out application, I will treat the statement of claim as having been amended as the Plaintiffs have asked for in the terms of their draft amended-statement of claim. I take the matter in this way because that is how the case has been argued. Mr Jarvis, QC, on behalf of the Defendant, has taken the proposed amendments on board and has dealt with them as part of his case on the strike out application. In such circumstances, if I rule that the action ought to be struck out, I will dismiss the Plaintiffs' application to amend the statement of claim on the basis that even with the amendments the action is bound to fail. If I dismiss the strike out application, the Plaintiffs ought to have leave to amend in terms of their draft pleading. The amendment is sought at this early stage and in circumstances where it will have passed a rigorous examination on the strike out application it ought to be allowed to proceed to trial as now setting out the Plaintiffs' case against the Defendant.
The Background
2. In order to understand the basis of the strike out application, it is necessary briefly to set out the background to the application and most particularly the position of the Defendant as a non-executive director of the 1st Plaintiff's group of companies.
3. The Defendant is a Canadian-trained lawyer who practised law in Canada until 1997. It was in that capacity that she met the Ma family, who are the family in control of the Moulin Global group of companies, and advised them on aspects of their residence status in Canada. Since 1997 she began to practice in Hong Kong, firstly with a Canadian law firm and since July 2000 with White & Case, with whom she is a partner.
4. Since her arrival in Hong Kong in 1977, both White & Case and Goodman Philips, the Canadian law firm that she was with between 1997 and 2000, provided legal advisory services to the 1st Plaintiff which is a company incorporated in Bermuda. It is now in liquidation but before its collapse it was a very substantial listed company whose shares had been listed on the Hong Kong Stock Exchange (“HKEx”). I have been referred to its 2000 Annual Report which showed that at 31 March 2000 its consolidated net assets were just short of $780 million. It had seven executive directors, five of whom were members of the Ma family. Its five non-executive directors included an experienced certified accountant and representatives from HSBC and Deutche Bank. Its auditors were the world-wide firm of KPMG.
5. In July and August 2000, the Defendant, in her capacity as a solicitor of White & Case gave the 1st Plaintiff's legal advice and on 24 July 2000, again on behalf of White & Case, attended a Board Meeting of the 1st Plaintiff. On 29 August 2000, the 1st Plaintiff's Board resolved to appoint the Defendant as a non-executive director and to establish an audit committee, of which the Defendant would in due course become a member. The Defendant accepted these appointments on 8 December 2000. It is in connection with these appointments that this action is now brought against the Defendant by the liquidator of the Plaintiffs for alleged breaches of duty by the Defendant in her discharge of those appointments to which some detailed reference will need to be made in the course of this judgment.
6. It is important to understand the conditions of the Defendant's appointment. The Defendant required that the 1st Plaintiff execute a deed of release and indemnity in her favour and secondly, that it purchase a directors and officers liability insurance policy against any liability in respect of negligence, default, breach of duty or breach of trust of which she may be held to be guilty in relation to the 1st Plaintiff and/or its direct and indirect subsidiaries. These two conditions were required by White & Case in allowing the Defendant to accept these appointments with the 1st Plaintiff. The evidence in this regard is in an e-mail sent by White & Case to the Defendant which she forwarded to Mr Cary Ma, the 1st Plaintiff's CEO, who was instrumental in securing the Defendant's appointment [A/12/267-268]; [B/5/11/1438]; [B/3/10/611-613].
7. The Deed of Indemnity and the insurance policy (“D&O Insurance”) which were both dated 1 December 2000 were provided to the Defendant on 7 December 2000 following which, on 8 December, she signed her consent to act as a non-executive director. The next day, the 1st Plaintiff made an announcement that she had been appointed as a non-executive director and a member of the audit committee. She was to resign from those positions on 31 October 2004 effective on 1 November 2004.
8. I now turn to consider, in summary form, the Plaintiffs' claims against her.
The Plaintiffs' Claims
9. These all centre on her purported duties as a non-executive director and member of the audit committee. The amended statement of claim alleges negligence against her based on a failure to make enquires and/or to take appropriate action and thereby to allow the Moulin Group of companies under the 1st Plaintiff to be dishonestly run into the ground by the Moulin Group management team headed by Mr Cary Ma and his relatives and other associates. No allegation of fraud or dishonesty is levelled against her and no claim is made against her in her capacity as a solicitor with White & Case advising the Plaintiffs qua solicitor. The loss and damage claimed which runs to over $300 million includes losses said to have been suffered by MEGT, Oaktree (the 3rd Plaintiff), and Leadkeen (the 4th Plaintiff by the amended statement of claim) for whom the Defendant had never acted as a director or in any other official capacity. The losses claimed by MEGT and Leadkeen are up to 23 June 2005, some eight months after her resignation.
10. The amended-statement of claim, which is a very carefully drafted document, runs to 100 pages including its schedules. The Defendant's response to it on this application is to take very general issue with it in a way that, at this stage, does not require the sort of examination of a pleading that is said to be bound to fail. In most applications of this type, the court would be required to go to individual pleaded allegations and examine them in the light of submissions made against the way a particular allegation or aspect of the case has been put which a defendant is submitting has no foundation and is therefore bound to fail. On this occasion, whilst there are, of course, elements of this approach that Mr Jarvis has taken, he begins by erecting, as it were, the Deed of Indemnity as a substantive obstacle past which the Plaintiff cannot advance. This claim, he submits, simply cannot get off the ground. He has very usefully, if I may say so, analysed his approach in paragraphs 1 and 2 of his skeleton which I gratefully reproduce here before I go on to examine his arguments as he has set them out. All his references in the passages below to Olivia are, of course, references to the Defendant. [The application to strike out the claim is made on the following grounds:]
“1.1. that the action was commenced by the 1st Plaintiff (‘Holdings') in breach of its covenant not to sue Olivia under clause 3(a) of the Deed of Release and Indemnity dated 1st December 2000 made between Holdings and Olivia (‘Deed of Indemnity'), or is liable to be struck out for circuity of action or that all further proceedings should be stayed pending provision by Holdings of an indemnity pursuant to clause 1(a) and (b) of the Deed of Indemnity;
1.2. that the SOC discloses no reasonable cause of action or is frivolous or vexatious or is otherwise an abuse of the process of the Court on the ground that the alleged breach of duties was not the dominant or effective cause of the loss and damage claimed to have been suffered by the Plaintiffs (‘Ps'); and
1.3. that the following claims in the SOC disclose no reasonable cause of action against Olivia:
1.3.1. all allegations and claims made by the 2nd and 3rd Plaintiffs (‘MGET' and ‘Oaktree') against Olivia;
1.3.2. all allegations which arose after Olivia's resignation on 31st October 2004; and
1.3.3. all allegations and claims arising out of unaudited consolidated accounts of Holdings for the year ended 31st December 2004 (‘2004 Accounts').
2. In a nutshell, it is submitted that the SOC should be struck out, and the action dismissed, because the action is both hopeless and pointless:-
2.1. the Deed of Indemnity is valid...
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