April 10 2018
The recent judgment in Tao Soh Ngun v HSBC International Trustee Ltd arose from an interesting piece of litigation.(1) The judgment confirms that while a party may be permitted to amend their pleading to add post-writ matters which clarify the basis of an existing claim that had already accrued when the proceedings commenced, it is not permissible to plead post-writ matters to introduce a claim that did not exist at that time. In this case, the plaintiff appears to have tried to amend her pleading to add new allegations of breach and loss based on matters that did not exist at the time when the proceedings commenced. To have allowed such amendments would not have sat comfortably with the 'relate back' principle (ie, that an amendment takes effect from the date of the original pleading).
The proceedings arose from a trust arrangement set up by the plaintiff, her deceased husband and the original trustee – the defendant having subsequently become the trustee in 1999. The plaintiff alleged, among other things, that the defendant had refused to adhere to her instructions as regards the administration of the trust and had allegedly breached its duties as trustee.
For its part, the bank trustee considered that the trust was a conventional discretionary one, providing it with – among other things – wide powers of appointment and for the application of capital and income on behalf of the beneficiaries. While the bank had a duty to consider the plaintiff's wishes, it argued that it was not obliged to follow her instructions.
This sort of trust litigation is not unusual in Hong Kong and the trust fund in question arose in connection with a well-known property development corporation.
The proceedings commenced in 2016. In December 2017, in something of a bold move, the plaintiff applied to amend her already amended statement of claim by referring to a further series of detailed letters of instruction that she had issued to the defendant with respect to the administration of the trust between December 2016 and December 2017. Each of these letters represented a transaction that had taken place after the commencement of the original action. The proposed amendments, based on the series of post-writ letters, referred to new allegations of breach by the defendant and new losses (in particular, the alleged loss of value in the trust's aggregate shareholding in a main holding company).
The defendant opposed the plaintiff's proposed amendments on the basis that they introduced post-writ matters which, in effect, introduced new claims that did not exist when the proceedings commenced.
The court first considered the law and whether it was still a rule of practice in Hong Kong that a statement of claim could not, without a defendant's consent, be amended to include post-writ matters, where the effect was to add a claim which accrued only after the proceedings had commenced. After analysing relevant Hong Kong and English case law, the court considered that there was such a rule of practice. Indeed, it had been approved by the Court of Appeal and, as such, was binding on the court.(2)
The court also took the opportunity to explain those English cases which, on their face, might appear to have relaxed the rule but on closer scrutiny were actually examples of cases that had not infringed the rule on their facts. For example, it was one thing to permit a party to plead subsequent events that clarified or explained a party's claim that existed when the proceedings commenced, but it was quite another to allow a party to introduce, by way of an amendment, a new claim that did not exist at that time.
The court then considered the nature of the plaintiff's proposed amendments to ascertain whether they sought to introduce new claims against the defendant. The court agreed with the defendant that the nature of the amendments was an attempt by the plaintiff to introduce new allegations of breach against the defendant which arose after the proceedings commenced and, based on those new allegations, the plaintiff sought new losses or relief.
An interesting passage in the judgment dissects the meaning of a 'cause of action' ("a combination of facts which gives rise to a legal right").(3) A comparison of some of the existing allegations of breach (based on an earlier series of letters of instruction from the plaintiff to the defendant) with the allegations based on the subsequent series of letters (which post-dated the action) suggested that the plaintiff was seeking to do more than reiterate or clarify her case – rather, she was seeking to add new claims based on matters that did not exist when the proceedings commenced.
Therefore, the court dismissed the plaintiff's application to amend her pleading.
In large and complex litigation such as this, amendments to parties' formal pleadings are not unusual. The relevant court rules are applied subject to the case management discretion of the courts. In practice, while such amendments are not unusual, there is a trend towards preventing abuse caused, for example, by late amendments that might upset key court dates.
In addition to the relevant procedural rules, the courts have adopted certain rules of practice over the years. This case demonstrates one such rule – adding post-writ facts to introduce a claim that did not exist when the proceedings commenced is a step too far.
Amendments to pleadings take effect not from the date when the amendment is made but from the date of the original document being amended (the 'relate back' principle). To have allowed the amendments based on a new set of allegations that arose from a subsequent series of letters of instruction would have been something of a fiction.
For further information on this topic please contact Warren Ganesh or David Smyth at RPC by telephone (+852 2216 7000) or email (email@example.com or firstname.lastname@example.org). The RPC website can be accessed at www.rpc.co.uk.
(1)  HKCFI 380, February 21 2018. At the time of writing, there is no indication of an application for permission to appeal from publicly available sources. The proceedings are listed for a 30-day trial beginning on or about May 29 2018. Given (among other things) time constraints and what the court referred to as "the advanced age of the plaintiff" (Paragraph 24(2) of the judgment), the court allowed the plaintiff's corresponding application for a 'split trial' (namely, issues of liability and quantum of loss to be tried separately).
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