Late amendments of pleadings disallowed by the Court of Appeal

Recently, there have been cases where the Court of Appeal dismissed appeals against the Court’s refusal of leave to amend pleadings. The Court of Appeal focused on the delay in making such applications and the prejudice caused to the opponents in such cases, and reiterated some of the underlying objectives of the Civil Justice Reform (“CJR”) – cost-effectiveness and facilitation of settlement.

In the Wellmei case, the Plaintiffs sought leave to amend their Statement of Claim to include an additional claim after a Consent Order for final judgment for part of their claims had been made, and their Sanctioned Offer on costs accepted by the Defendants. The Court of Appeal confirmed the lower Court’s refusal to grant leave to amend as (1) the late amendment would deprive the Defendants of the opportunity to respond effectively and cause unfairness to the Defendants, (2) the Plaintiffs failed to provide any satisfactory explanation in relation to the delay, and (3) the Court found that the Defendants’ approach in discussing settlement was in due compliance with the underlying objectives of the CJR.

In the EAA Securities case, the Defendants sought a late amendment to the Counterclaims on the second day of the trial. The Court of Appeal dismissed the appeal against the lower Court’s refusal to grant leave to amend as (1) the new claim sought to be introduced by the amendments was time barred, and (2) the amendment was very late, and injustice would be caused to the Plaintiff if the late claim was allowed.

It is, therefore, important to thoroughly prepare for a case from the outset e.g. internal investigation by a company, collation of all relevant records and ensure that all relevant claims and elements are included in the pleadings. If any amendment to pleadings is necessary due to unexpected circumstances and with good reasons, applications should be made as soon as possible and the possibility of making such application should be made known to the Court and the opponents in the various case management steps (e.g. the Timetabling Questionnaire).

Law Kwok Fai Paul and others v. Wellmei (HK) Plastics & Electronics Industrial Limited and Cai Qinghua CACV 45/2014

The Plaintiffs sought leave to amend their Statement of Claim by the addition of a claim for special damages, being the expenses of hiring private security personnel, for nuisance, assault, harassment, libel and negligence.

The action was commenced in February 2012. There was no reference to the hiring of private security personnel in any of the documents filed by the Plaintiffs. In January 2013, a Consent Order for final judgment, with costs of the application and the judgment to be assessed (if not agreed) to be paid forthwith by the Defendants to the Plaintiffs, was made.

In late March 2013, the Plaintiffs made a Sanctioned Offer on costs in full and final settlement of the whole of the Plaintiffs’ costs in the action. The Defendants accepted the Sanctioned Offer. The Defendants made the payment but it was returned by the Plaintiffs.

In May 2013, the Plaintiffs made an application for leave to amend their Statement of Claim to include the claim for special damages of more than $8.6 million.

In September 2013, the application for amendment was heard and refused by the Court. The Plaintiffs were granted leave to appeal in February 2014. The appeal was heard and dismissed by the Court of Appeal in October 2014 for the following reasons:-

• This was an appeal from an exercise of a Judge’s discretion and an appellate Court would generally not interfere with it unless the Judge had erred in law or material fact, or had failed to take relevant matters into account or had taken irrelevant matters into account, or was “plainly wrong”.
• The Defendants were litigants who had a litigation strategy that was responsive to the claims made against them and who were alive to the issue of costs. They were willing to retreat from earlier positions in response to the Plaintiffs’ positions and had accepted a Sanctioned Offer on costs. This approach was in due compliance with the underlying objectives of the CJR, including increasing cost-effectiveness, ensuring that the case was dealt with as expeditiously as was reasonably practicable and facilitating the settlement of disputes.
• The Plaintiffs had deprived the Defendants of the opportunity to respond effectively under the CJR, and it was unfair to the Defendants to have to deal with the Plaintiffs’ new position. The Plaintiffs suggested that the Court might be able to devise an order to remedy the unfairness suffered by the Defendants, but the Court was of the view that the burden was on the Plaintiffs to show that the unfairness to the Defendants could be remedied.
• No satisfactory explanation had been provided by the Plaintiffs in relation to the delay in amending the pleadings, and the actions taken by the Plaintiffs such as the Plaintiffs’ confirmation that they did not intend to amend their pleadings.

(1) EAA Securities Limited v. Fattydad Alice Pui Yan, the Administratrix of the Estate of Fattydad Henry, Deceased and So Tai Fai, and (2) EAA Securities Limited v. So Tai Fai and Fattydad Alice Pui Yan, the Administratrix of the Estate of Fattydad Henry, Deceased CACV 2054/2013

The deceased had maintained a securities trading account with the Plaintiff through his wife, So Tai Fai (“So”). The Plaintiff commenced two actions in 2003 and 2009, which were later consolidated, against the Defendants to recover the outstanding balance as a result of So’s unauthorized transactions carried out with the deceased’s account and in relation to certain cheque proceeds paid by the Plaintiff at So’s instructions into an account in the deceased and So’s joint names. The deceased counterclaimed 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).

An application for leave to amend the Counterclaim was made on the second day of the trial. The proposed amendments pleaded various contractual provisions regulating the securities trading account and sought to introduce an implied term and to expand on prayer A.

The Judge refused the amendments and struck out prayers A and C. The administratrix appealed to the Court of Appeal, seeking to reinstate prayers A and C on the basis of the alleged implied term.

The Court of Appeal dismissed the appeal in relation to the amendments and prayers A and C for the following reasons:-

• The new claim sought to be introduced by the amendments was time barred. However, the Court of Appeal noted that this fact alone was not conclusive.
• It was a very late amendment. Injustice would be caused 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, the Plaintiff could have gone to the market to buy the shares to satisfy the Court’s judgment for delivery of identical shares in case it lost the Counterclaim. A long time had lapsed and there had been inevitable changes in market prices.
• The Counterclaim in prayer C was parasitic on prayer A. Prayer C was a bad claim on the facts as well.

An order for costs in relation to the costs of the Counterclaim in the 2003 action, the costs of the aborted trial (except the first day) as well as costs relating to the amendments was made against the administratrix.

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