BANK OF QINGDAO CO LTD v. OOO SECURITIES (HK) GROUP LTD (formerly known as ORIENTIERT XYZ SECURITIES LTD)

HCA 1127/2022 and HCA 1141/2022 (Consolidated) [2025] HKCFI 2223 HCA 1127/2022 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 1127 OF 2022 __________________ BETWEEN BANK OF QINGDAO CO., LTD. 青島銀行股份有限公司 Plaintiff and OOO SECURITIES (HK) GROUP LIMITED (formerly known as ORIENTIERT XYZ SECURITIES LIMITED) Defendant (BY LEADING ACTION) __________________ AND HCA 1141/2022 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 1141 OF 2022 __________________ BETWEEN OOO SECURITIES (HK) GROUP LIMITED (formerly known as ORIENTIERT XYZ SECURITIES LIMITED) Plaintiff and BANK OF QINGDAO CO., LTD. 青島銀行股份有限公司 Defendant (BY COUNTERCLAIM ACTION) (Consolidated by Order of Master Kent Yee dated the 13th day of October 2022) ______________ Before: Deputy High Court Judge Gary CC Lam in Chambers (Open to public) Date of Hearing: 14 May 2025 Date of Decision: 28 May 2025 DECISION I. INTRODUCTION This is the Defendant’s appeal (by Notice of Appeal filed on 6 January 2025) against Master Val Chow’s Order made on 23 December 2024 allowing the Plaintiff’s summons for certain amendments proposed by the Plaintiff to its Consolidated Statement of Claim (that is, the Amendment Summons as defined below) and making no order on the Plaintiff’s summons for relief from sanction (that is, the Relief Summons as defined below). II. BACKGROUND In this consolidated action, the Plaintiff in HCA 1127/2022 (the leading action) (“BOQ”) claims against the Defendant therein (“OOO Securities”) in relation to certain securities referred to as the “Everglory Securities” acquired for the portfolio (the “Portfolio”) under an Investment Management Agreement dated 29 December 2015 (the “IMA”) between BOQ as client and OOO Securities as investment manager. The claim is made, broadly, on breach of contract and fiduciary duties. In HCA 1141/2022 (the counterclaim action), OOO Securities claims against BOQ, broadly, on breach of contract. In §4(3) of the Consolidated Statement of Claim filed on 19 October 2022, BOQ pleads:- “[OOO Securities] shall act as the discretionary investment manager to [BOQ] and shall, continuously from the Effective Date and during the term of the IMA, manage the Portfolio for [BOQ] on the basis of the Investment Guidelines attached to the IMA as Schedule 2… (collectively the “Investment Guidelines”). In connection therewith, [OOO Securities] shall have full power to supervise and direct the investment and reinvestment of the Securities of the Portfolio and to engage in such transactions on behalf of [BOQ] as [OOO Securities] may deem appropriate in [OOO Securities]’ absolute discretion and without prior consultation with [BOQ], subject only to the IMA and any Investment Guidelines. (Clause 3.1)” The Effective Date is 29 December 2015, as pleaded in §4(2) of the Consolidated Statement of Claim. As regards the duration of the IMA, in §4(11) of the Consolidated Statement of Claim, BOQ pleads:- “The IMA may be terminated by either party after three years [from] the Effective Date. (Clause 9.2)” In or around June 2022, OOO Securities made, for the Portfolio, unauthorised subscriptions (the “Everglory Subscriptions”) to the Everglory Securities exceeding (1) USD50,000,000; and (2) 25% of the total market value of the Portfolio. III. BOQ’S CLAIM ACCORDING TO CONSOLIDATED STATEMENT OF CLAIM For the present purposes, I only need to set out BOQ’s case as follows:- OOO Securities owed to BOQ contractual and/or fiduciary duties (the “Duties”), including a duty “to act in good faith and with full loyalty in the best interest of [BOQ]”: see §§7 and 7(1) of the Consolidated Statement of Claim. In relation to the Investment Guidelines, in §5 of the Consolidated Statement of Claim, BOQ pleads the following:- “… [OOO Securities] was subject to (among others) the following investment restrictions (“Investment Restrictions”) in managing the Portfolio:- (1) Diversification: The total investment amount in respect of the securities issued by one single issuer shall not exceed USD50,000,000. (2) Sector Concentration Limit: The proportion of the securities issued or guaranteed by one single issuer shall not exceed 25% of the total market value of the Portfolio.” The Everglory Subscriptions were made without its knowledge and consent, and in breach of the IMA, specifically, the Investment Restrictions; On 14 July 2022, BOQ issued a written notice (the “14 July 2022 Notice”) to terminate the IMA with immediate effect; By the 14 July 2022 Notice, the IMA was terminated, whether by lapse of the three years or by the reason that the breach of the IMA had entitled BOQ to issue the 14 July 2022 Notice. Further or alternatively, OOO Securities’ breach amounted to repudiation, which BOQ accepted by the 14 July 2022 Notice or by the issuance of the Writ in the leading action on 1 September 2022. BOQ prays for the following relief:- “(1) A declaration that the IMA, as well as the aforesaid trust and/or agency arrangement, had been validly terminated on 14 July 2022 or latest 1 September 2022; (2) An account of all the assets in the Portfolio… (3) An order that [OOO Securities] do forthwith deliver up or transfer to [BOQ] such assets… found due upon the taking of such account and inquiry; (4) An order that [OOO Securities] do forthwith deliver up or transfer to [BOQ] all remaining assets in the Portfolio; (5) An award of equitable compensation to be assessed… (6) Damages and/or a restitutionary sum to be assessed…” IV. OOO SECURITIES’ DEFENCE AND COUNTERCLAIM OOO Securities’ position, as appears from its Consolidated Defence and Counterclaim filed on 17 January 2023, is as follows:- OOO Securities dispute the terms of the Investment Restrictions, and there seems to be an issue over the authenticity of the IMA relied upon by BOQ. But as Mr Benjamin Yu SC (leading Mr Danny Tang), counsel for OOO Securities, points out, this dispute concerns me little for the present purpose. OOO Securities relies on certain amendments to the IMA contained in:- Schedule 5 thereto, effectively releasing OOO Securities from the Investment Restrictions; and Schedule 6 thereto, effectively extending the term of the IMA until the parties’ agreement to terminate. OOO Securities consulted BOQ on and obtained the latter’s consent to the Everglory Subscriptions. “In any event, given the terms of Schedule 5, the Schedule 2 investment restrictions no longer applied, and so [OOO Securities] had the general authority to invest in the Everglory Securities in its absolute discretion and without prior consultation with [BOQ] pursuant to Clause 3.1 of the IMA: ADCC §§26.3, 26.5”: see Mr Yu’s Skeleton Submissions §15.2. Although Mr Yu’s submissions refers to the Amended Consolidated Defence and Counterclaim, §§26.3 and 26.5 of the Consolidated Defence and Counterclaim are the same. By Schedule 6, BOQ could not unilaterally terminate the IMA without proper cause, and because there had been no breach of the IMA, there was no proper cause for BOQ to terminate the IMA, and therefore BOQ’s purported termination was wrongful and amounted to repudiation, which OOO Securities later accepted in November 2022. V. BOQ’S CONSOLIDATED REPLY AND DEFENCE TO COUNTERCLAIM On 14 March 2023, BOQ filed its Consolidated Reply and Defence to Counterclaim. In §10(1)(b) of it, BOQ pleads:- “(1) Paragraph 11.1 is denied: (b) Further, as per Clause 3.2 of the IMA, the Securities in the Portfolio shall be held by such institutions as notified by [BOQ] to [OOO Securities] from time to time. However, contrary to the express obligations stipulated in clause 3.2 of the IMA, it appears that (as is now asserted or admitted by [OOO Securities]) OOO Securities had at all material times arranged for the Securities in the Portfolio to be held by third party custodian nominated and appointed by [OOO Securities] itself.” In §19 of the Consolidated Reply and Counterclaim, BOQ pleads:- “Apart from constituting a wrongful breach of the Investment Restrictions and/or Schedule 5 Investment Restrictions (and thus in breach of the IMA and/or the Duties), the [Everglory Securities] bear, among others, the following unusual features which are contrary to commercial norm and/or commercial sense: (1) There is no credit rating for the Everglory Securities. (2) [OOO Securities] subscribed for the Everglory Securities in the total amount of USD263,966,000, which was equivalent to around 81% of its total issued amount. (3) There was no offering circular (OC) or documentation to the same or like effect) for the issuance of the Everglory Securities. (4) The maturity date is unusually long (i.e. 10 years with an option to extend for further 5 years to 23 July 2037 on the part of the issuer), taking into account that this is a bond issued by a private Cayman entity without any substantive business. (5) No interest would be awarded in respect of the aforesaid subscriptions. In other words, Everglory Securities are “zero coupon notes”.” VI. MATERIAL PROCEDURAL EVENTS SUBSEQUENT TO CONSOLIDATED REPLY AND COUNTERCLAIM On 30 May 2023, by way of paper disposal without an oral hearing, Master Hui made case-management directions, including, that:- “[2] [OOO Securities] do take out application to file and serve Rejoinder by 22 June 2023 if so advised; [3] The parties do exchange their signed witness statements… [4] The parties do obtain Counsel’s advice on the whole matter (on liability / evidence / quantum), if so required, within 42 days thereafter; [5] If further interlocutory applications have to be taken out, such applications shall be taken within 42 days thereafter; [6]… [7] The matter be adjourned to 16 January 2024 at 12 p.m. for Case Management Summons” On 6 September 2023, OOO Securities filed its Rejoinder. On 2 January 2024, the parties filed and exchanged their respective revised Timetabling Questionnaires (the “TTQ”) for the Case Management Summons heard on 16 January 2024. In the TTQs:- In Section C1, OOO Securities answered “yes” to the standard question: “Do you intend to amend your pleadings?” (emphasis added); In Section I2, OOO Securities answered yes, “subject to Counsel’s advice I intend to make applications for discovery under O.24 r.7 and/or r.9 and/or r.10 and the filing of supplemental witness statements(s) on or before 21 May 2024” (emphasis added); and In Section I2, BOQ answered “yes” to “Are there any other interlocutory applications that you intend to make which have not been mentioned in this questionnaire…?” (emphasis added) and mentioned that it “will make applications for (1) specific discovery and (2) supplemental witness statements on or before 9 January 2024…” (emphasis added). On 16 January 2024, Master D To made, among others, the following case-management order (the “CM Order”):- “[2] the parties do exchange their draft supplemental witness statement(s) as to facts within 42 days hereof, and to take out the applications for leave to adduce the same within 14 days thereafter; [3] Any other intended interlocutory applications including inspection of documents, specific discovery, and amendment of pleadings shall be taken out on or before 19 March 2024. [4] The Case Management Summons Hearing be adjourned to 18 June 2024 at 12 noon before a Master with 30 minutes reserved; [5] The parties do file and serve up-to-date Timetabling Questionnaires 7 days before the Case Management Hearing. Alternatively, if the parties consider that the case is ready for setting down for trial, parties do file and serve Listing Questionnaires instead, together with Certificates of Time Estimates…” (emphasis added). I pause here to point out that from §5 of the CM Order, Master D To was aware that despite all these intended interlocutory applications, the matter may still not be ready for setting down. She must be right, because at that time, she would not know what the supplemental witness statements would be, and what would be the outcomes of the other intended interlocutory applications. On 4 June 2024, Master SP Yip made an unless order (the “Unless Order”) providing that:- “[1]…unless the parties take out any other intended interlocutory applications including but not limited to inspection of documents, specific discovery, and amendment of pleadings by 4 p.m. on 2 July 2024, the defaulting party shall be debarred from taking out the said any other intended interlocutory applications. [3] The Case Management Summons hearing scheduled for 12 noon on 18 June 2024 be vacated and adjourned to 23 October 2024 at 3:30 p.m. before a Master with 30 minutes reserved.” (emphasis added) I pause to note that “but not limited to” was not a phrase used in the CM Order, but was added here. On 12 June 2024, BOQ issued a Summons for specific discovery (“OOO’s Discovery Summons”). On 8 July 2024, Master Dick Ho granted leave for OOO Securities to file Amended Consolidated Defence and Counterclaim, which OOO Securities filed on 12 July 2024. On 19 September 2024, more than two months upon the expiry of the Unless Order at 4pm on 2 July 2024, BOQ issued (1) a Summons for leave to amend its Consolidated Statement of Claim (the “Amendment Summons”); and (2) a Summons for relief from sanction of the Unless Order (the “Relief Summons”). On 23 December 2024, upon hearing arguments, Master Val Chow (1) granted leave for the Amended Consolidated Statement of Claim, and (2) made no order on the Relief Summons. On 6 January 2025, OOO Securities filed the Notice of Appeal herein against Master Val Chow’s grant of leave and no order on the Relief Summons, and seeks an order that (1) the Amendment Summons should be dismissed save and except for the amendments agreed to by OOO Securities; and (2) the Relief Summons should be dismissed. On 24 February 2025, by paper disposal, Master Val Chow dismissed OOO Securities’ application for stay of the order of granting leave. On 17 April 2025, OOO Securities filed and served its Re-Amended Consolidated Defence and Counterclaim, expressly pleading that it was filed without prejudice to its appeal against Master Val Chow’s order. It remains for me to point out that no leave to set down for trial has been granted. VII. PRELIMINARY POINT – RELIEF SUMMONS As a preliminary point, Mr Yu, for OOO Securities, submits that:- The Unless Order covered the Amendment Summons. Since the Amendment Summons was filed upon its expiry, BOQ was automatically debarred from making the application by the Amendment Summons; and Since BOQ has not lodged any appeal against Master Val Chow’s no order on the Relief Summons, I should not be concerned with the Relief Summons but should only deal with the Amendment Summons. With respect, I disagree that I should still not be concerned with the Relief Summons if I would find that the Unless Order covered the Amendment Summons. First, as mentioned above, the Notice of Appeal is against both the grant of leave on the Amendment Summons and no order on the Relief Summons. Thus, both Summonses are brought by the appeal to me for de novo argument. Second, there is no procedure provided for cross-appeal or respondent’s notice in an appeal against Master’s order, and even without cross-appeal or a respondent’s notice as such, in a de novo hearing of an appeal against a Master’s decision, the Court simply considers the matter afresh and exercises the jurisdiction afresh. In my view, the cases cited in §58/1/4 of the Hong Kong Civil Procedure 2025 Vol 1, relied upon by Mr Rimsky Yuen, SC (leading Mr Martin Ho, absent during the hearing with the Court’s leave), counsel for BOQ, for the proposition that jurisdiction could be exercised afresh even in the absence of cross-appeal or respondent’s notice are not limited to appeal on an Order 14 Summons as Mr Yu suggests. Third, with the grant of leave for amendment, BOQ could not appeal against the no order on the Relief Summons because such order means that Master Val Chow did not find the Unless Order covered the Amendment Summons, which was (and still is) the stance taken by BOQ. Fourth, both Summonses are interlinked. In this context, one cannot deal with one without the other. Therefore, I shall deal with both the Amendment Summons and the Relief Summonses de novo. VIII. ISSUES In my view, the questions to ask should be the following questions and in the following order:- What the scope of the Unless Order was; If the Unless Order covered the Amendment Summons, whether relief from sanction should be granted; and If relief from sanction is granted, whether the Amendment Summons should be allowed. This is not an order advocated for by Mr Yuen, who submits that I should ask whether the Amendment Summons would otherwise be allowed first. I ask the questions in the above order because if relief from sanction would be necessary, the considerations for determining whether the Amendment Summons would be different, for example, the Court may be more stringent in vetting the merits of the Amendment Summons given that BOQ would have been found to have breached the Unless Order and seeking indulgence from the Court not only for late amendment but for relief from breaches of an unless order. IX. RELIEF SUMMONS – SCOPE OF THE UNLESS ORDER The legal principles in relation to construing a court order are trite. As set out in Essilor Manufacturing (Thailand) Co., Ltd v Wong Kam Wai [2020] HKCA 351 at §25 per Poon CJHC:- “It is well settled that generally speaking, in interpreting a court order, the starting point is the natural and ordinary meaning of the words used in light of the syntax, context and background in which those words were used…” I am aware that that case was on a construction of a freezing order and penal consequences would result from a breach. However, this does not affect the general principles set out there, summarised by Mr Yu in §36 of his Skeleton Submissions in similar terms, though with reference to other authorities. The natural and ordinary meaning of “any other intended interlocutory applications including but not limited to inspection of documents, specific discovery, and amendment of pleadings” in the Unless Order, in my view, refers to the interlocutory applications “intended” at the time of the Unless Order. I take this view because:- The scope of the CM Order is highly relevant and in my view determinative of the scope of the Unless Order, for the reason that (a) the CM Order provides the context of the Unless Order; and (b) the Unless Order is a time-extension order of the CM Order rather than any order intended to make any substantive change to the CM Order as Mr Yu submits. The terms of the usual order in relation to taking interlocutory application are along the line “any interlocutory applications” or “any further interlocutory applications”, without the word “intended”: see Appendix B to Practice Directions 5.2. Therefore, the word “intended” in the CM Order and the Unless Order must have been intended to mean something. In context, in the TTQs, both parties specified the interlocutory applications they “intended” to make. Therefore, in context, it seems that the word “intended” in the CM Order, and thus the Unless Order, was intended to refer only to those interlocutory applications the parties intended to make. In my view, the purpose of this order was to ensure that the coming Case Management Conference could proceed on the basis that all the supplemental witness statements would have been exchanged, all the interlocutory applications intended at the time to be made would have been made and the outcomes of those interlocutory applications would have been available, so that the Master at the coming Case Management Conference could decide how to proceed with the whole case. In my view, with all such additional evidence (supplemental witness statements and additional documents) to come, the Master must have foreseen that she may have to make a usual order that further counsel’s advice shall be taken. I say so because if further counsel’s advice would not be ordered despite all such additional evidence, no one could properly assure the Master that there would be no further interlocutory applications. It would also not be right to say, despite all such additional evidence, that no interlocutory applications could be made in any event. Since production of such additional evidence could be a justification for allowing further interlocutory applications (subject, of course, to all other usual considerations for late applications), then in my view, the proper course a Master would take would be to order further counsel’ opinion to ensure that all matters would be dealt with and put in proper order sufficiently in advance of the Pre-trial Review to be fixed according to the setting down order to be made, unless the parties would assure the Master that whether counsel’s advice is taken or not, they would not make any further interlocutory applications. By such approach, this would minimise the necessity of making applications before a judge or the trial judge, to whom usually any interlocutory applications after grant of leave to set down or setting down would have to be referred and who should be more focused on the substantive matters rather than interlocutory matters. Therefore, without any good reason, and I cannot see any, it would be highly unusual that without ordering further counsel’s advice in the light of such additional evidence, Master D To would make a blanket order covering all interlocutory applications in the future. Mr Yu submits that the word “including” in the CM Order or the phrase “including but not limited to” in the Unless Order is “a time-honoured phrase to enlarge the meaning of the preceding words” (see Mr Yu’s Skeleton Submissions §57.3) and points out to me that in the Unless Order, the words “but not limited to” were added to the corresponding paragraph to the CM Order, which, he submits, reinforces his position that the meaning of the preceding words was enlarged. However, viewed against the context and purpose I identified above, in my view, Master D To was just to ensure that she did not miss any intended interlocutory applications already indicated by the parties, and the added words “but not limited to” in the Unless Order, in my view, does not add anything – if “including” viewed in such context and purpose did not enlarge the scope, I cannot see how “but not limited to”, which in its natural and ordinary connotes “including”, could. Given my finding that the Unless Order did not cover the Amendment Summons, I find that Master Val Chow was right in making no order on the Relief Summons. It remains for me to point out that Mr Yu and Mr Yuen had a totally different understanding of the time limit (if any) for applying for sanction from relief under Order 2 rule 4, which provides:- “Where a party has failed to comply with a rule or court order, any sanction for failure to comply imposed by the rule or court order has effect unless the party in default applies to the Court for and obtains relief from the sanction within 14 days of the failure.” Mr Yu submits that this rule means that the defaulting party has to make an application for relief within 14 days (though such 14-day limit could be extended by Order 3 rule 5), while Mr Yuen submits that this rule means that (1) if no application is taken within 14 days, then the sanction would become effective; and (2) the 14-day limit qualifies this only but is not any time limit for making an application for relief. Given my finding of the scope of the Unless Order above, it is strictly not necessary to express my view on the difference. However, because it is a point of some importance to which counsel devoted some time, I should express my view that the “14 days” should be understood as a time limit for making an application for relief, rather than for when the sanction would become effective. My view is based on the following reasons:- The wording is “any sanction… has effect” but not “any sanction… shall be effective” or “any sanction… shall become effective”. The rule is, in my view, to pressurise the defaulting party to inform the other side of its position concerning the sanction as soon as possible. For example, sometimes, the sanction is entering a judgment automatically, and the other party in favour of which the judgment is entered as a result of the sanction would very much want to know as soon as possible whether it can proceed to enforce the judgment. Such purpose could not be achieved without such a time limit. A sanction has been understood to take effect immediately: see Hong Kong Civil Procedure 2025 Vol 1 §2/4/2. Mr Yuen’s submissions would mean that the sanction would not take effect once the defaulting party makes an application for relief. A strange situation may result – the sanction does not take effect and at least theoretically, the defaulting party may then proceed to do the act required by an unless order during this vacuum. My understanding is also consistent with Hong Kong Civil Procedure 2025 Vol 1 §2/4/1, which also suggests that “an application for relief from sanction be made within 14 days of the failure”. Perhaps in most situations, the difference between Mr Yu and Mr Yuen would not give rise to any practical significance. 14 days or not, the Court would still have to consider, at the end of the day, why the parties would take, say, 13 days to make the application for relief from sanction. It is not that these 13 days would be ignored because it is within the 14-day limit. Similarly, if it was made only 60 days after the sanction becomes effective, I do not see whether the 14-day difference between 60 days and 46 days would give rise to any practical significance to the overall consideration of delay. But at least, I take this opportunity to clarify the situation with my view, so that hopefully, parties in the future would know where the starting point is. X. AMENDMENT SUMMONS The proposed amendments can be divided into three categories, namely:- The change of name amendments in §2(3) of the Amended Consolidated Statement of Claim; §12A of the Amended Consolidated Statement of Claim (the “Everglory Amendments”); and §§4(3A) and 12B of the Amended Consolidated Statement of Claim (the “Clause 3.2 Amendments”). A. Legal principles The legal principles in relation to an application for amendment to pleadings are trite:- “[G]enerally speaking, all such amendments out to be made for the purpose of determining the real question in controversy between the parties”: see Re Hin-Pro International Logistics Ltd [2016] 1 HKLRD 1367 at §13 per Peter Ng J. So, if the proposed amendments serve no useful purpose or are not necessary to determine the real questions in controversy, the amendments should not be allowed: see Thapa Kamala v Tong Ming Kay [2023] HKCA 1016 at §§29 and 31 per Chow JA; “Leave is readily granted to amend before trial unless it can be shown that the new claim based on the proposed amendment is bound to fail”: see Re Hin-Pro International Logistics Ltd, supra at §14; “While the court is entitled to have regard to the merits of the case, it should only do so when the merits are readily apparent, and are so apparent as not to required prolonged investigation”: see Re Hin-Pro International Logistics Ltd, supra at §14; “If the proposed amendments are bound to fail, no leave to amend should be granted. In this regard, the court will take the applicant’s proposed pleaded case to the highest”: see Re Hin-Pro International Logistics Ltd, supra at §15; “[T]he court shall always recognise that the primary aim in exercising the powers of the court is to ‘secure the just resolution of disputes in accordance with the substantive rights of the parties’”: see Re Hin-Pro International Logistics Ltd, supra at §18; and The Court should also consider am amendment application in terms of the length of delay, the reason for the delay and any prejudice. I also bear in mind the following general principles in relation to pleadings:- A party is not allowed to plead an inconsistent case in relation to a matter within its own knowledge: see Order 18 rule 12A; also see Hui Yin Sang v Tsoi Ping Kwan [2010] 1 HKC 585 at §25; Where the particulars allegedly pleaded in support of an allegation are not capable of supporting the allegation, the allegation may be struck out: see Siberian Mining Group Co Ltd v Cheung Keng Ching [2017] 2 HKC 512 at §17; and “[I]t is not appropriate to raise in the reply a new cause of action (see Hong Kong Civil Procedure 2005 Paragraph 18/3/2). A plaintiff who wishes to pursue an additional or alternative cause of action should do so by amending the statement of claim”: see Magic Score Ltd v The Hongkong and Shanghai Bank Corporation Ltd, HCA 11077/1994, 23 June 2006 at §20 per Lam J (as he then was), with reason for this proposition given at §21. B. Change of name amendments Mr Yu does not oppose the change of name amendments, but opposes the Everglory Amendments and the Clause 3.2 Amendments. C. Everglory Amendments I shall deal with the Everglory Amendments first. The amendments are adding §12A after §12. To put §12A in context, it is necessary to quote also §§11 and 12:- “11. In around June 2022, [OOO Securities] acted in wrongful breach of the Investment Restrictions (and thus in breach of the IMA and/or the Duties) by making unauthorised investments for the Portfolio (“Unauthorised Transactions)… (collectively, “Everglory Securities”): … 12. [OOO Securities] did not in any way notify [BOQ] or seek [BOQ]’s consent before entering into any of the Unauthorised Transactions as purported investments for the Portfolio. [BOQ] only first became aware of the Unauthorised Transactions on or around 28 June 2022 upon receiving the routine reporting messages from [OOO Securities] via WeChat… 12A. Further or alternatively and entirely without prejudice to the pleas contained in paragraphs 11 and 12 above, [BOQ] avers that: (1) the aforesaid subscription of the Everglory Securities were not genuine arm’s length transactions and/or were purported investments under the IMA which were not made in good faith or in the best interest of [BOQ]; (2) the Unauthorised Transactions (being the subscription of the Everglory Securities as pleaded in paragraph 11 above) wee entered into by the Defendant in breach of its Duties. Particulars (1) There was at the material times no credit rating for the Everglory Securities. (2) [OOO Securities], without any proper justification (if any, which is denied), subscribed for the Everglory Securities in the total amount of USD263,966,000, which was equivalent to around 81% of its total issued amount (which was unreasonably excessive in the circumstances of the case). (3) Contrary to general practice in the trade, there was no offering circular (OC) (or any documentation to the same or like effect) in respect of the issuance of the Everglory Securities. (4) The maturity date is unusually long (i.e. 10 years with an option to extend for a further period of 5 years to 23 July 2037 by the issuer), taking into account that this is a bond issued by a private Cayman entity without any or any substantive business and without any credit rating. (5) No interest would be awarded in respect of the aforesaid subscriptions. In other words, Everglory Securities are ‘zero coupon notes’, and [BOQ] does not stand to benefit (but only stands to lose whether or not the issuer defaults) from the investment. (6) According to materials available online, Everglory was and is closely connected with [OOO Securities]. Without prejudice to [BOQ]’s right to adduce further evidence and/or to administer interrogatories and/or to seek discovery, [BOQ] avers as follows…” It is immediately clear that:- The particulars in §12A(1) – (5) are essentially identical with §19(1) – (5) of the Consolidated Reply and Counterclaim (quoted in §11 above); §12A(6) is an additional particular in support of the allegation in §12A; and In the preamble of §12A itself, the cause of action of “breach of its Duties” was in the preamble of §19 of the Consolidated Reply and Defence to Counterclaim. For “not genuine arm’s length transactions” and “not made in good faith or in the best interests of [BOQ]” pleaded in §12A, it is only pleaded in §19 of the Consolidated Reply and Counterclaim, that there were “unusual features”. C1. Reason for delay While I accept Mr Yu (for OOO Securities)’s submissions that BOQ’s evidence is not crystal clear, I think reading from §§8-9 of the 4th Affirmation of Yau Kwong Kin filed on behalf of BOQ in context, it is reasonably clear that one of the reasons for this Everglory Amendment (that is, copying §19 of the Consolidated Reply and Counterclaim with “Further or alternatively” and §12A(6) added) was that in the evidence opposing the OOO’s Discovery Summons, OOO Securities raised that certain discovery requests were not relevant because the lack of commerciality of the Everglory Subscriptions (as well as the breach of Clause 3.2 of IMA) was not pleaded in the Consolidated Statement of Claim and therefore did not define the issues. This argument is in my view correct in the light of Magic Score Ltd v The Hongkong and Shanghai Bank Corporation Ltd, supra. Therefore, I do not accept that this is a good reason for the delay in applying for leave for the Amendments. The delay started at latest on the date of filing of the Consolidated Reply and Counterclaim, that is, 14 March 2023. To complete the picture, I should also point out that there is another explanation for the delay, that is, allegedly the relevant materials for the Everglory Amendments only came from the 2nd Affirmation of He Chuan filed on 15 August 2024. Such an explanation must be rejected, given that the facts pleaded in the Everglory Amendments were already pleaded in the Amended Consolidated Reply and Counterclaim filed on 9 August 2024. Although the delay is a long one and the reason for the delay is not a good reason, I still have to consider the merits of the proposed amendments themselves and any prejudice arising from the proposed amendments. C2. Merits of the Everglory Amendments In respect of the merits, Mr Yu submits that the phrase “Further or alternatively” adds much confusion here, making the plea embarrassing and impossible to respond to. He stresses that it is BOQ’s case that OOO Securities did not consult BOQ and BOQ did not give any consent in relation to the Everglory Subscriptions. He submits, therefore, that whether the Everlory Subscriptions were commercial or not is irrelevant at all, because:- If there was no consultation and no consent, even if the Everlory Subscriptions were so uncommercial that BOQ would not have given the consent if consulted, such un-commerciality would be irrelevant given that it is BOQ’s case that OOO Securities did not consult it in the first place. Similarly, if there was no consultation but there was consent, BOQ cannot run a case that it was consulted and gave consent not sufficiently informed or not informed at all because BOQ’s case is that it was not consulted and did not give any consent at all. If there was consultation and consent as OOO Securities pleads, even if the Everlory Subscriptions were so uncommercial, BOQ still gave the consent. Again, BOQ cannot run a case that it was consulted and gave consent, but the consent was not informed. Mr Yu, rightly in my view, points out that BOQ is not permissible to run an alternative case that there was consultation but BOQ did not give consent and to seek the trial court to infer that no such consent would have been given because of the un-commerciality of the Everlogry Subscriptions, or would not have been informed consent. Such an alternative case is impermissible by virtue of Order 18 rule 12A because whether BOQ was consulted and whether BOQ gave consent are well within BOQ’s own knowledge and it could not possibly verify by the Statement of Truth such inconsistent cases. That said, OOO Securities, in my view, effectively runs a permissible alternative case:- OOO Securities did consult and obtain consent from BOQ; or “In any event, given the terms of Schedule 5, the Schedule 2 investment restrictions no longer applied, and so [OOO Securities] had the general authority to invest in the Everglory Securities in its absolute discretion and without prior consultation with [BOQ] pursuant to Clause 3.1 of the IMA”: see Mr Yu’s Skeleton Submissions §15.2. Although Mr Yu does not put the case in §(2) above as an alternative case as such, §(2) will certainly be applicable if the trial court found that there was no consultation and no consent, and thus, it would become OOO Securities’ alternative case in this sense. In this scenario, with a fact-finding of the trial court that there was no consultation and no consent and OOO Securities would rely on its general authority to invest and the Investment Restrictions were released, §12A of the Consolidated Statement of Claim would come into play for BOQ to run the cause of action of “breach of its Duties” pleaded therein, namely, the Everglory Subscriptions “were not genuine arm’s length transactions” and “were not made in good faith or in the best interests of [BOQ]”. Whether those particulars would prove the un-commerciality as alleged, and if so, whether such un-commerciality can be said to be in support of the allegation of “not genuine arm’s length transactions” and/or “not made in good faith or in the best interests” are, in my view, not open-and-shut matters on which BOQ is bound to fail. In such circumstances, the ultimate question of whether there was “breach of its Duties” cannot be said to be bound to fail. In my view, BOQ’s alternative cause of action understood in this scenario must be a permissible inconsistent case. In this scenario, BOQ would still stand by its case that it was not consulted and it did not give any consent. It would then become an issue for the trial court to decide whether there was the release of the Investment Restrictions, and if so, whether there were any such “Duties” as pleaded by BOQ, and if so, whether if the features of the Everglory Subscriptions pleaded in §12A were proved, the Everglory Subscriptions amounted to such breach of Duties as pleaded by BOQ. For completeness, insofar as there is any suggestion that the release of the Investment Restrictions would be an alternative case of BOQ, this is more about how BOQ understood what the contractual terms were. I do not see an alternative case that the Restrictions were released would be impermissible here; such an alternative case only means that BOQ had a wrong understanding of the contractual terms. Mr Yu submits that in this scenario, that is, OOO Securities had been released from the Investment Restrictions, it would mean that OOO Securities could invest in its absolute discretion without any need to consult and obtain consent from BOQ. Relying on Frank Lee v Hongkong and Shanghai Banking Corp Ltd [2022] HKCFI 3680 at §122(1) per Q Au-Yeung J, Mr Yu submits that any breach of contract of fiduciary duty or conflict of interest must have already been authorised or consented to as a result of the release from the Investment Restrictions, and relying on Hurstanger Ltd v Wilson [2007] 1 WLR 2351 at §35 per Tuckey LJ, Mr Yu further submits that general consent would be sufficient for such purpose (rather than consent to each individual transaction). While I agree with the latter as a general proposition, I think I should deal with Frank Lee v Hongkong and Shanghai Banking Corp Ltd, supra in more details to understand what that case really stands for. In Frank Lee v Hongkong and Shanghai Banking Corp Ltd, supra, the contractual terms in question were that the transactions may still be entered into “when the Bank or a Group Office has an interest, relationship or arrangement that is material of a conflict of interest in relation to the transaction” and “without disclosing such capacity”: see §122(2). It was on such clear express terms that Queeny Au-Yeung J found that the breaches of the fiduciary duty of no conflict were contractually “excluded” as between the parties whose relationship was based on contract. In the present case, there was no such clear express term of exclusion, or in line with the word used by Mr Yu, there was no such term to “consent” to and/or “authorise” such breaches. Further, in §12 of the Consolidated Defence and Counterclaim, in respect of the duty “to act in good faith and with full loyalty in the best interest of [BOQ]” pleaded in §7(1) of the Consolidated Statement of Claim, there is no specific response save and except a general denial in §12.5 of the Consolidated Defence and Counterclaim. Therefore, in my view, whether there existed this duty or not is not an open-and-shut matter on which BOQ is bound to fail. It follows that in the scenario where the trial court finds as a fact that there was no consultation and no consent and there was the release of the Investment Restrictions as pleaded by OOO Securities, and even if BOQ could be said to know all these at the outset, §12A would be a cause of action permissible to be run by BOQ. Mr Yu’s another attack at §12A of the Amended Consolidated Statement of Claim is that §12A is not sufficiently particularised. Whether an allegation is sufficiently particularised is a matter of extent. In my view, the litmus test of the sufficiency of particularisation is whether OOO Securities would be able meaningfully to respond. Viewed this way, with respect, I think that the particulars are sufficient. I make it clear that in coming to this view, I do not consider, as highlighted by Mr Yuen, for BOQ, that OOO Securities has not applied for further and better particulars. As pointed out by Mr Yu, OOO Securities were appealing against Master Val Chow’s order and in §§27A and 27B of its Re-Amended Consolidated Defence and Counterclaim, it made it clear that it reserved its position on, among others, the sufficiency of particulars and it filed the pleading without prejudice to its appeal. In short, the sum total is that the Everglory Amendments are not bound to fail and would not be struck out for lack of particulars. C3. Prejudice The next question I should consider is whether there would be any prejudice. First, in §27D of its Re-Amended Consolidated Defence and Counterclaim, OOO Securities effectively admitted the facts in §§12A(1), (2), (3), (4), (5) and (6), save and except some relatively small differences over certain figures in §§12A(2) and 12A(6) and what conclusions should be drawn from such admitted facts. While the Re-Amended Consolidated Defence and Counterclaim was filed without prejudice to OOO Securities’ appeal, I cannot see how facts (verified by a Statement of Truth) would become different and I cannot shy away from looking at this reality. Also and in any event, in §123 of the Witness Statements of Zhang Lingfei filed on 6 December 2023 (filed before Master Val Cho’s order) on behalf of OOO Securities, Zhang Lingfei also deals with §19(1)-(5) of the Amended Consolidated Reply and Counterclaim (equivalent to §12A(1)-(5) of the Amended Consolidated Statement of Claim) along the same line, and this evidence is repeated by §122.4 of the Witness Statement of Lo Mark Chi Hang filed on 11 December 2023 (before Master Val Chow’s order) on behalf of OOO Securities. Mr Yu, for OOO Securities, submits that while the facts in the particulars of §12A are admitted, what conclusions can be drawn from the facts are not. Of course, OOO Securities certainly would not admit that the Everglory Subscriptions were unusual, uncommercial, “not genuine arm’s length transactions”, and were “not made in good faith or in the best interests of [OOO Securities]” (putting aside OOO Securities’ apparent alternative case here that BOQ had consented or authorised such breaches). But the particulars bind BOQ. On the particulars (mostly, if not effectively all, admitted by OOO Securities), it would simply be a matter of submissions or if necessary (being an idea floated by Mr Yu in his oral submissions, and I am not expressing any view on this), expert evidence on whether with these factual particulars, the Everglory Subscriptions were uncommercial and/or were not an arm’s length transaction. Assuming that such expert evidence is necessary, this should be a short point that can and should be dealt with preferably by a single joint expert and in any event, given that “shortness” of this point, I would not expect much expert evidence would be adduced even when each side could have its own expert. Second, no leave to set down has been granted, primarily because OOO Securities would like to see the result of the present appeal, and there and then decide the next steps. OOO Securities may justifiably choose to wait and see, but the fact thus becomes that there are no trial dates fixed yet, and thus, any additional evidence arising from the Everglory Amendments, which should not be substantial, would lengthen the trial little and in any event prejudice no trial dates. Third, Mr Yu, for OOO Securities, points out that another prejudice would arise from the embarrassing confusion of the Everglory Amendments, the confusion being the impermissible inconsistent cases and vagueness as to what causes of action BOQ could really run. However, given my analysis in Part C2 above, with respect, this point just falls away. In the circumstances, I find that there is little prejudice for allowing the Everglory Amendments. C4. Conclusion Considering the absence of good reason for the delay, the merits of the Everglory Amendments and little prejudice, I would allow the Everglory Amendments as Master Val Chow did. D. Clause 3.2 Amendments In respect of the Clause 3.2 Amendments:- “4(3A). The Securities in the Portfolio shall be held by such institutions as notified by [BOQ] to [OOO Securities] from time to time. Further, [OOO Securities] shall at no time have custody or physical control of the Portfolio. (Clause 3.2) 12B. Further, while [OOO Securities] had at one stage represented to [BOQ] that the Securities were held with Citibank (namely at the very initial stage in late 2015… ), in breach of Clause 3.2 of the IMA and the Duties, such representation turned out to be false, in that without the prior knowledge or consent of [BOQ]: (1) [OOO Securities] had held some of the Securities directly under its own custody, as revealed in a statement dated 31 May 2022 provided by [OOO Securities] to [BOQ] via WeChat on 2 June 2022, and as acknowledge by [OOO Securities] (including in paragraph 11.1 of the Consolidated Amended Defence and Counterclaim). (2) [OOO Securities] transferred the Securities in the Portfolio from Citibank to Shanghai Pudong Development Bank (“SPDB”), as revealed in the letter issued by [OOO Securities]’s solicitors dated 17 January 2023.” D1. Reason for delay The reason proffered by BOQ seems to be that Clause 3.2 Amendments are said to be based on OOO Securities’ own plea in §11.1 of its Amended Consolidated Defence and Counterclaim filed on 12 July 2024:- “At all material times, save for certain paper bonds which are constituted by the physical note or certificate which were held in [OOO Securities]’s physical possession, the entirety of the Portfolio was held by third-party custodians pursuant to Clause 3.2 of the IMA. It is therefore denied that [OOO Securities] was the holder or was in physical possession or control of the assets under the Portfolio.” However, such reason must be rejected. The evidence filed before me as well as from §12B(1) and (2) of the Amended Consolidated Statement of Claim itself shows indisputably that the materials that would have already alerted BOQ about the viability of the claim in the Clause 3.2 Amendments go back as far as 31 May 2022 when the statement was issued, or 2 June 2022 when the WeChat message was sent, or 17 January 2023 when OOO Securities’ letter was sent. So, I do not accept the reason for the delay, and the delay is a long one, having started at latest on 17 January 2023. D2. Legal principles on striking out a claim for nominal damages As regards merits, the complaint is not that this is not a valid cause of action. The complaint is not that it is plain and obvious that this amendment is bad and liable to be struck out. The complaint is that this cause of action would add little, if any, to the ultimate result given that no loss has been alleged, and putting to the highest on the pleaded facts, BOQ would only be entitled to nominal damages: see Poosaala Ram Prasad v Hongkong and Shanghai Banking Corp Ltd [2023] 1 HKLRD 572 at §22 per G Lam JA. Mr Yu, for OOO Securities, submits that a claim sounding in nominal damages only is liable to be struck out, referring me to (1) an unreported English Court of Appeal’s judgment in White v Woodroffe, 24 January 2000 at §26; (2) an English Court of Appeal’s judgment in Galoo Ltd v Bright Graham Murray [1994] 1 WLR 1360 at 1366B-E; and (3) an unreported Queen’s Bench’s judgment in Grigory Loutchansky v Times Newspapers Ltd, 24 October 2020. In White v Woodroffe, supra, the claims against the third and fourth defendants were struck out because the claim “could sound out the most only in nominal damages”: see §26. I note, however, in that case, such a claim, against the third and fourth defendants, was the only claim remaining in that case (after the Court of Appeal agreed that the other claims should be struck out), and that only claim was made in a commercial context where the parties entered into a contract for transferring the rights of publication and other related rights. In such circumstances, I completely agree that such a claim should be struck out in a commercial context because (1) a defendant should not be vexed by a claim for no meaningful damages; and (2) the court should not use its precious resources for such a claim. Similarly, in Galoo Ltd v Bright Graham Murray, supra, applied in White v Woodroffe, supra, the claim in question was the only claim and in commercial context. In that case, the first and second plaintiffs (as clients)’s only claim against the defendants (as accountants) was that the latter did not prepare their accounts properly. The claim was struck out as a claim for nominal damages only. The claim being the only claim and in commercial context, I completely agree that the claim should be struck out. Out of fairness, Mr Yu refers me to Grigory Loutchansky v Times Newspapers Ltd, supra for the proposition that in defamation cases, a claim for nominal damages would usually not be struck out because in context, the claimant’s reputation is at stake; in other words, the claim is not or not just about damages, but vindication of his or her reputation. From these case, I venture to summarise the relevant principles in relation to striking out a claim for nominal damages as follows:- The starting point is that a plaintiff is entitled to mount a claim (for which all requisite elements exist) even though that claim sounds in nominal damages only. However, where such a claim is made in context where money is the only or the only main concern and such a claim is the only claim in the proceedings, the Court may be more ready to strike out such a claim because in such context, (a) a defendant should not be vexed by a claim for no meaningful damages; and (b) the court should not use its precious resources for such a claim. I add that if relief from sanction of an unless order would be necessary, then the Court may also consider whether granting relief from sanction for a claim which sounds only in nominal damages would be in the interest of the administration of justice taking into account the claimant has breached an unless order. D3. Analysis In the present case, the Clause 3.2 Amendments are made in commercial context. However, the claim here is not the only claim. While it may sound at most in nominal damages only, striking it out would not save any party or the court any time and other resources. Mr Yu effectively argues that as such, the claim is inconsequential and should be struck out. However, applying the principles I distilled above, the starting point must be that BOQ is entitled to run this cause of action in the Clause 3.2 Amendment, and in the present case, I see no good reason to strike it out simply on the ground that it itself is a claim sounding in nominal damages only. Therefore, in my view, the Clause 3.2 Amendments are not bound to fail. D4. Prejudice As I mentioned above, the Clause 3.2 Amendment arises from OOO’s Securities’ own plea in its Amended Consolidated Defence and Counterclaim §11.1. Further, the matters relied upon by BOQ in §12B(1) and (2) of the Amended Consolidated Statement of Claim are documentary evidence which OOO Securities also rely upon (in §16 of the 3rd Affirmation of Andrew On Tao Cheng filed on 4 November 2024 on behalf of OOO Securities) in explaining that there is no good reason for BOQ’s delay in making this amendment. Therefore, it is (or at least almost is) OOO Securities’ admission to the claim in the Clause 3.2 Amendments. There could not be any lengthening of the trial (which, in any event, is not yet fixed), and there could not possibly be any extra evidence that would have to be adduced on this point. Therefore, I see little prejudice arising from the Clause 3.2 Amendments. D5. Conclusion Having considered the lack of good reason for the long delay, the merits of the amendments and lack of prejudice, I would also allow the Clause 3.2 Amendments as Master Val Chow did. X. CONCLUSION In the circumstances, I dismiss OOO Securities’ appeal. In respect of costs, both parties asked me to make a costs order nisi because of the possibility of various permutations of the results on the two Summonses. I agreed, and now make a costs order nisi that OOO Securities shall pay BOQ costs of the Appeal, with certificate for two counsel, to be summarily assessed on paper. For the summary assessment, upon the costs order nisi becoming absolute, BOQ shall lodge and serve a statement of costs within 3 days, and OOO Securities shall lodge and serve a list of objection within 3 days thereafter. Lastly, I thank Mr Yu SC and Mr Tang, counsel for OOO Securities, and Mr Yuen SC and Mr Ho, counsel for BOQ, for their able assistance. (Gary CC Lam) Deputy High Court Judge Mr Rimsky Yuen SC and Mr Martin Ho (absent during the hearing with the Court’s leave), for the Plaintiff in HCA 1127/2022 and the Defendant in HCA 1141/2022 Mr Benjamin Yu SC and Mr Danny Tang, for the Defendant in HCA 1127/2022 and the Plaintiff in HCA 1141/2022