CHOW HOW YEEN MARGARET AND OTHERS v. WEX PHARMACEUTICALS INC. AND ANOTHER

HCA 537/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 537 OF 2013

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BETWEEN

CHOW HOW YEEN MARGARET 1st Plaintiff
GAO CHENG (XIE LI) COMPANY LIMITED 2nd Plaintiff
MUSCULAR INVESTMENT COMPANY LIMITED 3rd Plaintiff

and

WEX PHARMACEUTICALS INC. 1st Defendant
WEX MEDICAL LIMITED 2nd Defendant

and

FRANK HAY KONG SHUM 1st Third Party
GRACE WAI LAN LEONG 2nd Third Party
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Before: Hon Au-Yeung J in Court

Date of Hearing: 27 September 2016
Date of Ruling: 28 September 2016

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R U L I N G

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1. This is my ruling for the amendment summons and strike-out summons which I heard on day 1 of the trial:

Amendments to the statement of claim

2. Although the cause of action has not changed, the disputed amendments, if allowed, would have the effect of increasing the claimof the plaintiffs by CAD670,000. This means that 200,000 shares purchased by Chow (P1) were not purchased at CAD2.70 each as currentlypleaded but will become CAD5.50 each.

3. The plaintiffs say that it was a mistake in calculation and there is documentary evidence from the defendants’ side to supportthe proposed amendments.

4. The sheer lateness of this application is enough to dismiss it.

5. With respect, I do not regard such a substantial change to the quantum as being a mere clerical mistake or error in calculation. It is a substantial change to the computation of part of the damages. Moreover, the documentary evidence in support was disclosedin a further list of documents after the pre-trial review. How could the plaintiffs expect the defendants to come up with evidenceto rebut the proposed amendments in the limited amount of time?

6. The summons for amendment proposes to give a timetable for consequential amendments. This timetable, would mean that issues on quantumwould only be defined towards the end of trial. This simply would not enable proper cross-examination of witnesses to be done.

7. Further, Mr Carolan, counsel for the defendants, says that in the current form of pleadings, quantum is not in issue. The amendedquantum would prevent the defendants from proving the negative, ie that the plaintiffs have not paid at CAD5.5 per share in the limitedtime available. This is in my view a real prejudice to the defendants which the court should not allow to happen.

8. Mr Carolan further bases his opposition on the grounds that:

(a) The documentary evidence purportedly relied on by the plaintiffs, amongst others, the Annual Report of 2005 do not support theamendments. The Annual Report was in the original discovery just that the plaintiffs were not aware of its significant. Mr Carolanalso points out that whilst there was documentary evidence of the plaintiffs paying $2.65m for the shares in question there was nothingto support that the plaintiffs had paid at the level of the alleged CAD5.5 per share;

(b) The witness statement of Chow did not support the plaintiffs’ case that they paid CAD5.5 per share.

9. On its face, the Annual Report of 2005 had nothing to do with Chow’s shares (as opposed to Muscular). Chow’s own old spreadsheetalso claimed CAD2.7 per share. Even so, with respect to Mr Carolan, ground (a) concerned whether or not there was sufficient proof of the amendments. It was not plain and obvious that the plaintiffs could not have persuaded the court in the course of evidencethat there was such proof. This ground in itself would not have persuaded me to dismiss the application.

10. Ground (b) does not trouble me. If the amendments were allowed, the court certainly has discretion to permit Chow to supplementher witness statement by oral evidence confirming the unit price of the shares and identify the documents she would rely on to establishthe amendments.

11. In summary, due to the lateness in the application and the prejudice that would be caused to the defendants, I disallowed the amendments,save to the extent that they were not opposed by the defendants.

The strike-out summons

12. This concerns paragraph 46 of Shum’s witness statement which states:

“Even if WEX had lost the ownership of the China Patent, WEX could still rely on its Tectin patent to protect its use of TTX productsin relieving the pain suffered by drug addicts undergoing opiate dependence withdrawal.”

13. Mr Remedios, counsel for the plaintiffs, submits that this sentence was irrelevant and not pleaded, and the plaintiffs have not hadan opportunity to explore evidence arising from this statement. It was Shum’s personal opinion. It also contradicts the jointexpert opinion which he refers to in his submission.

14. I agree with Mr Remedios’ submission. The court need not rule on the truth of the contents of that assertion. The contents ofthis part of the witness statement are irrelevant.

15. On the other hand, paragraph 46 needs to be looked at in the proper context. Shum was explaining why he did not see fit to disclosethe litigation on the China Patent and the judgment dated 27 November 2001 to Chow. Whether that belief was rightly or reasonablyheld may be relevant to the issue of whether Shum was dishonest in concealing material facts from the plaintiffs and the defenceto the fraud claim. I am not satisfied that paragraph 46 was so plainly and obviously irrelevant or frivolous or vexatious thatit should be struck out without hearing the evidence of Shum.

16. I therefore dismissed the application.

17. I will deal with costs all in one go at the end of the trial.

(Queeny Au-Yeung)
Judge of the Court of First Instance
High Court

Mr Leo Remedios and Ms Yvonne Ngai, instructed by Chan, Lau & Wai, for the plaintiffs

Mr Paul J Carolan, instructed by Baker & McKenzie, for the defendants