GTC INDUSTRIES LTD AND OTHERS v. LEE MAN HOI OCEAN AND OTHERS

HCA 600/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 600 OF 2012

______________________

BETWEEN
	GTC INDUSTRIES LIMITED	1st Plaintiff
	PIMATRONICS LIMITED	2nd Plaintiff
	紹萬科技(深圳)有限公司	3rd Plaintiff
and
	LEE MAN HOI OCEAN (李敏海)	1st Defendant
	YUEN KIN TONG (袁健堂)	2nd Defendant
	MW CHINA RESOURCES SOLUTIONS LIMITED (茂榮資源管理有限公司)	3rd Defendant

______________________

Before: Deputy High Court Judge Wilson Chan in Chambers

Date of Hearing: 20 June 2014

Date of Decision: 20 June 2014

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D E C I S I O N

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1.  I would allow the plaintiffs’ application for leave to re-amend their Amended Statement of Claim. I shall later hear the parties on the precise form of the consequential directions. In the meantime, I shall now give very brief reasons for my decision.

2.  The amendments proposed by the plaintiffs are set out in paragraph 14A and prayer (7A) of the draft Re-Amended Statement of Claim.  The proposed paragraph 14A provides as follows: 

“ If and insofar as necessary, the plaintiffs will contend that the 1^st and 2^nd defendants, being members of the senior management staff of the plaintiffs, owed a duty to the plaintiffs by way of implied term in contract and/or tort to apply reasonable care and skill to ensure that all formalities were complied with in respect of their own employment by the 3^rd plaintiff. If (which is denied) the employment of the 1^st and 2^nd defendants by the 3rd plaintiff were invalid by reason of non-compliance with legal requirements under PRC law:

(1) The 1^st and 2^nd defendants cannot rely on the same, as they cannot be allowed to benefit from their own wrong.

(2) Further or alternatively, the 1^st and 2^nd defendants are liable for their breach of duty, and the plaintiffs are entitled, by way of damages, to be put in the same position as if their employment was valid.”

3.  Paragraph 14A is in direct response to the allegation by the 1^st and 2^nd defendants that their employment with the 3^rd plaintiff is invalid by reason of non-compliance with the legal requirements under PRC law.  Such allegation was first introduced by the conclusion reached by the 2nd and 3^rd defendants’ expert in his Expert Report dated 27 July 2012, whereby he stated that “where the employer fails to apply for and obtain a valid employment permit in accordance with PRC law for that Hong Kong resident”, the labour contract is “very likely void”.  However, it was not confirmed as a part of the 2^nd and 3^rd defendants’ pleaded case until 6 August 2013 when the 2^nd and 3^rd defendants filed their Reply to the plaintiffs’ Request for Further and Better Particulars. 

4.  The well known principles set out in Ketteman v Hansel Properties Limited [1987] 1 AC 189 regarding amendments remain applicable post-CJR subject to the caveat that the exercise of discretion should promote the underlying objectives of the CJR as set out in Order 1A of the Rules of the High Court; and the importance of not disturbing a milestone date [see: Li Shiu To v Li Shiu Tsang, HCA 416/2003 (Decision of Deputy High Court Judge Lok dated 14 August 2012)].

5.  In this respect, it is important to note that under Order 1A, rule 2(2) of the Rules of the High Court, the court’s “primary aim” in exercising case management or other powers of the court is to secure a “just resolution of disputes in accordance with the substantive rights of the parties”.

6.  In the circumstances of the present case, I agree with Mr Justin Ho, counsel for the plaintiffs, that the risk of adjourning the trial dates is not high. 

(1) As is clear from the amendments in the draft Re‑Amended Statement of Claim, the scope of the proposed amendment is rather narrow, and would hardly require substantial amendment to the 2^nd and 3^rd defendants’ Amended Defence. 

(2) The plaintiffs have confirmed that they have no intention to file further expert evidence in support of the new averments.  The 2^nd and 3^rd defendants, on the other hand, say that further expert evidence will be obtained.  However, in this respect, it must be remembered that PRC experts have already been engaged and it is difficult to see how and why the 2^nd and 3^rd defendants would require a lengthy period of time to secure an expert opinion from their existing expert on a specific aspect of contract law. 

(3) Mr Eugene Yim, counsel for the 2^nd and 3^rd defendants, suggested in his skeleton submissions that a further round of witness statements will be necessary, but he accepts that they are likely to be short ones.  I do not see why the preparation of such witness statements cannot begin right away.

7.  Regarding the limitation issue, I agree with Mr Ho that the new matters sought to be pleaded by the proposed amendments do arise “out of the same facts or substantially the same facts” as the existing causes of action already pleaded by the plaintiffs against the 1^st and 2^nd defendants.

8.  The scope and extent of the 2^nd defendant’s responsibilities and duties as the Chief Executive Officer of the 1^st plaintiff and the Senior Quality Control Manager of the 3^rd plaintiff under the employment contracts are already issues which require to be tried at the trial of this action.  In such circumstances, the subject matter and facts which underpin the new claim under paragraph 14A involve matters which are, in any event, going to be litigated between the parties.  Clearly, such factual matters go no further than introducing “minor differences likely to be the subject of inquiry” and do not involve any “major” investigation that would not in any event have to be undertaken:  Moulin Global Eyecare Holdings Limited v Olivia Lee Sin Mei [2013] 1 HKLRD 744, at paragraph 48.

9.  Finally, I do not agree with Mr Yim’s submissions that the proposed amendments should be disallowed on the ground that they are futile.  In my view, this is not a case where the lack of merits of the proposed amendments are readily apparent, and are so apparent without a prolonged investigation [see: Practice Note 20/8/6 at page 462 of the Hong Kong Civil Procedure 2014].

10.  For the reasons stated above, the plaintiffs’ application for leave to re-amend their Amended Statement of Claim is allowed.

(Submissions on the consequential directions)

11.  There be leave to the 1^st, 2^nd and 3^rd defendants to serve expert report to address the re-amendments within 21 days from the date hereof.  There be leave to the plaintiffs to serve supplemental expert report in reply within 14 days thereafter.  There be leave to the 1^st, 2^nd and 3^rd defendants to serve further Witness Statements to address the re-amendments on or before 25 July 2014. 

(Submissions on costs)

12.  The usual, and I stress the word “usual”, order for cases where an application for leave to amend has been resisted but is allowed is that there be two sets of costs: namely, costs of and occasioned by the amendment shall be to the other side in any event, but costs of the hearing before the court should be to the party who is successful in the argument as to whether leave to amend ought to be granted.  However, the court has discretion to order otherwise [Practice Note 20/8/51 of the Hong Kong Civil Procedure 2014]. 

13.  In the present case, the application for leave to amend is made late in the day, and no good reason has been given for the delay.  In the circumstances, I do not think it is right to award costs against the defendants for today’s hearing.  Accordingly, I order that: (1) the costs of and occasioned by the application (including the hearing on 29 May 2014) be to the 1^st, 2^nd and 3^rd defendants in any event; and (2) the costs of today’s hearing be in the cause.

	(Wilson Chan)
	Deputy High Court Judge

Mr Justin Ho, instructed by Anthony Siu & Co, for the 1^st to 3^rd plaintiffs

The 1^st defendant was not represented and did not appear

Mr Eugene Yim, instructed by Lo, Chan & Leung, for the 2^nd and 3^rd defendants

HCA 600/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 600 OF 2012

_______________________________

BETWEEN

	GTC INDUSTRIES LIMITED	1st Plaintiff
	PIMATRONICS LIMITED	2nd Plaintiff
	紹萬科技(深圳)有限公司	3rd Plaintiff
	and
	LEE MAN HOI OCEAN (李敏海)	1st Defendant
	YUEN KIN TONG(袁健堂)	2nd Defendant
	MW CHINA RESOURCES SOLUTIONS LIMITED (茂榮資源管理有限公司)	3rd Defendant

_______________________________

Before: Mr Registrar K.W. Lung in Chambers (Open to the public)

Date of Hearing: 4 January 2013

Date of Decision: 4 January 2013

_______________________________

DECISION

_______________________________

The application

1.  Before me this morning is the application of the 2^nd defendant and the 3^rd defendant for an extension of 28 days for them to serve their expert report in reply pursuant to my Order dated 31 October 2012:

“1.b: The 2^nd and 3^rd defendants be at liberty to serve the expert report in reply within; 28 days thereafter.”

2.  The above direction was a further direction of my Order dated 20 June 2012, in which I had given direction that the 2^nd defendant and the 3^rd defendant be given leave to adduce expert evidence on PRC law in relation to the true terms, meaning and effect and enforceability of the employment contract referred to in the Defence and that the plaintiffs be given leave to serve the expert report in response thereto and finally, the 2^nd defendant and the 3^rd defendant be at liberty to serve an expert report in reply.

The brief fact of the case

3.  There is no dispute that the expert evidence is required at the trial.  The disputes between the plaintiffs and the defendants are that the plaintiffs alleged that the 1^st and the 2^nd defendants, being the former employees of the 2^nd plaintiff, a related corporation of the 1^st and the 3^rd plaintiffs, were in breach of their fiduciary duty in that they had used the confidential information and the resources of the plaintiffs and had solicited and/or diverted potential customers of the plaintiffs to become the 3^rd defendant’s customers sometime before August 2007.[1]

Discussion on an “unless order” to be made

4.  This morning, Mr. Kwan acts for the plaintiffs  and Mr. Lo for the 2^nd defendant and the 3^rd defendant.  Mr. Lo has told me that 1^st defendant does not raise objection and Mr. Lo agrees to pay the 1^st defendant’s costs of $800.

5.  Mr. Kwan proposes that an “unless order” with longer time should be imposed for this application. However, Mr. Lo opposes, saying that the court should not impose an “unless order”.

6.  Mr. Lo tells me that the plaintiffs’ expert report in response takes 250 pages (including the annexures), which cause me alarm if the expert report was prepared in accordance with the directions at the Case Management Conference.  Mr. Kwan and Mr. Lo confirm that the expert reports were prepared in accordance with the directions and they are relevant for the resolution of the disputes at the trial.

7.  I enquire with Mr. Lo as to whether he had sought advice from his expert if 28 days that he now asks for are sufficient for the expert to do the reply expert report.  Mr. Lo says that he had not done so and 28 days period is only his own estimate.

8.  I consider that it is not proper for Mr. Lo to take out the application for extension of time without ensuring from his own expert that the extension will be sufficient for his expert to prepare the expert report, in which case it is very likely that he may have to take out another application for further extension of time.  In order to minimize the number of interlocutory hearings for the proceedings, I have to stand down the matter for Mr. Lo to seek advice from his expert as to whether the extension sought for is sufficient for him to prepare the expert report.

9.  Mr. Lo returns and confirms that his expert will need 14 days more in view of the intervening public holidays. Mr. Kwan has no objection to this further extension of time.

Practice Direction 5.2, paragraph 29

10.  Bearing in mind the judgment of DHCJ Le Pichon in K.M. Cheung & Co. Solicitors (a firm) v. Kung Ching HCA 831/2011 (unreported) 26 October 2012, in which the learned Deputy Judge took the view that unless order should only be imposed upon a history of failure to comply, I refer Mr. Lo to paragraph 29 of the Practice Direction 5.2, which provides that the court is entitled to impose unless order for application for extension if directions had been given at the Case Management Conference.  Practice Direction 5.2, paragraph 29 reads:

“29. Parties are expected to have complied with the timetable laid down by the Court by the time of the CMC. Unless sufficient grounds have been shown to it, the Court will not grant extensions of time for compliance. If it does, the grant of extension will most likely be on an unless order basis with self-executing sanctions.”

Mr. Lo agrees that the directions for the expert evidence were given in the previous Case Management Conferences on 20 June 2012 and 31 October 2012 respectively.  He agrees that he has no valid reason against the court making an “unless order”.

The Orders

11.  In the circumstances, I make an order that unless the 2^nd defendant and the 3^rd defendant serve the expert report in reply by 4:00 p.m. 15 February 2013, the 2^nd defendant and the 3^rd defendant are debarred from adducing the expert report in reply.

12.  As to the costs of this application, Mr. Kwan has informed me that he had attempted to agree with the 2^nd defendant and the 3^rd defendant to extend the time on an unless order basis, which proposal was refused. Hence this hearing today.  Mr. Lo agrees that there was such a negotiation.  He counter-proposed longer time if an unless order were made.  In the circumstances, the costs of today’s hearing should be given to the plaintiffs, which the parties agree to be $1,500 to be paid within 14 days.

	(K.W. Lung)
	Registrar, High Court

 

Mr. A. KWAN, instructed by Messrs Anthony Siu & Co., for the 1^st to 3^rd Plaintiffs

Mr. N. LO, instructed by Messrs Lo, Chan & Leung, for the 2^nd & 3^rd Defendants

Messrs Ernest Li & Co., for the 1^st Defendant is absent