HOLINAIL H.K. LTD v. MATTHIAS POU AND OTHERS

HCA 2397/2024

[2025] HKCFI 2511

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2397 OF 2024

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D E C I S I O N

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Introduction

1.  By summonses dated 3 December 2024 and 25 February 2025[1], the Plaintiff seeks (i) a local and worldwide Mareva injunction against the 1^st Defendant; and (ii) a local Mareva injunction against the 2^nd, 3^rd and 4^th Defendants.

2.  The matter came before Tam J on 6 December 2024 and Herbert Au-Yeung J on 28 February 2025. The Defendants agreed to provide an “interim-interim” undertaking to the extent of HK$13,698,712.29 while the Plaintiff’s summonses were pending resolution.

3.  This is the substantive hearing of the Plaintiff’s summonses.

Material Background

4.  The Plaintiff has been carrying on a business of developing, manufacturing and supplying figurines, collectibles, models built up, die-cast and craft. It is a part of a group of companies (the “Holinail Group”) founded by Mr Massol back in 1985. Through a subsidiary, the Plaintiff owns a factory in the Mainland.

5.  The 1^st, 3^rd and 4^th Defendants are the Plaintiff’s former employees.

6.  Insofar as the 1^st Defendant is concerned:-

(1)  He started working for the Holinail Group in 2001.

(2)  From 2013 to 2016, he was the Plaintiff’s international business manager.

(3)  From 2016 to June 2024, he was the Plaintiff’s international business director.

(4)  He was the most senior employee in the Plaintiff.

(5)  By a power of attorney dated 6 January 2014 (the “Power of Attorney”), the 1^st Defendant was authorized to enter into any agreement with the Plaintiff’s clients and to negotiate the main terms and conditions of the transactions with the Plaintiff’s suppliers and financial partners.

(6)  In February 2024, the 1^st Defendant tendered resignation for personal reasons. His last day of employment was on 28 June 2024.

7.  Insofar as the 3^rd Defendant is concerned:-

(1)  She started working for the Plaintiff as a manager in 2014.

(2)  She was the second most senior employee in the Plaintiff.

(3)  She was responsible for managing the Plaintiff’s factory in the Mainland, monitoring the progress of the orders allocated to her account and supporting managerial decisions.

(4)  She tendered resignation in April 2024. Her last day of employment was 10 June 2024.

8.  Insofar as the 4^th Defendant is concerned:-

(1)  She started working for the Plaintiff as an administration officer in April 2021.

(2)  She tendered resignation in January 2024. Her last day of employment was 14 March 2024.

9.  When the 1^st Defendant was still employed by the Plaintiff, he set up the 2^nd Defendant on 22 April 2020. As a matter of public records, the 1^st Defendant was the sole director and sole shareholder of the 2^nd Defendant. The evidence shows that the 1^st Defendant also held out himself as the 2^nd Defendant’s chief executive officer.

10.  It is not in dispute that the 1^st, 3^rd and 4^th Defendants are now working for the 2^nd Defendant.

11.  In October 2024, a former customer of the Plaintiff (mistakenly) sent an email to a former employee of the Plaintiff at his former email address. This caused the Plaintiff to feel suspicious.

12.  In the circumstances, the Plaintiff engaged a technology consultant, namely Alternative Enterprises (HK) Ltd (“Alternative Enterprises”) to carry out an investigation. Alternative Enterprises then unearthed and reviewed the electronic records in the computers used by the 1^st, 3^rd and 4^th Defendants.

13.  The findings discovered by Alternative Enterprises are set out in annexure 1 of the Plaintiff’s statement of claim. In short, it was discovered that:-

(1)  The 1^st, 3^rd and 4^th Defendants discussed how to “shift”, “transfer” and/or “switch” the Plaintiff’s customers and new business opportunities to the 2^nd Defendant.

(2)  The targeted customers included Mighty Jaxx, Leblon Delienne SAS, Juce Gace, Ankama, DeAgostini Japan, NED Trading, Faller GmbH, Jee, Frank Chess, LBD, Nemesis Now, etc.

(3)  The 1^st, 3^rd and 4^th Defendants discussed how to use the Plaintiff’s resources to develop the 2^nd Defendant’s business. For instance, they discussed (a) using the Plaintiff’s figurines and office premises to prepare the pitch deck or promotional materials for the 2^nd Defendant; and (b) attending a fair in the United States under the Plaintiff’s name but distributing the name cards of the 2^nd Defendant.

(4)  The 2^nd Defendant did issue invoices to some of the Plaintiff’s customers.

(5)  During the discussion, the 1^st, 3^rd and 4^th Defendants indicated that they had to remain “low key”.

14.  In the premises, it is the Plaintiff’s case that:-

(1)  The 1^st Defendant flagrantly breached his fiduciary duties owed to the Plaintiff.

(2)  The 1^st, 3^rd and 4^th Defendants flagrantly breached their duties of fidelity owed to the Plaintiff.

(3)  The 2^nd, 3^rd and 4^th Defendants dishonestly assisted the 1^st Defendant to breach his fiduciary duties owed to the Plaintiff.

(4)  The 1^st, 3^rd and 4^th Defendants conspired together to injure the Plaintiff by unlawful means.

Legal Principles

15.  The legal principles relating to Mareva injunctions are well-established. The applicant has to show: (i) he has a good arguable case; (ii) there are assets within the jurisdiction; (iii) the balance of convenience lies in favour of granting a Mareva injunction; and (iv) there is a real risk of dissipation. The court may grant a worldwide Mareva injunction where some of the assets are within the jurisdiction and some are abroad. SeeHong Kong Civil Procedure (Vol.1) at paras 29/1/65 and 29/1/83.

16.  The question of whether there is a real risk of dissipation involves evaluative and predictive judgment. It is trite that the risk can be inferred from the defendant’s low commercial morality or dishonesty: see Convoy Collateral Ltd v Cho Kwai Chee [2020] 6 HKC 81 at paras 40 and 53 (per Lam VP, as Lam PJ then was).

Good Arguable Case on Liability

17.  Mr Byron Chiu (for the Plaintiff) submitted there is overwhelming evidence showing that the Defendants committed serious wrongdoings against the Plaintiff.

18.  I agree with Mr Chiu’s submissions.

19.  The evidence shows that:-

(1)  When the 1^st, 3^rd and 4^th Defendants were still employed by the Plaintiff, they had extensive discussion as to (i) how to divert the Plaintiff’s business, orders and corporate opportunities to the 2^nd Defendant; and (ii) how to exploit the Plaintiff’s resources for supporting the 2^nd Defendant’s operation.

(2)  In light of the 1^st, 3^rd and 4^th Defendants’ collaborative efforts, some of the Plaintiff’s customers stopped doing business with the Plaintiff and they started placing orders with the 2^nd Defendant.

(3)  The 1^st, 3^rd and 4^th Defendants were closely involved in the business dealings between the 2^nd Defendant and the Plaintiff’s customers.

20.  In Leader Screws Manufacturing Co Ltd v Huang Shunkui[2021] HKCFI 141 at paras 47-48, Queeny Au-Yeung J stated:-

“47. The concept of fiduciary duty encaptures a situation where one person is in a relationship with another which gives rise to a legitimate expectation, which equity will recognize, that the fiduciary will not utilize his or her personal position in such a way which is adverse to the interests of the principle. That expectation is assessed objectively, so it is not necessary for the principal subjectively to harbour the expectation, nor for the person alleged to be a fiduciary to subjectively consider himself to be undertaking fiduciary duties. See Snell’s Equity, 34th ed, §7-005.

48.  Therefore, much depends on the employee’s role and functions. A senior employee/manager has been held to owe fiduciary duties to his employer in carrying out the specific duties to which he was assigned: TBC International (HK) Ltd v Chan Kwok Sum, HCA 10671/1995, 24 March 1997, at §§6 and 7, Waung J.”

21.  In the present case, the 1^st Defendant was the most senior employee in the Plaintiff. The Power of Attorney effectively empowered him to carry out the operation of the Plaintiff.

22.  In this connection, I do not accept the 1^st Defendant’s suggestion that the Power of Attorney was created for the limited purpose of authorising him to sign unimportant documents on behalf of Mr Massol. This suggestion is flatly contradicted by the terms of the Power of Attorney.

23.  I am of the view it is, to say the least, highly arguable that (i) the 1^st Defendant did owe fiduciary duties to the Plaintiff; and (ii) he did breach the fiduciary duties owed to the Plaintiff.

24.  On the evidence, it is also, to say the least, highly arguable that the 1^st, 3^rd and 4^th Defendants breached the aforesaid duties by (i) conspiring to procure the Plaintiff’s customers to do business and place orders with the 2^nd Defendant instead of the Plaintiff; (ii) participating in the competing business operated by the 2^nd Defendant; and (iii) disrupting the Plaintiff’s business.

25.  As pointed out by the learned authors of Employment Law and Practice in Hong Kong (2^nd Ed) at paras 3.028 to 3.029 and 3.032, an employee owes a “duty to serve his or her employer with fidelity and good faith”, and such duties include: (i) an obligation not to persuade customers to shift away from the employer; (ii) an obligation not to take part in a business in competition with the employer’s business; and (iii) an obligation not to disrupt the business of the employer.

26.  For completeness, I also reject the following assertions made by the Defendants

27.  The Defendants allege that the Plaintiff and the 2^nd Defendant pursue different lines of business, in that whilst the Plaintiff focuses on “partwork” projects, the 2^nd Defendant focuses on “premium” projects.

28.  However:-

(1)  As evidenced by the Plaintiff’s promotional materials and contemporaneous exchange with its customers (such as Mighty Jaxx and Attakus), the Plaintiff did manufacture, supply and trade “premium” products.

(2)  As evidenced by the materials unearthed by Alternative Enterprises, the 2^nd Defendant did supply “partwork” or “non-premium” products to the Plaintiff’s customers (such as DeAgostini Japan, which specialises in “partwork” products).

29.  In light of the evidence, it is, to say the least, highly arguable (i) that the 2^nd Defendant has been competing with the Plaintiff; (ii) that the 1^st, 3^rd and 4^th Defendants have been diverting the Plaintiff’s businesses and orders to the 2^nd Defendant; and (iii) that the 1^st, 3^rd and 4^th Defendants had participated in the competing business of the 2^nd Defendant.

30.  The 1^st Defendant also alleges that he developed the 2^nd Defendant’s business during his spare time.

31.  This allegation is contradicted by the materials unearthed by Alternative Enterprises, which show that:-

(1)  The 1^st, 3^rd and 4^th Defendants discussed how to divert the Plaintiff’s businesses and orders to the 2^nd Defendant during office hours.

(2)  The 1^st, 3^rd and 4^th Defendants even used the Plaintiff’s resources to develop the 2^nd Defendant’s business. Whilst they used the figurines and office premises to prepare promotional materials for the 2^nd Defendant, they caused the Plaintiff to be responsible for the fees of the photographer who was engaged to take pictures of the figurines.

32.  Lastly, Mr Kevin Lau (for the Defendants) submitted that as the products and services of the Plaintiff were of bad quality, the customers “voted with their feet” and chose to do business with the 2^nd Defendant instead of the Plaintiff.

33.  On the evidence, I do not accept this submission. The 1^st and 3^rd Defendants were the ones who were responsible for operating the Plaintiff’s business. They were the ones who liaised with the Plaintiff’s customers. If the Plaintiff’s products and services were of bad quality, it is most unlikely that the customers, who had dealings with the 1^st and 3^rd Defendants, would wish to do business with the 2^nd Defendant (which has been operated by the 1^st and 3^rd Defendants). I do not believe that the customers would, on their own volition, choose to do business with the 2^nd Defendant in the absence of any solicitation by the 1^st, 3^rd and 4^th Defendants.

34.  For all the above reasons, I am satisfied that the Plaintiff has made out a good arguable case against the Defendants on the question of liability.

Good Arguable Case on Quantum

35.  Bearing in mind that the evidence at the interlocutory stage may be “inchoate”, the question of whether there is a good arguable case as to quantum is to be determined qualitatively, not quantitatively: see  Agritrade Resources Ltd v Ashok Kumar Sahoo[2022] HKCA 280 at para 37 (per Cheung JA).

36.  Instead of embarking on some forensic analysis as if a mini trial is taking place, the court should adopt a broad-brush approach to determine the appropriate figure that merits the protection by way of a Mareva injunction: see Lam Suk Ying v Lam Sik Shi (HCA 4713/2011, 14 January 2011) at para 20 (per Recorder Benjamin Yu SC).

37.  The Plaintiff contends it is entitled to a quantum of HK$13,698,712.29.  In this connection, the Plaintiff relies on:-

(1)  The Defendants’ admission that the 2^nd Defendant’s net profits in 2022 were HK$2,968,199.

(2)  The estimate provided by Mr Massol in regard to the net profits arising from the business that was diverted from the Plaintiff to the 2^nd Defendant in 2023 and 2024.

38.  I am of the view that the estimate provided by Mr Massol makes sense. He is able to explain why the profit margins in respect of the business with different customers varied. Based on the evidence available to the court, I am unable to conclude that Mr Massol’s estimate is arbitrary.

39.  Meanwhile, the position of the Defendants has been opaque.

40.  They only produced the 2^nd Defendant’s tax returns to contend that the 2^nd Defendant has merely earned net profits of around HK$2.4 million odd since April 2020.

41.  For reasons best known to themselves, the Defendants chose not to produce the 2^nd Defendant’s audited financial statements, management account, books and records as well as the underlying documents relating to the transactions with the Plaintiff’s former customers.

42.  Without these documents, neither the court nor the Plaintiff can meaningfully assess the net profits that were actually earned by the 2^nd Defendant.

43.  Be that as it may, Mr Lau contended that the Plaintiff has failed to show causation. He suggested that as the products and services provided by the Plaintiff were bad, the customers would have ceased doing business with the Plaintiff anyhow. He cited the business dealings with Mighty Jaxx and Juce Gace as examples.

44.  In this connection:-

(1)  For the reasons set out in paragraph 33 above, I do not accept Mr Lau’s submission. Bearing in mind that both the Plaintiff and the 2^nd Defendant were operated by the 1^st and 3^rd Defendants, it is doubtful as to whether the services and products offered by the 2^nd Defendant would be superior to those offered by the Plaintiff. In fact, the contemporaneous exchange shows that there were issues regarding the quality of the 2^nd Defendant’s products.

(2)  As to the business dealing with Mighty Jaxx, Mr Lau pointed out that according to a piece of internal document of the Plaintiff[2], the Plaintiff had ceased doing business with Mighty Jaxx from 9  April 2021. However, as pointed out by Mr Chiu, the said internal document was put forward for the purpose of demonstrating that Mighty Jaxx acquired “premium” products from the Plaintiff. In any event, it is Mr Massol’s evidence that the last invoice that the Plaintiff issued to Mighty Jaxx was dated 20 April 2022. This coincided with the materials unearthed by Alternative Enterprises, which show that the 2^nd Defendant provided an offer to Mighty Jaxx on 11 April 2022 in respect of a project named “The Wanderer 2^nd & 3^rd CW”.  In my view, the question whether the Defendants solicited Mighty Jaxx is plainly a matter for trial, and the Plaintiff does have a good arguable case.

(3)  As regards the business dealings with Juce Gace, Mr Lau referred me to a recent email showing that a representative of Juce Gace was allegedly dissatisfied with the Plaintiff’s products. However, as pointed out by Mr Chiu, in the contemporaneous email exchange back in 2021, Juce Gace’s representatives indicated that they were content with the Plaintiff’s efforts and that they intended to place orders with the Plaintiff in 2022. In my view, the question whether the Defendants procured Juce Gace to place orders with the 2^nd Defendant instead of the Plaintiff  is plainly a matter for trial, and on the evidence, I am satisfied that the Plaintiff does have a good arguable case.

45.  Mr Lau also submitted that some customers (such as DeAgostini Japan) were loyal to the 1^st and 3^rd Defendants, and this was the reason why they chose to do business with the 2^nd Defendant rather than the Plaintiff. In this connection, Mr Lau referred me to a recent email from a representative of DeAgostini Japan. There, he indicated his support for the 1^st Defendant.

46.  However, Mr Chiu pointed out that the 1^st Defendant worked for the Plaintiff until 28 June 2024. As such, before his departure, the 1^st Defendant should not have (i) operated a competing business under the 2^nd Defendant; and (ii) diverted the Plaintiff’s customers (such as DeAgostini Japan) to the 2^nd Defendant. In this connection, the Defendants have not adduced evidence to show that DeAgostini Japan only placed orders with the 2^nd Defendant in the 2^nd half of 2024 after the 1^st Defendant left the Plaintiff. On the evidence, I do not believe that DeAgostini Japan only started doing business with the 2^nd Defendant after 28 June 2024. In light of the massive scheme of diversion that has been perpetrated since April 2022, there is every reason to believe that the Defendants had started taking steps to divert the business with DeAgostini Japan before 28 June 2024.

47.  Lastly, as to the business with Ankama in 2023, Mr Lau took issue with the phrase “gross profits” that was used in the contemporaneous exchange amongst the Defendants (which form the basis of the Plaintiff’s claim for HK$780,000 under this head[3]). Having considered the contemporaneous exchange holistically, I am of the view that it is, to say the least, highly arguable that despite the phrase “gross profits” was used, the Defendants intended to refer to the notion of “net profits”. Bearing in mind the context of the discussion, there was no reason to suppose that the Defendants intended to take into account overhead costs and expenses. For completeness, it does not appear to me that the figure of HK$780,000 (or US$100,000) referred to the business revenue arising from the business dealings.

48.  For all the above reasons, I am satisfied that the Plaintiff has made out a good arguable case against the Defendants on quantum to the extent of HK$13,698,075[4].

Balance of Convenience and Risk of Dissipation

49.  Mr Lau submits that the Plaintiff has failed to prove that there is a real risk of dissipation.

50.  In light of the overwhelming evidence against the Defendants, I cannot accept Mr Lau’s submissions.

51.  As mentioned, the evidence shows that:-

(1)  When the 1^st, 3^rd and 4^th Defendants were still employed by the Plaintiff, they devised and implemented a scheme that aimed at diverting the Plaintiff’s business and orders to the 2^nd Defendant. They sought to benefit the 2^nd Defendant and/or themselves at the expense of the Plaintiff. They paid no regard to the fiduciary duties and/or duties of fidelity owed to the Plaintiff.

(2)  During their discussion, the 1^st, 3^rd and 4^th Defendants mentioned that they had to be insidious. It is apparent they appreciated that their conduct was wrongful. Nonetheless, they continued with their wrongdoings.

(3)  The 1^st, 3^rd and 4^th Defendants even used the Plaintiff’s figurines and office premises to prepare the 2^nd Defendant’s pitch deck or promotional materials. They pretended as if the products belonged to the 2^nd Defendant. What was even more shocking was that they caused the invoice in respect of the services provided by the photographer to be issued to the Plaintiff.

52.  The conduct of the Defendants was outrageous.

53.  On the evidence (which is overwhelming), I am satisfied that the Defendants are dishonest and of low commercial morality. They calculatedly concealed their wrongdoings. This was done to ensure that they could continuously take advantage of the Plaintiff. In light of their conduct, I am not of the view that the 1^st, 3^rd and 4^th Defendants are the kind of persons who would graciously face the consequences of their wrongdoings. I am satisfied it can be inferred that the Defendants might dissipate their assets with a view to evading judgment: see Convoy Collateral Ltd v Cho Kwai Chee (supra) at para 53.

54.  However, Mr Lau sought to persuade me that the position of the 4^th Defendant is different from the position of the 1^st and 3^rd Defendants.  He drew my attention to the following matters:-

(1)  The 4^th Defendant was young and she was a junior employee.

(2)  She merely earned a humble salary of HK$18,000.

(3)  She did not make strategic decisions. She only provided administrative support and assistance.

55.  Despite Mr Lau’s efforts, I am of the view that the Plaintiff has made out an overwhelming case against the 4^th Defendant based on breach of duties of fidelity, dishonest assistance and conspiracy to injure by unlawful means.

56.  As pointed out by Mr Chiu, the 4^th Defendant knew and should have known that:-

(1)  she was the Plaintiff’s employee;

(2)  the 1^st and 3^rd Defendants were the Plaintiff’s employees; and

(3)  the 1^st and 3^rd Defendants as well as herself should not commit acts that harm the Plaintiff’s interest.

57.  Notwithstanding so, the 4^th Defendant knowingly participated in the scheme that diverted the Plaintiff’s business, orders and corporate opportunities to the 2^nd Defendant. Indeed, the materials discovered by Alternative Enterprises show, among other things, that:-

(1)  The 4^th Defendant was involved in the discussion about attending the fair in the United States in the Plaintiff’s name but distributing the name card of the 2^nd Defendant.

(2)  The 4^th Defendant participated in, amongst other things, (i) the business dealing between the 2^nd Defendant and Juce Gace in August 2022 concerning a project named “I am Wood Namo Edit”; (ii) the business dealing between the 2^nd Defendant and Leblon Delienne SAS in November 2022; and (iii) the business dealing between the 2^nd Defendant and Ankama in February 2024.

58.  In the premises, I accept Mr Chiu’s submissions that the 4^th Defendant was anything but innocent.

Delay and Tipping Off 

59.  Mr Lau sensibly accepted that the Plaintiff could not have pursued the present application before October 2024. However, he contended that (i) there had been delay since October 2024; and (ii) by issuing a complaint letter dated 18 October 2024, the Plaintiff had “tipped off” the Defendants.

60.  First of all, I am not of the view that there has been any inordinate delay in pursuing the present application since October 2024.  It took time for the Plaintiff to investigate the matters relating to the claims in these proceedings.  As soon as its suspicion was aroused, the Plaintiff immediately engaged Alternative Enterprises to review the electronic records in the computers used by the 1^st, 3^rd and 4^th Defendants.

61.  More fundamentally, as a matter of law, it is not sufficient for the defendant to show that the applicant has delayed unreasonably.  It is also necessary to show that “because of the delay in bringing [the] application it would be unreasonable or unjust to grant the order sought by the [applicant]”: see Re Wako Giken (HK) Co Ltd [2010] 4 HKLRD 121 at paras 24 to 25 (per Harris J).

62.  Whilst I accept that equity would not act in vain, I am not of the view that the court should be lenient towards unscrupulous litigants who may, in bad faith, dissipate assets, thereby rendering themselves “judgment-proof”. There is no reason why unscrupulous litigants should be allowed to benefit from their unconscionability.

63.  After all, the question is whether the Mareva injunction sought will be of practical value. Depending on the circumstances, if it can be shown that the Mareva injunction sought is of no practical value at all, this may be a reason why the court may exercise its discretion against granting the proposed Mareva injunction.

64.  In the present case, there is no evidence showing that the Defendants have already dissipated all their assets, such that the Mareva injunction granted by the court would be completely futile.

65.  In this connection, it is not in dispute that the 2^nd Defendant has still been carrying on business. As such, there are good reasons to believe that the Mareva injunction sought will be able to freeze some meaningful assets.

66.  In the premises, I am not of the view that relief should be refused on the ground of alleged delay or on the ground that the Plaintiff issued a complaint letter on 18 October 2024.

Worldwide Mareva Injunction

67.  The 1^st Defendant is now residing in Canada.  It is apparent that he has assets there.

68.  If the Defendants have sufficient assets in Hong Kong, it would be unnecessary to grant a worldwide Mareva injunction against the 1^st Defendant.

69.  In this connection, Mr Lau submits that the Plaintiff has failed to show that the assets in Hong Kong are not sufficient to cover the Plaintiff’s claims.

70.  However, there is simply no evidence showing that the Defendants have HK$13,698,075 in Hong Kong to satisfy the Plaintiff’s claims.

71.  Had such evidence existed, the Defendants would have adduced the same for opposing the Plaintiff’s application for a worldwide Mareva injunction against the 1^st Defendant. This did not happen.

72.  I am not of the view that the Plaintiff can be criticized for not adducing precise evidence on the 1^st Defendant’s assets. It is unrealistic to expect the Plaintiff to have precise information relating to the 1^st Defendant’s financial position.

73.  For completeness, I do not accept that the Plaintiff was guilty of inordinate delay in pursuing a worldwide Mareva against the 1^st Defendant. Understandably:-

(1)  The Plaintiff would wish to focus on building up its case regarding the diversion scheme at the initial stage of the proceedings.

(2)  It took time for the Plaintiff to investigate the assets of the 1^st Defendant and the Plaintiff would not wish to pursue a worldwide Mareva injunction against the 1^st Defendant when the picture was not yet clear. Bearing in mind the draconian nature of the relief sought, there was every reason why the Plaintiff should conduct these proceedings in a cautious and responsible manner.

Conclusion and Disposition

74.  For all the above reasons, I grant (i) a local and worldwide Mareva injunction against the 1^st Defendant; and (ii) a local Mareva injunction against the 2^nd, 3^rd and 4^th Defendants in terms of the Plaintiff’s summonses dated 3 December 2024 and 25 February 2025, save that:-

(1)  the amount covered should be HK$13,698,075; and

(2)  the Defendants do have 14 days to comply with the ancillary disclosure order.

75.  The Mareva injunctions order does not prohibit:-

(1)  the 1^st Defendant from spending HK$100,000 per month towards his ordinary living expenses.

(2)  the 1^st Defendant from making payment of income tax in Canada in 2025 and spending HK$54,000 for the purpose of a family trip in France in the summer of 2025.

(3)  the 2^nd defendant from spending HK$400,000 per month towards its ordinary and proper business expenses.

(4)  the 3^rd Defendant from spending HK$10,000 per week towards her ordinary living expenses.

(5)  the 4^th Defendant from spending HK$6,000 per week towards her ordinary living expenses.

(6)  the Defendants from collectively spending HK$1.7 million on legal advice and legal expenses in these proceedings up to and including the stage of exchanging witness statements.

76.  I order that there be liberty to apply.

77.  As to costs, I order that:-

(1)  The costs in respect of the Plaintiff’s application for the Mareva injunction against the Defendants be to the Plaintiff in the cause.

(2)  The costs arising from the Defendants’ opposition to the Plaintiff’s application (including the costs in respect of the present hearing, the affirmations in opposition filed by the Defendants and the affirmation in reply filed by the Plaintiff) be paid by the Defendants to the Plaintiff to be taxed forthwith on a party-to-party basis if not agreed (with certificate for counsel).

78.  I express my gratitude to Mr Byron Chiu and Mr Kevin Lau for their very helpful assistance.

HCA 2397/2024

[2025] HKCFI 1157

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2397 OF 2024

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REASONS FOR DECISION

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A.  INTRODUCTION

1.  On the face of it, this is a very simple time-extension application made by the 2^nd to 4^th defendants, and listed before this Court on 10 March 2025 for 3 minutes only (“the Time Extension Summons”).  However, because of the way this case has been conducted, I would like to make use of this opportunity to set out my own observations for practitioners’ reference, and hopefully this can achieve the purpose of saving not only the Court’s time but also parties’ costs in future. 

B.  BACKGROUND

2.  This action was commenced by the plaintiff on 3 December 2024 against the defendants.  In a gist, it is alleged that the 1^st, 3^rd and 4^th defendants, who were former employees of the plaintiff, have, inter alia, diverted the plaintiff’s businesses away from the plaintiff to the 2^nd defendant, which is a company set up by the 1^st defendant.

3.  Upon the commencement of this action, the plaintiff filed a summons (“the Mareva Summons”), returnable on 6 December 2024, to apply for Mareva injunction and disclosure orders. 

4.  The matter was heard by Tam J, who adjourned the Mareva Summons for argument upon a series of undertakings given by the defendants to the Court.

5.  On 11 December 2024, Tam J further granted leave to the defendants to file and serve affirmation(s)  in opposition to the Mareva Summons on or before 27 December 2024.

6.  By consent, the time for the defendants to file and serve affirmation(s)  in opposition to the Mareva Summons was extended by Master Hui on 3 January 2025 to 24 January 2025.

7.  On 4 February 2025, the said time limit was further extended by Master Thomas Kwong to 4 March 2025.

8.  In the meantime, the plaintiff took out another summons on 25 February 2025 (“the Worldwide Mareva Summons”), and applied to extend the then existing application for local Mareva injunction into one for worldwide Mareva injunction against the 1^st defendant covering his assets in Canada, France and United Kingdom. 

9.  The call-over hearing of the Worldwide Mareva Summons was fixed to be heard before this Court on 28 February 2025 (“the Call-Over Hearing”).

10.  As the Worldwide Mareva Summons only concerned the 1^st defendant, theoretically, the 2^nd – 4^th defendants were not required to attend the Call-Over Hearing.  However, since all 4 defendants were represented by the same firm of solicitors, that means their solicitors’ firm would have representative attending the Call-Over Hearing anyway.

11.  Both the plaintiff and the 1^st defendant were represented by counsel at the Call-Over Hearing.  Upon negotiation, they agreed that, upon certain undertaking given by the 1^st defendant to the Court, the Worldwide Mareva Summons shall be adjourned for argument and to be heard together with the Mareva Summons. 

12.  The plaintiff and the 1^st defendant further agreed that the 1^st defendant shall file and serve his affirmation in opposition to the Mareva Summons and the Worldwide Mareva Summons in a composite manner, and the time for doing so should be in accordance with that ordered by Master Thomas Kwong (i.e. 4 March 2025).  

13.  As the said due date of 4 March 2025 was only 2 working days away, this Court enquired with the 1^st defendant’s counsel whether it was realistic to expect the 1^st defendant to file an affirmation to deal with the Worldwide Mareva Summons within such a short time.  Upon such an enquiry, parties agreed that the 1^st defendant should be granted time to file his composite affirmation.  It was further agreed that the extension of time should be granted on an unless basis, given the substantive argument for the Mareva Summons has already been fixed to be heard on 3 June 2025.  What they could not agree was the deadline by which such an affirmation should be filed.  Having heard submissions, it was ordered that unless the 1^st defendant’s affirmation would be filed and served by 4pm on 14 March 2025, he shall be debarred from doing so.

14.  It may be recalled that the 2^nd – 4^th defendants were also yet to file and serve their affirmation(s)  in opposition by the time of the Call-Over Hearing.  The deadline for them to do so was still 4 March 2025.  This Court therefore enquired with Mr Lau for the 1^st defendant whether those defendants would also ask for an extension of time.  What this Court had in mind at the time was that if they intended to seek an extension of time anyway, the matter (which is very straight forward)  could be dealt with there and then.  Costs and time could be saved.  In the circumstances of the present case, in which Tam J had directed that the plaintiff shall file and serve its affirmation in reply within 21 days after the defendants have filed their affirmation(s), I could also see the advantage of the plaintiff having to file 1 affirmation only in reply to the affirmation(s)  of all the defendants, rather than filing an affirmation first in reply to the 2^nd – 4^th defendants, and then another affirmation to deal with the 1^st defendant’s composite affirmation.  This is particularly so because the 1^st defendant, being the most senior employee in charge of the plaintiff’s business and operations while he was in the employment of the plaintiff, had been portrayed as the main culprit.

15.  However, upon taking instructions from those instructing him, Mr Lau informed this Court that he had no instruction to apply for any extension of time for the 2^nd – 4^th defendants. As a result, their deadline to file and serve affirmation(s)  in opposition to the Mareva Summons remained 4 March 2025.

C.  THE 2^ND – 4^TH DEFENDANTS’ APPLICATION FOR EXTENSION OF TIME

16.  To my surprise, it has now transpired that, on 25 February 2025 (i.e. 3 days before the Call-Over Hearing), the defendants’ solicitors, Messrs. Han Kun Law Offices LLP (“Han Kun”), had already written to the plaintiff’s solicitors, Messrs. Ho & Ip (“Ho & Ip”), and asked for extension of time of 28 days for all 4 defendants to file and serve their affirmation(s)  in opposition to the Mareva Summons.

17.  By the time of the Call-Over Hearing, Ho & Ip had not replied to the said request yet.

18.  As aforesaid, the Call-Over Hearing of the Worldwide Mareva Summons was heard on 28 February 2025 (Friday), at which the solicitor of Han Kun present for the 1^st defendant informed the Court through counsel that the firm had no instruction to ask for any extension of time, and as a result, no extension was granted.

19.  On the following working day (i.e. 3 March 2025 (Monday)), Han Kun wrote to Ho & Ip again (“Han Kun’s 3 March Letter”), and asked for extension of time for the 2^nd – 4^th defendants to file and serve affirmation(s)  in opposition to the Mareva Summons by 14 March 2025 on an unless basis (that is, to make the timetable identical to that which was set by this Court in the Call-Over Hearing).  It was also stated that if the plaintiff did not agree to the said proposal, the 2^nd – 4^th defendants would take out a summons on the following day (i.e. 4 March 2025 – the deadline imposed by the order of Master Thomas Kwong dated 4 February 2025).

20.  Ho & Ip replied on the same day.  For the purpose of this Reasons for Decision, it is necessary to quote the letter in full:

“1. We refer to your letters of 25 February 2025 and 3 March 2025, both relating to your seeking of further 28 days extension of time for all or some of your clients to file their affirmation(s)  in opposition in relation to our client’s application by Summons of 3 December 2024 (‘3.12.2024 Summons’).

History of extension applications

2. This is the third time an extension is sought by your clients. Briefly set out below is the record of your clients’ previous extension applications :-

2.1

Time for D1 to D4 to file their Affirmation(s)  in opposition to 3.12.2024 Summons
	Dates of		Court Orders
	Applications for extension	Agreed / extended
1.	2024.12.10	2024.12.27	Order on 2024.12.11
2.	2024.12.24	2025.01.24	Order on 2025.01.03
3.	2025.01.24	2025.03.04	Order on 2025.02.04

2.2  First extension was requested for 28 days by your letter dated 18 December 2024.  In our letter in reply dated 23 December 2024, we have stated our view that the reasons stated in your said letter is not valid.  Nevertheless, we have consent to your request for 21 days extension as requested.

2.3  The second extension was made in your letter dated 21 January 2025 for a further 28 days. You simply reiterated the same reasons given in your previous letter dated 18 December 2024 with no explanation as to why your clients need further time since 18 December 2024 (when you had considered that 21 days extension was sufficient).  Hence, our client did not agree to a further extension. At the hearing on 4 February 2025, when the extension of 28 days was given, Master T Kwong clearly stated that any further extension will likely be made on an unless basis only. 

Orders made on 28 February 2025 in 25.2.2025 Summons

3.  At the hearing of our client’s further summons application dated 25 February 2025 (‘25.2.2025 Summons’)  on 28 February 2025, it was ordered, inter alia, that the 1^st Defendant do file his opposition affirmation in a composite way to the 2 Summonses (3.12.2024 Summons and 25.2.2025 Summons)  by 14 March 2025 on an unless basis. Our client will need to file its affirmation in reply in a composite manner by 3 April 2025.

4.  In light of the Order of Mr. Justice H. Au-Yeung made at the Court hearing on 28 February 2025, the extension request for 1^st Defendant is no longer relevant as the time had now been set by Mr. Justice H. Au-Yeung.

5.  At the hearing on 28 February 2025, the learned Mr. Justice H. Au-Yeung also asked if any like extension for filing of affirmation in opposition for the other Defendants (i.e. 2^nd to 4^th Defendants)  was needed and if so, the Court could deal with it at the hearing.  Counsel for the 1^st Defendant, after taking instructions from your representatives, replied no.

6.  We now received your letter of even date continuing the request for extension of time for the 2^nd to 4^th Defendants in the matter.  Up to this moment, you have proffered no explanation as to why the matter could not have been handled and resolved at the hearing on 28 February 2025.

7.   We failed to see any logic or reason that the 2^nd to 4^th Defendants could have a longer extension than the 1^st Defendant.

8.  We agree that the 2^nd to 4^th Defendants should also have the same time line as the 1^st Defendant as regards the filing of affirmation in opposition. 

9.  By reasons of matters stated above, our client is prepared to enter into a consent summons in the terms below:-

(a)   Unless the 2^nd, 3^rd and 4^th Defendants do file and serve their affirmation(s)  in opposition to the Plaintiff’s Summons filed on 3 December 2024 by 4:00 p.m. on 14 March 2025, they shall be debarred from doing so;

(b)   Costs of and occasioned by this summons application be paid by the 2^nd to 4^th Defendants to the Plaintiff on an indemnity basis forthwith.

10.  Should you insist to make an application to the Court for the extension concerned, please also let the Court have notice of this letter and for the Court’s attention and consideration.”  (original emphasis)

(“Ho & Ip’s 3 March Letter”)

21.  On 4 March 2025, the 2^nd to 4^th defendants took out the Time Extension Summons, returnable on 10 March 2025 before this Court.

22.  On 5 March 2025, Han Kun replied to Ho & Ip by letter that while the 2^nd – 4^th defendants agreed to bear the plaintiff’s standard costs of $1,040, they refused to pay indemnity costs. 

23.  Ho & Ip then wrote to this Court on the same day.  This letter reads:

“We refer to the Defendants’ Summons for time extension returnable on 10 March 2025 at 9:30am and write to seek the Court’s leave for excusing our attendance at the said hearing in order to save costs.

Our stance has been clearly stated in our letter dated 3 March 2025 to Han Kun Law Offices (copy enclosed). We do not object to the extension sought on an unless basis and we consider it appropriate for costs be awarded on indemnity basis.

Our view is that had the Defendants took the Court’s open invitation to deal with the extension at the hearing on 28 February 2025, the present application and the time and costs thereof incurred would not be necessary. Costs have been wasted. Hence, the Plaintiff is entitled to costs on indemnity basis. Thus far, there is no proper explanation proffered by the Defendants. It is pertinent to note that the extension for all Defendants had been raised and requested in the letter dated 25 February 2025 from Han Kun Law Offices, in which a draft Consent Summons on behalf of all Defendants was also enclosed. It is clear that prior to the hearing on 28 February 2025, Han Kun Law Offices had instructions from all the Defendants in the extension application.

We enclose herewith the following correspondence for the Court’s consideration : -

(1)  letter dated 25 February 2025 from Han Kun Law Offices;

(2)  letter dated 3 March 2025 from Han Kun Law Offices;

(3)  letter dated 3 March 2025 from Ho & Ip Solicitors; and

(4)  letter dated 5 March 2025 from Han Kun Law Offices.

As costs is at the discretion of the Court, we would leave the matter to the Court’s determination. We would respectfully ask the Court’s leave that our attendance at the Court hearing on 10 March 2025 be excused so as to save costs.

[…]”

(Original emphasis)

(“Ho & Ip’s 5 March Letter”)

24.  This Court replied to Ho & Ip on 6 March 2025 in the following way:

“Parties shall endeavour to reach an agreement on this simple matter and file a Consent Summons (if agreement can be reached)  as soon as possible. The Court would not consider submissions made by letter.”

25.  Unfortunately, as parties could not reach any agreement, the hearing on 10 March 2025 had to proceed as scheduled.

D.  THIS COURT’S OBSERVATION

26.  My observations on how the case has been conducted are as follows.

D1.  Correspondence between solicitors

27.  Understandably, part of litigation solicitors’ usual task is to correspond with solicitors representing the opponent by letters.

28.  It is also entirely reasonable that solicitors charge their clients for the time incurred for perusing and writing those letters.

29.  However, solicitors must have a duty to their clients not to incur costs unnecessarily, for example, by doing something which is not useful at all in advancing their clients’ case.

30.  Ho & Ip’s 3 March Letter serves a good example to illustrate this point. 

31.  It may be recalled that, by Han Kun’s 3 March Letter, Han Kun has proposed that a further extension of time up to 4pm on 14 March 2025 be granted to the 2^nd to 4^th defendants to file their affirmation(s)  in opposition on an unless basis.  While I am not saying that it is blameless for the 2^nd to 4^th defendants to seek a further extension of time, in the circumstances of the case, there is no doubt that this request would not cause any delay to the proceedings as a whole, and the plaintiff would not be prejudiced in any way because it would still have 21 days thereafter to prepare its affirmation in reply.  Indeed, as confirmed by Mr Lo for the plaintiff at the hearing on 10 March 2025, if this request for extension had been made at the Call-Over Hearing, he would have instructed counsel to accept it. 

32.  The only valid complaint which Ho & Ip could have was why Han Kun informed the Court at the Call-Over Hearing that they did not have instructions to ask for extension of time, when they had in fact, by letter dated 25 February 2025, made such a request even before the said hearing. If they had asked for an extension of time at the Call-Over Hearing, then parties would not have to deal with this matter again.

33.  Be that as it may, with greatest respect to the solicitor who decided to make a mountain out of a molehill, there is absolutely no need and inappropriate for Ho & Ip to incur costs for a letter which is as long as the Ho & Ip’s 3 March Letter, reciting the history of time extension(s)  obtained by the defendants all the way from December 2024 (because they had already agreed to an unless order).  It is also puzzling as to why Ho & Ip considered it necessary to argue that there is no reason that the 2^nd to 4^th defendants should be granted a longer extension than that which the 1^st defendant had obtained.  I have not lost sight of Han Kun’s suggestion in their letter dated 3 March 2025 to the contrary, but that is water under the bridge because, despite such a suggestion, the 2^nd to 4^th defendants were, after all, not asking for such a “longer extension”.

34.  When the matter can be dealt with by a short letter, it is unreasonable for litigation solicitors to write long letters which cannot achieve any meaningful purpose (apart from winning an “argument”).  This would not only incur costs for their own clients.  It would also lead to higher costs to the other side who has to pay for their solicitors perusing such meaningless letters.

35.  I therefore urge solicitors to bear this in mind before they decide to incur time and costs on such correspondences. 

D2.  Copying the court with correspondences

36.  On 28 October 2016, Lam VP (as he then was)  handed down Reasons for Judgment in AXA China Region Insurance Company Limited v Leong Fong Cheng (CACV 113/2016, unreported, 28 October 2016)  in which his Lordship reminded practitioners and litigants that:

“44. […] As laid down in the rules (Order 59 Rule 14(1)  of the Rules of the High Court, the proper procedure for making applications in an appeal is by way of summons which should set out the relief sought. In most cases, an application should be supported by affidavit or affirmation. The summons and the affidavit or affirmation must be served on the other parties to the appeal. Though the court may now process an interlocutory application on paper, it usually gives directions for the orderly filing of evidence and submissions upon a proper application by summons having been filed. It is only in very exceptional circumstances that the court will entertain an application by letter.

45. Unfortunately, the indulgence of the court in entertaining informal requests or applications by correspondence has too often been exploited and abused by some litigants acting in person (and occasionally by solicitors)  who developed a habit of writing to court without regard to the proper procedure that should be followed. This is not acceptable because judicial time is limited and the court has to distribute such limited resource on a fair and orderly basis.

[…]

50. Judges cannot be expected to read correspondence from a litigant as soon as they were sent or faxed to the court. But some litigants apparently have such expectations. Judicial clerks are often harassed by telephone calls from such litigants.

51. The reality is that judges have to deal with many cases simultaneously and there is no reason why those making requests or applications by correspondence should be allowed to jump the queue when others who follow the proper procedures (by filing a summons and affirmations and submissions according to the directions from the court)  have to be deferred. Overlooking such irregularities is not in line with Order 1A Rule 1(f)  and Rule 2(1)  which require the court to ensure that the resources of the court are distributed fairly.

52. Moreover, in many instances, it is not appropriate for the court to act on assertions or statements set out in letters or faxes (which are not on oath), particularly when the other side has yet to respond.

53. Time has come for the court to reinstate firmly the proper procedural discipline even in cases involving litigants acting in person. Henceforth, whilst the court may consider notifying parties of dates of hearing and directions given by judges by letters or faxes, apart from queries regarding purely administrative or clerical matters which need not involve the exercise of any judicial power, the court generally will not take heed of applications, requests or assertions advanced by litigants (and solicitors)  in correspondence. If a party wishes to make an application, he or she (or the solicitor concerned)  should apply by summons, supported by affidavits or affirmations. Thus, a party cannot expect the judge to read (or reply to)  his or her letter unless it is a letter written pursuant to direction or leave granted by the judge.

54. Parties or solicitors can and should liaise with each other by correspondence. However, such correspondence should not be copied to the court. If such correspondence is relevant to a particular application, it should be produced in the proper way, viz by way of exhibit to an affidavit or affirmation filed in the context of that application.

55.  Efficient and effective case management can only be achieved if all stakeholders adhere to the rules and procedures that are in place (and they are in place for good reasons)  […]” 

37.  While Lam VP’s reminders were made in the context of an application to the Court of Appeal, they must also be applicable to the Court of First Instance (see Order 32 rule 1 of the Rules of the High Court). 

38.  I regret to say that, more than 8 years on since Lam VP’s reminders, the Court is still receiving applications made by letters from time to time from solicitors. While there are occasions when they have been expressly permitted to do so, on most other occasions they are not.  There have also been occasions when solicitors would seek directions from the Court by letter, and enclosed therewith a large number of correspondences exchanged between the 2 firms. Again, unless they have been expressly permitted by the Court to do so, this is entirely inappropriate.

39.  The above conduct is even more unacceptable, when actually solicitors have been reminded not to do it in as recent as May 2023.  On 18 May 2023, the Law Society has by virtue of its Circular 23-301 drawn its members’ attention to a letter dated 11 May 2023 issued by Au-Yeung J as Civil Listing Judge of the Court of First Instance.  For the sake of completeness, I set out the letter herein in full:

“The Court has been receiving lots of applications from solicitors by letters (or faxes), some of which are not even copied to the other parties of a case. Some letters have heavy enclosures.

May I remind practitioners of the case of AXA China Region Insurance Co Ltd, CACV 113/2016, 28 October 2016, §§44-45, 53-54 wherein Lam VP (as he then was)  referred to the situation of solicitors in writing to the Court without regard to the proper procedure that should be followed.

Please be reminded that a party cannot expect a judge to read or reply to his/her letter unless it is written pursuant to the direction or leave granted by the judge, or in response to requisitions from or matters initiated by the Court by letter or fax. Apart from queries regarding purely administrative or clerical matters which need not involve the exercise of any judicial power (like re-fixing of hearing dates by consent, clarification of judgments/orders which may call for corrigenda, or application for transcripts), the court generally will not take heed of applications, requests or assertions advanced by solicitors in correspondence.

Parties and solicitors can and should liaise by correspondence, but such correspondence should not be copied to the Court. Correspondence that is relevant to a particular application should be produced in the proper way, ie by way of exhibit to an affidavit filed in the context of that application.

Where there is an application to make, it should be done properly by a summons, supported by an affidavit (where needed)  filed at the same time.  Applications like variation of costs order nisi and stay of execution should not be done by letter.”

40.  The message contained in the above letter is crystal clear.  It is sincerely hoped that solicitors would comply with this in future.

D3.  Indemnity costs

41.  Costs are in the discretion of the Court, and it is trite that such discretion is not fettered or circumscribed beyond the requirement that taxation on an indemnity basis must be appropriate: Town Planning Board v Society for Protection of the Harbour Ltd (No 2) (2004)  7 HKCFAR 114, at [13], [16] & [17].

42.  As to when it would be appropriate to make an indemnity costs order, the general rules are also well established and have been discussed in many authorities. 

43.  In Overseas Trust Bank Ltd v Coopers & Lybrand (a firm)  and Others [1991] 1 HKLR 177, Godfrey J (as his Lordship then was)  explained that:

“[…] In order to justify a taxation on the indemnity basis, the successful party has to show, either that the case is one of a type already recognised in the practice of the court as warranting a taxation on that basis (such as, for example, the contempt cases to which I have already referred)  or that there is some feature in the case even more special or unusual than one which would justify a taxation on the common fund basis. A case in which the successful party has demonstrated that the proceedings were initiated or prosecuted by the unsuccessful party in a manner which constitutes that party’s proceedings an abuse of the process of the court might well be a candidate for an award of taxation of costs on an indemnity basis. A taxation of the successful party’s costs on an indemnity basis could properly be ordered, in my opinion, where the proceedings were scandalous or vexatious, or had been initiated or prosecuted maliciously, or for an ulterior motive, or in an oppressive manner. Any proceedings instituted or prosecuted in such circumstances as to constitute an affront to the court could properly be the subject of a direction for taxation of the successful party’s costs on an indemnity basis.” (at 182G – 183C)

44.  In Choy Yee Chun (The representative of the estate of Chan Pui Yiu)  v Bond Star Development Ltd[1997] HKLRD 1327, Stock J (as his Lordship then was), having referred to the Judgment quoted above, stated:

“It has since been held that, though there must still be shown special and unusual features, even the circumstances particularised by Godfrey J. are not to be taken as exhaustive of the conditions in which it might be appropriate to make such an award, and that the power to award taxation on an indemnity basis is not confined to cases which have been brought with an ulterior motive or for an improper purpose. (See Macmillan Inc. v. Bishopsgate Investment Trust Ltd., 10 December 1993 (unreported)  cited in Sung Foo Kee Ltd. v. Pak Lik Co. [1996]3 HKC 570).

In Sung Foo Kee Ltd a litigant had been repeatedly in contempt of court orders and the trial judge had found that the defendant had deployed defences which he termed “hocus pocus” and had used the legal process to prevent the plaintiff obtaining its just payment.  The Court of Appeal said that it would have awarded costs on an indemnity basis.  It remarked (at page 575)  that the circumstances in which an indemnity award might properly be made were not restricted to circumstances such as those described by Godfrey J. in Overseas Trust Bank (supra). At p.575B - E of Sung Foo Kee Ltd. (supra), Godfrey J.A. said –

‘Here, as in England and Wales, the judge has a discretion, in a case which does fall outside the general rule, to direct the taxation of the receiving party’s costs on the basis which he considers to be appropriate to that case. This is not a discretion limited by indications in previous cases, such as, eg the observations of Godfrey J in Overseas Trust Bank Ltd v Coopers & Lybrand [1991] 1 HKLR 177 (in which he declined to order the successful party’s costs to be taxed on the indemnity basis), as to the sort of special or unusual feature (there does have to be some special or unusual feature)  which could justify an award of indemnity costs. Although the examples given in the judgment of Godfrey J at 182J-183C may be of assistance in other cases in which indemnity costs are claimed, his judgment does not purport to be and is not to be taken as determinative of the sort of case in which indemnity costs may be ordered.’

The Court of Appeal endorsed the view of the English courts that :

‘The power to order taxation on an indemnity basis is not confined to cases which have been brought with an ulterior motive or for an improper purpose. Litigants who conduct their cases in bad faith, or as a personal vendetta, or in an improper or oppressive manner, or who cause costs to be incurred irrationally or out of all proportion as to what is at stake, may also expect to be ordered to pay costs on an indemnity basis if they lose, and have part of their costs disallowed if they win.  Nor are these necessarily the only situations where the jurisdiction may be exercised; the discretion is not to be fettered or circumscribed beyond the requirement that taxation on an indemnity basis must be ‘appropriate’.’ (see Macmillan Inc. v. Bishopsgate Investment Trust Ltd. supra)

Further at p.576 -

‘… it is a pity that various courts have attempted to define in exactly what circumstances indemnity costs may be ordered.’ (see Munkenbeck & Marshall v. McAlpine (1995)  44 Con LR 30 per Hollis J, at page 33)

The Court of Appeal in Sung Foo Kee Ltd at page 576F added :

‘… Our rules do now expressly provide for the taxation of costs on an indemnity basis and when they consider it appropriate judges should not be slow to make orders for the receiving party’s costs to be taxed on that basis.’ ”

(at 1334G – 1335G)

45.  In Cheung Wei Man Vivien and Chan Kim Thiam v Centaline Property Agency Ltd & Others (HCA 286/2000, unreported, 15 December 2006), Lam J (as Lam PJ then was)  also had the following to say:

“6. It is also useful to remind ourselves what Simon Brown LJ said in Liam v MGN Ltd (No.2) [2002] 1 WLR 2810 at Paras.11 and 12 in considering whether the conduct of a losing party is so unreasonable so as to warrant an award of indemnity costs. In particular, at Para.12, His Lordship observed,

‘I for my part understand the court there to have been deciding no more than that conduct, albeit falling short of misconduct deserving of moral condemnation, can be so unreasonable as to justify an order for indemnity costs.  With that I respectfully agree.  To my mind, however, such conduct would need to be unreasonable to a high degree; unreasonable in this context certainly does not mean merely wrong or misguided in hindsight.’ ”

46.  It can therefore be seen that, while the Court would take into account the litigation conduct of a party when deciding whether to make an indemnity costs order, such conduct has to be “unreasonable to a high degree”, and unreasonable in this context “certainly does not mean merely wrong or misguided in hindsight”.

47.  Although it goes without saying that each application has to be considered on a case-by-case basis, in my view, legal representatives should be able to exercise their good common sense when deciding whether the seriousness of the case which they are handling is to the extent that it worth incurring costs on pursuing for indemnity costs.  If the case is not serious enough, it would simply be a waste of costs for putting forward such an application. Legal representatives should also consider proportionality in the process.   If the extra amount of costs which their clients would be able to recover from the other side (as compared to the usual party-and-party costs)  is not much as compared to the costs which need to be incurred for the purpose of making the application for an indemnity costs order, then the legal representatives should advise their clients accordingly.  Indeed, for most lay clients, the court proceeding which they are facing is the only one which they have ever been involved in.  Therefore, they normally have to rely heavily on the advice of their legal representatives, especially in relation to matter concerning costs. Hence, it is of utmost importance that appropriate advice be given, so that costs would not be incurred unnecessarily. 

48.  It should also be borne in mind that, no matter how unmeritorious an application is, the Court is still duty bound to deal with it with reasons.  Viewed in this way, legal representatives who advise their clients to make applications without having properly assessed their merits beforehand are irresponsible not only to their clients, but also to the whole justice system, for our precious judicial resources should be wisely used.

49.  Unfortunately, the present case is another example when solicitors for the plaintiff should simply not have asked for indemnity costs.  I have come to this conclusion for 2 reasons.

50.  Firstly, while one can see the grievance of the plaintiff’s solicitors of having to deal with an extension of time application which could have been dealt with conveniently by the Court on an earlier occasion (at the Call-Over Hearing), as a matter of fact, having to deal with this new application is not something really troublesome, and would not lead to much extra time and costs.   As aforesaid, in the light of what happened at the Call-Over Hearing, it is in reality a no-brainer that the extension to 14 March 2025 on an unless order basis should be granted, and approving a simple consent summons containing an unless order to be drafted by the other side should not take more than 5 minutes.  While one may be interested to know why Han Kun would represent to the Court that they had no instruction to ask for an extension of time at the Call-Over Hearing when they clearly had already been instructed to ask for it by correspondence (see further Section F below), the insistence of knowing the answer in these circumstances simply cannot achieve anything meaningful.  Even if it is clear that Han Kun had made a mistake, in my view, it should be apparent that there is still a long way to go before one may categorise this conduct as “unreasonable to a high degree”.  If one has to talk about unreasonableness, I would say that Ho & Ip’s insistence of getting an indemnity costs order is even more unreasonable than Han Kun’s conduct at the Call-Over Hearing.

51.  Secondly, the plaintiff’s insistence for an indemnity costs order is apparently disproportionate.

52.  At the hearing on 10 March 2025, Mr Lo handed up a Statement of Costs and asked for more than $18,000 from the other side.  Upon further enquiry, Mr Lo confirmed that:

(1)  If, having received Han Kun’s 3 March Letter, the plaintiff agreed to the unless order as proposed by the 2^nd – 4^th defendants right away, the total amount of costs extra costs incurred would have been $4,540 (I would say that this in itself is on the high side);

(2)  In order to insist upon an indemnity costs order, an extra amount of costs in the total sum of around $12,000 has been incurred (including the drafting of letters, perusal of letters and court attendance).

53.  The figures speak louder than words.  In my view, the plaintiff’s insistence on an indemnity costs order is clearly in contravention of the underlying objective as provided by Order 1A rule 1(c)  of the Rules of the High Court (Cap.4A, Laws of Hong Kong): to promote a sense of reasonable proportion and procedural economy in the conduct of proceedings.

54.  I regret to say that this is not the first time I have encountered totally unmeritorious application for indemnity costs, and it seems to me that there is a trend that parties (usually represented)  would make such an application quite lightly without seriously considering whether that is appropriate or not. 

55.  I urge legal representatives to think through the matter carefully before suggesting that an indemnity costs order is appropriate.  They should not simply “try their luck”.

56.  Before I end this section, I should also record that Mr Lo agreed, upon reflection, that he should not have incurred time and costs on the demand for indemnity costs in the present case.  As a result, he has given an undertaking not to charge the plaintiff for Ho & Ip’s 3 March Letter, Ho & Ip’s 5 March Letter and his court attendance on 10 March 2025, which is accepted.

D4.  Excused from attending hearings

57.  From time to time, solicitors would write to the Court and ask to be excused from attending court hearings.  For example, if the court hearing relates to an interlocutory application which concerns the plaintiff and a co-defendant (but somehow the summons has been served on a defendant who has no interest in the said interlocutory application), then it is usually advisable for the solicitors acting for such a defendant to ask to be excused, so that costs on attendance at the hearing would not be unnecessarily incurred.

58.  However, if a party has an application to make at the hearing, then it is normally[1] not up to that party to put in a skeleton argument (or even a full written submission)  and then asks to be excused from attending the hearing, for it goes without saying that the attendance of the legal representative would be necessary so that questions from the Bench may be answered at the hearing.  

59.  Hence, in the present case, when Ho & Ip has made an application for indemnity costs on behalf of their lay client, they are obliged to attend the hearing.  It is inappropriate for them to ask the Court to read the arguments from the correspondence and ask to be excused “to save time and costs”.

60.  I should also add this.  From time to time, there are cases in which there are only 2 parties in an action, and the receiving end of an application would write to the Court, asking to be excused from attending the hearing, and stating that while it stays neutral to the application, it is up to the applicant to satisfy the Court that the order sought should be made.  In my view, normally[2] this is not an appropriate way to deal with the matter.  If the respondent has no objection to the application, he should liaise with the applicant on the terms of the consent summons so that the Court may consider whether to make the order and vacate the scheduled hearing.  To raise no objection against an application but at the same time refusing to sign a consent summons may be considered unreasonable which may lead to adverse cost consequence.

D5.  Agreement for time extension

61.  In relation to time summonses, normally the party who asks for the Court’s indulgence would be ordered to bear the costs of the other side.

62.  It may be because of this usual practice that it is not uncommon, especially in Masters’ Court, to see that applications for extension of time (even for first extension)  are met with objection, and the differences between the parties are sometimes whether, for example, the extension should be for 14 or 28 days.  While it is of course the applicant’s burden to satisfy the Court that the period of extension sought is reasonable, if the respondent to the application is minded to object against the extension, he should be prepared to explain, in the above example, why the extension should be limited to 14 days and the importance of speeding up the whole matter by 2 weeks.  A general assertion that there should be no delay in the matter, without more, is normally insufficient for this purpose.

63.  While I should not be taken to mean that parties should be encouraged to ask for a longer as opposed to a shorter extension of time (or to apply for extension at all – after all, the time limit imposed by the Rules of the High Court and the like is supposed to be complied with, and extension of time should not be regarded as the norm), in my view, respondents to such applications (and those advising them)  should bear in mind that they have to be reasonable when dealing with the matter.  They should consider whether the respondent’s interest would really be prejudiced by the extension, by reference to, for example, the time left before the substantive hearing is heard.  They should not object for the sake of objecting.  In this regard, practitioners are reminded that the Court is required to further the underlying objectives of the Rules of the High Court by actively managing cases, and that includes, inter alia, encouraging parties to co-operate with each other in the conduct of the proceedings: Order 1A rule 4(2)(a)  of the Rules of the High Court.

64.  Respondents to time summonses should also not take it for granted that they would be awarded costs no matter what happens at the time summons hearing.  It should be borne in mind that the Court has a wide and general discretion in matters relating to costs, and how the discretion ought to be exercised in any given case must depend on the facts and circumstances of the case: China Medical Technologies, Inc (in liquidation)  v Wu Xiaodong[2024] HKCA 310, at [8].  If the receiving end of a time summons does not deal with the matter reasonably, it would be open to the Court to make no order as to costs, or even to award costs to the party which has successfully obtained the extension which he asked for. 

65.  Hence, practitioners are reminded that they have to be reasonable in the conduct of the case, including time summonses.  Parties should not apply for extensions lightly, and if applied, the period of extension should be as short as possible.  On the other hand, consent to requests for time should not be unreasonably withheld.

66.  Having said all the above, it cannot be emphasised enough that the timetable set by the rules or by the Court is supposed to be complied with, all the more so in the case of time limit which has been extended already.  Therefore, if an applicant has applied for and been granted a time extension, he is even more expected to comply with it, rather than having to come back to the Court again for another extension of time. 

E.  ORDER

67.  Parties had reached consensus (even before the Time Extension Summons is taken out)  that the timetable for the 2^nd to 4^th defendants to file and serve their affirmation(s)  in opposition to the Mareva Summons should align with that related to the 1^st defendant, and that the extension should be granted on an unless order basis.

68.  I therefore ordered that unless the 2^nd to 4^th defendants do file and serve their affirmation(s)  in opposition by 4pm on 14 March 2025, they shall be debarred from doing so.

F.  COSTS

69.  In the present application, while the 2^nd to 4^th defendants are asking for indulgence of the Court, it is apparent that if the plaintiff did not unreasonably insist on getting an indemnity costs order against them, the hearing on 10 March 2025 would have been vacated by consent.

70.  On the other hand, I find that there was no reason why the 2^nd to 4^th defendants’ solicitors should not have asked for time extension at the Call-Over Hearing.  Ms Hui explained that she informed the Court through counsel at the Call-Over Hearing that she had no instruction to ask for extension because she was not in a position to accept an unless order there and then.  I do not accept this explanation, because she was simply not asked to agree to any unless order at the Call-Over Hearing.  There was nothing to stop her from asking for a 28 days’ extension on a without unless order basis.  This would be consistent with her instructions as reflected in her firm’s letter dated 25 February 2025. 

71.  Taking all these matters into account, I considered that the most appropriate costs order would be “No order as to costs”, which I had so ordered.

Mr K. Y. Lo of Ho & Ip, for the plaintiff

Ms Becky Hui of Han Kun Law Offices LLP, for the defendants