Case Document

100%Judiciary

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1069 OF 2008

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HCA 1069/2008

BETWEEN
	YAN HOW YEE (甄巧儀)	Plaintiff
	and
	YU KIN SANG PAUL (俞乾生)	1^st Defendant
	WONG WAI FAN FANNY (黃惠芬)	2^nd Defendant
	CHAN MEI FUN (陳美芬)	3^rd Defendant
	HO KEUNG FAI (何強輝)	4^th Defendant
	WOS BUILDING MATERIALS (HK) COMPANY LIMITED (香港活士木製品有限公司)	5^th Defendant
	HAYWOOD INTERNATIONAL DEVELOPMENT LIMITED (希活國際發展有限公司)	6^th Defendant

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Before: Deputy High Court Judge Field in Chambers

Date of Hearing: 3 November 2016

Date of Judgment: 3 November 2016

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JUDGMENT

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Introduction

1.This is an appeal against the order of Master Chow dated 10 November 2015, by which she stayed the defendants’ Bill of Costs and Notice of Commencement of Taxation and awarded to the plaintiff (“P”) the costs of and occasioned by the plaintiff’s taxation strike‑out summons.

2.I think it appropriate briefly to sketch out the background to that order and, in doing so, I draw liberally on the factual summaries contained in the two skeleton arguments that have been put before the court .

3.P and the 1^st defendant (“D1”) had been business partners from about 1990 until the action herein was begun. The business was one in the wood and timber trade, in particular the sale of veneer products. The business was done through the 6^th defendant, Haywood International Development Limited (“the company”).

4.P and D1 had been the only two shareholders in the company, each holding 50 per cent of its issued capital; they were also the only two directors of the company.

5.D1 gave notice of his resignation as a director of the company with effect from 12 July 2008 on 15 July 2008.

6.The 5^th defendant (“D5”) is a Hong Kong company incorporated on 15 May 2008 and at all material times it has been controlled and beneficially owned by D1. It is undisputed that D5 has carried on the same sort of business as is carried on by the company.

7.The 2^nd Defendant (“D2”) was an accounting clerk of the company who resigned on 18 February 2008, with effect from 18 March 2008. On leaving the company’s employment she took up employment with D5.

8.The 3^rd Defendant (“D3”) was the sales executive of the company. She resigned on 7 April 2008 with effect from 7 May 2008 and then took up employment with the D5.

9.The 4^th Defendant (“D4”) was employed by the company as a warehouse worker and messenger until he was summarily dismissed on 2 May 2008.

10.In her action brought derivately against the defendants [HCA 1069/2008], P’s case was that D1 wrongfully and in breach of fiduciary duty had set up a business competing with the company and that the other defendants had dishonestly participated, in one way or another, in the breaches of fiduciary duty alleged against D1.

11.The Defence of the defendants appears to be a narrow one. It is that D1 terminated his directorship of the company in or around mid‑August 2007 and was no longer under fiduciary obligations to the company when the competing business run by D5 was established and began operation.

12.There was a mediation and at the conclusion of that process a handwritten “agreement” was signed by D1, D2 and D3. P was of the view that a binding settlement agreement had been concluded and sought to take steps to have that agreement formalised, in which case the original action would be brought to an end. D1, D2 and D3 insisted that no binding settlement had been concluded.

13.P then took out a summons in the original action on 25 July 2014 to enforce the alleged settlement agreement. ‌In effect, P was proceeding on the basis as if a Tomlin order had been made staying the action other than for the purposes of enforcing the terms of settlement.

14.Doubts were expressed as to whether it was appropriate to seek to enforce the settlement agreement through a summons taken out in the original action and in the result the parties agreed a consent order by which the summons would be discontinued, with the plaintiff bringing a fresh action by writ to enforce the settlement agreement. The consent order was made on 6 January 2015. It provided that D1, D2 and D3 shouldhave their costs of the discontinued summons. The consent order did not provide that the costs were to be taxable forthwith or that there should be a summary assessment as to the costs.

15.Some months later on 6 October 2015, D1, D2 and D3 began the process of seeking a taxation of the costs awarded under the consent summons. As I have already indicated, P moved to strike out those costs proceedings. She relied on Order 62, rule 9D para (1) which provides:

“Subject to paragraphs (2) and (4), the costs of any proceedings shall not be taxed until the conclusion of the action.”

16.Master Chow took the view that the original action had not been concluded and that accordingly the attempt to tax the costs awarded under the consent order was misconceived.

17.On behalf of D1, D2 and D3 who now appeal against Master Chow’s order, Mr Peter Yu has submitted that P’s original action, as a matter of practicality and common sense, had been concluded and Master Chow was wrong to find to the contrary.

18.Mr Yu prayed in aid the decision of Mr Edward Chan SC, sitting as a Deputy High Court Judge, in Sang Hing Mechanical and Electrical Engineering Limited v Arnhold & Co Ltd [2005] 1 HKLRD 540. He drew my attention to paragraph 15 of the judgment in that case where the learned Deputy Judge considered situations in which a case may come to an end for the purposes of interpreting the expression (“costs in any event”) under the former Rules of Court. In the course of this paragraph, he said :

“.... The action may be settled with a consent order or judgment. On the other hand, an action may be settled by a Tomlin order in which case, the action is stayed with liberty to apply for the purpose of carrying out the terms of settlement reached betweenthe parties. ‌Likewise in some instances, after the commencement of an action by a plaintiff, a defendant may apply to have the action stayed on various grounds. ‌The existence of an arbitrationagreement is merely one of the instances for application for stayof the action. Other grounds for stay of the action may include forum non conveniens. In all these instances where the action is stayed, the underlying dispute between the parties has not been resolved. It would only be determined by another forum or tribunal. In my view where an action is stayed, the action should be considered as having come to an end for the purpose of deciding whether there is an ‘event’ for the taxation of an order for ‘cost in any event’. In as much as a judgment in an action may be set aside on appeal or on the ground of fraud, the mere existence of a possibility that a stay may be lifted on some special grounds does not mean that the action stayed is still on going so that an order for ‘cost in any event’ should not be taxed. ”

19.In my judgment, those observations of the Deputy Judge are not applicable to the factual situation before me. ‌As I have said, the Deputy Judge there was concerned with whether there had been an “event” for the purposes of the previous Order 62 in the Hong Kong Rules of Court. This appeal is concerned with the meaning and effect of the words “the conclusion of the action” in the current Order 62, rule 9D that is part of a series of new rules dealing with costs.

20.I am quite satisfied that the original action brought by the plaintiff has not been concluded. I say this because D1, D2 and D3 are stoutly defending the claim that the action was settled at the end of the mediation. If that defence succeeds, it is plain that the original action will continue. It is, in reality, merely stayed pending the outcome of the proceedings to enforce the settlement.

21.I am in no position to predict what the outcome of the settlement enforcement proceedings will be. I must proceed on the basis that there is a real possibility that the defendants will succeed in their defence. The inevitable consequence of that will be that the original action will proceed and, as Mr Yu has realistically accepted, it would be a nonsense in those circumstances for the plaintiff to have to issue fresh proceedings in order to make the self‑same claims which are already pleaded out in the original action.

22.Mr Yu had a subsidiary argument. He contended that, even if the action had not been concluded for the purposes of paragraph (1) of rule 9D, the Master ought to have found that there was no likelihood of anyfurther order being made in that cause or matter and, accordingly, pursuant to rule (4) of 9D, she should have allowed the taxation proceedings of the costs order made in the consent order.

23.In effect for the same reasons that I have concluded that the action has not concluded, I am of the view that the Master was well entitled to form the judgment that there was a likelihood of a further order being made within the original action. ‌That likelihood was of the same magnitude that the defence to the proceedings to enforce the settlement agreement would succeed.

24.Accordingly, despite the skilful and persuasive submissions that have been advanced on behalf of the appellant, for the reasons I have given this appeal is dismissed.