Chinacast Education Corporation and Others v. Chan Tze Ngon and Others

HCA 1062/2012

[2019] HKCFI 814

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1062 OF 2012

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REASONS FOR DECISION

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Introduction

1.By a notice of appeal to a judge in chambers under Order 58, rule 1 of the Rules of the High Court (“RHC”) dated 25 October 2018 (“the notice of appeal”) the3^rd defendant gave notice that he intended to appeal against the decision of Master M Wong (“the master”) given on 12 October 2018.

2.The hearing of the appeal came before me on 5 March 2019.

The jurisdiction point

3.The plaintiffs raised a jurisdiction point.  It was submitted by Mr Jonathan Wong, for the plaintiffs, that the nature of the proceedings before the master was an assessment of damages and hence, an appeal should lie to the Court of Appeal under Order 58, rule 2(b) RHC and not to a judge of the Court of First Instance in chambers under Order 58, rule 1.

4.After hearing the submissions of counsel on the question of jurisdiction, I dismissed the 3^rddefendant’s appeal against the decision of the master with costs to the plaintiffs.  I indicated that written reasons would be given later.  These are my reasons.

The relevant background

5.The plaintiffs obtained a Mareva injunction against various defendants, including the 3^rddefendant, by the order of Tong J on 19 June 2012 which was granted ex parte.  In obtaining the injunction, the plaintiffsgave the usual cross-undertaking in damages as contained in Schedule 2 to the order of Tong J (“undertaking in damages”).  This provided that:

“ If the court later finds that this Order has caused loss to the Defendants or any other party and decides that the Defendant or that other party should be compensated for that loss, the Plaintiffs will comply with any order the court may make.”

6.The application by the plaintiffs for the continuation of the Mareva injunction against the 3^rddefendant came before Anthony Chan J for hearing on 29 and 30 October 2013. 

7.By his decision given on 11 November 2013 Anthony Chan J continued the Mareva injunction against the 3^rddefendant until the conclusion of trial or further order with the variations as set out in his order dated 11 November 2013.  Anthony Chan J also ordered the plaintiffs to fortify their undertaking in damages within 14 days from the date of the order with either a payment into court or a bank guarantee of HK$3 million.

8.The plaintiffs duly complied with the order to fortify their undertaking in damages by making a payment into court of the sum of HK$3 million.

9.After a lengthy trial before Deputy High Court Judge Kent Yee (“the judge”) the plaintiffs’ claims against D3 were dismissed for the reasons given by the judge in his judgment dated 31 July 2017.  The judgealso ordered, inter alia, that the Mareva injunction be discharged forthwith. 

10.The judge also entered judgment for the 3^rd defendant on his counterclaim for his outstanding remuneration but dismissed the 3^rd defendant’s counterclaim for damages.  I shall return to this later.

11.The plaintiffs subsequently applied by a summons filed on 7 August 2017 for payment out of the HK$3 million which had been paid into court as fortification of the undertaking in damages.

12.By a summons filed on 7 September 2017 the plaintiffs applied for a renewal of the Mareva injunction pending the determination of their appeal against the judgment of the judge dated 31 July 2017. 

13.The hearing of the plaintiffs’ summons for the renewal of the injunction came before the judge on 15 September 2017.

14.For the reasons given by him in his decision dated 19 September 2017, the judge ordered that the injunction be renewed until the determination of the plaintiffs’ renewed application to the Court of Appeal to be made within 21 days from the date of his decision.  The judge also said that if the plaintiffs did not make the renewed application to the Court of Appeal within 21 days, the renewal of the injunction granted by him would cease to have effect.

15.The plaintiffs’ application by the summons filed on 7 August 2017 for payment out of the HK$3 million paid into court as fortification of the undertaking in damages came before the judge on 27 September 2017 (“the 27 September 2017 hearing”).

16.At the 27 September 2017 hearing there were also the following applications before the judge:

(1)   an oral application on behalf of the plaintiffs for the cessation of the effect of the interim renewal of the injunction against the 3^rd defendant; and

(2)   an oral application on behalf of the 3^rddefendant for an inquiry as to damages as a result of the injunction against him.

17.After hearing solicitors for the plaintiffs and counsel for the 3^rddefendant, the judge made the order dated 27 September 2017. 

18.On the plaintiffs’ application for cessation of the effect of the interim renewal of the injunction against the 3^rddefendant, the judge ordered that the interim renewal of the injunction against the 3^rd defendantgranted by him on 19 September 2017 shall cease to have effect forthwith with an order for costs in favour of the 3^rddefendant.

19.On the 3^rd defendant’s application for an inquiry as to damagesas a result of the injunction against the 3^rd defendant, the judge ordered that:  

“ 3. The 3^rd Defendant do within 28 days from today file and serve his evidence in support of his claim for damages as a result of the injunction order by Mr. Justice Tong dated 19 June 2012;

4. The Plaintiffs do within 28 days thereafter file and serve their evidence in opposition to the 3^rdDefendant’s application;

5. The 3^rdDefendant do file and serve his evidence in reply, if any, within 21 days thereafter;

6. There be no further affirmation without leave of the court;

7. The 3^rd Defendant’s application for enquiry as to damages be heard before a Master in chambers on a date to be fixed not before 8 January 2018 for a pre-trial review with one hour reserved;

8. The costs of the hearing of the 3^rd Defendant’s application be in the cause of the application;”

20.At the 27 September 2017 hearing the judge also dismissed the plaintiffs’ summons for paymentout of the HK$3 million paid into court as fortification of the undertaking in damages with costs to the 3^rddefendant.

21.The pre-trial review first came before the master on 8 February2018.  It was adjourned to enable the 3^rd defendant to take out applications for expert directions and for cross-examination of the plaintiffs.

22.By a summons filed on 22 February 2018 the 3^rddefendant took out an application to be heard before the master at the adjourned pre-trial review for leave to adduce expert evidence on quantum of a registered professional surveyor in relation to the open market value of two properties. 

23.The adjourned pre-trial review came before the master on 23 April 2018. 

24.At the adjourned pre-trial review on 23 April 2018 the summons filed on 22 February 2018 was amended for the 3^rd defendant to add another expert in the summons namely, an expert on financial services and investments.

25.The plaintiffs’ and the 3^rd defendant were able to agree that there was no need to adduce the expert evidence of the registered professional surveyor as they could agree on the values of the properties in question. 

26.As regards the 3^rddefendant’s application for leave to add another expert on financial services and investments, the master dismissed that application.

27.At the adjourned pre-trial review on 23 April 2018, the master ordered, inter alia, that: 

“ 7. The 3^rd Defendant’s application for an inquiry as to damages (‘the Application’) be heard on a date to be fixed with half a day reserved in consultation with counsel’s diaries;

8. The affidavit evidence filed herein being the 10^th Affirmation of the 3^rd Defendant dated 19 October 2017, the 20^th Affidavit of Douglas Nelson Woodrum dated 21 November 2017 and the 11^th Affirmation of the 3^rd Defendant dated 11 December 2017 do stand as the parties’ evidence;

9. Costs of the pre-trial review be in the cause of the Application.”

28.The inquiry as to damages took place at a trial in open court before the master on 16 August 2018.  The master handed down his decision on 12 October 2018 (“the master’s decision”).

29.The notice of appeal was issued on 25 October 2018.

The submissions

30.Mr Wong submitted that the nature of the hearing before the master was an assessment of damages pursuant to the undertaking in damages.  He relied on Order 58, rule 2(b) RHC and submitted that an appeal from the master’s decision shall lie to the Court of Appeal under Order 58, rule 2(b) and not to a judge in chambers under Order 58, rule 1.

31.Mr Nicholas Cooney SC, with Mr Nicholas Oh, for the 3^rddefendant, submitted that the hearing before the master was not an assessment of damages. He submitted that what the 3^rddefendant was seeking before the master was compensation and that it was not correct to label the application as one for damages.  It was also submitted that the appeal was against the exercise of the master’s discretion and that it was proper to appeal to a judge in chambers under Order 58, rule 1.

Discussion

32.It is clear that the undertaking in damages is given to the courtand not to the party enjoined.  Where the injunction is discharged at trial, the party enjoined may apply to the court for the undertaking to be enforced.

33.As stated at para 29/1/25 of Hong Kong Civil Procedure 2019 Vol 1:

“ An undertaking in damages does not found an independent causeof action to recover losses sustained as a result of the injunction;the defendant’s only remedy is to enforce the cross-undertaking in the proceedings in which the cross-undertaking was given (Wingames Investment Ltd v. Mascot Land Ltd [2013] 1 H.K.L.R.D. 1186; [2013] 5 HKC 45). A cross-undertaking as to damages is given to the court, not to any opposite party, and no action, set-off or counterclaim can be founded upon it (YanfullInvestments Ltd v Datak Ooi Kee Liang (2017) 20 H.K.C.F.A.R 493, applying Wingames Investment Ltd, ibid.)”

34.As I have said, at the trial before him the judge entered judgment for the 3^rd defendant on his counterclaim for his remuneration but dismissed his counterclaim for damages.  The judge said at para 249 of his judgment:

“ I also enter judgement in favour of [the 3^rddefendant] in respect of his counterclaim regarding his outstanding remuneration. I cannot allow his claim for damages.”

35.The judge disallowed the 3^rd defendant’s claim for damages which he dealt with at para 7 of his judgment:

“ Moreover, in his counterclaim, [the 3^rd defendant] claims damages for his loss and damage arising from a Mareva injunction granted by A. Chan J against him upon the application of the Group (‘the Mareva Injunction’). This is an unusual claim, and [the 3^rd defendant] has not adduced any evidence to support his alleged loss and damage.In any event, if the Mareva Injunction is found to have been wrongly granted, the Group pursuant to their undertaking should compensate [the 3^rd defendant] for his loss and damage and this should not be canvassed in the trial.”

36.The judge was clearly right to dismiss the 3^rddefendant’s counterclaim for damages as a result of the Mareva injunction.  This was not a matter for the trial before the judge of the issues between the plaintiffs and the 3^rddefendant.  This was a matter of enforcement of the undertaking in damages.

37.There is no merit in the submission that the 3^rd defendant’s claim for compensation was not a claim for damages.

38.Mr Cooney relied on what McCombe LJ said in Abbey Forwarding Ltd v Hone (No 3) [2015] Ch 309 at 333 at para 63:

“ … I reach the conclusion that the law as to the recoverability of loss suffered by reason of a cross-undertaking is as stated byLord Diplock in his dictum in the Hoffmann–La Roche case, but with this caveat. Logical and sensible adjustments may well be required, simply because the court is not awarding damages for breach of contract. It is compensating for loss for which the defendant ‘should be compensated’ (to apply the words of the undertaking). Labels such as ‘common law damages’ and ‘equitable compensation’ are not, to my mind, useful. The court is compensating for loss caused by the injunction which was wrongly granted. It will usually do so applying the useful rules as to remoteness derived from the law of contract, but because there is in truth no contract there has to be room for exceptions.”

39.I do not see how the observations of McCombe LJ as set out above assists the 3^rddefendant.

40.The 3^rd defendant’s claim was clearly for damages for the loss he suffered as a result of the Mareva injunction. 

41.I would observe that in his counterclaim the 3^rddefendant’s claim for the loss he alleged to have suffered as a result of the Mareva injunction is pleaded at para 126 of his amended defence and counterclaim as follows:  

“ … by reason of the matters set out above and the hasty and ill-considered application for an injunction and obtaining of the injunction, the Plaintiffs have caused the 3^rd Defendant loss, including as follows: …”

Prayer (1) of the counterclaim claims damages. 

42.At the 27 September 2017 hearing before the judge and also at the first pre-trial review on 8 February 2018 and the adjourned pre-trial review before the master on 23 April 2018, the 3^rddefendant was represented by Mr Oh, who also appeared before me as Mr Cooney’s junior.

43.I would observe that Mr Oh, in his written note dated 19 April 2018 for the adjourned pre-trial review before the master on 23 April 2018, made it plain (at paras 1 and 2) that the hearing of the adjourned pre-trial review was for the inquiry as to damages arising from the Mareva injunction and that:  

“ [the 3^rd defendant’s] claim for damages are under two heads:

(a) Lost investment opportunity in Hong Kong in two properties that the 3^rd defendant had viewed and intended to purchase …;

(b)      Other lost investment opportunities, in particular, investing into a ‘diversified basket of investments’ ….”

44.It is significant that at para 5 of his said written note, Mr Oh submitted to the master as follows:

“ Nature of the hearing

5.         It is submitted that an inquiry of damages arising from a wrongfully granted Mareva injunction is no different from an assessment of damages, and can be heard before a Master.  Once it is decided that an inquiry should be ordered, the inquiry is to determine the amount of damage and the Court shall look into the causation, remoteness and quantum to determine the amount of damages payable ….” [emphasis added]

45.At para 39 of the 3^rddefendant’s 10^thaffirmation affirmed on 19 October 2017, which was part of the evidence at the trial before the master, the 3^rd defendant said:

“ In the premises, I would humbly pray for This Honourable Court to assess my damages at HK$7,290,000 or such sum as This Honourable Court shall deem fit.”

46.As set out at para 29/1/25 of Hong Kong Civil Procedure: 

“ On an application to enforce an undertaking as to damages, there are two separate points to consider: first, as a matter of discretion, should the court order that the undertaking be enforced? Secondly, if so, what loss has the defendant sufferedin terms of money, was it caused by the injunction and was it too remote? (Balkanbank v. Taher (No. 2) [1995] 1 W.L.R. 1056, CA). A judge may leave both questions to be determined at the same time, or, more probably, in an enquiry as to damages or he may decide the first question himself ….”

47.There are two separate questions to consider:

(1)   As a matter of discretion, should the court order that the undertaking be enforced? (“the first question”); and

(2)   If so, what loss has the defendant suffered in terms of money, was it caused by the injunction and was it too remote? (“the second question”).

48.The judge did not decide the first question himself. He left both the first question and the second question to be determined by the master in the inquiry as to damages.

49.At para 16 of the master’s decision, the master set out the 3^rddefendant’s claims as follows:

“ The 3^rd defendant’s claims

16. The 3^rd defendant claims damages arising from the Injunction Order which prevented him from:-

(1) Purchasing a property in Hong Kong, in particular,Flat 1404, Block B, Kornhill (‘Property A’) or Flat 808, Block H, Kornhill (‘Property B’);

(2) Purchasing a property in Beijing; and

(3)   Obtaining a reasonable return on the sums restrained.”

50.And at paras 29 and 30 of the master’s decision, he said:

“ 29. Based on the above, the 3^rddefendant estimates that the loss occasioned by the Injunction Order was as follows:-

(1) If he had purchased Property B and a property in Beijing,HK$7,290,000 (HK$2,890,000 + HK$4,400,000).

(2) If he had purchased Property B and invested in a basket of investments, HK$5,090,000 (HK$2,890,000 + HK$2,200,000).

30.       Thus, the 3^rd defendant asks the court to assess his damages at HK$7,290,000 or such sum as the court deems fit.”

51.At para 33 of the master’s decision, the master set out the submission of the 3^rddefendant:

“ … the 3^rddefendant submits that as the plaintiffs failed at trial, the injunction was wrongly granted, and the undertaking oughtto be given effect. There are no special circumstances to order otherwise. The inquiry itself should only be concerned with the quantum of damages to be awarded to the 3^rd defendant.”

52.It is plain that at the trial before the master, the 3^rddefendant was asking the master to assess damages and to award him damages at HK$7,290,000 or such sum as the court deems fit. 

53.The master also said at paras 34 to 36 of the master’s decision:

“ 34. On the other hand, the plaintiffs submit that on an application to enforce an undertaking as to damages, there are two separate points to consider (see HKCP 2019, paragraph 29/1/25):-

(1) First, as a matter of discretion, should the court order that the undertaking be enforced?

(2) Secondly, if so, what loss has the defendant suffered in terms of money, was it caused by the injunction and was it too remote?

35. A judge may leave both questions to be determined at the same time, or he may decide the first question himself. An order made on an application for an inquiry into damages should spell out clearly what, if any, residual discretion is left to be exercised later and it should, for example, be possible to tell on the face of the order whether the plaintiff is to pay the amount ascertained on the inquiry.

36.       In the present case, DHCJ Kent Yee does not seem to have answered the first question and only ordered that the Application be heard before a master.  The master is therefore required to decide on both questions.”

54.And at para 40 he said:

“ I therefore agree with the approach of the plaintiffs. The courtshould answer the two questions as submitted by the plaintiffs.”

55.As the master said at para 36, on the two questions to consider, the judge did not decide the first question himself and only ordered that the application for an inquiry as to damages be heard before a master.  The master was therefore required to decide the first question and the second question at the trial.

56.Accordingly, the master proceeded with the trial on the basis that both questions were live issues before him.

57.It was necessary for the 3^rd defendant to establish a reasonably arguable case for the loss that he allegedly suffered as a result of the injunction.

58.As to the first question, the master found as a fact that the 3^rddefendant did not establish a reasonably arguable case for the loss that he allegedly suffered (para 42 of the master’s decision).  This was a finding made after considering the evidence adduced at the trial before him.

59.The master gave detailed reasons for his finding at paras 43 to 64 of the master’s decision. 

60.At para 64 the master said:

“ In view of the lack of cogency of the 3^rd defendant’s evidence in establishing his loss, I am of the view that the court should not exercise its discretion to enforce the undertaking. The first question is therefore answered in the negative.”

61.The first question was resolved against the 3^rd defendant.

62.The master then went on to deal with what loss the 3^rd defendant has suffered at paras 65 and 66 of the master’s decision:

“ What loss has the 3^rd defendant suffered?

65. In view of my answer to the first question, there should not be an inquiry as to damages in the first place. Even if I am wrong on the first question, I am not satisfied that the 3^rd defendant has proved that he had suffered any loss as a result of the Injunction Order. The reasons are simply the same as mentioned above. There is a clear lack of cogent evidence to establish the 3^rddefendant’s loss or that such loss was caused by the Injunction Order.

66.       Thus, if I have to proceed to answer the second question,my assessment of the 3^rd defendant’s loss is nil.”

63.The nature of an appeal from a master to a judge in chambersis dealt with by way of actual rehearing of the application which led to the order under appeal, and the judge treats the matter as though it came before him for the first time (para 58/1/2 Hong Kong Civil Procedure).  Unlike an appeal to the Court of Appeal under Order 59, no grounds of appeal are required to be set out in a notice of appeal to a judge in chambers under Order 58, rule 1.

64.I would observe that in the notice of appeal the orders sought by the 3^rddefendant at the hearing of the appeal are:

“ 1. The 3^rd Defendant’s Application be allowed;

2.   The Plaintiffs’ liability for damages under the Undertaking be assessed at HK$3,160,000 or HK$2,890,000 (as the case may be); …”

65.It appears that for the appeal the 3^rd defendant has reduced his claim for damages but he nevertheless asks the court by way of rehearing to assess damages to him in the sums set out in the notice of appeal. 

66.Order 58, rule 2 provides that:

“ An appeal shall lie to the Court of Appeal from any judgment, order or decision (other than an interlocutory judgment, order or decision) of a master, given or made- …”

   (b) on an assessment of damages under Order 37 or otherwise …”

67.There is no merit in the submission that the nature of the proceedings before the master was not an assessment of damages but only an exercise of discretion by the master.  There was no order for a split trial of the first question and the second question.  The master was dealing with both the first question and the second question at the trial before him. 

68.I have also considered the question whether the master’s decision was an interlocutory decision.

69.In First Pacific Bank Ltd v Robert H.P. Fung [1990] 1 H.K.L.R. 527 it was held that as a general rule, a judgment or order in an application is to be regarded as interlocutory unless it would have the effect, whatever the result of the application, of finally disposing of the controversy between the parties.

70.It was also held that where there is a split trial or split hearing, a decision on a “preliminary issue” is not to be regarded as interlocutory simply because it will not be finally determinative of the action whichever way it goes.  Instead a broad commonsense test should be applied, asking whether, if not tried separately, the issue would have formed a substantive part of the final trial.

71.I would also refer to B + B Construction Ltd and Sun Alliance and London (2000) 3 HKCFAR where the Court of Final Appeal held, inter alia, that deciding whether an order of the Court of Appeal was final or interlocutory, involved an examination of the nature of the application to see if the order would, whether it failed or succeeded, determine the whole action.  In considering the nature of the application, it was necessary to look not only at its form, eg under which order or rule of court it was made, but also at the purpose and substance of the application and the issues to be determined by the court.

72.In Shell Hong Kong Ltd v Yeung Wai Man Kiu Yip Co. Ltd & another (2003) 6 HKCFAR 2 the Court of Final Appeal considered, inter alia, the question of whether a judgment was interlocutory or final for the purposes of appeal.

73.In dealing with the question of whether a judgment is interlocutory or final, Chan PJ said at paras 26 and 27:

“ Whether a judgment is interlocutory or final

26. In deciding whether an order or judgment is interlocutory or final for the purpose of obtaining leave to appeal, the court has preferred the “application approach” to the “order approach”, although it has been said that the former is “right in experience” and the latter is “right in logic” (per Lord Denning MR in Salter Rex & Co v Ghosh [1971] 2 QB 597 at p.601). See also First Pacific Bank Ltd v Robert HP Fung [1990] 1 HKLR 527 and B + B Construction Ltd v Sun Alliance and London Insurance Plc [2001] 1 HKLRD 1, where the application approach was affirmed. This approach was understood to involve an examination of the nature of the application to see whether the order or judgment made upon such an application would, whether it fails or succeeds, determine the whole action.

27. But it has been recognized that, on the application approach, a judgment, in some circumstances, may be final even if it does not finally determine the whole action, see eg White v Brunton [1984] QB 570; Holmes v Bangladesh Biman Corp [1988] 2 Lloyd’s Rep 120; First Pacific Bank Ltd v Robert HP Fung [1990] 1 HKLR 527.”

74.After reviewing the authorities he cited, Chan PJ said at para 31:

“ In my view, what one can extract from these cases is that where an order or judgment given in an application does not finally dispose of the whole action but only an issue in the action, it is necessary to consider the purpose and substance of the application, the issue dealt with and determined by the court and the effect of a determination of this issue on the rights of the parties, the further conduct of the proceeding and the final disposal of the whole action. A broad commonsense approach should be adopted. If the issue dealt with and determined by the court is “a substantive part of the final trial” (Holmes v Bangladesh Biman Corp [1988] 2 Lloyd’s Rep 120 at p.124); or “a crucial issue” in the case or a point “that goes to the root of the case” (First Pacific Bank Ltd v Robert HP Fung [1990] 1 HKLR 527 at p.532), or “a dominant feature of the case” (Korso Finance Establishment Anstalt v Wedge & Others (unrep., 15 February 1994) at p.7), then the order or judgment, even if it does not finally dispose of the whole action, should nevertheless be regarded as a final judgment.”

75.In my view, the determination of the first question by the master after considering the evidence adduced at the trial before him was a final and not an interlocutory decision.  It had the effect of finally disposing of the controversy between the parties.

76.The word “otherwise” simply means “in another way, or in other ways; by other means …; in another case; in other circumstances …; in other respects ….” (Shorter Oxford English Dictionary 6^thed).

77.I was satisfied that the nature of the proceedings before the master was an assessment of damages under the “or otherwise” limb in Order 58, rule 2(b) and as such, an appeal lies to the Court of Appeal and not to a judge of the Court of First Instance in chambers.

78.For those reasons I dismissed the appeal with costs to the plaintiffs.

Mr Jonathan Wong, instructed by Norton Rose Fulbright Hong Kong, for the 1^st to 5^th plaintiffs

Mr Nicholas Cooney SC and Mr Nicholas Oh, instructed by Lee & Chow, for the 3^rd defendant