Cityton Development Inc. and Another v. Kum Kwok Wang and Another

DCCJ 6435/2004

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 6435 OF 2004

--------------------

BETWEEN

--------------------

Coram  :  His Honour Judge Chow in Chambers

Date of hearing  :  11^th February, 2006

Date of handing down Decision  :  28^th April, 2006

_______________

DECISION

_______________

1.By this application, the 1^st Defendant seeks to vary the costs order nisi made by this court on 30.12.2005, on the ground that since the substantive claim of the Plaintiffs is in respect of breach of confidentiality and that the interlocutory injunction was dismissed, costs should follow the event.  Hence the 1^st Defendant should be entitled to the costs in relation to that dismissed interlocutory application as well as costs occasioned by the Plaintiffs’ claims for permanent injunction.  He submits that the Court should adopt an issue based approach.  As such a proportion of the costs spent on the dismissed interlocutory application as well as the claims for permanent injunction should be apportioned to the 1^st Defendant and should be set off against the costs to which the Plaintiffs are entitled.  He further submits that the following are the relevant factors for consideration of costs:-

i.   The interlocutory injunction application was dismissed.

ii.   A large part of the pleadings and affirmations prepared by the 1^st Defendant which were geared towards answering and defending the confidentiality point.

iii.   Much effort was spent by the 1^st Defendant’s legal team in the preparation of defending and resisting such a substantive claim.

iv.  The substantive claim for a permanent injunction and restraint in respect of the confidentiality issue was conceded by the Plaintiff’s Counsel on the first day of trial.  Clearly this demonstrates that the Plaintiffs had embarked on an unfounded, improper, unreasonable and unwanted application at the interlocutory stage.  Thus costs had been wasted.

2.In the Judgment handed down on 30.12.2005, I set out clearly that this is an application by the Plaintiffs against their two former employees (the two Defendants) for breach of their duties of fidelity, on the ground that whilst still being employed by the Plaintiffs, the Defendants secretly set up a company to do business in competition with the Plaintiffs, and secretly diverted business from the Plaintiffs.  I concluded the liability issue by finding that “I accept the evidence of the Plaintiffs and reject that that of the 1^st Defendant.  I find that he was clearly in breach of his fiduciary duties owed to Cityon and his duties of fidelity owed to Goldway.”  According to the finding set out in the Judgment, to say that the Plaintiffs’ claim is in respect of breach of confidentiality is not entirely correct.  I only made an order in relation to the damages suffered by the Plaintiffs.  I made no order in respect of the Plaintiffs’ other prayers for reliefs.  The other reliefs, as stated in the Statement of Claim, are as follows:-

“(1)    The 1^st and/or 2^nd Defendants, whether acting by themselves, their directors, officers, agents or servants, or any of them or otherwise howsoever, be restrained from causing, soliciting or negotiating any business or business order with the customers of the 2^nd Plaintiff.

(2)     The 1^st and/or 2^nd Defendants, whether acting by themselves, their directors, officers, agents or servants, or any of them or otherwise howsoever, be restrained from dealing with or divulging confidential quoted pricing of the products of the 2^nd Plaintiff to their customer.

(3)     An Order that that each of the 1^st and 2^nd Defendants deliver up to the Plaintiffs’ solicitors all documents and/or electronic storage media (including but not limited to floppy disks and CD-ROMS), if any, containing the Confidential Information.”

3.According to the Court record, the interlocutory injunction heard on 21.1.2005 has not been dismissed.  Judge Wesley Wong, who heard the application, made no ruling on this application.  He merely ordered a speedy trial and that the costs of the application be costs in the cause.  In my view the Plaintiffs had a high chance of getting an interlocutory injunction.  The Plaintiffs’ counsel did not make any concession on the claim for a permanent injunction and restraint in respect of the confidentiality issue on the first day of trial.  He merely informed the Court that apart from damages, he would not seek other reliefs.  He did not tell me that he did this because he did not have a strong case.  On the issue of Confidential Information paragraph 11 of the Plaintiffs’ Statement of Claim and paragraph (3) of the Prayer of Claim do touch on this issue, in respect of which I made no order in my Judgment because I did not make any decision on this issue.  It follows that there should be no order for costs in respect of the preparation for the trial on this issue.  In respect of this matter, the parties have set out in detail the parts of the affirmation/witness statements relating to Confidential Information, namely:-

Plaintiffs’ side

1^st Affidavit of Vincent Luc Serre              Paras. 11, 12, 22, 23.

3^rd Affidavit of Vincent Luc Serre              Paras. 6 to 18.

1^st Defendant’s side

1^st Affirmation of 1^st Defendant                 Paras. 48 to 59.

Witness Statement of 1^st Defendant           Paras. 10, 11.

Witness Statement of Tsang Koon Ying     whole witness statement

Affirmation of Wong Hing Yun                   whole affirmation

4.It is appropriate to vary the costs order nisi made on 30.12.2005.  I order that there be no order as to costs in respect of the preparation of the above-said paragraphs of affidavit/witness statements/affirmation.  Subject to that, the 1^st Defendant is to pay the costs of this action to the Plaintiffs, to be taxed, if not agreed, with certificate for Counsel.  For the present application, I make an order nisi, to be made absolute in 14 days’ time, that there be costs in the cause, with certificate for Counsel.

The Plaintiffs :    represented by Mr. Ronald Tang instructed by Messrs. Joseph Mok & Co., Solicitors
The 1^st Defendant :    represented by Mr. Osmand Lam, instructed by Messrs. Chong & Partners, Solicitors