Axa China Region Insurance Co Ltd v. Lin Kwai Ying Katie

HCA 1228/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1228 OF 2011

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Before: Hon Chung J in Chambers

Date of Hearing: 17 April 2012

Date of Decision: 25 April 2012

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D E C I S I O N

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INTRODUCTION

1.This is the defendant’s application to strike out the amended statement of claim (“the S/C”). The defendant’s re-amended summons sets out the following bases for the application:-

(a)  the S/C discloses no reasonable cause of action;

(b)  the S/C is an abuse of the court’s process.

The application is opposed by the plaintiff.

BACKGROUND

2.By reason of the nature of this application (an application for striking out the S/C), the factual averments in the S/C are taken as the relevant facts.  They are summarized below for ease of comprehension.

3.The plaintiff, part of the global AXA Group, is itself an international establishment providing financial protection and wealth management services.  For such purpose, the plaintiff develops financial protection and wealth management products and sells the same to individual as well as corporate and institutional clients.

4.As a result of an earlier business acquisition by the plaintiff, the defendant became the plaintiff’s employee from about May 2007 (up to January 2011, when her resignation took effect).  During her employment, the defendant was the head of one of the plaintiff’s Hong Kong brand-name services, “Swiss Privilege”.

THE ALLEGATIONS IN THE S/C

5.The causes of action relied on in the S/C are essentially these:-

(1)  breach of the term of employment contract prohibiting the solicitation or inducement of any person who was employed or engaged by the plaintiff, and with whom the defendant had any dealing in the course of her employment, to terminate his or her employment or engagement with the plaintiff (“breach of the non-solicitation obligation”);

(2)  breach of the defendant’s fiduciary duties, namely, not to place herself in a position where her personal interest would conflict with the plaintiff’s and/or in not to act for her own benefit or the benefit of others without the informed consent of the plaintiff (“breach of fiduciary duties”);

(3)  the tort of causing loss by unlawful means (the unlawful means here being the breach of the non-solicitation obligation and the breach of fiduciary duties).

6.The above wrongs are said to have arisen from the same set of facts, namely:-

(a)  on various occasions since mid-June 2010, the defendant contacted various employees of the plaintiff and persuaded them to join the services of her new employer, a direct competitor of the plaintiff’s business;

(b)  as a result of the defendant’s breach of the non-solicitation obligation, various employees of the plaintiff resigned from the plaintiff and joined the services of the defendant’s new employer during the period from July 2010 to January 2011.

ISSUES IN THIS APPLICATION

7.The defendant’s primary case in this application is that the plaintiff’s claim falls within para 1 (especially para 1(a) and 1(b)), Schedule, Labour Tribunal Ordinance (Cap 25) and hence is within the exclusive jurisdiction of the Labour Tribunal (“the Tribunal”).

8.While not disputing that the part of its claim summarized in para 5(1) and (2) above may fall within the Tribunal’s exclusive jurisdiction, the plaintiff contends that the part of its claim summarized in para 5(3) above does not.

9.The plaintiff further contends that, as regards the part of its claim falling outside the Tribunal’s exclusive jurisdiction, the S/C is deficient in that:-

(1)  the facts averred to therein are insufficient to constitute a valid cause of action in causing loss by unlawful means;

(2)  some of the factual averments required to properly constitute such a cause of action are lacking.

CAUSING LOSS BY UNLAWFUL MEANS

10.The ingredients of the tort of causing loss by unlawful means are undisputed:-

(a)  the defendant used unlawful means;

(b)  such use interferes with the actions of a third party in relation to the plaintiff;

(c)   there was an intention to cause loss to the plaintiff;

(d)  the plaintiff suffers damages as a result.

Clerk & Lindsell on Torts (2010) 20^th Ed, para 24-70; Bullen, Leake & Jacob’s Precedents of Pleadings (2011) 17^th Ed, para 60-08.

(a)     What is “unlawful means”?

11.The main disagreement between the parties concerns the meaning of “unlawful means”.

12.On the defendant’s part, she contends that the phrase consists of acts intended to cause loss to the plaintiff and must be “unlawful” as against, and hence actionable on proof of loss by, third parties.  The contention finds support in the majority view of the House of Lords’ decision in OBG Ltd and Another v Allan and Others [2008] 1 AC 1, especially para 49 thereof.

13.On the plaintiff’s part, reliance is placed on the minority view of the OBG Ltd decision to the effect the phrase should encompass all acts which a person is not permitted to do, including common law torts, statutory torts, crimes, breaches of contract, breaches of trust and equitable obligations, breaches of confidence, and the like: the OBG Ltd decision, especially paras 149 to 155.

14.As can be seen from paras 5(3) and 6 above, the “unlawful means” pleaded in the S/C is the defendant’s alleged breach of the non-solicitation obligation and breach of fiduciary duties.  Because these were wrongful acts arising from the former relationship between the plaintiff and the defendant, it cannot be (and is not) the plaintiff’s case that such acts were directed against, and hence actionable by, those of the plaintiff’s employees who allegedly resigned from the plaintiff and joined the defendant’s new employer.

15.Such being the case, whether such acts constitute “unlawful means” depends on whether the true state of the law is that set out in para 12 above or that in para 13 above.  As will be further discussed under the heading “Leave to Re-amend the S/C” below, this is relevant to whether leave to re-amend the S/C should be given.

(b)     Deficiencies in the S/C

16.The defendant accuses the S/C as suffering from various deficiencies:-

(1)  it is not alleged that the employees whom the defendant approached, or those who resigned, were employees whom she had dealings with in the course of her employment with the plaintiff;

(2)  it is not pleaded that the defendant has solicited or induced the plaintiff’s employees referred to in paras 10(d), 10(f) and 11 of the S/C to leave the plaintiff’s employment;

(3)  there is no averment regarding the defendant’s intention to cause harm.

In relation to para 16(1) above, the plaintiff relies on the undisputed fact that she headed the plaintiff’s “Swiss Privilege” services and the plaintiff’s employees referred to in the S/C also used to work for that part of the plaintiff’s business.

17.In relation to para 16(2) above, the plaintiff relies on para 10. S/C itself:-

“… at various times prior to and after her submission of resignation … the Defendant has sought to persuade a number of the Plaintiff’s employees and consultants … to terminate their employment contract with the Plaintiff and join her … ”.

18.In relation para 16(3) above, while accepting there is no averment about the defendant’s intention, the plaintiff argues that the material facts have been pleaded; that is, the only logical consequence of those of the plaintiff’s employees resigning and joining the plaintiff’s competitor was that the plaintiff has lost valuable and/or experienced personnel.

19.In brief, I agree with the defendant’s above arguments and disagree with the plaintiff’s. At best, the present state of the S/C is embarrassing and may prejudice or delay the fair trial of this action.

20.The fact that the defendant was the head of the plaintiff’s “Swiss Privilege” services and those employees were working with that part of the plaintiff’s business may mean the defendant has had dealings with those employees (but the ambiguity remains unresolved). It has repeatedly been said that material facts ought to be pleaded, rather than left to be “inferred”: see, for example, Pak Win Investment Ltd v Chung Yuet Sheung, Lorrain and Others, HCA 419/2011 (9 February 2012), para 27; Deutsche Bank AG (Hong Kong Branch) v Daniel Mamadou-Blanco, HCA 1514/2011 (23 December 2011), paras 35 to 36; Tempra Virginia Pido v Compass Technology Co Ltd And Another [2010] 2 HKLRD 537, para 25.  This is correct because “inference” is a matter for evidence and fact-finding, whereas pleadings serve (among other functions) to inform and define the ambit of the dispute and promote economy in the trial-preparation process: Hong Kong Civil Procedure 2012, Vol 1, para 18/12/1.

21.Despite the plea made at para 10, S/C (to the effect the defendant persuaded the employees to leave the plaintiff and join its competitor), para 10(d) itself does not allege any involvement on the defendant’s part.  Similarly, neither does para 10(f) or 11, S/C put forth such allegation.

22.Finally, as regards the lack of averment regarding the defendant’s intention to cause loss, the plaintiff’s loss of valuable and/or experienced personnel is a factual phenomenon.  In the absence of a proper plea, it is still unknown (or at least unclear) if the loss was intended by the defendant.

THE EXCLUSIVE JURISDICTION OF THE TRIBUNAL

23.The Tribunal’s jurisdiction is conferred by s 7 of, and the Schedule to, Cap 25.  S 7(1) thereof stipulates that:-

“The tribunal shall have jurisdiction to inquire into, hear and determine the claims specified in the Schedule”.

S 7(2) thereof further stipulates:-

“Save as is provided in this Ordinance, no claim within the jurisdiction of the tribunal shall be actionable in any court in Hong Kong”.

Thus, claims falling within the jurisdiction conferred on the Tribunal can only be actionable therein (subject to para 3, Schedule, Cap 25 (see below)).

24.Para 1 of the Schedule provides:-

“A claim for a sum of money which arises from … the breach of a term, whether express or implied … of a contract of employment … ”.

But an exception is provided for by para 3 of the Schedule:-

“Notwithstanding paragraphs 1 and 2, the tribunal shall not have jurisdiction to hear and determine a claim for a sum of money, or otherwise in respect of a cause of action, founded in tort whether arising froma breach of contract or a breach of a duty imposed by a rule of common law or by any enactment” (emphasis supplied).

25.Even though I concluded that the S/C is defective and is insufficient to ground a reasonable cause of action in causing loss by unlawful means, I shall nonetheless also consider this part of the parties’ disagreement.  This is relevant to whether leave should be given to the plaintiff to re-amend the S/C (as will be further discussed below).

26.The language of paras 1 and 3, Schedule, Cap 25 has created some tension; this has been acknowledged in the Deutsche Bank AG (Hong Kong Branch) decision, para 21. As has been pointed out in that decision, because of the language used in those provisions, there can be an overlap between a claim falling within para 1 thereof and one also falling within para 3 thereof.

27.The tension has also been noted and discussed in two other decisions.  In time order they are Estinah v Golden Hand Indonesian Employment Agency [2001] HKEC 985 and Gain Hill (Hong Kong) Ltd v Li Kin Yip [2006] 4 HKLRD 186.

28.It was observed in the Estinah decision (which was concerned with a breach of a statutory duty imposed by s 57(b), Employment Ordinance (Cap  57)):-

“On the plain wording of paragraph 3 [of the Schedule], it would seem to me that the claim insofar as it is based on breach of statutory duty is excluded from the jurisdiction of the Labour Tribunal, as it is a cause of action founded in tort arising from a breach of duty imposed by section 57(a) of the Employment Ordinance. An action for breach of statutory duty is an action in tort, this is the established view and it has been recognised in textbooks on the law of torts … ” (para 37);

“Miss Po also submitted that the claim should not be excluded under paragraph 3 of the Schedule as this would give rise to tension between paragraphs 1(b) and 3 and might make it difficult to apply the provisions in the Schedule in practice. I agree with Mr Ling that it is clear from the opening words of paragraph 3 (i.e. ‘notwithstanding paragraphs 1 and 2’), it was envisaged that there would be an element of overlap between the claims in paragraphs 1 and 2 and the claim in paragraph 3. Take for instance a claim for a sum of money which arose from the breach of an express or implied term of a contract of employment to provide a safe system of work. This would fall within paragraph 1(a) and yet one would have no difficulty in seeing that it would be excluded from the jurisdiction of the Labour Tribunal as this claim is in respect of a cause of action founded in tort whether arising from a breach of contract or a breach of duty imposed by the common law or by statute. As for paragraph 1(b) [of the Schedule], … [where] there is failure of a person to comply with the Employment Ordinance and the means of enforcing the right which arose is provided in the Ordinance itself, there is no need to rely on a cause of action founded on breach of statutory duty. I agree … that where a claimant is driven to rely on a private right of action impliedly conferred by statute, as in this case, the claim is excluded from the jurisdiction of the Labour Tribunal by virtue of paragraph 3 in the Schedule” (para 38).

29.The above reasoning and conclusion was adopted in the Gain Hill (Hong Kong) Ltd decision (which was concerned with a breach of confidence (founded in both contract and tort)).  After quoting the above passages in the Estinah decision, the judgment continued:-

“I agree with the views of Kwan J.

The words ‘Notwithstanding paragraphs 1 and 2’ in paragraph 3 of the Schedule must mean something. The meaning is in my view clear. In spite of the fact that the Labour Tribunal has jurisdiction under paragraphs 1 and 2, the Labour Tribunal shall not have jurisdiction to determine a claim for a sum of money in respect of a cause of action ‘founded in tort whether arising from a breach of contract or a breach of duty imposed by a rule of common law…… ’

Here there is an overlap between the claim in paragraph 1 and the claim in paragraph 3 of the Schedule. The claim for damages for breach of confidence is founded both in contract and in tort. It would fall within paragraph 1(a) as being within the jurisdiction of the Labour Tribunal but it would be excluded from the jurisdiction of the Labour Tribunal under paragraph 3 as being a claim for a sum of money in respect of a cause of action ‘founded in tort whether arising from a breach of contract or a breach of duty imposed by a rule of common law ……..’ The intention of the legislature was to exclude such claims from the jurisdiction of the Labour Tribunal” (paras 38 to 40).

30.I also agree with the reasoning of, and conclusion reached in, the two earlier decisions.  The underlying rationale for the conclusion has not been discussed in those decisions.  If any rationale is needed, it may be that the legislature intended the Labour Tribunal to be “an informal forum for employees [and employers] to pursue their claims … in a speedy manner”: the Deutsche Bank AG (Hong Kong Branch) decision, paras 13 and 18.  Claims based on tort, breach of common duties or statutory duties and the like are likely to be too complicated for the Labour Tribunal to be able to deal with them speedily.

31.The above conclusion is subject to the court being satisfied that the additional claims are not put forth as pure litigation tactics: this has been called “window-dressing” in Kao, Lee & Yip (a firm) v Lau Wing and Another, HCA 1854/2005 (7 March 2006), para 25 and the Gain Hill (Hong Kong) Ltd decision, para 33. 

32.Applying the above to the S/C, I do not find the cause of action of causing loss by unlawful means to be “window-dressing”.  For this reason, subject to the defects in pleading, which have been discussed under the previous heading and will be further discussed under the next heading, this action falls within para 3, Schedule, Cap 25.

LEAVE TO RE-AMEND THE S/C

33.It is trite law the court’s discretionary powers to striking out pleadings should be exercised only in plain and obvious cases: Hong Kong Civil Procedure 2012, Vol 1, para 18/19/4.  Cases involving difficult points of law are sometimes unsuitable for such kind of application: see, for example, Chuang, Eugene Yue Chien v Kevin Ho Yau Kwong, HCA 1904/2001 (8 November 2002), para 14(3).

34.In this connection, the minority view of the decision in the OBG Ltd decision is relevant to this application (see para 13 above).

35.A similar dispute arose in Shenzhen Futaihong Precision Industry Co Ltd and Others v BYD Co Ltd and Others, HCA 2114/2007 ((24 August 2010) (which was concerned with the striking out of a similar pleading)).  The court declined in that decision to strike out the statement of claim on the ground that:-

“… this cause of action is still developing and the reasons of Lord Nicholls in his dissent are indeed powerful. Lord Hope in Revenue and Customs Commissioners [v. Total Network SL [2007] EWCA Civ. 39] has also expressed his reservation about the majority view of OBG Ltd.” (para 58)

36.It has also been said in Hong Kong Civil Procedure 2012, Vol 1, para 18/19/4:-

“… This rule also empowers the court to amend the indorsement on any writ or any pleading. If a statement of claim does not disclose the cause of action relied on, an opportunity to amend may be given, even though the formulation of the amendment is not before the court … However, unless there is reason to believe that the case can be improved by amendment, leave will not be given … ”.

37.By reason of the above matters, I consider the most appropriate course to be this: the S/C should be struck out; however, this action is not dismissed if the plaintiff files and serves a re-amended statement of claim to re-formulate its case regarding the tort of causing loss by unlawful means within 21 days from today.

CONCLUSION

38.An order will be made in line with the conclusion reached in para 37 above.

COSTS

39.It is probable the parties will prefer to put forth their respective arguments regarding the costs of this application after having sight of the plaintiff’s re-amended statement of claim.

40.Directions relating to the costs of this application will be given after the re-amended statement of claim has been filed and served (in default of which costs of this application are to be paid by the plaintiff to the defendant).

Mr Martin W H Wong, instructed by Chong & Partners, for the plaintiff

Mr Yang Wahn Hew, instructed by Gall, for the defendant