L&L CATERING SERVICES LTD v. LAU AYIN

DCCJ 2894/2018

[2018] HKDC 1417

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 2894 OF 2018

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

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

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

DECISION

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

Introduction

1.  This is the plaintiff’s application for a default judgment pursuant to O 19 r 7 of the Rules of the District Court. 

2.  The Writ of Summons indorsed with a Statement of Claim was issued on 4 July 2018.  It was served on the defendant at his last known address by way of registered post on 5 July 2018.  According to the mail tracking system of Hong Kong Post, the documents were delivered to the defendant on 7 July 2018. Likewise, the Notice of Intention to Enter Judgment by the plaintiff was served on the defendant at his last known address by way of registered post on 30 August 2018 and Hong Kong Post’s mail tracking system shows that the Notice was delivered to the defendant on 1 September 2018. 

3.  The defendant did not acknowledge service of the Writ of Summons.  Nor did he file any defence. 

4.  On 22 October 2018, the plaintiff filed a summons for the present application together with a supporting affirmation concerning service of the Writ of Summons.  These documents were sent to the defendant by way of ordinary post on 29 October 2018. 

5.  The defendant did not appear at the hearing of the plaintiff’s summons on 8 November 2018. 

The Plaintiff’s claim

6.  This is the plaintiff’s pleaded case as summarised from the Statement of Claim.

7.  The plaintiff is an operator of a catering club business.  The defendant is one of the plaintiff’s shareholders and directors.

8.  Pursuant to an oral agreement and a subsequent resolution of the plaintiff’s board of directors, it was agreed and resolved that the defendant should hold a Certificate of Compliance issued by the Home Affairs Department on behalf of the plaintiff, and the defendant should transfer the Certificate of Compliance back to the plaintiff upon confirmation on the transfer procedure with the Home Affairs Department.

9.  In late December 2017, the plaintiff confirmed the details on how to transfer the Certificate of Compliance from the defendant to the plaintiff. However, despite repeated requests, the defendant refused and/or failed to transfer the Certificate of Compliance to the plaintiff.

10.  According to the plaintiff, the defendant has acted in breach of his duties as a director as he refused and/or failed to transfer the Certificate of Compliance back to the plaintiff and he unlawfully requested the plaintiff to pay him around $200,000 for the transfer. 

11.  The plaintiff seeks an injunction to compel the defendant to transfer the Certificate of Compliance to the plaintiff.

Discussion

12.  O 19 r 7 of the Rules of the District Court provides that “…on the hearing of the application the Court shall give such judgment as the plaintiff appears entitled to on his statement of claim.”  Therefore, in considering an application under that rule, the court cannot receive any evidence thereunder, but must give judgment according to the pleadings alone: Hong Kong Civil Procedure 2019 Vol. 1 §19/7/11.

13.  The court’s power to give judgment under this rule is not mandatory, but discretionary in nature: Hong Kong Civil Procedure 2019 Vol. 1 §19/7/13.

14.  With respect to the granting of a mandatory injunction, the relevant principles are set out in Morris v Redland Bricks Ltd [1970] AC 652 per Lord Upjohn at 665:-

(1) A mandatory injunction can only be granted where the plaintiff shows a very strong probability upon the facts that grave damage will accrue to him in the future.  It is a jurisdiction to be exercised sparingly and with caution but in the proper case unhesitatingly.

(2) Damages will not be a sufficient or adequate remedy if such damage does happen. 

(3) Unlike the case where a negative injunction is granted to prevent the continuance or recurrence of a wrongful act, the question of the cost to the defendant to do works to prevent or lessen the likelihood of a future apprehended wrong must be an element to be taken into account.

(4) If in the exercise of its discretion the court decides that it is a proper case to grant a mandatory injunction, then the court must be careful to see that the defendant knows exactly in fact what he has to do and this means not as a matter of law but as a matter of fact.

15.  Having considered the Statement of Claim and submissions from the plaintiff’s counsel, I came to the view that it is inappropriate for me to exercise the court’s discretion in favour of granting the mandatory injunction on this occasion.  My reasons are as follows.

16.  First, it has been held that there is no cause of action based on breach of fiduciary duty unless the plaintiff is able to plead (and later prove) an actual conflict of duty with resulting loss.  In other words, the plaintiff must identify and plead the actual conflict, the breach of duty and the consequential loss or damage: C. S. Low Investment Ltd v Freshfields (a firm) [1991] 1 HKLR 12 at 25I (per Fuad VP) and 28D (per Hunter JA). 

17.  Here, although the plaintiff has set out the directors’ duties in their general terms, it did not identify which particular duty or duties the defendant has breached and what consequential loss the plaintiff has suffered as a result of the defendant’s conduct.  A generic averment that “the plaintiff has suffered loss and damage to be assessed” does not suffice, in particular when the court needs to consider whether damages would be an adequate remedy.

18.  Secondly, the plaintiff did not identify or specify in the pleading what loss or damage it would suffer if the defendant continued to withhold the transfer of the Certificate of Compliance to the plaintiff.  The plaintiff’s counsel has explained in his skeleton arguments that the plaintiff would suffer loss of business, unnecessary and irrecoverable expenses, and damage to its business reputation.  But these are not borne out in the Statement of Claim and, under to O. 19 r. 7, the court must not take such information into consideration.

19.  Thirdly, although the plaintiff relies on a certain oral agreement allegedly made amongst the plaintiff’s four shareholders (the defendant being one of them), the plaintiff omitted to state the date of the agreement, which is a required particular: Hong Kong Civil Procedure 2019 Vol. 1 18/12/3.

20.  Fourthly, the plaintiff asks for an order that the defendant do transfer the Certificate of Compliance to the plaintiff.  On the face of the proposed order, it is unclear what exactly the defendant would need to do if he were to comply with the mandatory injunction.  In the course of his oral submissions, the plaintiff’s counsel explained that certain forms would need to be signed by the defendant in order to effect the transfer.  Again, this is not specified in the Statement of Claim or the proposed order.

Conclusion

21.  In view of the foregoing discussion, I am not satisfied that the statement of claim contains all the necessary facts for the court to grant a mandatory injunction against the defendant.  The plaintiff’s summons dated 16 October 2018 is dismissed.  There be no order as to costs.