DR. BUT YIU KUEN, DAVID v. HONG KONG MEDICAL CONSULTANTS LTD

HCA 1089/2021

[2025] HKCFI 1102

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1089 OF 2021

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DECISION

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Introduction and Brief Background

1.  By this action, the Plaintiff (“P”), a doctor, seeks a declaration that the restrictive covenant in Clause 7.1 of his employment contract with the Defendant (“D”), was and is void and of no effect, and was not operative or binding upon P.  The following matters are pleaded in the Statement of Claim (“SOC”):

(1)     By an employment contract dated 27 September 2017 between P and D (“the Employment Agreement”), D agreed to employ P as an in-house medical practitioner in his capacity as a specialist in Gastroenterology and Hepatology starting from 1 March 2018 until termination;

(2)     Clause 7.1 provides:

“[P] hereby agrees that, during the term of the Employment and for a period of [five] years after the termination of the Employment, he will not and will procure that his associates will not:-

  (i)     Unless with the prior written approval of [D], be directly or indirectly engaged in, concerned with or interested in any other business carried on within a radius of 3kilometres which is in any respect in competition with or similar to the Clinic, provided that this shall not prohibit (a) the holding (directly or through nominees) of investments listed on any stock exchange as long as not more than five percent of the issued shares or stock of any class of the relevant company shall be so held or (b) any holding of securities of any company within the Company.”

(3)     By written notice dated 11 June 2021, P determined the said employment with effect from 11 September 2021;

(4)     The restrictive covenant in Clause 7.1 imposes unreasonable and unnecessary restraints on P’s trade and freedom to practise as a medical practitioner in his capacity a specialist in Gastroenterology and Hepatology and is wider than is reasonably necessary for the protection of D’s interest or the interests of the public, and is void and of no effect; and

(5)     Nevertheless, D has wrongfully maintained and still continues to maintain that the restrictions imposed by the restrictive covenant are effective and binding on P.

2.  In defence, D had averred that Clause 7.1 is reasonable and necessary to protect D’s legitimate interest, including its trade connections, its client base and its reputation and goodwill.  By counterclaim, apart from alleging that P was in breach of Clause 7.1, D further alleged that P was in breach of Clause 7.1(ii) and Clause 8.1 of the Employment Agreement.  In essence, it was pleaded that during the term of his employment with D, P solicited business from patients and customers of D and had used, caused, permitted or suffered to be used confidential information of or belonging to D.  It was also alleged that during the employ of D, he was employed by Smart Health Consultant Limited.  D sought inter alia damages and an account of profit.

3.  By Summons dated 20 November 2024 (“the Summons”), P apply for:

(1)     Leave for D to withdraw its Re-Amended Defence and D’s Re-Amended Counterclaim be dismissed;

(2)     Judgment be entered for P and that there be a declaration that the restrictive covenant contained in Clause 7.1 of the Employment Agreement dated 27 September 2017 was and is void and of no effect and was not and is not operative or binding upon P;

(3)     The Case Management Summons hearing on 4 December 2024 at 9:30am be vacated; and

(4)     The costs of this action, including this application, be paid by D to P on an indemnity basis to be taxed if not agreed.

4.  By Order dated 26 November 2024 (“the Order”), by consent, orders were granted inter alia in terms of paragraphs (1) and (3) above.  Paragraphs (2) and (4) were adjourned for substantive argument.  Today is the adjourned hearing.

5.  An Affirmation of P, filed on 20 November 2024, was filed in support of the Summons.  Notwithstanding leave given by the Order for D to file and serve an affirmation in opposition to the Summons, no affirmation has been filed.

6.  As confirmed by Mr Chee-Ching Sik, counsel for D, D does not object to the entering of judgment by P but will leave it for D to address the court on the need for declaratory relief.  Furthermore, D also agrees to pay to P’s costs of this action, including the Summons, on a party to party basis.

Analysis

7.  It is now well established that the principle that a declaration will not be granted when giving judgment by consent or without a trial, is a rule of practice and not of law and will give way to the paramount duty of the court to do fullest justice to the plaintiff to which he is entitled.  Where declaratory relief is the only and substantial relief sought by the plaintiff, it may be necessary to make a declaration to do justice to the plaintiff.  See Hong Kong Civil Procedure 2025, Vol.1, §§15/16/2, 19/7/14 and 19/7/20.

8.  I am satisfied on matters pleaded in the SOC, which are impliedly admitted in the absence of any defence or by the withdrawal of the defence, would entitle P to the declaration sought. 

9.  I am further satisfied that the declaration, which is the only substantial relief sought, is necessary to do fullest justice to P and will so order.

10.  As P’s employment was terminated on 11 September 2021, the 5-year restrictive covenant would only expire on 11 September 2026. P should not have to continue practising for another year and a half with the constant threat of the restrictive covenant hanging over his head and will give P certainty as to his legal rights even though no injunction had been applied for by D in the past few years.

11.  As for whether D should pay P’s costs on an indemnity basis, in Commissioner of Inland Revenue v Poon Cho Ming, John (No 2) (2020) 23 HKCFAR 74 at §4, Bokhary NPJ summarized the court’s approach to the exercise of the court’s discretion to award indemnity costs as follows:

(1)     In certain circumstances, costs may be awarded on a more generous than usual basis of taxation so as to achieve a fairer result;

(2)     It is for the receiving party to show that the case has some special or unusual feature;

(3)     Such features are not confined to an ulterior motive, an improper purpose, deception or underhand conduct on the party of the paying party;

(4)     Neither the attributes of the parties nor the character of the proceedings are irrelevant to the question of whether a more generous than usual basis of taxation should be ordered;

(5)     The discretion to order a more generous than usual basis of taxation is not to be fettered or circumscribed beyond the requirement that such taxation be ordered only when it is appropriate to do so;

(6)     As to that, the grounds on which a more generous than usual basis of taxation is to be ordered must be connected with the case. That extends to – but no further than to – any matter relating to the litigation and the parties’ conduct in it, and also to the circumstances leading to the litigation.

12.  Whilst each case is decided on its own facts, as stressed by Bokhary NPJ ibid at §7, the law must always, even where a discretion is concerned, have a reasonable measure of predictability and consistency. 

13.  In this regard, it has been held: (1) where the proceedings in question should never have been brought or defended but the party nevertheless unreasonably or unjustifiably persisted, he may well be visited with indemnity costs (see e.g. Huge Dragon Corp Ltd v Lung Mun Oasis (IO) [2014] 3 HKLRD 286 per Jeremy Poon J (as he then was) at §13); and (2) where serious allegations of fraud and dishonesty, or inferences of serious misconduct, are made but unsupported by cogent evidence, and in the end abandoned, an award of indemnity costs may be awarded to mark the court’s disapproval (see e.g. Tobii Technology Inc v Hong Kong Team Light International Ltd & Anor [2023] HKCFI 1228 at §§26-27 per DHCJ Jonathan Chang SC).

14.  In the present case, in the absence of any good explanation from D, it is open for the court to come to the view that the withdrawal of the D’s defence and dismissal of its counterclaim is a strong indication of the lack of merits of the claims made therein, or that the serious allegations made against P could not be substantiated, and D’s acceptance of that: see ibid at §19 and Xu Zhiqiang & Ors v Ng Kwok On & Ors [2018] HKCFI 274 §§30 and 43 per DHCJ Joseph Kwan. 

15.  I do not accept D’s submission that to assess the merits of the underlying claims, the court can consider the pleadings and witness statements already filed.  The starting point must be that by withdrawing its defence and counterclaim (or agreeing to the dismissal of the counterclaim), D must acknowledge its lack of merits: see Tobii Technology Inc, §19.  It is for D to supply to the court good explanation why the court should not come to the view that its claims and allegations have no merits.  As observed by the learned deputy judge in Xu Zhiqiang & Ors at §25, to require this court to conduct a detailed examination of the merits of party’s allegations, where that party’s claim has been discontinued, before it can decide whether an award for indemnity costs should be made would not be the right approach or proper use of the time and resources of the court.

16.  Without any cogent evidence in support of its defence and counterclaim (despite four extensions of time, D did not comply with an unless order to serve any supplemental witness statement in supports of its counterclaim), and admittedly at most D relied on inferences to be drawn, D should not have made serious allegations against a professional man: see Tobii Technology Inc at §§13, 26-27 and Shown Wai Investment Company Limited v Hui Yip Wing David [2024] HKCFI 2339 per DHCJ MK Liu at §8(2).

17.  Although it was submitted by D that the matters raised in the counterclaim were not clear cut and highly fact sensitive that could only be resolved at trial, the fact of the matter is no evidence was filed by D in support of the counterclaim.  Despite repeatedly indicating that it intended to take out a specific discovery application, ultimately D never took out such application.  This is the case even if D’s case was not strikeout-able or no application was taken by P to strike out D’s defence and counterclaim.

18.  In all the circumstances of this case, even taking into account all that D had submitted, and even accepting the alleged delay and litigation conduct by D was not such as to warrant an indemnity costs against D, I take the view that there are special and or unusual features in this case that justify an order of indemnity costs against D.

19.  I will therefore order that D shall pay to P the costs of this action, including the Summons, on an indemnity basis with certificate for one counsel (Ms Wong) to be taxed if not agreed.