QUORUM ASSOCIATES LLC v. DANDAN ZHANG

HCA 1911/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1911 OF 2002

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D E C I S I O N

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Application

1. There are 2 summonses before this Court:

(a)	The Plaintiff’s summons dated 26 May 2005 for leave to discontinue the present proceedings against the Defendant with costs to be taxed, if not agreed.
(b)	The Defendant’s summons dated 14 February 2003 asking for further and better particulars of the Statement of Claim herein.

Background

2. Since 1997, the Defendant (“Madam Zhang”) has been involved with the retainer executive search business, commonly known as “headhunting”.  The Plaintiff (“Quorum LCC”) was and is an executive search company registered in the States.  At all material times,  Quorum Associates Limited (“QAL”) was a wholly owned subsidiary company in Hong Kong of Quorum LLC.

3. In March 2002, Madam Zhang commenced her action LBTC 2554/2002 in the Labour Tribunal against QAL.  The proceedings were later transferred to the High Court and became HCA 3655/2002.  The matter subsequently went before the Hon. Suffiad J. for a 10 days’ trial in November 2004.  The learned Judge identified 4 issues for him to decide:

“	(a)	who was the employer of the plaintiff at the material time of what was claimed by the plaintiff;
	(b)	had the plaintiff’s employment been effectively terminated before May 2002, and if so when;
	(c)	was the plaintiff entitled to a 25% share of the US$11,500.00 and US$20,000.00 fees received from Fidelity pursuant to the terms of her employment letter; and
	(d)	was the plaintiff entitled to claim the expense reimbursements claimed by her.”
	(paragraph 31 of the Judgment)

4. On 12 April 2005, a written judgment was handed down.  Suffiad J. accepted that Madam Zhang a thoroughly honest and truthful witness.  He found:

(a)	QAL was the employer of Madam Zhang at the material times from 21 December 2000.
(b)	By the parties’ conduct, the employment relationship came to an end at 31 March 2002.
(c)&(d)	Madam Zhang could recover from QAL:
	Arrears of salary	US$39,999.99 equivalent to HK$311,999.90
	Split fees	US$7,875.00 equivalent to HK$61,425.00
	Expense reimbursement	HK$10,097.90
		Total: HK$383,522.80
	Interest and costs were also awarded to Madam Zhang.

5. In the meantime, it is noted that Quorum LLC also commenced the present proceedings HCA 1911/2002 against Madam Zhang on 21 May 2002, for, inter alia, damages for improper use of confidential information, accounts of profits, and so forth.  Madam Zhang vigorously defended for these proceedings.  She applied for security of costs against Quorum LLC.  It was successful and a sum of HK$80,000 was paid into the Court on 12 November 2002.  Then, Madam Zhang went on to apply to consolidate HCA 3655/2002 with the present action when Quorum LLC asked for a stay of HCA 1911/2002 pending final determination of HCA 3655/2002.  The matter was heard by a Master on 13 June 2003.  Madam Zhang’s consolidation application was dismissed and the stay application was allowed.

6. Shortly after the delivery of the said Judgment of Suffiad J, Madam Zhang applied to uplift the said stay and restore her application for further and better particulars of the Statement of Claim against Quorum LLC.  On 26 May 2005, Quorum LLC decided to apply to discontinue the present action.  The call-over hearing of the discontinuance application was heard by me on 6 June 2005.  Madam Zhang opposed to it and I adjourn the matter to be argued.  I also gave usual directions as to filing of affidavit evidence.  Madam Zhang filed her affidavit in opposition on 20 June 2005 but Quorum LLC did not file anything in support or in reply.

7. The parties appeared before me on 22 July 2005.  Madam Zhang acted for herself while Mr. Hart of Messrs. Barlow Lyde & Gilbert appeared for Quorum LLC.  Having heard from the parties, I reserved my decision to be handed down at a later date.

Ruling

8. Upon consideration of the evidence authorities and submissions from the parties, I have come to the conclusion that the application by Quorum is to be allowed with costs to Madam Zhang on indemnity basis.  The summons of Madam Zhang turns out to be academic and I simply make no order to it.  My reasons appear as follows.

(a)	To start with, if the plaintiff does not wish to pursue his proceedings, it is certainly undesirable to compel him to litigate against his will.  The Court will normally grant leave to discontinue the proceedings provided that no injustice will be caused to the defendant.
(b)	The Court has a wide discretion as to the terms upon which it may grant leave to the plaintiff to discontinue the action.  It may impose terms as to costs, as to the bringing of a subsequent action or otherwise as it thinks fit.
(c)	In our case, Madam Zhang sought 4 reliefs:
		(i)	“	Indemnity costs” as the action was brought with ulterior motive,
		(ii)	Lump sum assessment of $975,600,
		(iii)	Payment/Security of costs prior to Discontinuance, and/or
		(iv)	Leave to add a Counterclaim in the event that Quorum LLC does not comply with the Court Order.
(d)	(c)(ii) and (iii) can be easily deposed of.  On 12 November 2002, Quorum LLC paid the sum of HK$80,000 into Court as security of costs for Madam Zhang up to the stage of stay upon the basis that she suffered a pecuniary loss at HK$826.00 per hour.  Since the stay, the parties had not taken any step until they came before me on the discontinuance application.  Payment/Security of costs in the “substantial” sum of $975,600 on lump sum assessment is clearly not appropriate.
(e)	(c)(iv) is also not appropriate since I have declined to order any payment/security of costs as aforesaid.  Further, “counterclaim” herein has not been pursued by Madam Zhang since 21 May 2002, I doubt very much it should be “added” when Quorum LLC has decided to drop the case.
(f)	In my view, the only real issue before me is: whether indemnity costs should be awarded against Quorum LLC?  On this question, useful guidelines can be located at paragraph 62/App/12 at page 928 HKCP 2004:
	“	When to order indemnity costs—The Court of Appeal in Choy Yee Chun (The Representative of the estate of Chan Pui Yiu) v. Bond Star Development Ltd [1997] H.K.L.R.D. 1327, CA reviewed the cases and summarised the law as follows.  A taxation of the successful party’s costs on an indemnity basis could properly be ordered where the proceedings were scandalous or vexatious, or had been initiated or prosecuted maliciously, or for an ulterior motive, or in an oppressive manner.  Any proceedings instituted or prosecuted in such circumstances as to constitute an affront to the court could properly be the subject to a direction for the taxation of the successful party’s cost on the indemnity basis.  However, the circumstances in which an indemnity award might properly be made were not restricted to circumstances such as those described.  The discretion was not to be fettered or circumscribed beyond the requirement that taxation on an indemnity basis must be “appropriate” ……
		The court may also have regard to the events prior to the institution of the proceedings, rather than merely confine itself to the way the litigation was contested by the losing party: Scherer v. Counting Instruments Ltd [1996] 1 W.L.R. 615, followed in Choy Yee Chun (above); see also Zheng Lie Lie & Others v. Prosperfield Ventures & Another, unreported, HCA No. 4572 of 2002, May 7, 2003, [2003] H.K.E.C. 558 and Hung Mau Decoration Co. Ltd v. Kowloon Tsai Home Owners Association, unreported, HCA No. 3609 of 2001, April 15, 2003, [2003] 2 H.K.L.R.D. E6, [2003] H.K.E.C. 472.”
(g)	Bearing these principles in mind, I agree to award costs to Madam Zhang on indemnity basis upon consideration of the following factors:
		(i)	Before joining to Quorum LLC and QAL, Madam Zhang has been worked as a director of A.T. Kearney, one of the larger global retainer executive search firm.
		(ii)	QLA has been a wholly owned subsidiary of Quorum LLC.  The four partners and directors of Quorum LLC were at all material times the directors of QLA.
		(iii)	On 20 March 2002, Madam Zhang commenced her proceedings in Labour Tribunal against QLA.
		(iv)	Before the Labour Tribunal, QLA had the benefit of legal advice from Messrs. Coudert Brothers throughout the action there, except the actual attendances of 4 call-over/mention hearings on 16 April 1002, 30 May 2005, 8 July 2005 and 4 September 2002.
		(v)	In the meantime, Quorum LLC commenced the present action on 21 May 2002 against Madam Zhang making serious allegation of her for breach of confidentiality, and so forth.
		(vi)	About the same time, Quorum LLC also lodged a complaint to the police against Madam Zhang.  In about July 2004, the police decided not to lay any prosecution against Madam Zhang.
		(vii)	On 4 September 2002, a presiding officer of the Labour Tribunal to High Court upon the application by QLA by the letter of Messrs. Coudert Brothers of 28 August 2002 for a “transfer” on the ground that:
			“	… that this claim can be consolidated with the pending claims between the same parties concerning similar (or in fact identical) issues in the High Court …”
		(viii)	The Labour Tribunal action then has become HCA 3655/2002.
		(ix)	Madam Zhang applied for a consolidation of this action and HCA 3655/2002.  Quorum LLC and QAL opposed to it and argued for a stay of the present action pending final determination in HCA 3655/2002.  On 13 June 2003, the Master refused the consolidation, allowed the stay and directed that, subject to any order of the Listing Master or the Listing Judge, the trial of this present action (if any) be heard before the same Judge in HCA 3655/2002.
		(x)	On 12 April 2004, Madam Zhang won in HCA 3655/2002 after a 10 days’ trial in High Court.
		(xi)	Before this Court, there is the following “uncontradicted evidence” from Madam Zhang against Quorum LLC:
			“	4.	Quorum NY’s initial ulterior motive of this 2nd action is to intimidate me into dropping the 1st action; The 2nd ulterior motive is to let me suffer by either not able to afford the legal costs thus without justice served, or seeking justice with a loss of both income and career continuity (which Quorum NY already succeeded).  Furthermore, Quorum NY launched the 2nd action with total disregard of the time and resources of the High Court.
				5.	……
				6.	During the trial of the 1st action, Quorum HK voluntarily offered its repeated promise for resolving the 2nd action amicably.  Since Judgment of the 1st action on 12 April 2002 though, either Quorum HK or Quorum NY had no appeal, no remorse, no apology, no response to my repeated requests for payments of the Judgment and calls for settlement talks.  Behind my back, Quorum NY is now bankrupting [sic. winding up] Quorum HK and at the same time, address and same phone number of Quorum HK’s 18F, One International Finance Center office, it became Quorum Associates Asia!”
(h)	Upon the evidence before the Court, in my view, it is not easy to conclude that Quorum LLC did prosecute this action with “ulterior motive”.  However, I am satisfied that, as a whole, the proceedings herein were taken against Madam Zhang “oppressively”.  A successful business lady has been dragged to these litigations/trouble for some years.  QAL is not going to be good for any payment.  Quorum LLC is residing outside the jurisdiction of Hong Kong and asking to put an end to the matter.  The serious allegations against Madam Zhang is not to be pursued.  It is doubtful if she will be getting any further payment other than the said $80,000.00 security for costs.

Costs

9. At the hearing before me, the parties spent most of the time on the issue of indemnity costs.  Madam Zhang succeeded in it.  I see no reason to depart from the usual costs order.  There will be an order nisi that Quorum LLC shall bear costs of its application and the hearing before me, on indemnity basis, to be taxed if not agreed.