GTC INDUSTRIES LTD AND OTHERS v. LEE MAN HOI OCEAN AND OTHERS

HCA 600/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 600 OF 2012

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D E C I S I O N

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1.  I would allow the plaintiffs’ application for leave to re-amend their Amended Statement of Claim. I shall later hear the parties on the precise form of the consequential directions. In the meantime, I shall now give very brief reasons for my decision.

2.  The amendments proposed by the plaintiffs are set out in paragraph 14A and prayer (7A) of the draft Re-Amended Statement of Claim.  The proposed paragraph 14A provides as follows: 

“ If and insofar as necessary, the plaintiffs will contend that the 1^st and 2^nd defendants, being members of the senior management staff of the plaintiffs, owed a duty to the plaintiffs by way of implied term in contract and/or tort to apply reasonable care and skill to ensure that all formalities were complied with in respect of their own employment by the 3^rd plaintiff. If (which is denied) the employment of the 1^st and 2^nd defendants by the 3rd plaintiff were invalid by reason of non-compliance with legal requirements under PRC law:

(1) The 1^st and 2^nd defendants cannot rely on the same, as they cannot be allowed to benefit from their own wrong.

(2) Further or alternatively, the 1^st and 2^nd defendants are liable for their breach of duty, and the plaintiffs are entitled, by way of damages, to be put in the same position as if their employment was valid.”

3.  Paragraph 14A is in direct response to the allegation by the 1^st and 2^nd defendants that their employment with the 3^rd plaintiff is invalid by reason of non-compliance with the legal requirements under PRC law.  Such allegation was first introduced by the conclusion reached by the 2nd and 3^rd defendants’ expert in his Expert Report dated 27 July 2012, whereby he stated that “where the employer fails to apply for and obtain a valid employment permit in accordance with PRC law for that Hong Kong resident”, the labour contract is “very likely void”.  However, it was not confirmed as a part of the 2^nd and 3^rd defendants’ pleaded case until 6 August 2013 when the 2^nd and 3^rd defendants filed their Reply to the plaintiffs’ Request for Further and Better Particulars. 

4.  The well known principles set out in Ketteman v Hansel Properties Limited [1987] 1 AC 189 regarding amendments remain applicable post-CJR subject to the caveat that the exercise of discretion should promote the underlying objectives of the CJR as set out in Order 1A of the Rules of the High Court; and the importance of not disturbing a milestone date [see: Li Shiu To v Li Shiu Tsang, HCA 416/2003 (Decision of Deputy High Court Judge Lok dated 14 August 2012)].

5.  In this respect, it is important to note that under Order 1A, rule 2(2) of the Rules of the High Court, the court’s “primary aim” in exercising case management or other powers of the court is to secure a “just resolution of disputes in accordance with the substantive rights of the parties”.

6.  In the circumstances of the present case, I agree with Mr Justin Ho, counsel for the plaintiffs, that the risk of adjourning the trial dates is not high. 

(1) As is clear from the amendments in the draft Re‑Amended Statement of Claim, the scope of the proposed amendment is rather narrow, and would hardly require substantial amendment to the 2^nd and 3^rd defendants’ Amended Defence. 

(2) The plaintiffs have confirmed that they have no intention to file further expert evidence in support of the new averments.  The 2^nd and 3^rd defendants, on the other hand, say that further expert evidence will be obtained.  However, in this respect, it must be remembered that PRC experts have already been engaged and it is difficult to see how and why the 2^nd and 3^rd defendants would require a lengthy period of time to secure an expert opinion from their existing expert on a specific aspect of contract law. 

(3) Mr Eugene Yim, counsel for the 2^nd and 3^rd defendants, suggested in his skeleton submissions that a further round of witness statements will be necessary, but he accepts that they are likely to be short ones.  I do not see why the preparation of such witness statements cannot begin right away.

7.  Regarding the limitation issue, I agree with Mr Ho that the new matters sought to be pleaded by the proposed amendments do arise “out of the same facts or substantially the same facts” as the existing causes of action already pleaded by the plaintiffs against the 1^st and 2^nd defendants.

8.  The scope and extent of the 2^nd defendant’s responsibilities and duties as the Chief Executive Officer of the 1^st plaintiff and the Senior Quality Control Manager of the 3^rd plaintiff under the employment contracts are already issues which require to be tried at the trial of this action.  In such circumstances, the subject matter and facts which underpin the new claim under paragraph 14A involve matters which are, in any event, going to be litigated between the parties.  Clearly, such factual matters go no further than introducing “minor differences likely to be the subject of inquiry” and do not involve any “major” investigation that would not in any event have to be undertaken:  Moulin Global Eyecare Holdings Limited v Olivia Lee Sin Mei [2013] 1 HKLRD 744, at paragraph 48.

9.  Finally, I do not agree with Mr Yim’s submissions that the proposed amendments should be disallowed on the ground that they are futile.  In my view, this is not a case where the lack of merits of the proposed amendments are readily apparent, and are so apparent without a prolonged investigation [see: Practice Note 20/8/6 at page 462 of the Hong Kong Civil Procedure 2014].

10.  For the reasons stated above, the plaintiffs’ application for leave to re-amend their Amended Statement of Claim is allowed.

(Submissions on the consequential directions)

11.  There be leave to the 1^st, 2^nd and 3^rd defendants to serve expert report to address the re-amendments within 21 days from the date hereof.  There be leave to the plaintiffs to serve supplemental expert report in reply within 14 days thereafter.  There be leave to the 1^st, 2^nd and 3^rd defendants to serve further Witness Statements to address the re-amendments on or before 25 July 2014. 

(Submissions on costs)

12.  The usual, and I stress the word “usual”, order for cases where an application for leave to amend has been resisted but is allowed is that there be two sets of costs: namely, costs of and occasioned by the amendment shall be to the other side in any event, but costs of the hearing before the court should be to the party who is successful in the argument as to whether leave to amend ought to be granted.  However, the court has discretion to order otherwise [Practice Note 20/8/51 of the Hong Kong Civil Procedure 2014]. 

13.  In the present case, the application for leave to amend is made late in the day, and no good reason has been given for the delay.  In the circumstances, I do not think it is right to award costs against the defendants for today’s hearing.  Accordingly, I order that: (1) the costs of and occasioned by the application (including the hearing on 29 May 2014) be to the 1^st, 2^nd and 3^rd defendants in any event; and (2) the costs of today’s hearing be in the cause.