AIM GLOBAL HOLDINGS LTD AND OTHERS v. CHIEN KUN ALLEN AND ANOTHER

HCA 2217/2014 and
HCA 2495/2014
(Consolidated)

[2019] HKCFI 939

HCA 2217/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2217 OF 2014

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(By Original Action)

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(By Counterclaim)

AND

HCA 2495/2014

ACTION NO 2495 OF 2014

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(Consolidated pursuant to the Order of
Master Leong dated 3 February 2015)

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DECISION ON COSTS

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The parties

1.  HCA 2217/2014 and HCA 2495/2014 have been consolidated.  There are five parties before me.  I will for convenience call AIM Global Holdings Limited (“AIM”), Lily Liu Durr (“Liu”) and Shanghai Weicon Optical Co Ltd (“Weicon”) collectively the plaintiffs (“Ps”) of the one part, and Chien Kun Allen (“Chien”) and Rising Dragon Global Limited (“Rising Dragon”) collectively the defendants (“Ds”) of the other.

The applications and the hearing

2.  There were three summonses before me:

   (a)   Ds’ summons filed on 28 August 2018 (the “1^st Amendment Summons”) for leave to file a Re-Re-Re-Re-Amended Defence and Counterclaim as per the proposed draft attached thereto (the “Proposed Draft 4RAD&C”);

   (b)   Ds’ summons filed on 8 February 2019 for leave to amend the 1^stAmendment Summons (the “2^nd Amendment Summons”).  Ds seek thereby to add some additional words to §48FC(6) of the Proposed Draft 4RAD&C; and

   (c)   Ps’ summons filed on 18 March 2019 (“Ps’ Summons”) for leave to file and rely on Liu’s 5^thaffirmation (“Liu #5”) in opposition to the 1^st and 2^nd Amendment Summonses.

3.  During the hearing, and after some proposals from me with the Court’s active case management powers in mind, the parties came to terms,not just on the issue of amendment, but also on the issue of having a split trial of one aspect of Ds’ counterclaim.  An Order to the following effects was granted:

   (a)   P’s Summons was withdrawn, with, I ordered, costs to Ds;

   (b)   Both Amendment Summons were allowed, with consequential directions;

   (c)   In respect of the part of Ds’ counterclaim based on the Share Award Agreement (as defined below), the issue of Ps’ liability be tried first.  For the avoidance of doubt, and subject to any contrary direction by the trial Judge, the Order makes clear that in determining liability, the Court shall also determine the basis upon, and date upon which damages should be assessed in relation to this aspect of Ds’ counterclaim.

4.  In so far as costs were concerned:

   (a)   Save those costs arising out of P’s opposition to the 1^st and 2^nd Amendment Summonses, (including the costs of this hearing) (the “Disputed Amendment Costs”), which thus require my ruling, parties agreed that the costs of and occasioned by the 1^st and 2^nd Amendment Summonses, and of the amendments to the pleadings consequential thereto, be to Ps.

   (b)   Mr Chong, counsel for Ps, orally sought leave from me to appealout of time against a costs order that Deputy Judge A To granted against Ps when the learned Deputy Judge on 4 January 2018 dismissed Ps’ application for a split trial.  I offered Mr Chong the opportunity to properly file an application for leave.  He declined, and invited me to rule on his application.

5.  In the end, and having granted the order summarized in paragraph 3 above, I adjourned the questions of costs for ruling.  This is my ruling. 

The relevant background facts

6.  The facts of the case can be shortly stated.

7.  AIM is a BVI Company.  Weicon is a Mainland company.  AIM is the holding company of Weicon.  Liu is the sole shareholder of AIM.  That makes Liu the sole beneficial owner of Weicon.

8.  Rising Dragon is a BVI company.  Chien is an officer of Rising Dragon.

9.  The disputes between Ps and Ds concern four alleged agreements (collectively “the Four Agreements”):

   (a)   An alleged agreement of 26 August 2013 between Rising Dragon and AIM, Weicon and Liu (the “Services Agreement”);

   (b)   Three alleged agreements entered into on 15 November 2013 between:

   (i)   Chien and AIM (the “HK Employment Agreement”);

   (ii)   Chien and Weicon (the “PRC Employment Agreement”),and

   (iii)   Chien, Liu and AIM (the “Share Award Agreement”).

10.  It is Ds’ counterclaim that Ps have breached the Four Agreements. As summarized by Ds [1], Ds’ case prior to the proposed amendments was:

“ [Ds] are entitled and seek to enforce their rights under and in relation to the Four Agreements, including declarations as to thevalidity thereof. They seek substantial monetary compensation which includes

(a) HK$1,260,000 (alternatively damages) due from [Liu], AIM and Weicon to Rising Dragon under the Services Agreement;

(b) HK$211,333.50 due from AIM to [Chien] pursuant to the breach of the HK Employment Agreement (alternatively damages); and

(c)   at least US$5,672,000 (HK$44,241,600) in damages from AIM and [Liu] to [Chien], being the value of 720 shares or such number of shares as shall equal 6% of the enlarged issued share capital of AIM as at 24 June 2014, for breach of the Share Award Agreement.”

11.  In respect of the part of Ds’ counterclaim for breach of the Share Award, should it become successful, and depending upon the law to be found by the Court after trial to be applicable (whether law of BVI, Hong Kong, or the Mainland), the valuation date (the “Valuation Date”) to be adopted for assessment of damages can be different.  This is the main issue which has sparked off a number of disputes between the parties, as will be explained below.

The application for split trial

12.  On 14 November 2016, Ps took out an application for a split trial (“Ps’ Split Trial Application”).  The basis was that given the fact that there were a number of possible Valuation Dates, quantum of Ds’ claim based on the Share Award Agreement should be split off from the trial on liability, and should only be dealt with afterwards.  That application came before Deputy Judge A To for hearing on 3 January 2018.  It was refused, with costs to Ds.  I will come back to what happened during that hearing.

The 1^st and 2^nd Amendment Summonses

13.  As explained by Mr Hew, counsel for Ds in his written submissions, the proposed amendments sought to be effected fall into two categories: (1) the Clarificatory Amendments, and (2) the Valuation Date Amendments.  As summarized by Mr Hew, the Valuation Date Amendments plead other possible alternative valuation dates relevant to the part of Ds’ counterclaim based on the Share Award Agreement, and are based on the supplemental reports of Ds’ BVI and Mainland experts.

Ps’ original basis for objecting the 1^st and 2^nd Amendment Summonses

14.  Though not clear on the face of his written submissions, Mr Chong confirmed during the hearing that he only objected to the Valuation Date Amendments.

15.  Mr Chong’s original objections went like this.  In his submissions, Ps’ Split Trial Application was dismissed upon Ds’ “expressed undertaking given to the Court that Ds would maintain only 1 of 3 days (pleaded by Ds) for the assessment of damages so as would render a split trial unnecessary” (Mr Chong’s emphasis).  He submitted further that the Valuation Date Amendments now seek to introduce additional alternative Valuation Dates, and are therefore contrary to the undertaking.  He submitted that Ds’ conduct was an abuse of process, and that allowing the 1^st and 2^nd Amendment Summonses “would be allowing a litigant to mislead this Honourable Court into dismissing a justifiable application on a false premises and therefore to make an application for amendment to revise and undertaking given to the Court.”

The Disputed Amendment Costs

16.  Ds have indeed got their amendments.  The is the starting point. 

17.  But Ds did not get the amendments with no terms attached.  The part of their counterclaim based on the Share Award Agreement has now been split, which order they had previously resisted.  It is relevant to note that in response to Mr Chong’s objections based upon what had happened during Ps’ Split Trial Application, Mr Hew in his written submissions submitted that:

“ … in any event, the decision on the split trial application was an interlocutory, case management decision which can be varied or departed from if there is a material change in circumstances …. So if the present application—which is after all merely an application to amend pleadings—succeeds then the Court can be asked to consider whether or not to grant a split trial.”

But whilst making those submissions, Ds had not prior to this hearing actually offered to consent to a split trial offer.

18.  Mr Chong’s written submissions were no less belligerent.  I have summarized his attacks above.  He had never offered to agree to the 1^st and 2^nd Amendment Summonses should Ds consent to a split trial.

19.  In the end, it was upon this Court’s proposal when the issues of amendment and split trial were considered together, thereby potentially saving much future costs and time.  This hearing has in effect been turned into a useful case management conference.

20.  Having looked at the matters as above, and in all the circumstances, I am of the view that the appropriate and fair order for the Disputed Amendment Costs (including the costs of this hearing) should be costs in the cause of Ds’ counterclaim.  I so order.

Leave to appeal out of time

21.  Mr Chong has in his written submissions highlighted for my consideration a number of passages from the transcript of the hearing of Ps’ Split Trial Application.  I have considered them.  I am not satisfied that any undertaking of the nature claimed by Mr Chong had been given by Mr Hew or Ds.

22.  I see no evidence of Ds or Mr Hew having sought to mislead Deputy Judge A To.  I accept Mr Hew’s submissions that the Split Trial Application was dealt with and dismissed upon the basis of the pleadings then before the Court.  It was not, as submitted by Mr Hew, as if Ds had at the time of the Split Trial Application the 1^st and 2^nd Amendment Summonses in their back pockets.  I accept that the 1^st and 2^nd Amendment Summonses were taken out as a result of subsequent change of circumstances.

23.  In my view, any appeal against the costs order of Deputy Judge A To when dismissing Ps’ Split Trial Application has no prospect of success, reasonable or otherwise.  I dismiss the application.

Disposition

24.  For the reasons set out above:

   (a)   I order that the Disputed Amendment Costs (including the costs of this hearing) be in the cause of Ds’ Counterclaim; and

   (b)   I dismiss Ps’ application for leave to appeal out of time against the costs order made by Deputy Judge A To when dismissing Ps’ Split Trial Application.  I make no separate costs order in this regard.